Apollo Approaches $2.5 Billion Close for Europe Debt Fund

Apollo Global Management LLC (APO), the private-equity firm run by Leon Black, expects to raise about 2 billion euros ($2.5 billion) by next week for a fund that will buy loans from European banks.

Apollo European Principal Finance Fund II secured 1.6 billion euros as of June 21 and anticipated 400 million more in commitments by the July 24 closing, according to an update to clients, a copy of which was obtained by Bloomberg News. The fund is seeking 1.5 billion to 2 billion euros with a limit of 2.5 billion euros.

Private-equity firms are positioning themselves to take advantage of banks’ efforts to offload nonperforming loans, repay government bailouts and meet new regulatory requirements. Avenue Capital Group LLC, the distressed-debt firm co-founded by billionaire Marc Lasry, recently raised a $2.78 billion fund that will buy distressed debt in Europe.

Carolyn Sargent, a spokeswoman for Apollo at Rubenstein Associates Inc. in New York, declined to comment.

Apollo’s new fund will focus on purchasing European nonperforming loans in the residential, commercial, consumer and corporate areas from stressed and distressed financial institutions. Apollo’s servicing business, Lapithus Group, will help collect on the loans.

The firm gathered 1.3 billion euros in 2009 for the predecessor fund, Apollo European Principal Finance Fund I. That fund produced an 8.6 percent net internal rate of return as of March 31, according to the company.

First Investment

Fund I deployed about 1.2 billion euros in 19 loan portfolios and made four strategic investments as of May 31, according to the update. The fund in May bought almost half of a 101 million-euro German commercial mortgage loan that was secured by a property in Leipzig whose sole tenant is the federal state of Saxony, according to the update.

The same month, Fund II made its first investment, buying 660 million euros of Irish credit-card loans from Bank of America Corp. for 465 million euros. The investment will be split between both funds.

To contact the reporter on this story: Sabrina Willmer in New York at swillmer2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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