The business development company
The firm, an affiliate of the New York buyout firm
Apollo Investment, which focuses on investing in distressed debt, said it will use the money to fund new portfolio investments, reduce outstanding borrowing and for general corporate purposes. The notes, taken together with current revolving commitments, bring Apollo Investment’s available debt capacity to $1.8 billion.
Apollo Investment, a publicly traded closed-end fund, typically invests $20 million to $250 million in its portfolio companies. The company seeks to make investments with stated maturities of five to 10 years.
This is the BDC’s first note placement, James C. Zelter, its chief executive officer, said in a press release. “The significant size and duration of the Notes complements our recent increase in revolving credit commitments and will support the continued long-term growth of our business.”
Nicholas Marshi, a co-founder and the chief investment officer of Santa Monica, Calif., hedge fund Southland Capital Management LLC, said Apollo Investment had done well to find a source of credit at a time when the collateralized loan obligation market, previously a key source of BDC financing before the Great Recession, remains moribund.
“Apollo’s breakthrough is a good sign that private sector financing for the industry may be opening up. Nonetheless, it’s important to underscore that this debt is no silver bullet,” Marshi wrote on the investing blog Seeking Alpha.
The pricing is not as favorable as CLOs would provide, nor is the term as long, although it matches well with the maturities of the investments Apollo Investment would seek to make.
The notes also include a “make-whole” prepayment premium, which probably would make Apollo Investment reluctant to retire the debt early, Marshi wrote.