Apollo Explores $3 Billion Sale of Private Credit Fund MFIC

Apollo in Talks to Sell $3 Billion Private Credit Fund

Apollo Global Management has reportedly entered discussions to sell MidCap Financial Investment (MFIC), its publicly listed business development company. The fund and its associated portfolio are valued at approximately $3 billion, according to sources familiar with the matter.

Sector Challenges and MFIC's Performance

This potential transaction occurs amid a challenging period for U.S. private credit lenders, also known as BDCs. The sector is currently facing weaker investor demand and increased redemption pressure. Credit ratings agency Fitch recently described the BDC sector's outlook as 'deteriorating' due to these pressures and above-average troubled loans.

MFIC has seen its own challenges, with defaults in its fund increasing to 5.3% in the first quarter from 3.9% in December. In response to its shares trading at a significant discount to net asset value, management has been actively repurchasing shares this year.

Implications of the Potential Sale

The likely buyer for MFIC is expected to be another business development company. The deal could be structured using the buyer's own shares to acquire MFIC. MFIC's primary function is to invest in loans originated by Apollo’s larger MidCap Financial platform, which focuses on lending to midsize companies.

Market Outlook and Key Factors

The outcome of these talks will be closely watched as an indicator of consolidation within the stressed private credit market. Key factors include the valuation of MFIC's loan portfolio and the market's reaction to a potential large-scale BDC merger.

FAQ

Q: What is Apollo reportedly selling?

A: Apollo is in talks to sell MidCap Financial Investment (MFIC), its publicly listed business development company focused on private credit.

Q: What is the reported valuation of the deal?

A: The fund and its portfolio are valued at approximately $3 billion.

Q: Why is this sale happening now?

A: The sale comes as the U.S. private credit sector faces challenges, including weaker investor demand, rising defaults in the fund, and redemption pressure.

Source: Investing.com