Citi and Apollo ink latest financial alliance as private-credit deals explode

By Steve Gelsi

Citi and Apollo plan $25 billion private-credit program with capital from insurance annuity company Athene and Abu Dhabi's Mubadala Investment Co.

Banking giant Citigroup Inc. and private-equity titan Apollo Global Management Inc. said Thursday that they're forming a $25 billion program for making private loans to businesses, as the world of private lending continues its rapid growth with new business alliances.

The two companies will focus initially on North America, with the potential to expand to additional geographies in the future.

Along with Citi (C) and Apollo (APO), the program will manage capital from Mubadala Investment Co., which is the sovereign-wealth arm of Abu Dhabi, as well as Athene, which is Apollo's insurance annuity business.

"The strategic program is designed to significantly enhance access for corporate and sponsor clients to the private lending capital pool, at a scale and size which can provide funding certainty in strategic transactions," the companies said.

Citi and Apollo said they expect to finance about $25 billion of debt opportunities over the next several years but may expand "significantly" over that dollar amount.

Viswas Raghavan, head of banking and executive vice chair at Citi, is overseeing the alliance, along with Jim Zelter, co-president of Apollo, who described the effort as a "first-of-its-kind, scaled direct lending program with Citi, a preeminent banking partner and leader in capital markets and advisory."

Big investment banks such as Citi, as regulated lenders backed by the Federal Insurance Deposit Corp., have been seen as private-credit competitors.

However, the growth in private credit has been involving regulated banks in more ways, as the asset type grows into more investment-grade products.

Asset-management firm BlackRock Inc. (BLK) estimates that private-credit assets under management are expected to increase to $2 trillion in 2024 from $1.5 trillion in 2023, with growth of up to $3.5 trillion by 2028.

Citigroup's stock was up 1.5% on Thursday, while Apollo's stock rose 0.6%.

Earlier this month, BlackRock said it would team up with Partners Group on a multi-private markets model aimed at drawing in investments from wealthy individuals.

Wells Fargo & Co. (WFC) said last year it'll team up with Centerbridge Partners to form a $5 billion lending fund.

Along with the Citigroup-Apollo deal, other recent alliances include Prudential Financial Inc. (PRU) paying an undisclosed sum for a majority stake in Deerpath Capital, a direct-lending manager.

Wilma Burdis, an insurance analyst at Raymond James, told MarketWatch that more such tie-ups are likely, at least in the world of insurance annuities.

"Private equity needs long-dated assets under management - illiquid assets under management - and life insurance companies need yield. It's a marriage that kind of works," Burdis said. "They're going to continue to combine. There will be different structures."

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-26-24 1056ET

Copyright (c) 2024 Dow Jones & Company, Inc.