Citigroup & Apollo Set $25B Lending Deal

Citigroup and Apollo have agreed to create a $25 billion private lending program in North America, with plans to possibly expand worldwide. This important partnership marks the beginning of a new phase where traditional banking meets alternative lending, which will greatly impact the industry.

Mubadala Investment Company, Apollo's strategic partner, and Apollo's subsidiary Athene will also participate in the venture.

Citi and Apollo anticipate strong client demand and may expand the program beyond the initial $25 billion. It aims to improve access to private lending capital for corporate and sponsor clients.

It will combine Citi's expansive banking client reach, origination, and capital markets expertise with Apollo's scaled, extensive capital base.

The collaboration is designed to provide funding certainty in strategic transactions.

Key Statements

Viswas Raghavan, Head of Banking and Executive Vice Chair at Citi, stated: "This exciting project brings Citi together with Apollo and other best-in-class partners to offer a full suite of innovative, private financing solutions to our clients"

Jim Zelter, Apollo Co-President, commented: "Our collaboration will allow Citi to enhance its client offerings and bring more private solutions to bear, while enabling Apollo to increase origination flow and tap into Citi's extensive client relationships"

Market Context

This collaboration is happening just as private credit is really taking off as an asset class. A report from Barclays Private Bank shows that, as of 2022, global closed-end private capital funds managed $14.7 trillion in assets. They're expected to grow to $19.6 trillion by 2028.

The collaboration between Citigroup and Apollo represents a significant development in the private credit market, leveraging the strengths of both institutions to provide innovative financing solutions to clients.

Our Opinion

This exciting new partnership marks the beginning of a fresh chapter where traditional banking meets alternative lending. It could mean more funding opportunities for businesses, though it might also ramp up competition for smaller lenders.

The participation of Mubadala Investment Company and Athene is certainly catching some attention. Diversifying funding sources is a savvy move, but involving sovereign wealth funds and insurance companies in direct lending might stir up some regulatory interest. Could this be another instance of "shadow banking" that ends up drawing the watchful eyes of regulators?

Also, this could really shake things up if they can tap into Citi's extensive client network to find top-notch deals. But remember, finding deals is just the beginning. The real challenge will be in how well they can handle and manage these loans over the long haul. With the program being so large, there are definitely some worries about how they'll manage risks and maintain solid underwriting standards.

No matter if this collaboration takes off or hits a few bumps, one thing's for sure—the industry is changing fast. The real question is: are we prepared to keep up with it?

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