Apollo eyes bigger role in government financing

Apollo Global Management is assessing opportunities to expand its role in financing governments and state-backed companies as rising debt levels push public-sector borrowers towards private capital, according to a report by Bloomberg.

The report cites Apollo President Jim Zelter as saying in a a Bloomberg Television interview in London that Europe is emerging as a particular area of focus, with governments increasingly viewing private financing as part of the answer to mounting funding requirements.

The alternative asset manager, which has built a reputation for structuring complex financing arrangements, is examining ways to strengthen the balance sheets of government-backed businesses through long-term capital. One potential approach would involve transferring hard assets into a subsidiary that could then raise financing, Zelter said.

The strategy builds on Apollo’s growing presence in European infrastructure and energy. The firm has invested in the region’s energy infrastructure, including an offshore wind project linked to Orsted, RWE’s German power grid operations and financing for the construction of the Hinkley Point C nuclear plant in the UK.

Zelter said European governments face growing financing demands at a time when the region’s banking, investment and pension systems are not adequately equipped to meet them, creating an opening for private capital providers.

Apollo has also strengthened its network of senior financial and policy contacts as it pursues larger transactions. Earlier this year, the firm reorganised its European and Asian leadership structures and appointed former Standard Chartered Chief Financial Officer Diego De Giorgi to lead its European operations.

The firm is also devoting more resources to Washington and other major political centres as it looks for opportunities to finance the defence sector. Zelter expects private capital to become increasingly important in supporting acquisitions and supply-chain programmes across the US and Europe.

Beyond government-related financing, Apollo is targeting the vast capital requirements associated with artificial intelligence infrastructure, including the data centres and power systems needed to support the sector’s expansion.

Zelter said, however, that Apollo intends to maintain limits on its exposure to AI-related investments. He noted that disciplined credit investors generally seek to keep exposure to individual industries within the mid- to high-single-digit range.