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Sasha Padbidri

The syndication of Citrix’s buyout debt may be going better than many anticipated, but market participants should not view this as a sign that the credit markets are open for business, according to the co-head of Apollo Global Management’s private equity business.

Speaking at the SuperReturnUS conference, David Sambur — who runs Apollo’s private equity division alongside Matt Nord — said that volatility in the stock market was making it hard for banks to underwrite new debt transactions.

“Everyone’s focused on this Citrix deal and I’ll say this to everyone in the room, I don’t think people should be hoping this deal opens up the market,” he said in a keynote interview earlier today. “I think we’re going to have a bumpy September.”

“Banks, by and large, aren’t committing to large debt deals right now,” he said. “Historically, debt commitments had about 200bps-300bps of insurance spread built into those commitments. When the stock market is down 4%-5%, it’s pretty hard to price that insurance.”

A group of investment banks led by Bank of America finally launched syndication of Citrix’s buyout debt earlier this month. The debt was underwritten in January, before markets sold off, so the banks have been struggling to minimize their losses on the debt as funding costs widen.

The deal is viewed by many as a bellwether for how credit markets may perform for the rest of the year. So far, syndication has been relatively smooth, although it remains to be seen whether yesterday’s selloff in stocks will impact the price investors are willing to pay for the debt.

Sambur’s comments highlight the current uncertainty in credit markets, which for years (save for the interruption of the initial shock of the pandemic) have been booming, thanks in part to loose monetary policy. He said the current environment is “great for contrarian investors”.

“We talked for long time about the reckoning coming,” he said. “We’ve had a 40-year bull market for interest rates and that’s driven all manner of excess.”

Today’s market backdrop is a dramatic shift in terms of monetary policy and macroeconomic factors, he said: “We’ve not invested in an inflationary environment.”

Corporate carveouts remains a key focus for Apollo, and distressed investing is beginning to show “early signs of interesting debt opportunities”, he added.

This year, Apollo has also used its growing credit business to rescue struggling debt transactions for companies such as Carvana, as well as supporting banks by taking down large chunks of hung LBO deals, including the Citrix transaction.

Rival firms are also diversifying: Carlyle’s credit business has overtaken private equity for the first time in 35 years, while Blackstone recently raised a $50bn vehicle for stressed real estate deals.

However, Sambur said Apollo would remain focused on private equity above all. “Private equity drives the DNA of our business,” he said.

Don’t expect Citrix to reopen markets, says Apollo chief

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