News Column

Fitch Expects to Rate Apollo Management Holdings' Unsecured Debt 'A-'

May 27, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign an unsecured debt rating of 'A-' to the 10- year senior unsecured notes issued by Apollo Management Holdings, L.P., a subsidiary of Apollo Global Management, LLC (Apollo, rated 'A-', Stable). A portion of the net proceeds are expected to be used to repay a portion of outstanding term loans under the existing bank credit facilities, while remaining proceeds are expected to be used for general corporate purposes.

Concurrently, Fitch has assigned a long-term Issuer Default Rating (IDR) of 'A-' to AMH Holdings (Cayman), L.P. This entity is the parent of Apollo Management Holdings, L.P, and will provide a joint and several guarantee on the public notes along with Apollo Principal Holdings I-IX, L.P. The Rating Outlook is Stable.

KEY RATING DRIVERS

The expected rating on the new unsecured notes reflects joint and several guarantees on indebtedness by the various subsidiaries which collect all of the fee, carry, and investment income earned by Apollo. Therefore the rating of the unsecured notes is expected to be equalized with the Issuer Default Rating of Apollo.

At March 31, 2014, Apollo's leverage (debt/FEBITDA) was 2.16 times (x), on a trailing 12 month (TTM) basis, which was below the peer average of approximately 3.0x. Leverage will increase with this issuance; however, Fitch expects the firm's leverage to decline over the balance of 2014 as incremental fees are earned from Apollo Investment Fund VIII, L.P., which began its investment period in August 2013, and Athene Holding Ltd.'sOctober 2013 acquisition of the U.S. annuity operations of Aviva plc. Longer-term, Fitch believes Apollo's leverage will be at-or-below the agency's general 'A' category tolerance of 2.5x.

RATING SENSITIVITIES

The rating of the unsecured notes is expected to be equalized with the Issuer Default Rating of Apollo. Therefore, any change in Apollo's rating would have a commensurate impact on the rating of the unsecured notes.

The Stable Outlook on the various operating subsidiaries of Apollo reflects Fitch's expectations that management will continue to generate stable management and advisory fees, grow/retain FAUM through the raising of new and expansion of existing funds, albeit at a much more moderate pace near-term, sustain recent operating margins, operate with relatively low leverage, and retain a solid liquidity profile in order to meet co-investment commitments to funds.

Declines in investment performance, a key man event, and/or legislative risk which negatively impact the company's ability to raise FAUM and generate fees, meaningful increases in leverage, and/or impairment of the liquidity profile could result in negative rating action. Furthermore, ratings could be adversely affected if the relationship between Apollo and Athene were to materially change as a result of regulatory scrutiny, outsized fines/penalties or loss of management or sub-advisory fees.

Conversely, positive rating momentum could develop from a demonstrated ability to operate at the current size, scale and margin level over an extended period of time. An increase in fee diversity, lower leverage, and/or stronger liquidity would also be viewed favorably.

Apollo is a global alternative investment manager specializing in private equity, credit and real estate. FAUM amounted to $128.5 billion at March 31, 2014 and total assets under management (AUM) were $159.3 billion. The company's Class A shares are listed on the NYSE under the ticker 'APO'.

Fitch has assigned the following expected rating:

Apollo Management Holdings, L.P.

--Unsecured debt 'A-(EXP)'.

Fitch has also assigned the following rating with a Stable Outlook:

AMH Holdings (Cayman), L.P.

--Long-term IDR 'A-'.

Existing ratings for Apollo are as follows:

Apollo Management Holdings, L.P.

Apollo Management, L.P.

Apollo Capital Management, L.P.

Apollo International Management, L.P.

AAA Holdings L.P.

Apollo Principal Holdings I-IX, L.P.

ST Holdings GP, LLC

ST Management Holdings, LLC

--Long-term IDR 'A-';

--Unsecured debt rating 'A-'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Global Financial Institutions Criteria' (January 2014);

--'Investment Manager and Alternative Funds Criteria' (December 2013).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725057

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=831819

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Meghan Neenan, CFA

Senior Director

+1-212-908-9121

Fitch Ratings, Inc.

33 White Hall St.

New York, NY 10004

or

Secondary Analyst

Mohak Rao, CFA

Director

+1-212-908-0559

or

Committee Chairperson

Joo-Yung Lee

Managing Director

+1-212-908-0560

or

Media Relations

Brian Bertsch, New York, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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