Investors will be closely watching Apollo Global Management (APO) following reports that the alternative asset manager is considering selling its $3 billion MidCap Financial Investment Corporation (MFIC) as retail investors are dumping private credit funds.
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According to The Wall Street Journal, which first reported the news, the New York-based private credit and insurance provider has been holding discussions with potential buyers to offload the publicly traded business development company (BDC). As a private credit fund, MFIC invests in senior secured loans provided to mid-sized firms through MidCap Financial, Apollo’s private specialty finance firm.
Apollo’s MFIC Battles Higher Default
The move by Apollo comes as defaults in the fund climbed from 3.9% in December to 5.3% in the first quarter of this year. In addition, Apollo has been using its cash to buy back shares in the fund amid its substantial discount relative to net asset value, the outlet reported.
Apollo, alongside several industry titans such as KKR (KKR) and Blackstone (BX), faced record redemption requests from their private credit funds during the first quarter of this year as worries about lending to the software industry mounted. According to estimates, investors sought to pull out more than $20 billion from such funds during the period.
This came as traditional software companies have suffered a hit to their valuation this year over fears AI would render their business obsolete. The development forced several BDCs to implement a withdrawal cap on their funding. Banking giant Morgan Stanley (MS) was also caught in the fray.
Meanwhile, Apollo continues to chase investment opportunities and is believed to be one of several private credit lenders lined up for a roughly $35 billion financing package for chipmaker Broadcom (AVGO).
Is Apollo Stock a Good Buy?
On Wall Street, analysts remain bullish stance on Apollo’s shares and have a Strong Buy consensus rating on the stock. This is based on 10 Buys and two Holds issued over the past three months.
In addition, the average APO price target of $146 suggests about 10% upside in the months ahead.
