Sept 26 (Askume) – Citigroup (CN) and Apollo Global (APO.N) have partnered on a $25 billion private and direct lending programme.This reflects a growing alliance between banks and non-banks seeking a share of the lucrative $2 trillion market .
Abu Dhabi sovereign wealth fund Mubadala Investment Co. and Apollo’s annuity and retirement services unit Athene said on Thursday they would also participate in the scheme.
Private loans refer to loans provided by non-bank lenders like Apollo, which are not subject to the same regulation as banks. This type of loan is typically offered to riskier borrowers or companies that use loans to make large-scale purchases.
These loans can be processed quickly and are an important source of funding for borrowers considered too vulnerable by traditional banks.
Though initially seen as a threat to banks, private credit companies have been looking to partner with traditional lenders over the past few months. Banks can help find customers more easily and earn fees without putting money at risk.
In January, Citi launched another private debt instrument in partnership with alternative investment manager LuminArcs Capital .
“The strength of Citi’s banking and capital markets franchises combined with Apollo’s deep capital resources will provide clients with a range of options to meet their growing financial needs,” Citi’s banking head Vishwas Raghavan said in a statement.
The companies said the plan will initially focus on North America but could later expand to more regions with a target of $25 billion.
“This partnership is another example of how private credit is rapidly evolving into mainstream finance,” said Anna Arsov, global head of private credit at Moody’s Ratings.
Last week, Apollo also received backing from BNP Paribas (BNPP.PA).Committed $5 billion to expand its private lending capacity .
An IMF report released in April said private debt markets should be subject to greater scrutiny because their opaque and highly interconnected nature could pose systemic risks to the broader financial system.
