Leon Black’s Apollo Global Management LLC is seeking to raise a $711.3 million collateralized loan obligation with Citigroup Inc. and Bank of America Corp., according to three people with knowledge of the deal.
The private-equity firm, which raised a $608.9 million deal last month, is combining so-called warehouse lines it had established with each bank into one larger deal, which it may price next week, said one of the people, who asked not to be identified because terms haven’t been announced publicly. Warehouses are lines of credits used to buy loans that will be rolled into a CLO.
CLO issuance has risen to the highest level since 2007 as investors seek greater yields as the Federal Reserve holds interest rates at about zero for the fifth year. There have been about $75.1 billion of the funds raised in the U.S. this year through November, compared with $46.3 billion for the same period in 2012, according to Morgan Stanley.
The Apollo fund, ALM X, includes a $410 million slice rated AAA, the person said. It will invest primarily in senior secured first-lien loans.
Fran McGill, a spokesman for Apollo at Rubenstein Associates, declined to comment.
New York-based Apollo was the ninth largest CLO manager globally as of June 30, according to a July 31 Moody’s Investors Service report. GSO Capital Partners LP, the credit investment arm of Blackstone Group LP, was the largest. Apollo was the seventh biggest manager in the U.S. by assets.
CLOs were the largest buyers of leveraged loans in the second quarter, with a 53 percent market share, according to a report from the Loan Syndications and Trading Association citing Standard & Poor’s Capital IQ Leveraged Commentary & Data. Retail funds were the second-largest buyer at 33 percent.
These funds are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return. Leveraged loans are rated below BBB- by S&P and less than Baa3 at Moody’s.