BOCA RATON, June 3 (Reuters) - Private equity firm Apollo Management said it was stepping up non-traditional methods for taking control of companies, such as buying credit of debt-strapped businesses, as traditional buyouts have dried up in the wake of the credit crunch.
President and founding partner Josh Harris said that with deals unable to be financed in traditional ways “you have to have a more flexible approach to private equity.”
“We’re not using traditional ways to buy companies,” Harris told several hundred investment executives at the SuperReturn private equity conference in Florida on Tuesday.
“What we are doing is ... buying good companies with bad balance sheets,” Harris said. “You can buy chunks of bank debt, buy chunks of bonds, work the company through the restructuring process, deleverage these companies and end up with appropriate capital structures.”
Harris also sees opportunities for buying securities of distressed companies to gain control positions.
He particularly sees opportunities in certain media, packaging and transportation sectors.
“We are out there ... accumulating control positions ... buying good companies with bad balance sheets at very attractive valuations that are three to five multiple points below what the private equity players paid less than a year ago, and we have a very high current return, 15 to 20 percent,” he said.
Harris said he was cautious on the economic situation, and thought the bottom had not yet been reached in the financial markets.
He said Apollo had spent $3.5 billion on investments since the credit crunch last summer, and had increased its investment pace as it sees better opportunities.
Apollo in April filed with the Securities Exchange Commission to raise $418 million through the sale of 29.8 million shares at $14 each via an initial public offering. Harris declined to answer questions about the IPO.
The buyout firm, run by billionaire investor Leon Black, took part in buyouts such as the $17.3 billion leveraged buyout of Harrah’s Entertainment Inc, the world’s biggest casino operator, and the $6.7 billion buyout of U.S. real estate brokerage Realogy Corp.
It also bought home-goods retailer Linens ‘n Things in 2006, which in May filed for Chapter 11 bankruptcy protection and announced plans to close 120 underperforming stores. (Additional reporting by Dane Hamilton, editing by Maureen Bavdek)
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