Apollo Investment Outlook Cut To Negative by Fitch

Oh no she didn't.

Fitch Ratings-New York-06 February 2009: Fitch Ratings has revised the Rating Outlook on Apollo Investment Corporation's(Apollo) ratings to Negative from Stable as follows:

--Long-term Issuer Default Rating (IDR) 'BBB'; and

--Senior secured debt 'BBB'.

Approximately $1.2 billion of debt is affected by this action.

The Outlook revision reflects the uncertainty surrounding the recognition of further unrealized depreciation on Apollo's portfolio, which, if material, could pressure the company's ability to maintain compliance with asset coverage requirements. Fitch recognizes Apollo's more conservative leverage strategy, relative to peers, and its plans to preserve capital and liquidity over the near-term; however, unpredictable movements in market valuation could quickly negate the current equity cushion. Similar to other Business Development Companies (BDCs), Apollo has a tangible net worth covenant in its debt facility, but Fitch does not believe the company has an impending need to seek relief under the covenant because its required equity is a function of asset size; meaning minimum equity requirements decline as assets are written down. BDCs which have sought covenant relief recently have minimum equity requirements which do not vary with asset size.

Rating stability will be driven by stabilization of market spreads and valuation multiples, the ability to de-lever incoming quarters in order to build the cushion on asset coverage, and the company's ability to access the debt and equity markets to raise capital when market conditions improve.Conversely, a reduction in asset coverage below 205% could prompt a ratings downgrade.

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