US private equity giant Apollo making inroads into Korea

Apollo Global Management Inc., a US private equity powerhouse, is set to launch a credit business in South Korea, aiming for the local private lending market with growth potential.

Apollo, which had approximately $513 billion in assets under management as of March 31, 2022, is one of the four largest PE behemoths in the US along with Blackstone Inc., Kohlberg Kravis Roberts & Co. (KKR) and The Carlyle Group.

Apollo will establish a 50-50 joint venture with a New York-based credit-oriented alternative investment manager EMP Belstar in South Korea, according to investment banking industry sources on Thursday.

They are poised to raise $1 billion in a credit fund for investment in various sectors such as corporate lending, acquisition financing and property project financing. Apollo, insurers backed by the PE firm and some local institutional investors are set to join the credit fund.

Apollo and EMP Belstar aim to expand their investments into other areas such as real estate and buyouts in the future.

“We have been exploring the market opportunity in Korea with a heightened degree of interest for several years, and are delighted to partner with Belstar to address the market need for alternative forms of liquidity and credit in Korea,” said Matt Michelini, partner and head of Asia Pacific at Apollo.

The PE giant managed $373 billion in credit assets globally as of the end of the first quarter, the largest around the world.

“Together with Apollo, we are helping Korea transition from a primarily bank-financed market to a market with alternative sources of credit,” said EMP Belstar's Chairman and Managing Partner Daniel Yun. 

GROWING INTEREST IN CREDIT SECTORS

The world’s PE industry is actively extending its investment, which had focused on buyouts, into the credit sectors.

Most major global PE powerhouses set up separate credit funds for investments in minority stakes and corporate lending.

South Korean PE firms have been in the nascent stages of the business since amendments to the Capital Market Act in October 2020 allowed the PEs' corporate lending and mezzanine financing, a hybrid of debt and equity financing.

MBK Partners, one of Asia's largest private equity firms, IMM Private Equity, Glenwood Private Equity, STIC Investments Co., VIG Partners and Affirma Capital are currently managing credit funds in the country.

CREDIT SERVICES FOR FIRMS WITH FUNDRAISING DIFFICULTIES

Apollo targets South Korea’s private equity lending market, which is still in the early stages, industry sources said. The PE firm aims to provide credit services, especially, to companies facing difficulties in fundraising due to rising borrowing costs.

“As South Korean banks’ lending policies become more conservative because of rising interest rates and worries about an economic slowdown, Apollo’s credit strategy is significantly competitive, given its flexible interest rates and maturities,” said Lee Joonho, CEO of EMP Belstar’s unit in South Korea.

Apollo joined hands with EMP Belstar as it has not only expertise in credit investment but also strong networks with South Korean companies and institutional investors.

EMP Belstar has been actively working with domestic investors in raising funds from mutual aid associations, insurers and others for sustained investments in US credit markets. During and following the global financial crisis in 2008-09 and the downturn due to COVID-19 in 2020, its affiliate Belstar Group provided funds collected from South Korean institutions to the Federal Reserve’s Term Asset-Backed Loan Facility Program (TALF), a program offering term non-recourse financing of certain asset classes to help provide liquidity and unfreeze the US economy. Belstar was in the spotlight in 2020 as it executed some $2.6 billion, or 58% of the total TALF of $4.5 billion.

In South Korea, EMP Belstar owns Korea Superfreeze Inc., a cold chain logistics center operator that utilizes liquefied natural gas refrigerant.

Write to Chae-Yeon Kim at why29@hankyung.com
Jongwoo Cheon edited this article.