Apollo Flexes Underwriting Power With $9.6 Billion ADT Debt Deal

(Bloomberg) -- Apollo Global Management Inc. has provided about $9.6 billion of debt commitments to support Thrive Holdings' acquisition of home security provider ADT Inc., one of the starkest examples yet of the firm muscling in on large investment banks' turf.

The alternative asset manager plans to bring in banks to co-underwrite the debt, which would then be sold to institutional investors in the high-yield bond and leveraged loan markets in a syndication process, according to a person with knowledge of the matter, who asked not to be identified discussing private details.

In addition, Apollo is providing some preferred equity to support the deal, according to a filing.

The leveraged buyout transaction marks the latest example of Apollo taking on roles that used to only be held by the largest investment banks, which typically would provide such bridge financing by themselves. Earlier this year, Apollo demonstrated the extent of its ability to forge bank-like relationships with companies — and move even more quickly — by offering Broadcom Inc. a $35 billion debt deal within weeks.

Notably, Apollo alone provided the financing commitments, according to a statement. That leaves the firm on the hook for the entire $9.6 billion if it unexpectedly can't syndicate some of the debt, which could potentially happen if markets turn volatile. While that outcome is unlikely, few firms can provide such a large commitment all at once on a single transaction.

Representatives for Apollo and Thrive declined to comment while messages left with ADT were not returned. Octus earlier reported some details of the financing.

Thrive announced Thursday that it is buying ADT for about $7.6 billion in equity value, or around $15.3 billion when factoring in the company's existing debt. Formed last year, Thrive Holdings is an offshoot of Joshua Kushner's venture firm Thrive Capital Management.

ADT has about $7.8 billion of existing debt, according to a report Thursday by S&P Global Ratings. The agency said the acquisition is likely to weaken the company's credit metrics and could lead it to lower ADT's BB rating by one notch.

"Given the transaction size and the uncertainty regarding ADT's existing debt, we believe cash flow could be constrained by increased borrowing costs," the report said.