Citigroup and Apollo Collaborate on a $25 Billion Private Credit Initiative

Citigroup Inc. and Apollo Global Management Inc. have announced a groundbreaking partnership in the burgeoning private credit sector, committing to collaboratively manage $25 billion in deals over the next half-decade. This alliance, revealed in a Bloomberg-cited statement, marks a strategic move to provide tailored financings for corporate and private equity clients primarily across North America. The collaboration will also see participation from Mubadala Investment Co. and Apollo’s insurance division, Athene.

Apollo Co-President Jim Zelter explained the significance of this partnership in an interview, stating, “This is where the industry is going.” He elaborated that this collaboration enhances Citigroup’s capabilities beyond its traditional M&A banking tools, offering a comprehensive suite of financial solutions.

The partnership is structured to allow for potential expansion beyond the initial $25 billion commitment and could extend its geographical reach in future phases. In its inaugural year, the venture aims to generate $5 billion in debt transactions.

This ambitious initiative is among the most notable in recent collaborations between traditional banks and private credit firms, a trend that is significantly transforming the landscape of Wall Street and broader capital markets. Banks are increasingly partnering with private credit entities to sustain fee revenues without overleveraging their balance sheets, navigating through stringent regulatory and capital constraints. Conversely, private credit managers are capitalizing on these partnerships to deploy substantial funds they have amassed, seeking new investment opportunities.

Under this partnership, Citigroup will leverage its investment banking prowess to identify new debt opportunities among its clientele, earning origination fees in the process. Apollo and its affiliates will furnish the necessary capital. This arrangement will serve as a new pillar in Citigroup’s debt capital markets strategy, augmenting its traditional roles in loan and bond arrangements for public market distributions.

Richard Zogheb, Citigroup’s Global Head of Debt Capital Markets, highlighted the strategic advantage of this partnership, noting, “We lose a number of transactions to private credit. The great news for us now is that we can maintain incumbency and offer that solution.”

This move aligns Citigroup with other major banks that are intensifying their forays into the $1.7 trillion private credit market, each adopting distinct strategies. JPMorgan Chase & Co., for example, has earmarked at least $10 billion from its balance sheet for direct lending, while Goldman Sachs Group Inc. has been mobilizing third-party capital for private deals via its asset management wing for years. Wells Fargo & Co. recently initiated a $5 billion fund in collaboration with Centerbridge Partners.

The partnership further cements the long-standing relationship between Citigroup and Apollo, which stretches back to when Zelter was a part of Citigroup, where he led the global high-yield and leveraged finance sectors before joining Apollo in 2006. Citigroup frequently underwrites debt transactions for Apollo’s private equity deals, underscoring the deep financial interconnections between the two entities.

This strategic move is set against a backdrop of efforts by Citigroup’s Vis Raghavan, recently appointed to integrate all the bank’s dealmakers, to bolster the bank’s market position. While Citigroup has ascended to the second spot in underwriting investment-grade bonds in the U.S., it seeks to enhance its standing in high-yield bonds and leveraged loans. Meanwhile, Apollo continues to manage nearly $700 billion in assets, aggressively targeting a diverse spectrum of private credit opportunities to fuel its growth in this highly competitive sector.