Apollo portfolio companies face higher borrowing costs amid ‘sponsor premium’

Companies backed by Apollo Global Management are paying roughly one percentage point more to borrow in the leveraged loan market than those backed by other private equity sponsors, according to a report by the Financial Times citing new academic research examining the impact of sponsor reputation on financing costs.

The study, authored by Vince Buccola of the University of Chicago and Greg Nini of Drexel University, identifies what it describes as a “sponsor premium” associated with Apollo. The researchers argue that the additional borrowing cost reflects lenders’ concerns about the private equity firm’s reputation for taking an aggressive approach in creditor negotiations and balance-sheet restructurings.

The researchers analysed almost 2,000 leveraged loans issued between 2016 and 2025. While factors including borrower leverage and credit quality accounted for 79% of the variation in loan yields, incorporating sponsor reputation increased the explanatory power of their model to 84%.

The approximately one percentage point premium is significant against the backdrop of the leveraged loan market. The typical loan in the researchers’ sample carried a yield of slightly above 7%, while the authors said the difference was broadly comparable to the yield gap between B+ and B- rated loans.

Apollo has long been associated with hard-fought creditor negotiations, with its handling of the 2015 Caesars Entertainment bankruptcy among the transactions that helped establish that reputation. The restructuring involved disputes with lenders and investors including Appaloosa Management, Oaktree Capital Management and Elliott Management.

Apollo ultimately reached settlements worth billions of dollars with Caesars lenders and bondholders following litigation over the restructuring.

The firm has subsequently sought to strengthen relationships with creditors, including through direct meetings with asset managers. Apollo has consistently argued that it uses contractual rights agreed in financing documents to maximise returns for its investors.

The research also found that Apollo-backed businesses do not, on average, carry unusually high levels of leverage or feature unusually lender-unfriendly documentation. The authors said this makes the apparent sponsor effect particularly notable.

The paper suggests Apollo is not alone in developing a reputation for aggressive tactics. A number of private equity sponsors have become associated with hardball negotiations since the global financial crisis, as weaker covenant protections have given borrowers and sponsors greater flexibility in restructuring situations.

Apollo has disputed the conclusions of the study, arguing that its portfolio companies borrow at competitive rates and retain broad support from lenders. In a statement Apollo said: “While coverage of a single transaction from over a decade ago may influence an algorithm — and produce a flawed study — it does not change the facts. Our funds’ portfolio companies borrow at competitive rates and enjoy wide support from the lending community.”

Apollo has approximately $200bn in private equity assets and a further $800bn in credit assets, making it both a major borrower-side sponsor and a significant participant on the lending side of the market.