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(Bloomberg) — Private credit’s effort to finance investment-grade companies is going to come down to its partnerships with banks, according to Apollo Global Management Inc. President Jim Zelter.
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“The future of IG private credit is really in partnership with the banks — no doubt about it,” Zelter said in an interview with Bloomberg TV.
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Apollo has 12 origination partnerships with banks, according to Zelter, in addition to its own deal-sourcing teams. Those include tie-ups with BNP Paribas SA, Citigroup Inc., Standard Chartered Plc, and others that are “private, or have not been announced, but still very active,” he said.
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Investment-grade companies have traditionally turned to banks for financing. However, private credit firms have been eyeing ways to diversify beyond providing debt for riskier companies. Apollo has said investment-grade opportunities could swell the total private credit market to $40 trillion.
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Partnerships have been pitched as a way for banks to reap fees from deals, but offload some of the funding burden to private credit firms. It’s also a way for the two sets of lenders to provide different portions of a capital structure.
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A bank might have appetite for more senior positions or prefer lending for a shorter amount of time than its private credit counterpart, Zelter said.
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In Zelter’s view, there are plenty of opportunities in Europe, as some governments might have limited budgets and can’t fulfill the capital expenditure needs of investment-grade companies in sectors including energy transition or data centers.
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Apollo is particularly interested in private investment-grade credit opportunities in Germany, according to Zelter.
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A lot of capital expenditure spending in the country has been delayed, Zelter said. As a result, debt and other long-term capital is “particularly appropriate” for opportunities in Germany, he said.
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Apollo’s credit business managed $690 billion of assets across public and private markets as of June 30.
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