Apollo’s Kleinman says firm has plowed almost $5bn into covid-ravaged aerospace industry this year

Apollo Global Management invested “approaching $5 billion” in airlines, aerospace and aircraft in the last six months, co-president Scott Kleinman said Thursday. This is one of the industries hardest-hit by the covid pandemic, which has strangled travel and led to massive layoffs in the industry.

“We haven’t been deterred by many covid-hit markets,” Kleinman said at an online panel run by the Milken Institute at its annual global conference, run remotely this year. “There are some very interesting opportunities, and we think there’s only more to come there. We haven’t yet felt all the pain that some of these sectors are seeing.”

Kleinman said investors need to set their expectations right. In some sectors, he said Apollo does not expect a return to normalcy until as far away as 2023.

“If you bake a conservative set of outlooks into your projections and into your analyses, you can then afford to be aggressive in those situations that look attractive,” he said.

Kleinman said Apollo’s investments in the space have included equity, credit, structured credit and structured equity, but did not say which vehicles made the investments.

As Buyouts has reported, the firm has made distressed-for-control investing a focus of its most recent flagship fund, Fund IX, which closed on $24.7 billion in 2017. As of March 31, the fund was 36 percent deployed. The firm has several other active vehicles.

Apollo did not respond to requests for comment for this story.

Dispersion in the market

Kleinman and his fellow panelists all stressed the covid-19 crisis was different than other economic downturns in that it was hitting some companies and sectors harder than others, with technology and healthcare companies seeing positive tailwinds, but others such as travel and hospitality struggling.

Kleinman referred to a “pretty wide spread” between companies which have profited during the crisis and those that have struggled.

“There are a lot of very interesting companies, not directly covid-hit companies, that are just not as sexy from a growth standpoint that are trading at pretty attractive valuations right now,” he said.

Virginie Morgon, the chief executive officer of Eurazeo, said 2020 was defined by “polarization” of the markets by sectors and by regions – which means the private equity industry must show good judgement when picking investments. “We’ve always been very good at that, sometimes taking a very contrarian position, and not going with the crowd or with the majority,” she said on the panel.

David Tayeh, head of private equity in North America for Investcorp, said his firm was looking at companies that may have slow short-term growth prospects but better long-term prospects, even in harder-hit industries. “What we look for, and we are looking at a couple currently, are businesses that we don’t think are permanently changed as a result of covid,” he said.

Action Item: watch the Milken Institute’s 2020 Global Conference panel discussion “Private Markets: Challenges and Opportunities” here.