(Sept 30): Apollo Global Management bought most of Deutsche Bank AG’s significant risk transfer (SRT) linked to a portfolio of US$3 billion (RM12.37 billion) in leveraged finance debt, according to people with knowledge of the matter.

The New York-based alternative asset manager took over 50% of the SRT transaction, said the people, who asked not to be identified because the transaction was private. The SRT was issued out of Deutsche Bank’s Loft programme. Representatives of Apollo and Deutsche Bank declined to comment.

In SRTs, banks offload the risk of loan portfolios, holding on to the assets but paying investment firms to share future losses. Usually, a bank would obtain default protection for as much as 15% of potential losses. In return, investors receive yields frequently in the low double digits.

Frankfurt-based Deutsche Bank increased the size of the transaction amid strong investor demand, Bloomberg News reported earlier this month. The SRT is a portfolio of credit facilities and loans, the people said.

The riskiest portion of US$420 million of bonds was priced at 10.5 percentage points over the secured overnight financing rate, or SOFR, data compiled by Bloomberg showed. A mezzanine portion of US$120 million, which absorbs losses after the junior piece, was priced at a spread of 3.75 percentage points over benchmark rates, the data showed. 

Global issuance of SRTs for the whole of 2024 is on pace to reach US$28 billion to US$30 billion, based on a strong second-half pipeline, according to Chorus Capital estimates released in July. That compares with about US$24 billion last year, the highest annual volume on record.

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