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Apollo Said to Seek Increasing Fund Size to $17.5 Billion

Apollo Global Management Founder Leon Black
Apollo Global Management LLC Founder Leon Black listens during the annual Milken Institute Global Conference in Beverly Hills, California, on April 30, 2013. Photographer: Patrick T. Fallon/Bloomberg

Apollo Global Management LLC, the private-equity firm run by Leon Black, is seeking permission from investors to raise the limit on its new buyout fund to $17.5 billion to meet client demand, according to three people familiar with the matter.

Apollo, which had initially sought to cap Apollo Investment Fund VIII LP at $15 billion, is trying to increase the amount after investors expressed interest in putting in as much as $20 billion, said the people, who asked not to be identified because the New York-based firm’s plans are private.

If the new limit is approved, Apollo’s buyout fund would be the largest since TPG Capital gathered $18.9 billion in 2008 for its flagship private-equity pool, according to data from London-based Preqin Ltd. Apollo, buoyed by strong performance of its previous funds, is attracting commitments in a competitive market where investors are cutting down on their relationships with private-equity firms.

At $17.5 billion, Apollo’s new fund would be 19 percent larger than the prior vehicle that raised $14.7 billion in 2008. Investors in private-equity funds, called limited partners, typically like firms to limit their offerings to a certain size as they fear that performance might suffer if their funds become too large. Apollo needs approval to change the size of the fund from clients that have already made commitments.

Charles Zehren, a spokesman for Apollo at Rubenstein Associates, declined to comment on the fundraising.

LyondellBasell Investment

The performance of the firm’s 2008 fund has been bolstered by Apollo’s most profitable investment, Rotterdam-based LyondellBasell Industries NV, whose debt the firm started accumulating in 2008. The world’s largest manufacturer of polypropylene filed for bankruptcy in 2009, and as the company recovered, Apollo swapped its debt for equity and bought more shares. The firm started selling its stake in September of last year and had produced $5.5 billion on top of $1.5 billion received in dividends, on a $2 billion investment as of June.

The 2008 fund was generating a 28 percent net internal rate of return as of June 30, according to the firm’s earnings report for the second quarter.

The firm last year started marketing the latest fund with a $12 billion target. That is different from the limit, known as the hard cap, which is the maximum amount a fund can raise if demand exceeds the target. Apollo told prospective investors in August their stakes in the fund might get cut back if they wait too long to commit, people familiar said at the time.

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