Apollo Advisors executives are spending two-thirds of their time on defense, bulking up the buyout firms portfolio companies, Leon Black, Apollo founding partner, said today at the Milken Institute Global Conference.
Were living in treacherous times. Its nothing like Ive seen in the 32 years hes been in the financial services business, Mr. Black said at the conference in Beverly Hills, Calif. The financial system is more broken than Ive ever seen.
Mr. Black added that conventional buyouts are dead and leveraged buyouts wont resume for another 18 to 24 months.
Buying the debt of portfolio companies is an attractive investment opportunity thanks to a provision in the federal stimulus package that makes profits from those debt deals tax-free for five years and makes taxes on the gains payable over another five years, he said. This provision will open the floodgates to these deals, Mr. Black said.
Apollo is also interested in buying the debt of good companies with bad balance sheets with a view to ultimately owning them. And the firm is investing in commodities, or businesses that are involved with commodities or hard assets, to counteract the inflation Mr. Black expects will result from the worldwide stimulus packages.