Apollo to turn $9 billion Oneok stake into investment-grade debt
The structure would give Oneok equity-like capital without adding conventional debt or pressuring its BBB credit rating, Bloomberg reported.
Apollo Global Management is seeking to turn its $9 billion stake in Oneok into investment-grade debt that can be sold to investors, according to Bloomberg.
The structure would allow Oneok to raise capital without adding conventional debt or putting pressure on its credit rating. Apollo is aiming for securities backed by the stake to receive investment-grade ratings, a person familiar with the matter said.
The investment would be treated as minority equity subordinated to Oneok’s existing debt. Apollo would then divide it into seniority levels, some of which could receive investment-grade ratings. Portions of the deal are expected to be placed with Apollo insurer Athene, third-party insurers and Apollo and client funds.
The transaction was originated by Apollo’s Capital Solutions business and will help Oneok finance its $4.4 billion purchase of Brazos Midstream Holdings’ natural gas operations in West Texas and repay debt.
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Apollo said it has completed more than $100 billion of similar transactions and has a pipeline exceeding $100 billion. The firm oversees more than $1 trillion.
Apollo’s return on the Oneok investment is capped at 7% for the first nine years, rising to 7.85% by the 15th year. The investment sits in a holding company structurally subordinate to Oneok’s existing senior debt, which is rated BBB.