Apollo Global Management Said to Unwind $325 Million Loan Fund

Leon Black’s Apollo Global Management LLC is seeking to unwind a $325 million collateralized loan obligation it raised in 2010 after the fund ended its reinvestment period, according to two people with knowledge of the matter

The firm is seeking buyers for about $200.4 million of loans made to about 100 borrowers including Calpine Corp. and Hertz Corp., which the ALM Loan Funding 2010-1 CLO still holds, said the people, who asked not to be identified because the sale is private. Bids are due tomorrow at 11 a.m. in New York, the people said.

New York-based Apollo is liquidating the fund after loan prices improved 11.5 percent since the start of 2010, as measured by the S&P/LSTA U.S. Leveraged Loan 100 Index. The pool ended its reinvestment period, the time in which it can buy new loans, last year, the people said.

When a CLO exits that period it must use cash to pay down the debt rather than buy more new loans. About 80 percent of existing CLOs will end their reinvestment period at the end of 2014, according to Royal Bank of Scotland Group Plc data.

Charles Zehren, a spokesman at Rubenstein Associates for Apollo, declined to comment

Apollo, which managed $109.7 billion in assets as of Sept. 30, managed 26 CLOs as of June 30, according to news releases. The lowest portion, or the so-called equity slice of the ALM CLO, may return more than 15 percent when the sale process, also known as a bids wanted in competition, is completed, one of the people said. Apollo sold the $325 million deal, its first, with Citigroup Inc. in May 2010, according to data compiled by Bloomberg.

CLO Holdings

The bid list for the Apollo CLO includes a $5.7 million piece of Asurion Corp.’s term loan, a $4.5 million piece of Freescale Semiconductor Inc.’s debt and $4.9 million of Cengage Learning Inc.’s borrowings, the people said.

The deal was among the first backed by widely syndicated loans raised in 2010, in which just $3.5 billion of funds were issued, according to Bloomberg data. There were $52.6 billion of such deals raised last year. At the height of the market in 2007, $91.1 billion of CLOs backed by widely syndicated loans were arranged, according to Morgan Stanley data.

CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.

The funds were the largest buyer of leveraged loans, the approximately $500 billion market that backs mergers and acquisitions, in the third quarter of 2012 with 54 percent market share, according to a study from the New York-based Loan Syndications and Trading Association.

Leveraged loans, those rated below BBB- by Standard & Poor’s and less than Baa3 at Moody’s Investors Service, returned 9.7 percent in 2012, according to the JPMorgan Leveraged Loan Index.

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