Alpha Dhabi and Mubadala joint venture acquires European lending assets from Apollo

Alpha Dhabi Holding and Abu Dhabi's strategic investment arm Mubadala Investment Company's joint venture has acquired a European direct-lending portfolio managed by US asset management firm Apollo Global Management, strengthening their credit investment platform.

Apollo will continue to manage and grow the portfolio following the transaction, the two companies said on Tuesday in a joint statement to the Abu Dhabi Securities Exchange.

The European direct-lending portfolio will add new positions in consumer services and goods, in addition to exposure in health care, high technology, business services and financial services, the statement added.

The move also strengthens credit investment opportunities and exposure to high-powered sectors in the UK and Europe, where the Alpha Dhabi-Mubadala partnership has been scaling its credit strategy.

Omar Eraiqat, deputy chief executive of credit and special situations at Mubadala, said the acquisition advanced Mubadala's strategy "to build a resilient, scaled credit platform" across the UK and Europe. The move bolsters Abu Dhabi’s growing presence in global credit markets.

Demand for private credit – lending to companies by financial institutions other than banks – has grown significantly in recent years. Unlike most bank loans, private credit solutions can be modified to meet borrowers’ needs in terms of the size, type or timing of transactions.

Global investors are increasingly allocating resources to the private credit market, with banks and asset managers pouring capital into the fast-growing industry. The size of the private credit market is estimated to grow to $2.3 trillion by 2027, from about $1.4 trillion at the start of 2023, a report by Morgan Stanley showed.

Mubadala has been allocating more investments to the private credit market in recent years.

Since its establishment in 2023, the Alpha Dhabi-Mubadala venture has grown to about $1 billion in assets across 24 obligors, the statement said on Tuesday. The latest Apollo-managed portfolio will add a further $600 million in high-quality assets, with the combined portfolio bringing total assets under management to approximately $1.6 billion across 39 obligors, it said.

The latest acquisition also advances the joint venture’s longer-term goal of building a $2.5 billion commitment programme, underpinned by a steady deal-flow pipeline and a disciplined investment strategy, the companies said.

“This acquisition represents a transformative step forward for our joint venture. Apollo EDL portfolio will complement our existing assets further positioning it to unlock further growth and diversification opportunities," said Hamad Al Ameri, managing director and group chief executive of Alpha Dhabi Holding.

As part of its long-term strategy, the acquisition will deliver "superior risk-adjusted returns while maintaining a disciplined approach to credit investing”, he added.

Alpha Dhabi Holding, a unit of Abu Dhabi's International Holding Company, with nearly Dh200 billion ($54.5 billion) in total assets, has grown into a regional conglomerate with interests in construction, health care, hospitality and industry after completing a series of acquisitions in 2021 and 2022. The conglomerate, through its entities, has been investing in Europe, the US and Africa.

Jim Vanek, partner and co-head of Global Performing Credit at Apollo, said the company continued to see "attractive risk-adjusted credit opportunities and a growing, structural need for private capital" in Europe.