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Listed Apollo affiliate writes up private equity holdings

AP Alternative Assets has written up all of its biggest private equity investments and seen its NAV rise 29% from 30 June, as Apollo reportedly nears a long expected public listing.

AP Alternative Assets, an Amsterdam-listed firm that invests in Apollo Global Management private equity funds, saw its overall net asset value increase in the third quarter as it wrote up its private equity portfolio.

The firm’s net asset value per unit on 30 September 2009 was $13, up 29 percent from the 30 June 2009 and up 48 percent from 31 December 2008.

AP Alternative Assets marked the fair value of some of its largest private equity investments with Apollo at $884.9 million, up from the fair value on 30 June 2009 of $697.4 million. Specifically, AP wrote up Harrah’s Entertainment from $142 million on 30 June to $148 million as of 30 September.

The firm also wrote up debt investment vehicles, which include holdings in various Apollo funds and investments, to $275.2 million from $188.2 million on 30 June.

The listed vehicle had about $1.4 billion invested in private equity as of 30 September, of which about 31 percent is invested in debt. AP had about $300 million of realisations through 30 September, the firm said.

AP also said its portfolio company holdings have some advantageous characteristics, including a majority of covenant-lite debt and few near-term maturities.

“Apollo has been one of the most active sponsors in leading debt exchanges to extend maturities and reduce liabilities across its Fund VI portfolio companies,” AP said in its quarterly report. The report shows that Fund VI portfolio companies have reduced debt maturities over the next four years by $752 million. Apollo closed its sixth buyout fund on $10.1 billion in 2006, investing at the height of the market.

After the debt exchanges, Apollo has managed to push back maturities that were looming in the next two years. Now, about $966 million comes due in 2012, which rapidly increases to $9.2 billion in 2013, $12.3 billion in 2014 and $12 billion in 2014. Next year, Apollo is scheduled to pay back about $473 million.

Before the debt exchanges, Apollo had a huge chunk of debt – $16 billion – scheduled to come due in 2013, and about $967 million due next year.

“Since [31 December 2008], Fund VI portfolio companies have reduced total maturities due through 2016 by nearly $13 billion and completely eliminated over $7.5 billion of total debt, creating runway for our portfolio companies to withstand the difficult market cycle,” the firm said in the report.

A good example of Apollo’s debt elimination is Harrah’s Entertainment, which the firm acquired along with TPG for $30.7 billion. The firm managed to cut its long-term debt to $19.3 billion from $23.1 billion by offering new notes with later maturities and less principal.

Meanwhile, a report in the Financial Times Wednesday said Apollo is preparing to list itself on the New York Stock Exchange in the next few weeks. Apollo would be the third private equity firm to list on the exchange, following The Blackstone Group and Fortress Investment Group.

Apollo registered in August 2008 to raise up to $480 million via a NYSE listing. The preceding year it listed its shares on Goldman Sachs' private exchange, following stake sales to the Abu Dhabi Investment Authority and the California Public Employees' Retirement System.