Apollo and Citi Forge $25 Billion Private Credit Partnership

The private credit landscape is undergoing a significant transformation as institutional giants Apollo Global Management and Citigroup Inc. announce a groundbreaking $25 billion private credit direct lending program. This collaboration marks one of the largest tie-ups between a major bank and a private equity firm, aiming to reshape how corporate financing is accessed and delivered in North America.

A Strategic Alliance with Global Ambitions

Initially focusing on North America, the program has the potential to expand into additional geographies. Apollo and Citi expect to finance approximately $25 billion of debt opportunities over the next several years, including corporate and financial sponsor transactions.¹ The scale of this initiative could extend beyond the initial commitment, reflecting robust client demand and market opportunities.²

The program will also involve Mubadala Investment Company, the sovereign wealth arm of Abu Dhabi, as Apollo's strategic partner, along with Athene, Apollo's insurance annuity subsidiary.² This consortium brings together substantial capital resources and diversified investment expertise.

Synergizing Strengths for Enhanced Capital Access

The partnership leverages Apollo's extensive private credit origination capabilities and Citi's expansive banking client reach, origination, and capital markets expertise. Apollo, with nearly $696 billion in assets under management as of Q2 2024—over $522 billion of which is tied to its credit businesses—specializes in high-quality private credit, including corporate lending and asset-backed finance.³

Viswas Raghavan, Head of Banking and Executive Vice Chairman at Citi, emphasized the strategic value: “Combining the strength of Citi's Banking and Capital Markets franchise with Apollo’s deep capital resources will provide clients with a range of options to meet their evolving financing needs and achieve their strategic goals”.³

Jim Zelter, Co-President of Apollo, highlighted the innovative nature of the collaboration: “Our collaboration will allow Citi to enhance its client offerings and bring more private solutions to bear while enabling Apollo to increase origination flow and tap into Citi’s extensive client relationships”.³

Implications for the Private Credit Market

This alliance underscores the growing convergence between traditional banking institutions and private credit managers. As banks face increasing regulatory pressures—particularly with the Basel III regulations mandating higher capital requirements—many are seeking partnerships to derisk their balance sheets while maintaining client relationships.⁴

Steve Boyko, Co-Chair of Proskauer Rose's Corporate Department, noted the strategic necessity of such partnerships: “The banks are getting more and more regulated... They don't want to cede their position to the direct lenders. These two partners are being pushed together between the regulatory landscape and the increased need for fundraising”.⁴

The collaboration is indicative of private credit's ascent into mainstream finance. With private credit assets under management projected to grow from $1.5 trillion in 2023 to $2 trillion in 2024—and potentially reaching $3.5 trillion by 2028—the market is poised for significant expansion.²

A Trend of Strategic Partnerships

The Apollo-Citi deal is part of a broader trend of alliances between banks and private credit firms. Other notable partnerships include:

● BlackRock Inc. teaming up with Partners Group to attract investments from wealthy individuals.

● Wells Fargo & Co. partnering with Centerbridge Partners to form a $5 billion lending fund.

● State Street Global Advisors collaborating with Apollo to enhance investor access to private market opportunities.

● Prudential Financial Inc. acquiring a majority stake in Deerpath Capital, a direct-lending manager.²

These partnerships reflect a strategic shift as financial institutions seek to capitalize on the lucrative private credit market while navigating regulatory challenges and competitive pressures.

Why Investors Should Pay Attention

The Apollo-Citi partnership underscores the growing importance of private credit in the investment landscape. As traditional banks collaborate with asset managers to navigate regulatory challenges and meet client demands, investors can:

● Diversify Portfolios: Incorporate private credit to enhance diversification and potentially improve risk-adjusted returns.

● Stay Ahead of Market Trends: Understanding such strategic alliances can inform investment decisions and help investors capitalize on emerging opportunities.

● Assess Risk Factors: Be mindful of the credit risk inherent in private lending and conduct thorough due diligence when considering investments in private credit vehicles.

Conclusion

The Apollo and Citi partnership represents a significant milestone in the evolution of private credit, offering a scalable and capital-efficient model that benefits corporate borrowers and institutional investors alike. By combining Apollo's deep capital base with Citi's extensive client network, the program is poised to enhance access to private lending capital pools at an unprecedented scale.

As regulatory landscapes evolve and market dynamics shift, such collaborations may become increasingly common, reshaping the financial industry's approach to corporate financing and investment opportunities.

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_{1. Citi, Citi and Apollo Announce $25 Billion Private Credit, Direct Lending Program, 2024.}

_{2. Market Watch, Citi and Apollo ink latest financial alliance as private-credit deals explode, 2024.} 

_{3. NASDAQ, Citigroup Inks Deal to Form Private Credit Program With Apollo, 2024.} 

_{4. The American Lawyer, Deal Watch: Are Only 'A Handful' of Law Firms Positioned Well After Citi-Apollo Partnership?, 2024.}

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