Apollo Investment (AINV) CEO Howard Widra on Q2 2022 Results - Earnings Call Transcript

Nov. 04, 2021 11:41 PM ETMidCap Financial Investment Corporation (MFIC)
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Apollo Investment (AINV) Q2 2022 Earnings Conference Call November 4, 2021 5:00 PM ET

Company Participants

Elizabeth Besen - Investor Relations Manager

Howard Widra - Chief Executive Officer

Tanner Powell - President & Chief Investment Officer

Greg Hunt - Chief Financial Officer

Conference Call Participants

Kyle Joseph - Jefferies

Melissa Wedel - JPMorgan

Robert Dodd - Raymond James

Operator

Good afternoon and welcome to Apollo Investment Corporation's Earnings Conference Call for period ended September 30, 2021. At this time, all participants have been placed in a listen-only mode. The call will be open for question-and-answer session following the speakers' prepared remarks. [Operator Instructions]

I will now turn the call over to Elizabeth Besen, Investor Relations Manager for Apollo Investment Corporation.

Elizabeth Besen

Thank you, operator and thank you for everyone for joining us today. Speaking on today's call are Howard Widra, Chief Executive Officer; Tanner Powell, President and Chief Investment Officer; and Greg Hunt, Chief Financial Officer.

I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited.

Information about the audio replay of this call is available in our earnings press release. I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information.

Today's conference call and webcast may include forward-looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law. To obtain copies of our SEC filings, please visit our website at www.apolloic.com.

I'd also like to remind everyone that we posted a supplemental financial information package on our website, which contains information about the portfolio, as well as the company's financial performance.

At this time, I'd like to turn the call over to Chief Executive Officer, Howard Widra.

Howard Widra

Thanks, Elizabeth. Good morning and thank you everybody for joining us today. I'll begin today's call by providing an update on our ongoing progress repositioning portfolio, followed by a review of our results by the quarter. Following my remarks, Tanner will discuss the market environment, review our investment activity for the quarter and provide an update on credit quality. Greg will then review our financial results in greater detail. We will then open the call for questions.

During today's call, we will be referring to some of the slides on our investor presentation, which is posted on our website. Beginning with an update on our portfolio repositioning, we continue to successfully execute our strategy of increasing our exposure to first lien floating rate corporate loans and reducing our exposure to junior capital and non-core positions. We've constructed what we believe to be a well diversified portfolio of high quality senior corporate loans, as evidenced by improving credit metrics, including lower leverage, lower attachment points, and higher interest coverage.

Regarding our aircraft leasing portfolio company, we believe Merx has successfully navigated this challenging period. As a result, AINV earned more income from Merx during the September quarter compared to recent quarters. Repayments during the quarter included the exit of two second lien investments. Post quarter end and MC, one of our shipping investments sold the vessel, which will result in a small pay down to AINV in the December quarter.

Moving to our results for the quarter after market closed today. We reported net investment income for the September quarter of $0.33 per share, $0.02 above our quarterly based distribution of $0.31. As mentioned on our last conference call. Given the total return feature in our fee structure and the strong performance of our corporate lending portfolio, we resumed paying incentive fees during the quarter.

Net investment income for the quarter reflects a full insanity. We ended the quarter with net asset value per share of $16.07, up $0.05 or 0.3%, driven by our corporate lending portfolio, which continues to perform well as well as the accretive impact of stock buybacks.

Regarding investment activity, the Apollo direct origination platform, which includes AINV was very active closing 4.6 billion and new commitments during the quarter. AINVs new investment commitments were strong totaling 222 million, all first lien floating rates senior corporate loans. Given this solid level of activity, our investment portfolio grew and our net leverage ratio increased to 1.51 times at the end of September, right in the middle of our target leveraged range.

We remain focused on increasing AINV's earnings power. Let me discuss how we think about our baseline earnings and the embedded upside in our portfolio. First, as a result of the stability we expect to continue to see from Merx, during the recorder, we recap the capital structure and receive $6.9 million of interest income from Merx during the September quarter, 2.1 million more than last quarter.

Second, although net leverage was 1.51 times at the end of the quarter. Average leverage for the quarter was 1.46 times, a good baseline for projecting earnings going forward. Third, fee and prepayment income totaled $1.7 million dollars for the quarter.

Although these sources of income can fluctuate from quarter-to-quarter, we expect to generate approximately $3.5 million of fee and prepayment income per quarter on average. As an illustration, in a March 2021 and June 2021 quarters, fee and prepayment income totaled 3.9 million and 5.9 million respectively.

Conversely, although we earned a $2 million dividend from MC during the September quarter, we expect to earn approximately $1 million on average going forward, a level consistent with prior periods. Taking these items in aggregate would produce a baseline of approximately $0.34 per share.

From that $0.34 baseline, there are a number of items we are focusing on to grow earnings in the near-term. First, we continue to generate incremental cash proceeds from the portion of our non-core assets that are non-generating income.

For every $10 million of cash we generate from these non-income producing assets, we can generate approximately $650,000 of annual net investment income, or approximately $0.1 per share. In this regard, we have generated incremental cash each quarter and are very focused on executing some more significant process in the coming -- progress in the coming quarters.

Second, we continue to make progress with Merx. Prior to COVID, Merx generated a 13% return on average over a number of years. The current payment level as recently adjusted this quarter is approximately 9%. Although we don't expect to close this gap completely, we do believe that we can improve the return by either reducing capital and Merx with the same gross dollar return or increasing the cash return by improving the capital structure.

Third, we continue to focus on monetizing underlying assets, specifically Spotted Hawk, dynamic, MC and Chiron. Taken together these assets and a few others account for approximately $230 million of fair value and generate only $16 million of annual income, redeploying those assets that are approximate on euro yield to generate an incremental $2 to $3 million of annual net investment income.

And last we continue to buyback our stock when the price dictates. We obviously hope these opportunities become more-and-more infrequent, but when they occur, the buybacks are both accretive to book value, and moderately accretive to EPS. We believe these items provide additional support to our baseline earnings, and also provide a path to generating the earnings above the baseline.

Turning to our distribution for the quarter, the board has declared a base distribution of $0.31 per share, and a supplemental distribution of $0.5 per share, both distributions are payable on January 6 2022, to shareholders as a record on December 20 2021.

I'd like to remind everyone that as we've indicated previously, we intend to declare a quarterly based distribution of $0.31 per share, and a quarterly supplemental distribution of $0.5 per share for at least one more quarter.

With that, I will turn the call over to Tanner, to discuss the market environment and our investment activity.

Tanner Powell

Thanks, Howard, beginning with the market environment, the broader market sentiment remains mostly positive with the continued rollout of the vaccine and the reopening of the economy.

While the post-pandemic recovery continues, concerns about inflation due to supply chain problems, higher energy prices and labor shortages could create periods of volatility.

Specific to our business, competition for attractive middle market loans remains intense, as the syndicated loan market and private credit providers buy for new opportunities, particularly, as private credit providers make increasingly larger commitments. As a result, terms and covenants are becoming increasingly borrower friendly. That said, we continue to see more companies financed through private credit.

Moving to AINV’s investment activity, new corporate lending commitments for the quarter totaled $222 million across 18 companies for an average new commitment of $12.3 million, 88% of the new commitments were leveraged lending, 5% lender finance, 5% asset based and 2% life sciences.

Consistent with our strategy, all new commitments were first lien floating rate loans with a weighted average spread of 613 basis points, and a weighted average net leverage of 4.4 times and 95% were made pursuant to our co-investment order.

Gross fundings for the quarter total $211 million, excluding revolvers. Sales and repayments totaled $107 million, excluding revolvers. The strength in the market enabled us to continue to reduce our exposure to second liens, during the quarter, repayments included $35 million of second liens, including the full exit of two positions. Net fundings four revolvers totaled $10 million, in aggregate net fundings for the quarter were $114 billion.

Moving to Merx. The overall air traffic environment appears to be improving, particularly in the US. We're optimistic that demand for air traffic will continue to grow with the ongoing rollout of the vaccine and the lifting of travel restrictions. Furthermore, the aircraft leasing market will continue to be an important and growing percentage of the world fleet, as airlines will increasingly look at third-party balance sheets to finance their operating assets.

Specific to our investment, as Howard mentioned, we believe Merx has successfully navigated the significant disruption caused by the COVID-19 pandemic. The level of lease revenue generated from our fleet has stabilized. We have worked through our exposure to airlines that have undergone restructurings. We have been able to remarket aircraft during the period with long term leases or sales. And Merx continues to benefit from a growing servicing business which has increased in value over time.

Given the stabilization of Merx, during the quarter we recast at $4.5 million of Merx equity into debt, and as Howard mentioned, AINV received $6.9 million of interest income from Merx during the September quarter, $2.1 million more than last quarter.

Merx remains focused on remarketing aircraft that are due to come off lease via extensions, with existing lessees releasing to other airlines on long term leases or sales. During the September quarter, Merx sold two aircraft and signed lease extensions for six aircraft. Our lease maturity schedule is well staggered.

We believe Merx’s portfolio compares favorably with other major lessors in terms of asset, geography, age, maturity and lessee diversification. Merx’s portfolio is skewed towards the most widely used types of aircraft, which means demand for Merx’s fleet is anticipated to be resilient. Merx's fleet primarily consists of narrow body aircraft serving both US and foreign markets.

The Apollo aviation platform will continue to seek to opportunistically deploy capital. To be clear, Merx has focused on its existing portfolio, and is not seeking to materially grow its balance sheet portfolio. However, growth in the overall Apollo aviation platform will nurture the benefit of Merx as the exclusive servicer for aircraft owned by other Apollo funds.

Turning to the overall AINV portfolio, our investment portfolio had a fair value of $2.61 billion at the end of September across 144 companies in 26 different industries. We ended the quarter with core assets representing 93% of the portfolio and non-core assets representing 7%.

Firstly, net assets represented 92% of the corporate lending portfolio up from 90% last quarter. At the end of September, the weighted average spread on the corporate lending portfolio was 602 basis points. As a reminder, the weighted average LIBOR floor on our floating rate investment is approximately 1%, well above today's current LIBOR.

As Howard mentioned, we continue to see ongoing improvement in our credit metrics, as we reposition the portfolio. The weighted average net leverage of the corporate lending portfolio declined to 5.1 times down from 5.22 times last quarter. The weighted average attachment point declined 0.3 times down from 0.4 times last quarter. Our low attachment point is a clear indication of the seniority of our corporate lending portfolio compared to loans, which are classified as senior, but have much deeper attachment points.

The weighted average interest coverage improved to three times, up from 2.9 times last quarter. The improvement in these metrics, not just this quarter, but over the last several quarters clearly demonstrate the improved quality of our investment portfolio. Investments made pursuant to our co-investment order represents 84% of the corporate lending portfolio at the end of the quarter.

Although, over all quality of our portfolio remains strong. Our second lien position in Sequential Brands was placed on non-accrual status during the quarter. Sequential Brands owns managers and licenses, a portfolio of consumer brands in the active and lifestyle categories. The company filed for Chapter 11 bankruptcy in August and is seeking an orderly liquidation of the brands in this portfolio.

Our second lien position was marked at 91 at the end of September compared to 82 at the end of June. The mark at the end of September reflects the liquidation process and the resolution of our current position, which is expected to occur in the December quarter. At the end of September investments on non-accrual status totaled $28 million, or 1.1% of the total portfolio at fair value.

During the quarter Spotted Hawk completed restructuring of its balance sheet our second lien position tranche A was converted to equity in our third lien position tranche B was cancelled. Both of these positions were previously on non-accrual status. The valuation of our investment in Spotted Hawk was not impacted by this restructuring.

With that, I will now turn the call over to Greg who will discuss the financial performance for the quarter.

Greg Hunt

Thank you, Tanner, and good afternoon everyone. Beginning with AINV statement of operations. Total investment income was $52.9 million for the quarter, up 4.6% quarter-over-quarter, reflecting higher interest income and higher dividend income partially offset by a decline in prepayment and fee income.

The quarter-over-quarter increase in interest income was attributable to higher earnings from Merx, as well as a larger average investment portfolio. Dividend income was $2.7 million for the quarter, an increase of $2.3 million driven by a dividend from MC one of our shipping investments. The income was $1 million compared to $1.2 million last quarter. Prepayment income was $700,000, down from $4.1 million last quarter, which is below normal levels.

As Howard mentioned, fee and prepayment income can fluctuate quarter-over-quarter, but we expect to generate approximately $3.5 million of fee and prepayment income per quarter on average. The weighted average yield and cost of our corporate lending portfolio was 7.6% at the end of September, down from 7.7% last quarter. The weighted average spread over corporate lending portfolio declined from 616 basis points to 602 basis points. Decline in yield and spread reflects the continued shift of the portfolio into first lien investments away from second lien investments.

Expenses for the quarter were $31.7 million, an increase of $6.5 million quarter-over-quarter, driven buyer our incentive fee as well as slightly higher interest expense.

Prior to the September quarter, AINV had not paid any incentive fee since the quarter ended December 2019. As a reminder, AINV’s incentive fee on income includes a total return hurdle with a rolling 12 quarter look back. Given the reversal of unrealized losses during the look back period, the manager earned a full 20% incentive during the quarter. The total return requirement closely aligns the incentives of our manager with the interest of our shareholders.

In addition, during the quarter, AINV received a slight fee offset from our navigator fund one which is Apollo's glow, which is Apollo's flagship commercial aircraft leasing fund. Not only does merch receive income from servicing aircraft in this fund, AINV benefits from a direct sea offset equal to 20% of fees earned by Apollo Global in connection with managing aviation assets for Apollo including navigator.

The increase in interest expense reflects both the growth in the portfolio, as well as an increase in our funding costs. As a reminder, in July, we issued $125 million of five year 4.5% unsecured notes, which drove the increase in our weighted average cost of funding from 3.08% to 3.2% quarter over quarter. Importantly, unsecured debt increase to 30% of our outstanding debt at the end of September, up from 24% last quarter. Net investment income per share for the September quarter was $0.33. Net leverage at the end of September was 1.1 -- 1.51 times, up from 1.39 times at the end of June. And our average net leverage for the September quarter was 1.46 times.

On page 16 in the earnings supplement, we disclose the net gains or losses by strategy over the past five quarters. As Howard mentioned, our corporate lending portfolio continues to perform well. We’re in the September quarter or corporate lending, portfolio had a gain of $5 million or $0.08 per share partially offset by $1.3 million or $0.02 per share on non core and legacy assets.

The net loss on non core and legacy assets reflects net losses on oil and gas renewables and shipping investments, partially offset by a gain on carbon-free legacy investments. Regarding carbon-free, as a reminder, our investment in carbon-free consists of an investment in the company's proprietary carbon capture technologies and an investment in the company's chemical plant. Carbon-free is benefiting from strong interest in carbon capture, utilization and storage as part of broader ESG trends.

We believe carbon-free is a leader in this space, as evidenced by partnerships announced during the quarter, which demonstrate market acceptance for its technology. NAV per share at the end of September was $16.07, a $0.05 quarter-over-quarter. The $0.05 increase is attributable to a $0.06 per share gain on the portfolio, $0.00 from buybacks partially offset by three cents from the distribution excess of net investment income.

Regarding liquidity, given the continued improvement in the quality of our investment portfolio and our recent unsecured debt issuance, our liquidity position continues to strengthen.

Moving to stock buybacks, during the quarter AINV purchased 450,953 shares at an average price of $13.09 for a total cost of $5.9 million. Since the end of the quarter, AINV has purchased an additional 308,000 shares at an average price at $13.30 for a total cost of $4.1 million, leaving $14.9 million of authorized -- authorization for future purchases under the Board's current authorization.

This concludes our remarks and operator, please open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question today from Kyle Joseph with Jefferies. Your line is open.

Kyle Joseph

Hey, good afternoon. Thanks for taking my question. Just want to make sure I got the moving parts on non-accrual, so Spotted Hawk came off and sequential was added, that was the only movement in terms of non-accruals?

Howard Widra

Yes, yes.

Kyle Joseph

And then how are you guys thinking about credit at this point, obviously, we're not -- kind of through the pandemic at this point, but obviously, there's some inflationary pressures and wage pressures, what's the biggest risk economically as you're thinking about as you're deploying capital?

Howard Widra

Well, I mean, right now, the performance has been great, right? And so that's terrific, sort of shows in that -- sort of corporate debt portfolio, but it also means, right, there's nowhere to go, but down from there, right? And so if you think like through cycles, and part of that, like you, you mentioned, a few of the things inflation, wage pressure, supply chains constraints.

And so, obviously, like, as we've talked about over an extended period of time, the best defense to that is sort of granularity and diversity. So, that -- like any of these risks don't expose you across the portfolio, we're, of course, looking at sort of, for example, supply chain constraints and how they affect individual borrowers and might impact them and feel relatively comfortable where we are in the capital structure that that's -- that in and of itself is not a tremendous risk to our portfolio. But it's sort of like the combination of all of these pressures combined with a very aggressive debt market, which means you have to retain your humility. And not everyone in the market is and so that's a concern.

Again, it's why we've always said like one of the key aspects is to have a very wide funnel, have a diversity of products, and be able to be as selective as you can be in a market like this.

So, I know I didn't give you like a specific answer, but that's really it's a very benign environment this minute. But you can see all sorts of things that could potentially come your way. So, we take a very -- we take portfolio construction very seriously.

And then on individual credits, try to look out at the specific risks we see coming to see how they can absorb.

Kyle Joseph

Got, it was very helpful. Appreciate it. One follow-up for me. Repayments have been, I don't know, for lack of a better term, lower than feared I say, for not just you guys, but -- what --what's your -- what are your thoughts? You talked about how active the debt markets have been in-- are I know it's hard to predict but just give a sense for how you see Repayments trending over the remainder of the year?

Howard Widra

Yeah, I mean, repayments in the first quarter of the year were really high. Right. And so you saw -- we -- as we mentioned, our fee income you saw that everywhere, and that it just sort of seemed to sort of all of the low and medium hanging fruit had sort of dissipated on repayments yet, like new issuance was high and so you saw that this quarter. I think you'll see in the December quarter some return to -- that maybe not the levels it was in the beginning of the year but sort of, you know, a return back to some normalized levels of repayments. There was a real sense I think in September of people thinking that there was a major tax change coming it was going to drive behaviors so that would drive sales.

So drive new business and payoffs. I think obviously that's changed some and sort of changes some people's focus by the end of the year still always drives a bunch of activity. So that's both on the repayment side in the new deal side. So I think it will, I think it will pick back up to normalized levels in the fourth quarter.

Greg Hunt

Yeah, I would add to Howard's comments, and can the overall takeaways are still the same? If I would hazard one guess for maybe why across our space, maybe it seemed a little bit less despite record M&A volume is there some autocorrelation Kyle to the type of companies that want a private debt solution, and you -- and because of that you see less of our companies graduating, and more specifically those type of companies that need heavy delay draws are active in their own M&A pipelines within the companies.

And as a result, the private credit players and this kind of goes to power of incumbency, which we beat the drum on within our institution, I know others do the same. You see a longer duration on those assets. And maybe on the margin, perhaps less of the syndicated markets really, really hot. And we're seeing as you might have seen in the past, and names that graduate and leave our -- leave our market and go to the syndicated market maybe that's happening, a little bit less on the margin, but overall, what would that go? What would -- what it would Howard was saying as well.

Kyle Joseph

Appreciate the color. Thanks for answering my questions.

Operator

And we will move next to Melissa Wedel with JPMorgan. Your line is open.

Melissa Wedel

Thank you. Appreciate you taking my question. I'm curious how or whether really, there's been any conversation amongst the board and management team about any fee waivers in the context of NII not covering the dividends.

Howard Widra

I mean, what we've been focused on with the board is the same thing we've focused on these calls is effectively establishing with like a very sort of, hopefully, like a tight band of certainty or long-term earnings power. So we tried to go through that and set that up. And then once that's set up, I think, sort of, obviously, you know, the major expense for all BDCs is the manager, you know, fees. And that has to basically take into account how we deliver on that and what the return the investors have. So the answer is, it's always there sometimes in the foreground sometimes in the background, but right now, it's -- let's, let's deliver on, you know where we think we can deliver, and then we can assess what's appropriate there given how what our portfolio is and what the yield is.

Melissa Wedel

Okay. One follow-up sort of on that point, you've talked about a few areas where you believe we can rotate some assets and sort of boost the baseline earning power of the portfolio. One of the things they recognize is that the timing of the that portfolio rotation can be uncertain and it's not always entirely within the managers' control. Can you talk us through how you're assessing that timeline for rotation? Thanks much.

Howard Widra

Yeah. We're approaching it very aggressively. Right now. We have talked a long time about sort of working that portfolio down. And we did from a very high number, but it's been sort of dribs and drabs over the past whatever year or 18 months. And now we're very focused both because the market is welcoming, there's some positive tailwinds on some of these investments and because we feel like the corporate portfolio is so strong and steady that it needs to sort of have its opportunity to shine, if you will.

So the answer is, I think you're right, we can't say definitively what's going to happen with illiquid positions. But we think that there is a pathway for all of our illiquid positions to be able to do something sort of strategic, whether that fully monetizes them or partially does. We're very focused on the next -- within the next year to have something strategic done with all of them. And hopefully that will happen linearly, not like, meaning some each quarter, some each -- but we're very focused to have that sort of done and completed, so we can sort of tell what we thought what we've always got as the core story of this without any other noise.

And Malissa actually, that really goes to your other question. It's like, well, how do you look at the fees. Well, the fees and the appropriate level of the fees will depend on what sort of the solid clean portfolio looks like and what it's yield is and what it's delivering to the shareholders. And so we need to sort of prove the NAV of these investments and make them earn the right return.

Melissa Wedel

Thank you.

Operator

[Operator Instructions] We will go next to Robert Dodd with Raymond James. Your line is open.

Robert Dodd

Thanks. Good afternoon. On Merx, if I can. I mean, obviously, this could be cash reallocated, move some of the equity to debt at the margin, would it be your preference to do that kind of going forward to rotate more of the remaining equity into debt and get up the ROIC over the total committed capital that way, or I mean, obviously, you could reduce the amount as well. And you talked about that, or should we expect dividend income from Merx the equity might stay the same and you just collect the excess cash flow earnings from Merx and that would flow to maybe dividend income, or would you prefer to convert it essentially to interest income?

Howard Widra

Yeah. Thanks. Thanks, Robert. Thanks for the question. And appreciate there's some complexity here. As a reminder, this is our investment in the business. And on the margin, as you asked the question, Robert, our preference would be to characterize it as debt, it creates more predictability, it takes away what is as I acknowledged, a complex investment or at least characterization of investment and makes it a little bit less complex. And so on the margin, we would prefer to do to characterise it as debt.

You know, I would also state that it would obviously and you would hopefully, expect us to do this as well, we would only be doing that to the extent that we had the confidence that we could support it. So that would obviously be the you know, the counter to that or how we balanced that decision-making process within the management team.

Robert Dodd

Understood, I appreciate that. One more if I can. On the corporate lending platform, obviously, Apollo's now got the debt solutions product that's about to launch, which could have a large pool of capital behind it. I mean, I presume, obviously, the plan would be to co-invest. Do you think the launch of that product or where that product is, say, a year from now do you think that would have any impact on the available or not necessarily even available, but target bite sizes for the AINV, BDC?

Howard Widra

No. Good question. But no, I say two things. First of all, the core strategy of that – of that vehicle is to do sort of like the, you know, the large market origination, which you've seen some deals, you know, Apollo in $1.5 billion, $2 billion sort of proprietary origination, where they take a portion of those deals, that – to do that, and whatever sort of other bespoke really large origination is done, and then a smaller portion of that vehicle with potentially overlap with what we're doing and sort of our base origination.

So, so, we do expect there to be some co investing, but not a huge amount of co-investing. By the same token, you know, for us, we don't expect to take part in their deals unless we feel like they're particularly, you know, aligned with what our strategy overall is,

The fact that that vehicle will, you know, will raise capital and grow should be helpful to our overall origination effort. Because, like everybody else in our market, the key to originating is having scale. We have quite a bit of scale, that's why we're able to originate, but it's like – you always need more, there's like an arms race and so having a vehicle like this with permanent capital, that it has appetite for the deals and actually has appetite to the deals on the larger end of our spectrum, you know, because that fits their strategy is also where we need more capital obviously, because those are bigger deals.

And so, we would not – we do not expect it to affect AINV’s bite size and that's because AINV’s gets its full bite size on all these deals, so it doesn't get cut back. You know, there’s always enough. It's always – it's and so – it's always about having more capital than it is the asset. So we don't expect it. Now, if it became a $40 billion, you know, vehicle, would my answer start to change maybe. But it's only going to become a $40 billion vehicle that does a lot of a lot of those large deals anyway. So hopefully that answers the question.

Robert Dodd

It does. I appreciate that Howard. Thank you.

Operator

And I'm showing that we have no further questions. At this time, I'll turn the call back to management for any closing remarks.

Howard Widra

Great. Thank you. And thanks, everybody for listening today. And we want to thank you again for signing on and feel free to reach out with any questions you have. Thanks.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time.

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