May 1, 2020 / 11:38 AM / 24 days ago

Apollo's first-quarter profit falls 20% as virus weighs on asset sales

NEW YORK (Reuters) - Apollo Global Management Inc (APO.N) said on Friday its first-quarter distributable earnings fell 20%, more than Wall Street expectations, driven by a decline in private equity asset sales amid the coronavirus-induced market turmoil.

Apollo said distributable earnings (DE) - the cash available for paying dividends to shareholders - fell to $165.1 million from $207.4 million a year ago. This translated to DE per share of 37 cents, which missed the consensus analyst forecast of 48 cents, according to data from Refinitiv. Apollo’s shares were down 4.8% in early afternoon trading.

Just like other buyout firms, Apollo was forced to mark down the value of its funds as global markets plunged due to economic shutdowns imposed by governments to curb the spread of the novel coronavirus.

“The pandemic resulting from the novel coronavirus and the actions taken in response have caused severe disruption to the global economy and financial markets,” Apollo said in a statement.

“In line with public equity and credit indices, we have experienced significant unrealized mark-to-market losses in our underlying funds.”

Apollo said its private equity portfolio depreciated by 21.6% in the first quarter, while its real estate, principal finance and infrastructure funds fell 6.5% in aggregate.

The New York-based firm’s credit funds - encompassing corporate credit, structured credit and direct origination - declined 9% during the quarter.

Apollo’s peers Blackstone Group Inc (BX.N) and Carlyle Group Inc (CG.O) also reported declines in the value of their funds in the first quarter.

Blackstone said here its private equity portfolio fell by 21.6%, while opportunistic and core real estate funds fell by 8.8% and 3.9%, respectively. Carlyle said here its own private equity funds depreciated by 8% in the quarter, while credit funds fell by 21%.

Apollo said its portfolio companies will not be accessing the Paycheck Protection Program rolled out by the Small Business Administration (SBA) as part of the $2.3 trillion U.S. economic stimulus package to aid small and mid-sized businesses impacted by the pandemic. The firm added that it does not expect its companies will benefit from U.S. Federal Reserve’s emergency funding schemes.

“Although we are still reviewing the guidance recently announced by the Federal Reserve, we do not anticipate that the Main Street lending program will provide any relief or financial assistance to companies controlled by us or our funds,” Apollo CEO Leon Black told investors and analysts on a conference call.

Apollo reported a $2.3 billion net loss under generally accepted accounting principles (GAAP), compared with a net income of $315.6 million a year ago, hit by a plunge in investment income.

The New York-based firm said it had $315.5 billion of assets under management at the end of March, down 5% from the prior quarter, due to unrealized market losses arising from the pandemic that was partially offset by fundraising.

Still, Apollo said it had invested $41 billion on gross purchases in the quarter, as it snapped up cheap assets during the market downturn. The firm said it expects to raise $20 billion across several strategies over the next year to invest in companies looking for capital.

Apollo declared a quarterly dividend of 42 cents per share.

Reporting by Chibuike Oguh in New York; Editing by Amy Caren Daniel and Nick Zieminski

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