In a tough year, private credit bosses are pointing fingers

{"text":[[{"start":8.15,"text":"After a difficult 2025, private credit bosses are expressing frustration at losing the narrative over their companies. In September, a top executive at Blue Owl Capital wondered why the shares of the company had fallen by 25 per cent for the year, telling an industry conference: “It just makes no sense to me . . . what am I missing?” "}],[{"start":32.6,"text":"Marc Rowan, the head of Apollo and the sector’s most influential thought leader, decided in November it was time to blame the media. At a periodic investor meeting held by Apollo’s insurance affiliate Athene, he offered a slide entitled “Does Anybody Know What They Are Talking About?”"}],[{"start":52.040000000000006,"text":"The page showed a series of recent headlines (including one from the FT) which he said demonstrated a misunderstanding of the nuances among the differing products and business models within private credit."}],[{"start":66.67,"text":"Rowan’s remarks were similar to what he has offered at earnings calls and investor conferences for the last several years: assurances that his firm Apollo is not overexposed to the risky and opportunistic leveraged buyout finance side of private credit. Rather, as he has long reiterated, Apollo’s focus in the credit business was 99.6 per cent focused on high-grade debt, offering “safe yield”, in its own language, that matched well with its retirement annuities business run by Athene, itself conservatively capitalised."}],[{"start":104.05000000000001,"text":"On the surface, Rowan is probably correct. Much of Apollo’s lending is highly structured and complex but typically secured with a senior lien against hard collateral. As for the balance sheet, Athene’s credit ratings sit just below AAA. "}],[{"start":120.69000000000001,"text":"However, what is also true for Apollo and several other big private credit managers is that their heritage is in racy private equity and the sometimes vicious world of distressed debt brawls. And those stereotypes will not be so easy to shake just as these firms want to manage trillions of Main Street dollars and position themselves as the heirs to bank-like lending. Trust, record and reputation matter in a complex business which regulators, the public and journalists are still struggling to grasp.  "}],[{"start":156.87,"text":"“We are becoming a bank. It truly sucks,” one longtime Apollo credit investing executive recently told me. This person worried about the loss of efficiency from what he said were new layers of bureaucracy and politics that come from being a large, diversified financial institution.  "}],[{"start":null,"text":"

"}],[{"start":177.01,"text":"Apollo now discloses a figure similar to the “net interest margin” measure of banks that shows the difference between the pay on its deposits and earn on loans. The firm reports a “spread-related earnings” figure which shows that its investments earn just over 1 per cent above what it pays out to annuity policyholders. The Apollo executive also pointed out that, like at a bank, overhead costs suddenly mattered more."}],[{"start":207.85999999999999,"text":"A heavy balance-sheet business with thin spread margins is not necessarily bad when the underlying market opportunity is measured in the trillions of dollars and there is the chance to earn leveraged returns that compound year after year, which Apollo and Athene aspire to do like a modern Berkshire Hathaway."}],[{"start":229.35999999999999,"text":"However, the firm remains in the harder-edged businesses of private equity and distressed debt. Apollo, for example, is in a messy legal fight at Patrick Drahi’s overleveraged Altice USA where the firm is a major creditor. Apollo had also taken a short position in the term loan of the now scandal-torn auto parts maker First Brands, which another Apollo executive said made it trickier for the firm to be seen as an ally to companies. Another person close to Apollo said, however, such short trades were one-off and merely the result of the firm’s intensive research process."}],[{"start":270.34999999999997,"text":"In 1990, Apollo itself was born of an insurance investment calamity. It scavenged on the oversized junk bond portfolio that had soured at the Executive Life Insurance Company, a west coast life insurer. The legal fallout from the distressed purchase of the ELIC junk bond portfolio helped to bring down French bank Credit Lyonnais and at one point California’s attorney-general sued four Apollo executives for being part of an illegal transaction, but the case was dismissed and no enforcement action against Apollo resulted."}],[{"start":308.65,"text":"That was a long time ago. But after years of aggressive manoeuvring in current private equity and distressed debt operations, Apollo and its brethren should expect wariness when they now want to present themselves as a friendly face in the boardroom."}],[{"start":335.4,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1765332739_4617.mp3"}