A unit of Leon Black’s Apollo Global Management LLC is raising a $1.1 billion collateralized loan obligation in what would be the largest such fund formed this year, according to a person with knowledge of the deal.
The proposed CLO for Apollo’s credit business would exceed an $856.8 million fund raised in March by Guggenheim Investments, according to data compiled by Bloomberg. JPMorgan Chase & Co. and Citigroup Inc. are arranging the Apollo deal, said the person, who asked not to be identified because the information wasn’t public.
CLOs are being created at a pace that’s not far off last year’s record. The funds are the biggest buyers of leveraged loans, a form of debt typically issued by speculative-grade companies that can help finance acquisitions.
About $56.5 billion of new CLOs have been raised this year in the U.S., following an unprecedented $123.7 billion in 2014, according to data compiled by Bloomberg and Bank of America Corp.
The creation of new CLOs got off to “an audacious start” this month, according to a Wells Fargo & Co. research report on June 5. The $9.2 billion raised so far in June compares with an average $10.3 billion per month in 2014, Bloomberg data show.
CLOs pool high-yield, high-risk corporate loans and slice them into securities of varying risk and return. The biggest portion of the Apollo fund would be a $715 million slice rated AAA, the person said.