Apollo launches $12bn lending platform with Mubadala as CLO market craters, Cove Hill, launched by Bain veteran, closes second fund, Florida SBA’s PE platform drops almost 10% in Q1

Apollo forms a $12 billion lending platform and Cove Hill quietly closes its second fund.

Happy Tuesday!

I’m still recovering from the holiday weekend, so bear with me. Instead of constant BBQing, I spent two days removing overgrown bushes from the yard. My body is suffering, but Wendy says I now have a month reprieve from chores. Fair exchange, I believe.

Lending: When you’re a multi-strategy mega platform, you can seize on opportunities created by shifting markets. In the lending breach created by the cratering of the CLO markets, Apollo Global Management formed a lending platform intended to provide about $12 billion in financings over the next three years, the firm said Monday. Apollo formed the platform across several of its permanent capital vehicles and in partnership with Mubadala Investment Co.

Check out PE Hub’s news brief here.

The platform, called Apollo Strategic Origination Partners, will target transactions of about $1 billion. Transactions will sit between the firm’s middle-market direct lending platform, MidCap Financial, and the broadly syndicated loan market, James Zelter, Apollo’s co-president and chief investment officer of credit, said in a statement.

The platform is filling a gap created by the breakdown in the market for collateralized loan obligations, writes Robin Blumenthal on Private Debt Investor today. The market targeted by the platform “is the white space between the middle market and the general corporate market,” John Zito, Apollo’s deputy chief investment officer of credit, told Robin.

The coronavirus pandemic “brought about an interesting dynamic with the CLO market,” where 65 percent of CLOs, which had been buying 75 percent of syndicated loans before the crisis, were in breach of their triple-C loan covenants and unable to do new financings, according to Zito, Robin writes. Check out her story here.

Check this: Cove Hill Partners is a firm we’ve been watching since the beginning. It was born during a time of rising interest in longer-hold funds. That trend has accelerated and gone beyond funds with longer lives. These days we’re seeing the longer-hold trend in M&A transactions where GPs find ways to sell pieces of their interests in a company to deliver proceeds to investors, while still retaining a stake in the business.

Cove Hill was one of the first GPs to raise a fund with the idea of the longer hold built into the fund structure. Fund I, which closed on more than $1 billion in 2017, has a 15-year life, plus extensions. It also have an evergreen provision that allows portfolio companies to be held indefinitely, we reported a few years ago.
The firm quietly has closed its second fund, which it raised during the pandemic downturn, writes Kirk Falconer on Buyouts. Read Kirk’s story here for the particulars.

Balson told us in 2017 that he’s been involved with “many businesses that continue to prosper and grow over really long periods of time.” Fund I was structured “to hold these special companies for as long as we believe the risk-return is attractive.”

Top Scoops
Florida State Board of Administration’s private equity portfolio value is expected to fall 9 to 10 percent for the first quarter, writes Justin Mitchell on Buyouts.
John Bradley, senior investment officer, said this “compares very favorably” against the program’s benchmark, which fell around 20 percent, Justin writes.

“What’s different this time is our distributions have actually increased by approximately 15 percent,” Bradley said. “A majority of the increase in these distributions has been from the sale of publicly-traded shares and the selling of publicly-traded shares has been very strong over the last few weeks. And so if there are any questions as to how our private equity GPs feel about public market valuations, this is probably as strong of a signal as I can think of.”

Read the story here on Buyouts.

Have a great day! Reach me with your thoughts, tips, gossip, whatever at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.