Citigroup Inc and Apollo Global Management Inc have announced a strategic partnership to target $25 billion in private credit transactions over the next five years, marking a significant expansion into the rapidly growing sector, according to a report by Bloomberg.
The partnership, which also includes Mubadala Investment Co and Apollo’s insurance unit, Athene, will initially focus on non-investment grade lending in North America. Both firms may expand the arrangement beyond the initial $25bn and explore opportunities in other regions, with teh venture expected to originate $5bn in debt transactions in its first year, according to Apollo Co-President Jim Zelter.
Speakig in an interview Zelter said: “This is where the industry is moving,” highlighting the increasing convergence between private capital providers and traditional banks, while emphasising that Citigroup’s role would evolve from its typical mergers and acquisitions (M&A) activity to offering a full range of financing options.
As part of the arrangement, Citigroup will leverage its investment banking expertise to identify debt deals among its clients, earning fees for originating the transactions, while Apollo, along with its partners, will provide the funding, adding a new dimension to Citigroup’s existing debt capital markets strategy, which traditionally focuses on public market loans and bond issuances.
“We’ve lost several transactions to private credit in the past,” said Richard Zogheb, Citigroup’s head of debt capital markets. “Now, we can maintain our client relationships and offer this private credit solution.”
Citigroup’s initiative mirrors similar moves by rivals into the $1.7tn private credit industry, although each firm has taken its own approach. JPMorgan Chase has allocated at least $10bn from its own balance sheet for direct lending, while Goldman Sachs has long raised third-party capital through its asset management division. Wells Fargo teamed up with Centerbridge Partners last year to launch a $5bn fund for private credit investments.
