Arthur Penn, the ex-global co-head of leveraged finance at UBS Warburg, who resurfaced at French bank CDC IXIS North America a few months ago, started work with Apollo Management last Thursday. Sources familiar with the situation said Penn is helping to develop a debt capital markets investment business and will soon begin the fundraising for the Apollo Distressed Investment Fund, which will look to buy bank debt, bonds and preferred securities. One source said Apollo is not looking for control situations, but instead distressed investments.
When reached at Apollo's New York offices, Penn declined comment. One distressed investor said Apollo's timing may be off as the peak in default rates occurred last year, but the source said Apollo still sees a lot of opportunity. The size of the distressed fund and number of people working on the deal has not yet been determined, he added. The fund will leverage off of the existing Apollo resources and infrastructure, he said. Apollo has a private equity fund that has distressed debt within it, but that fund takes control positions, he noted. Leon Black, founding partner of Apollo, did not return calls.
Penn was exploring the possibility of a middle-market leveraged finance shop for CDC (LMW, 2/3). But sources said the French bank was working too slowly, and so when the opportunity came up with Apollo, Penn grabbed it. "He will be with the ex-Drexel [Burnham Lambert] guys," said one banker. CDC promised to provide the funds to get the business started, but were delaying, the banker noted. Contrasting CDC's heavy-hitting move of bringing over Ken Wormser and his approximately 30-strong asset securitization group from CIBC World Markets earlier this year, the source said that is an agency business. "[With Penn] it would be much more proprietary." The banker added that as a start-up, the CDC operation would have needed support from CDC, rather than funds being purely from outside. A spokeswoman for CDC declined comment on personnel matters. The source said he did not know whether CDC was still planning to start a leveraged finance business.
A spokesman for CDC said in February regarding the leveraged business that nothing had been approved and as a state-controlled entity CDC is very risk averse. Prior to joining Warburg Dillon Read, Penn was head of global fixed-income capital markets at BT Alex Brown. Before that, he was a senior v.p. of capital markets at Lehman Brothers. Penn left UBS last October, following a reorganization. He was co-head along with Chris Ryan, but investment banking head Kenneth Moellis promoted Brian McBride to co-head of global syndicated finance with Ryan. Penn was moved to the buyout group, where after leaving he was replaced by Warren Woo.