Apollo Global Management
on Wednesday filed for a $417.5 million initial public offering, dipping its toes in public waters that other alternative investment vehicles have found chilly of late.
The New York-based firm, in a filing with the
Securities and Exchange Commission
, said it will sell 29.8 million shares priced at $14. It did not disclose underwriters.
The figure is significantly below where other alternative investment managers priced offerings just last year.
went public at $38 a share in May, but has traded as low as $13.40. The stock recently was trading at $18.15, down 8 cents.
Fortress Investment Group
, which is also known for its distressed debt buying, went public in February 2007, initially soaring in trading some 68% to $31. Like Blackstone, however, it has fallen dramatically since those days, sinking as low as $9.50 and recently trading down 22 cents to $13.15.
Why Apollo's IPO Makes Sense
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Apollo had fueled
about its intentions over the past year by entering into a number of recent private transactions. Last summer, it sold $1.2 billion in securities to California Public Employees' Retirement System, or CalPERS, and an affiliate of the Abu Dhabi Investment Authority. Apollo also sold $180 million of Class A shares to Credit Suisse for a now inflated price of $24, which can't be sold until August.
Apollo focuses on underperforming and distressed companies. As of the end of December, the firm had $40 billion in assets under management.
Apollo was founded by Leon Black in 1990 after a career at Drexel Burnham, known for its junk bonds and as an advisor to distressed companies. After an insider trading scandal, the firm went bankrupt when the junk bond market crashed and the firm was unable to obtain cash to keep it solvent, bringing to mind the recent collapse of
Black, known for his tough negotiating tactics, has struck roughly 76 deals at Apollo and the firm has posted average annual returns of 34%. According to the prospectus, the private-equity funds generated a 40% gross internal rate of return and a 29% net IRR from inception through Dec. 31. Apollo, according to
The Wall Street Journal
, is joining Blackstone and TPG in
a portion of the $12 billion in leveraged loans that
is packaging and selling for between 60 cents and 90 cents on the dollar.
In 2006, Apollo teamed with TPG to buy Harrah's, the top-performing gaming company.
Although the company has been very successful in the past raising billions in its funds, since July it has not been easy money. The subprime fallout led to the decline in availability of asset-backed commercial paper and debt underwriting. "Based on the performance of many of our portfolio companies and capital markets funds in the third and fourth quarter of 2007, the impact to date of these events on our private equity and capital markets funds has resulted in a reduction in revenue," Apollo's prospectus says.
The firm warns that if the disruption continues, it may experience "further tightening of liquidity, reduced earnings and cash flow, impairment charges, as well as challenges in raising additional capital, obtaining investment financing and making investments on attractive terms."
Apollo also took out a $1 billion loan to make a distribution to the managing partners and pay fees and expenses. That loan matures in April 2014. It also faces the risk of a change in taxation if Congress enacts legislation that would not allow them to be considered a partnership, but instead be taxed as a corporation.