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Apollo has sold a stake in the lending business it acquired from Credit Suisse last year shortly before the Swiss bank’s shotgun rescue by UBS, securing a multibillion-dollar investment from one of the US’s largest insurers.
MassMutual will invest more than $2bn, gaining a minority equity stake in the unit known as Atlas SP and committing to buy future assets from the lender in what is expected to be one of the largest partnerships between a traditional insurer and a private capital group.
Fast-growing private capital managers such as Apollo have in recent years pushed aggressively to create higher earning assets for insurance companies. The moves by Apollo and competitors including KKR and Brookfield have spurred a wave of consolidation and partnerships.
MassMutual is making a minority investment in Atlas SP so it can gain access to the asset-backed debts the unit originates, packages into securities and sells. These debts include mortgages and loans for cars, rental equipment and yachts.
As part of the deal, MassMutual will also provide “warehouse” financing and other capital to more than 200 businesses that finance operations through Atlas SP.
“This transaction is a unique market opportunity that enables MassMutual to access a scaled origination ecosystem,” said MassMutual chief investment officer Eric Partlan.
Credit Suisse sold the majority of its securitised products unit to Apollo in November 2022, just a few months before the Swiss bank was rescued by its rival UBS in March 2023.
The business was viewed as one of the bank’s most successful units, but took up too much capital and was jettisoned as part of a final restructuring plan. Apollo added it to more than a dozen internal loan origination units, which span aircraft leasing and middle-market corporate debts, renaming the unit Atlas SP.
The division had roots in Credit Suisse First Boston’s New York mortgage securitisation business in the 1980s and was led by veteran executive Jay Kim, who moved with most of the team to Atlas SP when the deal closed in February 2023.
Within weeks, a US regional banking crisis spurred a panic that ultimately contributed to Credit Suisse’s weekend takeover by UBS. That tumult played into the hands of nonbank lenders such as Atlas SP, enabling it to make loans that banks would not. Atlas SP has originated $24bn in debts since its creation, including a $1bn loan to PacWest, the California regional bank that suffered a sharp drop in deposits in early 2023.
Last month UBS agreed to sell an additional $8bn of loans to Atlas SP as part of a renegotiation of the deal that also scrapped an associated investment management arrangement.
Life insurers, particularly those linked to private equity groups, have pushed deeper into asset-backed securities in pursuit of investments that are a good match for their long-term liabilities but offer better returns than traditional government and corporate debt. But regulators are studying the liquidity risks being stored up in these strategies, and the potential spillover effects for the wider financial sector.
Executives at Apollo and MassMutual know each other well. The pair had partnered in a multibillion-dollar unsolicited takeover attempt of annuity specialist American Equity Investment Life, which the latter fended off.
Additional reporting by Owen Walker and Ian Smith in London
