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Apollo, Cerberus top major league buyout firm default charts, report suggests

18 Jun 2014

debt money dollarsApollo Global Management and Cerburus Capital top the chart of major private equity firms for seeing their portfolio companies default on debt, new research suggests.

About 57 per cent of Apollo investments structured before the financial crisis defaulted according to Reuters, which cited a report by Moody’s Investors Service.

Cerberus came next out of the top 12 buyout firms at 50 per cent, the report said, with Moody’s senior vice president John Rogers saying overall default rates would have been higher if the use of covenant-light loans had not been so high.

KKR fared best out of the top firms with a default rate of just 10 per cent, the report said.

A spokesman for Apollo said the firm had been heavily active in using opportunistic exchange offers and buybacks to reduce debt and extend maturities at its portfolio companies.

He added that Apollo companies experienced “minimal defaults” excluding these transactions.

Moody’s research concluded that the average annual default rate for companies backed by the buyout firms was six per cent, compared to 6.4 per cent for US speculative-grade non-financial companies with an estimated senior unsecured rating of B1 or lower.

Earlier this year Apollo closed its latest flagship fund on $17.5bn, making it the biggest vehicle raised since the financial crisis.

Like its predecessors, Fund VIII will focus on distressed investments, corporate carve-outs and opportunistic buyouts.

Apollo’s previous fund, which was closed on $14.7bn in 2008, had generated an annual gross IRR of 38 per cent at the turn of the year.

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