Apollo’s 125-page manifesto on private credit

One scoop to start: Apollo has moved a fast-growing unit focused on complex lending out of its prized buyout division, in the latest sign of a shift towards private credit and away from a business that built it into a $900bn behemoth.

And another: HSBC has closed a prestigious fast-track management programme that dates back to the bank’s founding 160 years ago, in the latest cost-cutting effort at Europe’s largest lender.

And another thing: An FT investigation sheds light on Wirecard fraudster Jan Marsalek’s activities in north Africa and shadow life as a Russian agent of influence.

In today’s newsletter: 

• Marc Rowan goes on tour for private credit

• UK oil majors’ failed green revolutions

Private credit bosses opine on private credit

Apollo head Marc Rowan is a man on a mission to define what private credit is. Now, the rainmaker who favours a professorial look is armed with a textbook of sorts to demystify the $2tn marketplace.

Rowan believes investors and the public increasingly misunderstand what private credit is after a number of high-profile blow-ups such as car parts supplier First Brands and car lender Tricolor Holdings have been presented as warning signs for the asset class.

At a November investor meeting held by Apollo’s insurance affiliate Athene, he pulled up a slide with a cutting question: “Does anybody know what they are talking about?”

The page showed a series of recent headlines (including one from the FT, of course) which he said demonstrated a misunderstanding of the nuances among the differing private credit products and business models.

Apollo on Thursday also published a 125-page slide deck that claimed to separate “fact” from “fiction” among common beliefs about private credit. (“People don’t know what private credit is!” one slide says.)

One of Rowan’s main gripes is that loans underwritten by banks that quickly distribute them to bond buyers have been conflated with private loans originated by Apollo and its peers, which hold them in their funds and insurers. 

The narrative has mattered, causing stock slumps and widespread consternation by many of Wall Street’s masters of the universe, DD’s Sujeet Indap wrote in a column earlier this week.

Rowan has responded by increasingly depicting Apollo as a different type of firm.

It’s not part of the gold rush of fly-by-night firms chasing increasingly competitive LBO financings, he says. Instead, it has a different focus: originating senior private loans to large, investment-grade-rated companies.

Other fund managers are also confounded by the level of scepticism they’re facing.

In September, a top executive at Blue Owl Capital wondered why the shares of the company had fallen by 25 per cent for the year, telling an industry conference: “It just makes no sense to me . . . what am I missing?”

Private capital chiefs, who are now stewards of valuable publicly listed companies, are being increasingly forced to defend businesses that didn’t get much scrutiny by regulators. 

One recent example of this is that Apollo, Blackstone and others have volunteered for stress tests in the UK.

It’s all part of these firms’ evolution from clubby, deal-oriented partnerships to more mainstream institutions with deep ties to highly regulated marketplaces such as insurance and retail savings.

Internally, these changes are still being digested and the identities of deal-oriented financiers are being tested.

“We are becoming a bank,” one longtime Apollo credit investing executive told DD’s Indap. “It truly sucks.”

The life and death of UK oil bosses’ green dreams

Six years ago, the incoming head of BP stunned his staff with plans for a green revolution. 

Bernard Looney said the oil giant had to “change, and change profoundly”. He pledged to reduce oil and gas production and invest in green tech.

At first, market factors seemed to underline his message. Oil prices crashed due to Covid-19 lockdowns. Ørsted, the first oil and gas company to exit fossil fuels and embrace renewable energy, saw its valuation soar.

But now the efforts have largely been abandoned. BP is doubling down on its core oil and gas business and many of the thousands of people hired to carry out the green transition have left the company. 

In the first nine months of this year, BP cut its spending on clean energy by 80 per cent compared with last year, to just $332mn.

“Our optimism for a fast transition was misplaced and we went too far, too fast,” Murray Auchincloss, BP’s current chief executive, said in February. “Oil and gas will be needed for decades to come.”

Fellow UK oil major Shell has also turned away from its clean energy plans, which had been led by former chief executive Ben van Beurden.

The companies went wrong by thinking they could become big players in electricity, sources told the FT. The bosses struggled to win over investors to their green spending plans, as well as their own employees.

But what ultimately halted the plans was the departure of the chief executives who were pushing them. 

Both companies have since dramatically scaled back several of their energy transition businesses, writing off billions of dollars of value as they shut down or sell off underperforming units. 

One BP employee said that these days at the company, not only was there not much discussion about the so-called green push, there was “radio silence”. 

Job moves

• Sidley Austin has elected 29 new partners from offices including New York, London and Chicago. The group includes five attorneys on the global finance team and four attorneys on the private equity team.

• Heathrow airport in London has named Philip Jansen as chair. Jansen was formerly the chief executive of telecoms group BT and is also the chair of WPP.

• Lululemon chief executive Calvin McDonald is stepping down at the end of January, kicking off a search for a new CEO.

Smart reads

Difficult boss Nik Storonsky, the billionaire head of the fintech Revolut, should be viewed as a positive force in UK finance, writes the FT’s John Gapper. Even if he can be a “pain”.

Campus equity As private capital pours into professional sports, a small PE firm just struck the first-ever deal to buy a stake in a US college athletics programme, Bloomberg reports. More deals could soon come.

Friends and foes Wall Street firms might soon face steeper competition for partnerships with Gulf funds, Semafor writes. The recent collapse of a deal between Apollo and Abu Dhabi’s XRG in Blackstone’s boardroom could be a harbinger of rivalries to come.

News round-up

Disney to invest $1bn in OpenAI (FT) 

Private capital-backed Mollie buys GoCardless for €1.1bn (FT) 

Natixis and Generali end talks over asset management tie-up (FT)

UK bankers warn on plan to use Russian assets for loans to Ukraine (FT)

ECB considers ditching AT1s to ‘increase quality’ of banks’ capital (FT)

Crypto founder Do Kwon sentenced to 15 years in prison (FT)