Citigroup and Apollo Global’s US$25 Billion Partnership: A Game-Changer in the Private Credit Market

Introduction

In a groundbreaking move, Citigroup and Apollo Global have joined forces for a US$25 billion private credit and direct lending program. This collaboration highlights a trend where banks and non-banks are teaming up to tap into the lucrative US$2 trillion market.

Key Players

• Citigroup
• Apollo Global
• Abu Dhabi sovereign wealth fund Mubadala Investment Company
• Apollo’s annuity and retirement services unit, Athene
  

  What is Private Credit?
  

  Private credit refers to loans provided by non-bank lenders like Apollo, which operate with less regulatory oversight compared to traditional banks. These loans are often extended to risky borrowers or companies seeking funding for large-scale acquisitions.

  Benefits of Private Credit
  

• Quick loan processing
• Vital source of funding for borrowers considered too risky by mainstream banks
  

  Banks and Non-Banks Collaboration
  

  Contrary to initial concerns, private credit firms are now collaborating with traditional lenders to leverage each other’s strengths. This partnership allows banks to access new customers and earn fees without risking their own capital.

  Expansion Plans
  

  While the program will initially focus on North America, Citigroup and Apollo have indicated the potential for geographical expansion beyond the US$25 billion target. This partnership marks a significant step towards mainstream acceptance of private credit in the financial industry.

  Industry Insights
  

• Moody’s Ratings global head of private credit Ana Arsov views this partnership as a testament to the rapid growth of private credit in mainstream finance.
• Apollo’s recent US$5 billion commitment from BNP Paribas further underscores the expanding influence of private credit players in the market.
  

  IMF Report on Private Credit
  

  An April report by the International Monetary Fund raised concerns about the private credit market’s opaque and interconnected nature, warning of potential systemic risks to the broader financial system.

  In conclusion, the collaboration between Citigroup and Apollo Global represents a pivotal moment in the evolution of the private credit market. By combining their expertise and resources, these industry giants are poised to reshape the financial landscape and meet the evolving needs of clients worldwide. Investors and financial observers should closely monitor this partnership as it unfolds, as it has the potential to impact the broader financial system and shape the future of lending practices.