Apollo Euronext fund sees 27% NAV decrease

Citing a ‘challenging economic climate’ and volatile debt markets, the buyout firm’s listed investment fund wrote down $500m of its private equity co-investments in deals including Harrah’s.

Apollo Alternative Assets (AAA), the global buyout firm's Euronext-listed investment vehicle, has written down its assets by more than $530 million, according to the financial results published for the nine months ending 30 September.

Approximately $500 million stemmed from write-downs pursuant to private equity co-investments with Apollo's sixth and seventh buyout funds. The biggest write-down disclosed in the quarterly filings was for unnamed portfolio companies listed collectively as “other”, reduced from a cost of $475 million to a value of $278 million.

Its co-investment in struggling casino operator Harrah's Entertainment is being carried at a value of roughly $99 million, compared to a cost of about $166 million.

AAA’s net asset value as of 30 September was £1.55 billion or $16 per unit, a decrease of 27 percent from £2.1 billion on 31 December 2007.

The reasons for the declines were attributed to the “challenging economic climate”, by Marc Rowan, one of Apollo’s founders.

Rowan stressed during an analysts call the importance of putting these figures into a long term context, given the “quarterly snapshot basis” in which they are published.

“Private equity trading is about its long term cycle and proactive management in terms of business capital structure,” Rowan said.

He said that debt was trading at a discount across the board and anticipates that sources of liquidity may be impossible to obtain in some markets, given that the credit available is extremely volatile, with prices changing daily.

The Lehman Brothers collapse also had an impact, as the collapsed investment bank had an aggregate commitment of $50 million to Apollo’s revolving debt facility.

AAA has now drawn down all $900 million of its available debt, and will negotiate an opt-out clause from its agreements which require it to co-invest in all deals agreed by Apollo's sixth and seventh buyout funds. 

Apollo is expected to close its eighth buyout fund on $15 billion next week, according to a Wall Street Journal report.