UBS to sell $8bn of loans to Apollo

UBS has reached an agreement to offload $8 billion worth of loans to private capital group Apollo, marking a strategic move as it continues to wind down certain segments of its investment bank associated with the acquisition of Credit Suisse last year. Apollo’s initial arrangement with Credit Suisse in 2022 involved the purchase of its securitized products division, alongside an accompanying investment management contract. This week’s deal effectively concludes that transaction.

The agreement signifies a significant step towards UBS’s objective of scaling back Credit Suisse’s investment banking operations, with a renewed focus on bolstering the combined group’s wealth management division. Sergio Ermotti, CEO of UBS, highlighted the bank’s commitment to streamlining operations and reducing complexity while emphasizing its dedication to client relationships.

The original deal between Credit Suisse and Apollo saw the alternative investment manager acquire one of the Swiss bank’s most lucrative divisions, albeit one requiring substantial capital. Apollo rebranded the acquired business as Atlas, which specialized in packaging debts like mortgages and yacht loans into securities. Additionally, Atlas agreed to provide investment management services for certain assets retained by Credit Suisse.

However, following UBS’s acquisition of Credit Suisse, the terms of the agreement with Apollo were reassessed. UBS sought more favorable terms, leading to the renegotiation of the investment management contract, which Credit Suisse disclosed as resulting in a $600 million loss for the bank. Under the revised terms announced on Wednesday, UBS anticipates a net gain of $300 million from the transaction, which includes the transfer of $8 billion in senior secured financing facilities to Apollo.

Apollo’s CEO, Marc Rowan, noted that the adjustments to the deal with UBS have had a neutral impact on the firm. He highlighted the robust performance of Atlas, citing record origination and capital raising figures, indicating the continued success of the business under Apollo’s stewardship.