Apollo lays $4bn pipeline for NAV loans

The mega-sponsor is planning originations in the coming months, primarily in the buyouts space.

Apollo Global Management is eyeing the burgeoning strategy of loans tied to the net asset value in private equity portfolios, with around $4 billion of potential opportunities in the near-term, a source told affiliate publication Private Funds CFO.

The originations are planned for the coming months and are primarily for buyout funds, although the source cautioned that these details are not set in stone.

Apollo’s plans were first reported Tuesday by Bloomberg.

It’s not clear how long Apollo has been engaged in NAV lending, but the source said that the firm is not a new participant in the space, which it shares with players including 17Capital, Fund Finance Partners, Hunter Point Capital and Hark Capital.

NAV lending offers multiple options to borrowers. Such loans can be used to provide liquidity to LPs, make investments or deleverage portfolio companies, Private Funds CFO reported this month as part of a fund finance feature series.

Apollo’s focus on the business is on low-LTV lending and borrowers using the funding for investments, rather than for GPs to generate liquidity for LPs, the source said.

The approach is consistent with what the firm has previously noted. Apollo’s Jasen Yang, a managing director in structured credit, told Private Debt Investor in February that the firm focuses on more conservative NAV loans.

Apollo’s pipeline scale is yet another signifier of NAV lending’s rise.

Yang addressed its growth with PDI, comparing the market’s awareness of it to subscription lines five years ago.

“Once people start seeing them, they become more socially acceptable,” he noted.

Placement agent Rede Partners made a similar comparison between the fund finance instruments. In a report released in May, it predicted that NAV financing – a category that encompasses preferred equity along with NAV loans – will hit an adoption rate in 2030 that is comparable to the nearly 90-percent figure that sub lines now have.