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Apollo has offered a stake within the lending enterprise it acquired from Credit score Suisse final yr shortly earlier than the Swiss financial institution’s shotgun rescue by UBS, securing a multibillion-dollar funding from one of many US’s largest insurers.

MassMutual will make investments greater than $2bn, gaining a minority fairness stake within the unit often called Atlas SP and committing to purchase future belongings from the lender in what is predicted to be one of many largest partnerships between a conventional insurer and a non-public capital group.

Quick-growing personal capital managers equivalent to Apollo have lately pushed aggressively to create greater incomes belongings for insurance coverage corporations. The strikes by Apollo and opponents together with KKR and Brookfield have spurred a wave of consolidation and partnerships.

MassMutual is making a minority funding in Atlas SP so it could actually acquire entry to the asset-backed money owed the unit originates, packages into securities and sells. These money owed embrace mortgages and loans for automobiles, rental tools and yachts.

As a part of the deal, MassMutual will even present “warehouse” financing and different capital to greater than 200 companies that finance operations by way of Atlas SP.

“This transaction is a novel market alternative that allows MassMutual to entry a scaled origination ecosystem,” mentioned MassMutual chief funding officer Eric Partlan.

Credit score Suisse offered the bulk of its securitised merchandise unit to Apollo in November 2022, only a few months earlier than the Swiss financial institution was rescued by its rival UBS in March 2023.

The enterprise was considered as one of many financial institution’s most profitable items, however took up an excessive amount of capital and was jettisoned as a part of a ultimate restructuring plan. Apollo added it to greater than a dozen inside mortgage origination items, which span plane leasing and middle-market company money owed, renaming the unit Atlas SP.

The division had roots in Credit score Suisse First Boston’s New York mortgage securitisation enterprise within the Eighties and was led by veteran govt Jay Kim, who moved with many of the group to Atlas SP when the deal closed in February 2023. 

Inside weeks, a US regional banking disaster spurred a panic that finally contributed to Credit score Suisse’s weekend takeover by UBS. That tumult performed into the fingers of nonbank lenders equivalent to Atlas SP, enabling it to make loans that banks wouldn’t. Atlas SP has originated $24bn in money owed since its creation, together with a $1bn mortgage to PacWest, the California regional financial institution that suffered a pointy drop in deposits in early 2023.

Final month UBS agreed to promote an extra $8bn of loans to Atlas SP as a part of a renegotiation of the deal that additionally scrapped an related funding administration association.

Life insurers, significantly these linked to non-public fairness teams, have pushed deeper into asset-backed securities in pursuit of investments which can be an excellent match for his or her long-term liabilities however provide higher returns than conventional authorities and company debt. However regulators are finding out the liquidity dangers being saved up in these methods, and the potential spillover results for the broader monetary sector.

Executives at Apollo and MassMutual know one another nicely. The pair had partnered in a multibillion-dollar unsolicited takeover try of annuity specialist American Fairness Funding Life, which the latter fended off.

Further reporting by Owen Walker and Ian Smith in London