The Zhitong Finance App learned that Apollo Global Management Company (APO.US) is evaluating playing a greater role in financing highly indebted governments and state-owned enterprises, as these entities increasingly turn to private capital to fill the budget gap. Apollo President Jim Zelter said in an interview in London on Tuesday that governments, particularly in Europe, are seeing private capital as a “solution” to rising debt.
Known for its innovative financing, Apollo is exploring ways for government-backed companies to enrich their balance sheets, including introducing long-term capital. Zelter said one option is to put hard assets into a subsidiary to raise capital. Over the years, this tool has helped Apollo expand its customer list, particularly in Europe.
Apollo's expansion in Europe includes investments in European energy infrastructure companies, such as a large-scale Woxu Energy offshore wind power project in the UK, the German grid business under the Rhine Group, and an agreement to finance the construction of the Hinkley Point C nuclear power plant in the UK.
“Europe's challenge is that the banking system, investment system, and pension system are not really prepared or able to meet these demands.” Zert said.
Apollo has been recruiting well-connected bankers and policy advisors to help leverage large transactions. The company reorganized its European and Asian leadership teams earlier this year and appointed Diego DeGeorge, the former chief financial officer of Standard Chartered Bank, to head the European business.
Zert said Apollo also spent more time in Washington and other global capitals looking for ways to finance the defense industry. He anticipates that private capital will play a greater role in procurement and supply projects in the US and Europe.
The company is also seeking to capture the trillions of dollars businesses need for AI infrastructure. Zelter said that Apollo has an upper limit on participation in this round of AI construction, adding that smart credit investors will control the portfolio exposure of any single industry to a medium to high single-digit percentage.
Alternative asset management companies, including Apollo and Blackstone, have invested billions of dollars in AI and the infrastructure needed to build and supply electricity. At the same time, investors have been asking asset managers to understand the extent to which AI-related investments have penetrated various types of funds.
“As investors today, we are all trying to figure out what are unintended consequences, or what are second-order and third-order derivative effects.” Zert said.