Apollo Global Management LLC (APO), the private-equity firm run by Leon Black, is telling prospective investors their commitments might get scaled back if they wait past October to invest in its next flagship fund, according to two people familiar with the matter.
The pool, Apollo Investment Fund VIII LP, plans to close on $9.5 billion by early September, ten months after it started raising money, said the people, who asked not to be identified because the information is private. New York-based Apollo initially sought $12 billion for the fund and later told investors it would limit the size to $15 billion, people familiar with matter said in June.
Apollo, which gathered $14.7 billion for a predecessor pool in 2008, is one of the few big buyout firms on track to raise a larger fund than it did before the 2007-2009 financial crisis amid a surge of profitable sales. During the second quarter, the firm exited three companies, sold shares in five more and took three public, making $7 billion in proceeds and distributing $5.7 billion to investors. That’s a crucial measure for clients when deciding on which funds to back.
Bud Perrone, a spokesman for Apollo at public-relations firm Rubenstein Associates, declined to comment on fundraising.
Carlyle Group LP expects to exceed its U.S. buyout fund target of $10 billion when it finishes fundraising, compared with the $13.7 billion gathered by the prior fund in 2007. KKR & Co.’s newest North America fund, which is targeting $8 billion, would be less than half the size of its prior vehicle. Blackstone Group LP last year closed on $16 billion for its latest flagship fund, down from the $21.7 billion pool that closed in 2007.
Apollo has closed on $8.4 billion for the flagship fund to date. The firm has continued to hand back money to investors in the third quarter including through sales of stakes in chemical maker LyondellBasell Industries NV, real estate brokerage Realogy Holdings Corp. and packaging company Berry Plastics Group Inc. The firm’s previous fund was producing a 28 percent net internal rate of return as of June 30, according to the firm’s earnings report for the three months ended June 30.
Apollo’s biggest profit has come from Rotterdam-based LyondellBasell, whose debt Apollo started accumulating in 2008. The company filed for bankruptcy in 2009, and as the company recovered following the financial crisis, Apollo traded in its debt for equity and bought additional shares. Apollo began selling its stake in September and has generated $5.5 billion, on top of $1.5 billion received in dividends, on a $2 billion investment.
Apollo, which held its initial public offering in March 2011, has advanced 66 percent in New York trading this year. The firm said it will pay a dividend of $1.32 a share to stockholders on Aug. 30.
While Apollo is exiting profitable investments, it is trying to salvage some bets that soured. The firm in April said it and TPG Capital will invest $500 million in a new venture to help finance growth investments at Caesars Entertainment Corp. and bolster the company’s balance sheet. Las Vegas-based Caesars was burdened by more than $20 billion in debt after the 2008 leveraged buyout by the two firms, and it has been losing money since the crisis.
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