In its quest to double its size by 2029, Apollo Global Management is ramping up its ability to write jumbo checks to high-grade corporations as it delves deeper into what it calls private credit’s next frontier.
The alternative-asset manager is making its high-grade capital-solutions business a key plank in its growth strategy and is beefing up resources for the unit, Apollo Co-President Scott Kleinman said in an interview.
“Companies that are extremely well-capitalized are calling us to find out more about these types of deals,” Kleinman said. “We think investment-grade capital solutions are the next frontier of private credit.”
Capital solutions deals provide flexible lending arrangements, and they’ve grown in popularity among alternative-asset managers that are eager to capitalize on banks’ pullback in lending. Borrowers can expect to cough up roughly 2% more than what they would pay to issue a bond, Kleinman said, but they can often get longer duration, as well as some added sweeteners.
Apollo has underwritten $18 billion worth of such deals over the past year for companies such as Intel, Vonovia, Air France-KLM and BP. The firm estimates that high-grade corporations have $75 trillion of capital expenditure and investment needs over next decade across sectors such as energy transition and digital infrastructure, as well as power and utilities.
During its investor day earlier this month, Apollo said it forecasts assets under management to increase to $1.5 trillion over the next five years. Apollo also projects that earnings at its Athene insurance arm, which is integral to its private credit business, will increase 10% annually on average over the next five years.
Apollo often places investment-grade products from its capital solutions business on the balance sheets of Athene and other third-party insurers that seek higher-yielding assets. Since insurers typically purchase assets with investment-grade ratings, Apollo’s capital solutions business hinges on finding that alignment.
