Citi and Apollo Team Up in $25bn Private Credit Push

Apollo Global and Citigoup have set up a $25bn direct lending program.

Citi’s role – bring in the clients. Citi has clients who will be able to use this capital.

Apollo’s role – bring the capital. Apollo has raised large private credit funds and has a strong investor brand in this space.

Citigroup Apollo private credit partnership. Citigroup brings the relationships. Apollo brings the capital.

Mubadala Investment Company will participate at Apollo’s strategic partner. Apollo’s retirement products subsidiary, Athene, will act aas an affiliate. Both may invest in direct loans originated through the partnership.

The program is initially for North America. There are plans to grow this to other geographies and beyond $25bn if things go well.

Citi launched a similar $2bn direct lending partnership with private credit manager LuminArx Capital Management earlier in the year.

Why

This type of partnership between private credit managers and banks is becomming more common.

For both banks and private credit managers, the partnerships are partly opportunistic and partly defensive.

For banks:

Opportunistic: They can earn fees on the loans they originate through these partnerships.
Defensive: They avoid losing clients to other banks and advisors. There will be many deals for which the bank will not be able to provide the loan themselves – this might be because of regulatory capital reasons, risk management reasons or other reasons. This could result in the client going elsewhere. Through this kind of partnership, the bank is able to keep the client and also keep business associated to the loan – for example if the loan is to finance an acqusition, the bank can keep the associated M&A business.

For private credit managers:

Opportunistic: They are able to deploy funds.
Defensive: By entering into partnerhsips, they prevent their competitors for entering these partnerships. This makes a difference to their ability to deploy raised capital, and to market themselves to their own investors when raising new funds.

Other bank – private credit manager partnerships

Other bank – private credit manager partnerships include: Goldman Sachs and Ares Management, JPMorgan Chase and Apollo, Credit Suisse and KKR, and Deutsche Bank and Blackstone.