Apollo prepares first close for European debt fund

  • Apollo European Principal Finance Fund III to hold final close in early 2017
  • Fund III targeting $3.5 bln
  • Pennsylvania Public Schools re-ups $200 mln to Apollo

Apollo Global Management is readying a first close for its newest European distressed-debt fund, a Portfolio Advisors investment memo showed.

The firm expects to hold a first close for Apollo European Principal Finance Fund III in October with a final close scheduled for early 2017, according to the memo, which was published in Pennsylvania Public School Employees’ Retirement System documents. Apollo began marketing the fund earlier this year with a $3.5 billion target, Bloomberg reported.

Pennsylvania PSERS committed as much as $200 million to the fund on Oct. 7. The commitment is subject to final negotiation of terms and conditions.

Apollo spokesman Charles Zehren couldn’t be reached for comment.

Apollo will use the fund to acquire portfolios of nonperforming loans, repossessed real estate and other distressed assets from European financial institutions, the Portfolio Advisors memo said. It also notes that Europe’s nonperforming-loan market has swelled to 2 trillion euros ($2.22 trillion).

Europe’s weak economic environment has been buffeted by the U.K. decision to leave the European Union, along with new regulations. The changes left banks, insurers “and other regulated financial institutions … incentivized to dispose of such nonperforming assets,” Pennsylvania PSERS Portfolio Manager James Del Gaudio wrote in a memo.

The fund’s investment committee is chaired by Fred Khedouri. Co-founders Josh Harris and Marc Rowan also sit on the panel, as do Sanjay Patel, Skardon Baker, Sebastian-Dominik Jais, Steve McElwain, Roger Orff and Andres Rubio.

The firm’s previous European Principal Fund, a $3.6 billion 2012 vintage, was netting a 9.9 percent internal rate of return and 1.15x multiple as of June 30. Pennsylvania PSERS committed $200 million to Fund II.

Apollo has about $186 billion of assets under management.

Action Item: Full report on Fund III is on the website: www.psers.state.pa.us/

Joshua Harris on Aug. 15, 2013, speaks to the media while he attends an NHL news conference announcing the new owners of the New Jersey Devils. Photo courtesy Reuters/Eduardo Munoz