UBS Group AG has reached a significant milestone in its agreement with Apollo Global Management Inc. for the acquisition of Credit Suisse’s securitized products group (SPG), marking a pivotal moment in the financial landscape.
In a statement released on Wednesday, UBS confirmed that Apollo would purchase $8 billion in senior secured financing facilities from the bank as part of the revised deal. This agreement comes after renegotiating key aspects of the transaction, including the termination of an investment management agreement and a transition service agreement.
The revised terms of the deal are expected to have a net gain of approximately $300 million for UBS in the first quarter, while Credit Suisse anticipates recognizing a net loss of $900 million. Despite the adjustments, Apollo emphasized that the changes would have no economic impact on its end.
Last year, UBS announced its intention to renegotiate the terms of the deal, initially struck by Credit Suisse in a last-ditch effort to regain investor confidence. The original agreement outlined UBS providing financing for certain assets, with Apollo managing others for a fee.
The SPG business, a cornerstone of Wall Street’s financial landscape, specialized in trading securities backed by pools of mortgages, car loans, and credit-card debt, tracing its origins to the bustling mortgage-bond scene of the 1980s.
Significant portions of SPG’s assets and workforce had already been transferred to an Apollo subsidiary named Atlas SP. Notably, Jay Kim, the New York-based trader who helmed the SPG business at Credit Suisse, transitioned to Atlas as part of the deal.
UBS CEO Sergio Ermotti expressed satisfaction with the deal, highlighting its role in freeing up capital from non-core businesses and streamlining operations.
Apollo CEO Marc Rowan hailed the completion of the Atlas transition as a milestone, noting the firm’s record origination and capital raising efforts during the period.
The figures disclosed on Wednesday by UBS and Credit Suisse reflect accounting adjustments and provisions made in the preceding quarters, demonstrating the complexities involved in such large-scale financial transactions.
As UBS, Credit Suisse, and Apollo navigate through this transformative deal, the financial community watches closely, anticipating its implications for the broader market and the strategic directions of the involved parties.
