Citigroup has teamed up with Apollo Global Management to establish a $25 billion private credit and direct lending program, highlighting a growing trend of collaboration between traditional banks and non-bank lenders in the lucrative $2 trillion private credit market.
Joining Citi and Apollo in this initiative are the Abu Dhabi sovereign wealth fund Mubadala Investment Company and Apollo’s annuity and retirement services arm, Athene. Private credit refers to loans issued by non-bank entities, like Apollo, which face less regulatory scrutiny compared to banks. These loans are often extended to higher-risk borrowers or companies seeking to fund significant buyouts.
The appeal of private credit lies in its ability to provide quicker funding for borrowers who may not meet the criteria of conventional banks. While initially perceived as competition, private credit firms are increasingly partnering with traditional banks to leverage their customer networks and earn fees without putting their own capital at risk.
Earlier this year, Citi launched another private lending initiative in collaboration with alternative investment manager LuminArx Capital. “By combining Citi’s banking and capital markets expertise with Apollo’s extensive capital resources, we aim to offer clients diverse financing solutions to meet their changing needs,” stated Viswas Raghavan, Citi’s head of banking.
While the new program will initially target North America, there are plans to extend its reach to additional regions and potentially increase the $25 billion target. “This partnership exemplifies the rapid integration of private credit into mainstream finance,” remarked Ana Arsov, global head of private credit at Moody’s Ratings.
In addition, Apollo recently secured a $5 billion commitment from BNP Paribas to bolster its private credit capabilities. However, a report from the International Monetary Fund in April cautioned that the private credit market’s opaque nature could pose systemic risks to the broader financial system, warranting closer scrutiny.
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