Interviewer (Bloomberg Host) (2:57)

We'll spend some time on that. Just for the record, you brought up First Tricolor before we did. We'll get to that in just a Mom. So you want to talk about origination? Let's talk about it. Of the debt that you originated, you talked about this a bit yesterday. What was the average rating and are you able to maintain excess spread as you scale up?

Jim Saltzer (Apollo President) (3:12)

Yeah. So if you look at our we think about the world investment grade and non investment grade, not, not, not private and public. And when you think about the spreads that we garnered in terms of our non our investment grade business, you know, it's in the mid-3002 and we've been able to really create that spread over the last 24 months with a little degradation of 15 to 20 basis points over year. On the non investment grade side, it's in the mid-400s and again we've been able to generate that spread over the last 24 months. And again, it's not just the direct private lending, but it's all the things you do to a sponsor. So our origination print is about 80% investment grade, 20% non investment grade. But really it's the change of the model in the, in the last 20, 30 years as a credit and vex investor or fixed income investor, you were an agent in the market. Whatever the origination machine wanted to deliver you, it was only price that you actually had to negotiate. And so you were an agent was really not a lot of the ability to really conduct and have the outcome. In our model where we're the origination principle, where we actually have an impact, it allows you really to have a much greater degree of control of documentation and return and yield. And that's going to suit us well over time. So it's this principal agent issue and we find ourselves really in the leading pack of the origination principal model versus the old model of an agent or vendor model.

Lisa (Co-Interviewer or Analyst) (4:41)

And Jim, what this does is it allows you to look at a lot of documents, it allows you to look at a lot of companies, allows you to see a broad swath of the economy to understand exactly where the pitfalls may be. Do you find some of these arguments about cockroaches and in growing weakness in the economy credible or are you just not seeing it in what you're reviewing? Even among the things that you're reject.

Jim Saltzer (Apollo President) (5:01)

You'Re 15, 16 years in a credit cycle right now in terms of the expansion since the gfc, you're going to find issues and challenges. In the last five to seven years you've had companies like SBB and First Republic bank. And so yes, these are clearly idiosyncratic. We're seeing a much larger theme of a strong economy. Torsten talked about it yesterday in terms of a K shaped economy. We're seeing an administration that's very pro business, anti, you know, not very regulatory friendly, want to push rates lower. And so all of those things where you will see challenges in certain companies late in a cycle. But we are not seeing any kind of credit cycle on the horizon that's waning anytime soon. We are not seeing it.

Lisa (Co-Interviewer or Analyst) (5:48)

Are you seeing a scary allocation of resources? And I say this given the fact that it has been very top heavy to related endeavors. Deutsche bank this morning a story in the Financial Times looking for ways to hedge against some of their data center loans because they are worried about the overall concentration, the risk that you're seeing overnight. Are you staying away from that?

Jim Saltzer (Apollo President) (6:06)

Well, I think what you're talking about is whenever you see a massive impulse infusion of capital into a sector, dark fiber E and P, Shell in the US software enterprises and now AI in the broad ecosystem, you have to think about debt and equity returns on invested capital. And there's been a tremendous rise in valuations on the debt side, on the equity side in the last 24 months. And certainly the assumptions that you're making on the debt side as an investor and a lender to those companies, you're taking more residual risk than you did 6 12, 18 months ago. So valuations are high, you have to be a bit more cautious, you want to be a lot more senior, you want to be secured. And so I think there's going to be a dispersion between returns between the investment grade and non investment grade market. But that's just late cycle behavior. And when you look around the globe as we talked about yesterday, their valuations are high, geopolitical risks are a bit greater and we don't see rates dramatically lower in the next 24 months. So that tells us take the risk down on subordinated credit, lean into senior investment grade opportunities.

Interviewer (Bloomberg Host) (7:14)

Jim, we've seen these capex cycles throughout economic history. You've lived a few of them over a long career as well. But there's something different about this one. And you're well versed in this in a way that I'm not. Some of these assets depreciate rapidly for you and the team. Does that change how you put together some of these deals that you make?

Jim Saltzer (Apollo President) (7:31)

It does. I mean, I think you're raising a really interesting point. Are we thinking is the right way to think about a data center, utility lines and electrical lines? 70, 80, 90 years ago, when day one, all you were doing is wiring the house for lights and then you hire, wired the house for a dishwasher, a TV and everything else that goes with it. And how do you think about that technology and what really is the advantage of that Data center in 5, 10, 15 years with the power supply? I differentiate that with how you might finance a portfolio of chips, GPUs that rapidly depreciate over three to five years. And there they might still all, they might both be in technology, but how you fund and structure both of those is very, very different. And I think that's the subtlety behind, behind the headlines which is going to differentiate the winners and losers. Because in every industry, Even the last 20 years that I just mentioned, those are all, those are all sectors that drew in a tremendous amount of capital. And you really don't know who the winner is from the debt and equity side for a few years. And so certainly with valuations as high as they are in this cycle right now, you have to take a step back and pause and say, okay, do I want to be a lender? Do I want to be an equity owner? What's the residual value assumptions that I'm making? That's really what will differentiate the winners and losers.

Interviewer (Bloomberg Host) (8:51)

I'm not sure how many people are taking a step back, Lisa, at the.

Lisa (Co-Interviewer or Analyst) (8:54)

Moment right now it seems like absolutely nobody. Those debt offerings are absolutely flooding. And frankly, there is a real question about whether there's behavior that potentially isn't as prudent as what you're doing that could potentially pose some sort of risk to the rest of the market.

Jim Saltzer (Apollo President) (9:07)

Well, if you think about the Mag 7 in the last five to seven years, they have been a very, very small participant of the ignition new issue market. In the last two months, there's been a handful of these companies that have been issued very, very large benchmark transactions. And again, that's not a zip code we play in day in and day out. But you have to wonder as a CFO are they being very strategic about accessing that financing and what's the long term return of those opportunities?

Interviewer (Bloomberg Host) (9:37)

Jim, you're going to stick with us. I'm sure we've got a lot to talk about. Jim's out of there of Apollo Indiana.

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