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.
A recent study suggests that companies backed by Apollo Global Management are paying a higher borrowing cost than those backed by other private equity sponsors. The Financial Times reports that this "sponsor premium" is attributed to Apollo's reputation for aggressive creditor negotiations and balance-sheet restructurings. According to researchers Vince Buccola from the University of Chicago and Greg Nini from Drexel University, Apollo's reputation for tough negotiations leads lenders to charge a one percentage point premium on average.
The study analyzed nearly 2,000 leveraged loans issued between 2016 and 2025, finding that while borrower leverage and credit quality accounted for 79% of the variation in loan yields, including sponsor reputation boosted the model's explanatory power to 84%. The premium is significant considering that the average yield on loans in the sample was slightly above 7%, comparable to the yield gap between B+ and B- rated loans.
Apollo has a history of contentious creditor negotiations, notably in the 2015 Caesars Entertainment bankruptcy case. The restructuring process involved disputes with lenders and investors like Appaloosa Management, Oaktree Capital Management, and Elliott Management. Following the restructuring, Apollo reached billion-dollar settlements with Caesars lenders and bondholders through litigation.
The firm has attempted to mend relationships with creditors, including holding direct meetings with asset managers. Apollo maintains that it utilizes contractual rights in financing documents to maximize returns for investors. The research also indicates that Apollo-backed businesses typically carry average leverage levels and have non-lender-unfriendly documentation. This makes the apparent sponsor effect particularly striking.
While the paper suggests that Apollo is not the only private equity sponsor to develop a reputation for aggressive tactics, it disputes the study's findings. Apollo argues that its portfolio companies borrow at competitive rates and enjoy broad support from lenders. The company, with approximately $200bn in private equity assets and $800bn in credit assets, is both a major borrower-side sponsor and a significant participant on the lending side of the market.
Written by urgent.news from Private Equity Wire's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
