Apollo warehouse loan facility rated

Further details have emerged regarding the transaction at the core of the recent strategic financing collaboration between Apollo Global Management and BNP Paribas (SCI 27 September). The resultant borrower vehicle, AGF WHCO 2-A Trust, entered into a senior secured revolving loan facility collateralised by warehouse loan obligations originated by ATLAS SP.

“This trade is very innovative and unique. The underlying collateral consists of warehouses that are investment-grade equivalent credit quality,” says Ashley Thomas, head of structured finance at ARC Ratings, which assigned double-A minus ratings to the vehicle.

Although elements of the underlying collateral are securitised, the transaction was ultimately structured as a corporate loan, meaning it technically didn’t qualify as a securitisation. UK and EU securitisation regulations prohibit tranching within asset pools, yet this structure allowed BNP Paribas and Apollo to navigate regulatory constraints while retaining the flexibility and financial benefits typically seen in securitisation transactions. 

The facility is primarily secured by the borrower’s equity interests in three asset-holding subsidiaries - AGF WHCO 2-A1 LP, AGF WHCO 2-A2 LP and AGF WHCO 2-A3 DAC. These subsidiaries are, in turn, secured by a US$4.98bn (US$6.085bn committed) portfolio of 46 assets spread across 12 different industry designations, including aircraft, container, equipment, railcar and unsecured marketplace loans.

The largest industry concentration is solar (accounting for 17.09% of the portfolio), followed by credit cards (14.73%), ‘other’ (13.30%) and non-US RMBS (10.66%). The largest issuer accounts for 7.1% of portfolio notional, while the largest 10 issuers account for 48.2%.

The majority (80.37%) of the portfolio is denominated in US dollars, with some sterling (10.66%), Canadian dollar (4.47%) and euro (4.50%) exposures. Non-US dollar advances are funded and repaid in their native currency to mitigate FX risk.

Based on the vehicle’s LTV test, the senior advance rate is 85%, thereby providing 15% hard credit enhancement. The revolving period lasts for three years following the closing date but is extendable, subject to lender approval of the additional commitment, with the final maturity date due to occur 45 years from the closing date.

The underlying warehouse transactions are structured as lending facilities to bankruptcy-remote SPVs, with a significant portion having recourse to the borrower for credit and market price movements. Covenants on the sponsor/originator or servicer are required to ensure adequate liquidity and capitalisation, and if there are material changes to underwriting guidelines, ATLAS SP would typically have consent rights to review assets before they are pledged to a facility.

ARC’s double-A minus rating reflects the credit quality of the collateral and the robust underwriting standards applied. “The investment-grade equivalent credit quality warehouses align with the underwriting standards of the manager, as well as the eligibility criteria and concentration limits,” notes Thomas.

As well as senior lender, BNP Paribas is administrative agent on the transaction. The investment manager is Apollo subsidiary AASP Management, while the sub-advisor is Atlas Securitized Products Advisors and the servicer provider is Redding Ridge Asset Management.

Marta Canini