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Will Apollo Global Management (APO) Stock Be Affected By Its Molycorp (MCP) Bonds Purchase?

Stocks in this article: APO

NEW YORK (TheStreet) --Apollo Global Management LLC (APO) is adding bonds of Molycorp Inc. (MCP) to its holdings in order to have control of the rare-earth mining company in the event it looks to restructure its $1.5 billion debt, Bloomberg reports.

Apollo bought $8.5 million of Molycorp's $230 million convertible notes, which are due in 2016. As of March 31 the investment firm, run by Leon Black, held a minimum of 22% of that securities class, Bloomberg added.

The firm thinks those holding Molycorp's convertible notes won't get a full recovery in the event of a default, and is looking to give those lenders control of a possible restructuring, and take over the company's equity.

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Separately, TheStreet Ratings team rates APOLLO GLOBAL MANAGEMENT LLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate APOLLO GLOBAL MANAGEMENT LLC (APO) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 71.0% when compared to the same quarter one year ago, falling from $248.98 million to $72.17 million.
  • Net operating cash flow has significantly decreased to $389.18 million or 56.03% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • APOLLO GLOBAL MANAGEMENT LLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APOLLO GLOBAL MANAGEMENT LLC increased its bottom line by earning $3.97 versus $1.95 in the prior year. For the next year, the market is expecting a contraction of 32.6% in earnings ($2.68 versus $3.97).
  • APO, with its very weak revenue results, has greatly underperformed against the industry average of 5.2%. Since the same quarter one year prior, revenues plummeted by 62.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 39.10% is the gross profit margin for APOLLO GLOBAL MANAGEMENT LLC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.68% trails the industry average.
  • You can view the full analysis from the report here: APO Ratings Report
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