Apollo finds opportunity in the downturn

The firm, led by Leon Black, invested about $23bn through the financial downturn including more than half of its $14.7bn seventh fund, which closed in 2008.

While many other private equity firms waited on the sidelines during the financial downturn, Apollo Global Management went on a spending spree, allocating about $23 billion across private equity and capital markets from the third quarter of 2007 to September 2010.

The $23 billion was invested mostly in control and non-control distressed investments and buyouts, leveraged loan portfolios and mezzanine and non-performing loans. Apollo also bought distressed debt and almost $30 billion in face value of leveraged senior loans at a discount to par from financial institutions.

“Since we purchased these leveraged loan portfolios from highly motivated sellers, we were able to secure attractive long-term, low cost financing and select credits well-known to Apollo,” the firm said in a filing this week with the US Securities and Exchange Commission.

Apollo, which has been preparing to go public, files financial updates with the SEC. The firm reported an increase in profits within its private equity business for the three months ending 30 September 2010. The firm’s economic net income increased to $315 million for the three months ending 30 September, up from $173 million for the same period last year.

Assets under management in the private equity business also increased during the three months ending 30 September, jumping $1.8 billion or 5.4 percent, due to improved investment valuations in Funds VI and VII. Apollo manages a total of about $35.3 billion in private equity, with about $10.2 billion uncalled.

Apollo’s seventh fund, which closed on $14.7 billion in 2008, was more than halfway invested as of 30 September, the firm reported.

The firm, led by Leon Black, has also been able to “purchase or retire” about $18.6 billion of debt in the sixth fund, which raised $10 billion in 2005. Portfolio companies in the sixth fund include Caesars Entertainment, Realogy and CEVA Logistics.