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UPDATE 5-Apollo ENI rises, driven by private equity
August 9, 2011 / 11:31 AM / in 6 years

UPDATE 5-Apollo ENI rises, driven by private equity

* Q2 economic net income $140 mln vs $23 mln a year ago

* Adj ENI per share 31 cents, matching Street view

* Sets dividend of 24 cents/share vs 22 cents in Q1

* Second earnings since Apollo listed on the NYSE in March (Adds details about IPOs, Gulf Stream)

By Megan Davies

NEW YORK, Aug 9 (Reuters) - Apollo Global Management LLC (APO.N) reported a rise in second-quarter earnings, helped by higher profits from its private equity unit, and said that the recent market falls potentially gave it opportunities to invest.

Apollo, in its second quarterly earnings report since its initial public offering in March, said economic net income (ENI) -- a measure used by private equity firms -- was $140 million, up from $23 million a year earlier.

Adjusted ENI per share was about 31 cents, according to Reuters calculations, which take into account compensation and tax. Analysts’ average forecast was 31 cents, according to Thomson Reuters I/B/E/S.

Apollo said it benefited from the sale of Hughes Communications, a broadband satellite services company that was sold to EchoStar Corp (SATS.O) in February for $1.33 billion. Apollo was a major shareholder in Hughes.

Apollo President Marc Spilker said that the falling markets over the past few days played to Apollo’s strengths as a “value-oriented and contrarian investor”.

This is an environment where Apollo looks to be aggressive, he said on a conference call with analysts.

He said that Apollo was “well-positioned with a strong balance sheet and $10 billion of dry powder” -- meaning capital available to invest.

While a falling stock market hurts valuations and constrains private equity firms’ ability to take portfolio companies public, it makes acquisition targets more affordable.

Apollo has a number of portfolio companies which have filed to go public, such as industrial firm Rexnord Corp and specialty chemicals maker Momentive.

Apollo’s shares, trading at about 30 percent below its $19 IPO price, slipped 8 cents lower on Tuesday to $13.16.

Shares of Apollo, as well as rival private equity firms Blackstone Group (BX.N) and KKR & Co (KKR.N) slumped on Monday as the sharp stock market declines dented their prospects for exiting investments and reduced the value of their portfolios.

Private equity firms’ results are closely tied to the value at which they mark their portfolio companies.

The volatility of these figures makes it hard to forecast private equity firms’ earnings on a quarterly basis. The firms hold their assets for a number of years and must determine a market value for them every quarter.

Keefe Bruyette & Woods analysts on July 18 cut their estimate for Apollo’s second-quarter ENI per share, citing an expected decline in fair values among the company’s publicly traded holdings.

Apollo said that assets under management were $72 billion at the end of June, up from $55 billion the same period a year earlier.

The company in July agreed a deal to buy Charlotte, North Carolina-based Gulf Stream Asset Management, which manages 10 collateralized loan obligations (CLOs). Apollo said this area is “clearly consolidating” and that it wants to be a consolidator in the CLO and senior loan space.

Using Generally Accepted Accounting Principles, Apollo posted a loss of $51 million, compared with a year-earlier loss of $75 million.

Apollo said it was declaring a dividend of 24 cents per Class A share. For the first quarter, it paid 22 cents. (Reporting by Megan Davies; editing by John Wallace, Dave Zimmerman and Gunna Dickson)

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