Apollo Global Management Inc. (NYSE: APO) inches down in early trading session on Tuesday as in order to make opportunistic investments in various credit asset classes, including snatching up some of the $43 billion in buyout loans presently trapped on bank balance sheets, it launched its first long-only fund.
According to John Zito, Apollo’s deputy chief investment officer of credit, the $2.4 billion Accord+ Fund will purchase both new and existing secured debt with double-digit yields, like the recent Carnival Corp. issuance, as well as private financings and high-quality structured credit that may be trading at prices below its true value.
In an interview, Zito claimed that whenever there is unrest, people “tend to be buyers” of investment-grade debt offerings. He added that Apollo sees opportunities to refinance some of the roughly $100 billion in debt due in 2024 the following year. The company anticipates a recession or downturn in the economy in 2019.
According to Zito, the market reacted to the rate change in 2022. “The actual economy will feel the effects of all those rate rises in 2023.”
The U.S. credit market has been shaken by rising interest rates, geopolitical unpredictability, and concerns about a recession, leaving banks responsible for billions of dollars in debt that they had previously committed to finance leveraged buyouts.
Banks typically provide financing with the intention of later selling it to investors, but as potential buyers have stayed away, lenders have been forced to hold onto the debt or sell it at significant discounts.
Apollo purchased highly rated collateralized loan obligations worth $1.1 billion that were sold by UK pension funds to fulfill margin calls, as well as a portion of the debt used to finance the purchase of Citrix Systems Inc. by Elliott Investment Management and Vista Equity Partners.
A portion of the hanging debt on bank balance sheets consists of loans and bonds supporting Apollo’s acquisition of the auto-parts manufacturer Tenneco Inc.
According to a statement, the Accord+ Fund brings the total amount of money raised through its Accord series to $11 billion.