Apollo Global Management has been sued by former executives of one of its portfolio companies who claimed it conspired to take $20 million from them following a debt-for-equity swap.
The private equity firm allegedly arranged the swap in 2013 without notifying the management of Dutch logistics company Ceva, according to a suit filed at a Florida federal court in August.
Apollo bought a chunk of the discounted debt before finalizing the swap, the papers said, allowing the firm to maintain ownership of Ceva but leaving the equity held by the executives worthless, the papers allege.
Ceva is the result of the merger of two logistics companies Apollo bought in 2007 for a combined $3.9 billion. Managers of the business were given the opportunity to buy shares in the combined entity, and were told “Apollo and Management will be aligned to share in value creation,” the suit alleges.
A 2013 report, published by Morgan Stanley when Ceva was going through financial difficulties, indicated the firm’s value could be $3.75 billion, high enough to satisfy debt obligations and provide value to equity holders, the suit alleges.
Ceva decided the findings were “flawed and inconclusive” and the debt-for-equity swap ensued. They were subsequently informed, by letter, that it is unlikely there will be any recoveries for shareholders, the document said.
Apollo declined to comment on the matter.
It is the second lawsuit brought against the firm in less than a year. In December it was sued by lenders to the now-defunct portfolio company Core Media for allegedly stripping its assets and avoiding liability for the debt incurred by the media company.
21st Century Fox and Endemol Shine Group, which became involved in the media group following a 2014 joint venture agreement, were also named in the complaint. The case is yet to be concluded.