Apollo Mulls $750 Million First Boston Leveraged-Finance Bet

(Bloomberg) — Apollo Global Management Inc. is in talks to inject $750 million to support the leveraged-finance business of Credit Suisse Group AG’s investment-banking spinoff First Boston, potentially making it one of the biggest backers of the Swiss lender’s revamp.

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The New York-based alternative asset manager’s commitment may be matched by the Zurich-based bank, giving the unit roughly $1.5 billion in capital, said the people, who requested anonymity as the information is private. That could be leveraged to create about $7.5 billion in lending capacity for B rated borrowers, one of the people said.

The commitment would be parallel and separate to a possible investment in the First Boston unit that Apollo is also discussing. The firm has already agreed to acquire Credit Suisse’s securitized-products group in a deal that’s expected to provide the lender with much-needed liquidity during a restructuring period that has seen clients pull out funds and the share price slump to record lows.

Read More: Credit Suisse Shares Hit Record Low on Outflow Claims Probe

No agreement has been reached for either of the two transactions considered by Apollo and it’s possible that terms change or negotiations collapse. Credit Suisse and Apollo representatives declined to comment.

Credit Suisse shares rose as much as 3.2% on Thursday, trading at 2.79 Swiss francs ($2.991) as of 12:23 p.m. in Zurich.

The deals underline the crucial role Apollo is playing in the Credit Suisse overhaul that Chief Executive Officer Ulrich Koerner unveiled in October in an effort to draw a line under years of scandals and management missteps. But the outflow of more than 110 billion francs of client funds during the fourth quarter has intensified the crisis of confidence around the company, even after it raised $4 billion in fresh capital.

A cornerstone of Credit Suisse’s new strategy is the plan to spin off its capital markets businesses including advisory and leveraged finance into a “super boutique” under the Credit Suisse First Boston name, to be led by Michael Klein. The rainmaker told staff at a town hall last week that they will be shareholders in the venture, to be based in New York.

Spinoff Details

But even though four months have passed since Koerner presented his plan, he has yet to provide the details for the planned spinoff, including how it’s going to be funded and who will ultimately own it.

The CSFB investments considered by Apollo would follow its acquisition of a significant portion of Credit Suisse’s securitized-products group. The companies said earlier this month they’ve completed a “substantial first close” of the deal, enabling them to launch Atlas SP Partners, which is led by Chief Executive Officer Jay Kim.

Credit Suisse also said it’s expecting to “recognize the full pre-tax gain” on the deal of about $800 million in the first quarter. It expects to complete the deal within the first half of the year, it said.

–With assistance from Allison McNeely and Steven Arons.

(Adds shares in fifth paragraph)

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