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Apollo Global Management bought more than half of a significant risk transfer transaction issued by Deutsche Bank last September with a sizeable portion of underlying borrowers that could now be facing credit events.

The transaction, LOFT 2024-1, was initially marketed as a securitization of a $2bn portfolio of leveraged loans of which $72m of exposure came from loans to Cerba, Cuppa Bidco (Lipton), ModivCare and Newfold Digital. The final deal was upsized to $3bn.

ModivCare is facing a court-supervised restructuring and Newfold an out-of-court restructuring, while Cerba and Lipton have faced increased distress this past year.

The weighted-average rating of the initially marketed portfolio was around B+/B. The underlying portfolio was predominantly made up of around 160 to 170 revolving credit facilities (RCFs), alongside a letter of credit and around six terms loans.

The credit protection included a mezzanine tranche of 14%-18% and a first-loss tranche of 0%-14%. The mezzanine tranche priced at SOFR+375bps and the first loss tranche priced at SOFR+1,050bps.

The SRT may serve as a protection for any potential losses, but Deutsche Bank has not confirmed whether it has already triggered a credit event for any of these names or others in the portfolio.