I have to admit to having a bit of a soft spot for Apollo. At the very least, they seem to have a grip on the cyclic nature of economies, and how a private equity firm can, and should, use the ups and downs that naturally accompany such shifts to make money. They also seem to have been one of the few firms to hold on to the notion that private equity is a contrarian sport. But there are a few new features among large LBO firms that, I suppose, they couldn't resist adopting. For example:
On April 20, 2007, Apollo Management Holdings, L.P., one of the entities in the Apollo Operating Group, entered into the AMH credit facility, under which AMH borrowed a $1.0 billion variable-rate term loan. We used these borrowings to make a $986.6 million distribution to our managing partners and to pay related fees and expenses. The Apollo Management Holdings, L.P. credit facility is guaranteed by Apollo Management, L.P.; Apollo Capital Management, L.P.; Apollo International Management, L.P.; Apollo Principal Holdings II, L.P.; Apollo Principal Holdings IV, L.P.; and AAA Holdings, L.P. and matures on April 20, 2014. The pro forma adjustment in the column labeled Borrowing Under AMH Credit Facility gives effect to the increase in interest expense, without consideration of any hedging, resulting from our entering into the AMH credit facility, as if the transaction occurred on January 1, 2007.
Well, who can blame them really. And they got, well, a pretty decent deal. Elsewhere we find:
Our April 20, 2007, $1.0 billion borrowing under the AMH credit facility bears interest at three-month LIBOR, plus 1.50%
Private equity loves 3-Month LIBOR. Quarterly payments on their bonus advances, you know.
On July 31, 2007, certain management companies within Apollo Management Holdings, L.P. transferred their indirect interests in a corporate aircraft, a G-IV, to a group of Apollo Non-Controlling Interest holders, which was treated as a distribution to such Non-Controlling Interest holders. Simultaneously with the transfer, such management companies were released from their obligations as guarantors of the loan used to finance the purchase of the G-IV. The transfer of the indirect interests and release as guarantors resulted in deconsolidation of the trust that owns the corporate aircraft. The pro forma adjustments in the column labeled Reorganization and Other Adjustments include the deconsolidation of Wilmington Trust, which holds the G-IV Aircraft.
I know, but now, really, who can begrudge them their airplane? It is not even a VI, so cool it. I suppose one could say that the name "Wilmington Trust" is an awfully boring moniker for an aircraft holding company, but then, the subtlety is somewhat crafty, no? "Trump Aircraft Holdings," does sound just as crude as "Trump," after all, so perhaps Apollo gets points here too.
Cranky as that may make you, there is, however, really a wonderful chart of their cyclic investment strategy worth taking a look at.
And, why is it, exactly, that private equity firms always make the best orgcharts?
Posting will be slow through April as I am on "vacation," and also acting as Guest Editor over on DealBreaker.com.
(Art credit: Lycia Apollo. Musée du Louvre, Paris, France, seized during the French Revolution).
