Fund Launch: Apollo Debt Solutions BDC
Apollo Global Management has launched a new non-traded BDC: Apollo Debt Solutions BDC. The SEC declared the Apollo’s new BDC effective on October 29, 2021.
According to the prospectus for Apollo Global Debt Solutions:
Our investment strategy is focused on sourcing deals directly with large private U.S. borrowers who seek access to financing and who historically relied heavily on bank lending or capital markets. We believe there is a market opportunity for these large private U.S. borrowers.
They will focus on companies with at least $75 million in EBITDA, but they might adjust this threshold for market disruptions, M&A related charges and synergies, etc. Quoting from the prospectus again:
We believe this opportunity set generates favorable pricing and more rigorous structural protections relative to that offered by investments in the broadly syndicated markets. From time to time, we may also invest in loans and debt securities issued by corporate borrowers outside of the private large borrower space to the extent we believe such investments enhance the overall risk/return profile for our shareholders and help us meet our investment objectives.
The fund was launched as a blind pool, but they already had a financing facility agreement on the date of the launch.
Apollo Debt Solutions Fund Structure
Apollo Debt Solutions BDC has a maximum capital raise of $5 million. The latest prospectus includes three classes of shares: Class S, Class D, and Class I . Class S shares will have a servicing/distribution fee of 0.85% per year, with a 3.5% cap. Class D wil have a shareholder servicing/distribution fee of 0.25% per year with a 1.5% cap. Class I shares will not have any shareholder servicing or distribution fees.
Apollo’s new BDC will have a base management fee of 1.25% per year. Additionally, it will charge an incentive fee consisting of two parts. The first part of the incentive fee is based on income- the manager will receive 12.5% of pre incentive fee net investment income over a 5.0% hurdle rate. Additionally, the fund will pay the manger 12.5% of cumulative realized capital gains.
About Apollo Global Management
Apollo is a leading global alternative asset manager with approximately $480 billion in AUM, according to a recent investor presentation. Apollo Global Management is listed on the NYSE under the symbol APO. They have three main business segments: Private Equity, Credit, and Real Assets. IT believes it is distinct from other alternative managers in the way it operates its three primary business segments: private equity, credit, and real assets, in an integrated manner. Apollo has been part of a broader trend of institutional alternative managers making the big shift into the retail channel. On recent conference calls, management has hinted at early success raising capital from retail investors.
Apollo Debt Solutions will be a good fund to watch in the coming months. Blackstone’s non-traded BDC has over $18 billion in assets. It will be interesting to see if Apollo achieves similar fundraising success.
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