Apollo Global Management has held talks to sell MidCap Financial Investment, its publicly listed business development company focused on private credit, the Wall Street Journal reported on Sunday, citing people familiar with the matter.
Apollo values the fund, known as MFIC, and its portfolio at about $3 billion, the report added.
MFIC invests in loans made by Apollo’s giant MidCap Financial, which lends to midsize companies. MidCap does not receive fee income from the loans it sells to MFIC, the WSJ report said.
Apollo bought MidCap in 2013 to strengthen its direct-lending platform.
According to the report, default in the fund jumped to 5.3% in the first quarter from 3.9% in December, and management has been using cash to repurchase shares this year because they traded at deep discounts to net asset value.
The buyer for the fund would likely be another business development company (BDC), the report added, and said the buyer could use shares in its own fund to purchase MFIC.
Apollo and MidCap Financial Investment did not immediately respond to Reuters’ request for comment.
The news of the deal comes amid a difficult time for U.S. private credit lenders, also known as BDCs, as weaker investor demand and rising redemption pressure continue to weigh on the sector.
Credit ratings agency Fitch said last month the BDC sector faces a “deteriorating” outlook as elevated investor redemptions and above-average troubled loans could constrain the liquidity of some BDCs.
Reuters
