Apollo Global Management Launches $500M Fixed-Rate Subordinated Notes
The company will use proceeds to redeem outstanding subordinated notes and fund general corporate activities.
October 07, 2024
Apollo Global Management Inc., a prominent global alternative asset manager, has announced the issuance of $500 million in 6.000% fixed-rate resettable junior subordinated notes due 2054. This marks a significant capital-raising initiative by the company, aimed at fortifying its balance sheet while addressing near-term financing needs. The proceeds from this issuance will be directed towards refinancing existing debt, including the redemption of $300 million worth of subordinated notes due in 2050.
The newly issued notes carry a 6.000% interest rate, payable semi-annually in June and December, starting from June 2025. Apollo has structured these notes with an initial interest rate fixed for the first 10 years until December 2034, after which the interest rate will be reset every five years based on the prevailing five-year U.S. Treasury rate plus a spread of 2.168%. Notably, Apollo retains the option to defer interest payments for up to five consecutive years without triggering a default event.
With the notes maturing in 2054, this long-dated debt offers Apollo flexibility in managing its capital structure while providing investors with the potential for consistent yield over an extended period. The redemption terms allow Apollo to call the notes during specific reset periods, starting in December 2034, at par value, offering the firm room to navigate future market conditions.
Apollo intends to allocate the bulk of the proceeds towards redeeming the outstanding $300 million principal of its 2050 subordinated notes, effectively refinancing this debt with the new issuance. Any remaining funds will be earmarked for general corporate purposes, supporting Apollo’s ongoing growth strategy across its key business segments.
In addition to refinancing existing obligations, the company has highlighted the flexibility these proceeds provide for addressing various corporate needs, which may include funding strategic acquisitions, investments in new opportunities, or further strengthening its capital position in a volatile market environment.
Issuer and Guarantees
Apollo Global Management Inc. is the sole issuer of these subordinated notes, with guarantees provided by a consortium of affiliated entities. These include Apollo Asset Management Inc., Apollo Principal Holdings A L.P., B L.P., C L.P., and AMH Holdings L.P. Together, these entities form a robust guarantor network that supports Apollo’s obligations under the notes. Importantly, the guarantees provided by these holding companies do not extend to Apollo’s fee-generating businesses or its subsidiaries involved in insurance through Athene Holding Ltd.
Interest Deferral Option
One of the more intriguing aspects of this issuance is the optional deferral of interest payments. Apollo has the right to defer interest payments for up to five consecutive years without triggering a default, providing the firm with additional financial maneuverability. During these periods, interest will continue to accrue, and the deferred payments will themselves accrue interest, compounded semi-annually.
However, should Apollo opt to defer interest payments, certain restrictions will come into play. Specifically, the company will be prohibited from making dividend payments or repurchasing equity until the deferred interest is fully paid. This restriction ensures that investors in the notes retain priority in the company’s capital allocation decisions during deferral periods.
Corporate Strategy and Outlook
Apollo’s decision to issue long-dated subordinated notes aligns with its broader strategic vision of capitalizing on its strong position as a leading global asset manager. With nearly $700 billion in assets under management as of mid-2024, Apollo continues to prioritize a flexible approach to capital deployment, balancing growth investments with prudent balance sheet management.
The redemption of its 2050 subordinated notes and the issuance of new notes further highlights Apollo’s ongoing efforts to optimize its debt profile. By taking advantage of favorable market conditions to lock in a fixed interest rate for the next decade, the firm is positioning itself to navigate future interest rate cycles while retaining the flexibility to refinance or call the notes in later years.
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