$25bn Apollo/Citi deal brings private credit into the mainstream
The $25bn (£18.69bn) direct lending partnership between Apollo and Citigroup signifies the mainstreaming of private credit, Moody’s has said.
Yesterday (26 September), the two firms announced that they had entered into an exclusive agreement for a subsidiary of Citi and certain affiliates of Apollo to form a direct lending programme in North America, with the potential to expand into other countries in the future.
The programme has been designed to “significantly enhance access for corporate and sponsor clients to the private lending capital pool, at a scale and size which can provide funding certainty in strategic transactions,” the partners said.
The two firms expect the programme to surpass its initial $25bn funding target within the next several years, due to strong client demand.
The size and reach of the deal has led Moody’s to suggest that private credit is entering the mainstream.
Read more: UBS sells $8bn of Credit Suisse loans to Apollo
“The partnership between Apollo and Citigroup is yet another example of the rapid growth of private credit into mainstream finance,” said Anna Arsov, head of private credit, Moody’s Ratings.
“This collaboration combines Citigroup’s extensive client relationships with Apollo’s access to private market capital.
“This arrangement benefits both entities: Citigroup retains its fees and clients while moving the responsibility for originating non-investment grade credit and capital requirements to Apollo and its partners.”
The programme will include participation from Mubadala Investment Company as Apollo’s strategic partner as well as Apollo’s subsidiary, Athene, both of which will have the opportunity to join commitments appropriate for their respective mandates.
“This exciting project brings Citi together with Apollo and other best-in-class partners to offer a full suite of innovative, private financing solutions to our clients,” said Viswas Raghavan, head of banking and executive vice chair at Citi.
Read more: Apollo inks $5bn funding commitment from BNP Paribas
“Combining the strength of Citi’s banking and capital markets franchise with Apollo’s deep capital resources will provide clients with a range of options to meet their evolving financing needs and achieve their strategic goals.”
Apollo’s co-president Jim Zelter described the partnership as “a first-of-its-kind”.
“Our collaboration will allow Citi to enhance its client offerings and bring more private solutions to bear, while enabling Apollo to increase origination flow and tap into Citi’s extensive client relationships,” Zelter added.
“As financial markets continue to evolve, together we believe this is a win-win arrangement that uses our respective strengths and assets to better serve our clients and other stakeholders in a reliable, scalable and capital efficient manner.”
The deal was facilitated by Wall Street law firms Cravath, Paul Weiss, and Sullivan & Cromwell.
Read more: State Street and Apollo to launch retail private credit ETF
