Apollo Global Management hit a quarterly record deployment in Q2, inking $28 billion worth of deals across its platforms. While investments through its private equity arm have drawn headlines, like its $5 billion acquisition of Verizon Communications’ media unit Yahoo, the real showstopper may be in the credit division.

Lending helped generate $55 million in transaction fees, most notably Hertz Global Holdings’ restructuring announced in May. “These results reflect our ability to source and distribute large scale credit, as we have made growing our high grade health origination pipeline our strategic priority,” said James Zelter, co-president and chief investment officer on the Q2 earnings call.

The increase in credit-derived fee earnings comes as private equity funds are increasingly lending to finance mergers directly, bypassing banks that have traditionally offered lower cost financing.

Direct lending has already undergone a shift, with funds initially targeting sectors seen as more resilient to pandemic effects (software, healthcare, business services). As recently as May, debt investors were warning that deal terms would not price in a full economic recovery. Now, though, credit funds are ramping up activity. The implications for dealmaking are numerous. Private loans well in excess of $500 million are becoming more common, Bloomberg notes, including a $2.6 billion loan to finance Thoma Bravo’s $6.6 billion take private of Stamps.com, announced earlier this month.

The resulting surge is giving private equity greater speed and certainty around loan terms, as well as healthy fee revenue.

“As you saw from our results, we are performing well across all metrics including record quarterly fee-related earnings of $0.68 per share,” said co-founder and CEO Marc Rowan on the call.

– Brandon Zero