Apollo Investment Corp. has invested $187 million in first and second-lien senior secured bank debt in the last 12 weeks and plans on investing another $630 million in bank debt and mezzanine by March. Art Penn, chief operating officer of Apollo Management’s business development corporation, said on a conference call with investors and analysts that the fund has invested in 12 portfolio companies totaling $243 million. Of this $56 million was in high-yield bonds, but the rest was bank debt. He said the average yield of the first-lien debt is 5% and the second lien is 8.4%. The sectors were industrial, chemical, packaging, consumer products, food, business services, cable and the media industries, he added. Over time the portfolio is expected to gravitate towards mezzanine investments, but a source explained that bank debt is the quickest investment to make, enabling the fund to be fully invested faster. A middle-market lender said he has encountered Apollo writing big tickets in the last few months.
Apollo raised $870 million in an IPO last March for lending to and making mezzanine investments in middle-market companies. A slew of private-equity funds then announced similar plans, including The Blackstone Group and Porticoes, a prospective fund formed by Ken Kencel and Les Lieberman. Of the 15 or so that filed, only Prospect Energy Corp. has raised money to date. Michael Gross, founding partner of Apollo, declined to comment on any other funds and there prospects for raising the money on the call.
One private-equity investor said after Apollo raised a number of events collided to halt the others. Apollo’s stock traded down, which made it more difficult for the others to tap retail investors. The surge of competitors all filing within two weeks raised supply pressure and the third factor was the press, which has a field day on how private-equity firms were going to rip off retail investors, he added.