Business Context and Reporting Period
This Form 8-K Current Report was filed by Apollo Investment Corporation (not Midcap Financial Investment Corp) on April 14, 2005. The report details the entry into a material definitive agreement regarding a new credit facility.
Key Financial Metrics and Debt Structure
- Facility Size: Initial aggregate principal amount not exceeding $800,000,000.
- Expansion Option: Ability to seek additional commitments up to $400,000,000.
- Term: Five-year revolving facility maturing on April 14, 2010.
- Pricing: 100 basis points over LIBOR.
- Collateral: Secured by substantially all assets in Apollo's portfolio.
- Current Utilization: $0 (Apollo has not yet borrowed any amounts).
Material Changes and Covenants
The primary material change is the establishment of the Senior Secured Revolving Credit Agreement with JPMorgan Chase Bank, N.A. as administrative agent. The agreement imposes the following restrictive covenants:
- Shareholders' Equity: Must maintain the greater of (i) 40% of total assets or (ii) $300,000,000 plus 25% of net proceeds from equity sales after closing.
- Asset Coverage Ratio: Total assets (less total liabilities) to total indebtedness must not be less than 2.0:1.0.
- Borrowing Base: Borrowings are subject to a borrowing base applying different advance rates to different asset types.
- Other Restrictions: Limitations on additional indebtedness, liens, investments, mergers, and asset dispositions outside the ordinary course of business.
Outlook and Management Commentary
Apollo intends to use the Credit Agreement to supplement equity capital for additional portfolio investments. Management notes that a significant portion of equity capital has already been employed and expects to begin utilizing the credit facility in the coming months to support portfolio additions. JPMorgan also serves as custodian for Apollo.
Investor Verification Checklist
- Verify the exact identity of the registrant (Apollo Investment Corporation) versus the metadata provided.
- Confirm the current status of the borrowing base and whether the 2.0:1.0 asset coverage ratio is being maintained.
- Monitor the utilization of the $800 million facility and any exercise of the $400 million expansion option.
- Review the attached Press Release (Exhibit 99.1) and Credit Agreement (Exhibit 99.2) for specific definitions of "permitted debt" and "ordinary course of business."