Apollo Senior Debt Fund

Chidem Kurdas

With the flow of leveraged buyout deals not likely to recover any time soon, big private equity firms are increasingly focused on other types of investments. Thus Leon Black’s Apollo is to start a fund to invest primarily in senior secured loans issued by below-investment-grade companies.

This is separate from the $400 million collateralized loan obligation Apollo is reportedly raising with JP Morgan as the marketer.

Mr. Black will not be managing the debt fund, though he may be advising the portfolio managers. The latter include Apollo senior partner Anthony Civale and chief executive James Zelter. Other managers are Joseph Moroney and Robert Ruberton.

The team sounds sanguine about getting yield, but also guarded regarding the potential for volatility in credit markets, increased defaults and times of illiquidity. Senior loans are easier to sell than private equity holdings but the secondary market is limited and some of the paper may be seldom traded. The fund may invest in distressed debt, including bankruptcy situations.

Given the risks, will investors go for it? Probably yes. That high yield looks very attractive at a time of low rates.

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Tags: Apollo, Leon Black