Apollo Readies Large Cap Direct Loan Fund

As the old adage goes, “if you can’t beat them, join them…”

That appears to be exactly what Apollo Global Management is doing, after the asset manager has spun up its first ever dedicated fund for large-cap direct loans.

The firm is looking to “fill the gap left by banks pulling back from financing buyouts,” according to a Thursday morning Bloomberg wrap up of the news. 

The newly formed venture is going to be called Apollo Origination Partners, and it’ll be the first in a series of funds that will make direct loans to companies with at least $100 million in earnings, the report says. The fund raised $2.35 billion to get started.

John Zito, Apollo’s deputy chief investment officer of credit, told Bloomberg: “The number of firms who can do $1 billion deals is shrinking. We’re financing these sponsors in ways that they used to access the syndicated market. Now they’re accessing the private market.” 

Wall Street has pulled back on this type of funding as concerns about inflation, raising rates and recession have loomed. 

Apollo has already handled 11 transactions of at least $1 billion each, this year through July, the report says. 

The company is stress testing new loans using the assumption that there could be a recession anytime with the next four to six quarters. Loans come with first-lien collateral protection, and Apollo is looking for “well capitalized” borrowers who have sticky customer bases with recurring revenue. 

“Everyone wants capital right now. We’re leaning into our deepest sponsor relationships,” Zito said.