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1、1The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and vie

2、ws of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.January 2025 John Cortese,Partner,Global Head of TradingRob Bittencourt,Partner,Corporate CreditAkila Grewal,Partner,Global Head of Credit Pr

3、oductShobhit Gupta,Managing Director,Corporate CreditTal Barak Harif,Principal,Head Credit Writer2025 Credit Outlook:Defying GravityKEY TAKEAWAYS Following the strong performance of 2024,credit markets are entering 2025 in a solid position.While at first glance,it may appear that risks are one-sided

4、 given spreads are near multi-year tights across several segments of the credit market,we expect the fundamental and technical backdrop to remain strong.Still,we believe there could be some headline risk associated with the implementation of the incoming US administrations policiesfrom tariffs,immig

5、ration,and fiscal policywhich could potentially inject more volatility into markets.We expect the relationship between banks and private credit firms will continue to turn more symbiotic through strategic alliances.Initially targeted at the sub-investment grade market,we expect these partnerships wi

6、ll eventually extend to investment grade(IG)companies as well:While public IG funding is widely accessible,the lack of flexible financing solutions available today can create an opportunity for private credit providers.Another key theme for the new year will likely be the rising demand for data cent

7、er capacity and associated infrastructure,which we estimate will require more than$2 trillion over the next five years.Given the sheer size and unique characteristics of many of these projects,we think that bespoke,privately originated IG financing will be part of the capital solution to finance thi

8、s investment.As 2025 progresses,we expect investors will turn their attention to the next sub-investment grade maturity wall,with over$620 billion of high yield bonds and loans set to come due in 2026 and 2027.1 We saw some notable differences in the way many of the 2024/25 maturities were addressed

9、,which could suggest a large opportunity for private credit to reprise its role as an alternative financing option for companies with upcoming maturities.1 Sources:JPMorgan,Bloomberg,S&P/IHS MarkitATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY2The information herein is provided

10、for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analyst

11、s as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.I)IntroductionWith 2024 behind us,its now clear that the past year followed a very different path than most market participants had anticipated at its outset.Entering last year,

12、economists were betting on a 50%chance of a recession,while analysts were projecting a decline in the S&P 500 Index and a widening of investment grade and high yield credit spreads.2 Instead,the US economic expansion continued and risk assets rallied.In 2024,the S&P 500 Index eclipsed 6,000,notching

13、 a 23%annual return,while investment grade spreads narrowed to a 25-year low,ending the year at 80 basis points,and high yield spreads narrowed to a 17-year low,ending the year at 287 basis points.3 Looking forward,although the new year has begun with credit spreads at or near historical tights,we c

14、ontinue to believe that the fundamental and technical backdrop in creditmarkets remains strong and expect valuations to remain well supported at least through the first half of 2025.At the same time,we believe there could be some headline risk associated with the implementation of the incoming admin

15、istrations policies,which could potentially inject more volatility into the macroeconomic backdrop as the yearprogresses.In this credit outlook,we discuss our expectations for credit markets,including the fundamentals,technical backdrop,and key areas of focus for the year.We will also introduce thre

16、e key themes for the credit markets in 2025:The emerging alliance between banks and private credit asset managers The opportunity to finance the rising demand for data centers and related infrastructure The evolving role private credit is playing in addressing maturity wallsII)OverviewAs Apollo Chie

17、f Economist Torsten Slk details in his 2025 Economic Outlook,the US economy has charted its own path in the post-pandemic world and is diverging both from its own historical performance and that of other developed economies.This robust economic growth,the start of the Federal Reserves(Feds)easing cy

18、cle and,most recently,the election of Donald Trump,along with Republican control of both the House and Senate,have led to a strong rally in risk assets.Entering 2025,equity valuations are at all-time highs,while credit spreads across corporate and securitized credit markets sit at multi-year tights.

19、US investment grade and high yield spreads narrowed to their tightest levels in more than 15 years in November while US CLOspreadswiththe exception of AAAsare near their tightest levels since the Global Financial Crisis(GFC).As spreads have tightened,beta compression has been a key theme across cred

20、it,with the CLO BB-AAA basis narrowing by 175 basis points in 2024.Similarly,CCC-rated corporate bonds in the US,which lagged the broader market earlier in 2024,have since caught up with their spreads tightening by 250 basis points vs.BB-rated credit over the last six months.This has resulted in str

21、ong total returns across credit,led by lower-quality segments of the market,with both CCC-rated corporate bonds and BB-rated CLOs each delivering total returns of more than 15%in 2024.Following the strong performance of 2024,we expect the markets will carry this momentum into the new year despite th

22、e tight spread environment.We continue to believe the strong fundamental and technical backdrop in credit markets remains intact.However,the outlook for the second half of 2025 is more tenuous,given uncertainty around the new administrations fiscal,tariff,and immigration policies.The implementation

23、of any of the more extreme versions of these policiessuch as a broad-based implementation of tariffs,higher deficits tied to tax cuts or an aggressive crackdown on illegal immigration,including large-scale deportationscould drive inflation higher,undoing the Feds progress over the past year.Five-yea

24、r inflation breakevens remained between 2%-2.5%for most of last year,and a breakout from this range would be negative for both risk and risk-free valuations.While this is a tail risk we are watching,it is not our base case.If the US economic expansion can stay on track,potentially aided by deregulat

25、ion and lower corporate taxes,we believe the positive fundamental backdrop for credit should persist.While tariff and immigration policies as well as potential cuts to government spending could prove disruptive,we expect their impact will be contained to a subset of individual companies and sectors.

26、In summary,we expect a market environment where index-level valuations are range-bound,even as uncertainty around monetary and fiscal policy drives higher sector and single-name dispersion.FUNDAMENTALS REMAIN ROBUSTThe consensus forecast is for 2025 US economic growth to slow marginally to 2.1%4 fro

27、m 2.7%,which is still high enough to support corporate fundamentals.Earnings have continued to grow,alleviating pressure on interest coverage and leverage ratios.The beginning of an easing cycle by the Fed and Europes major central banks has also offered relief to the highest leveraged/most floating

28、-rate sensitive parts of the market.With monetary policy likely to ease further in 2025notwithstanding the ongoing debate about the appropriate pacing of cutsfunding cost stress is expected to continue to decline.Further,primary markets remain wide open for most issuers:In 2024,more than 80%of the l

29、everaged loan market was refinanced/repriced5 suggesting most sub-investment grade companies retained access to the market.2 Survey of the largest banks projections for 2024.3 Bloomberg,December 2024.4 Bloomberg,December 2024.5 Based on JPM Leveraged Loan Index.ATLWAA-20250114-4156305-131196172025 C

30、REDIT OUTLOOK:DEFYING GRAVITY3The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect

31、 the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.For households,robust wage growth both in nominal and real terms has boosted consumer fundamentals offsetting th

32、e increase in borrowing costs since 2019.Although household debt-service ratios(debt cost as%of disposable personal income)have increased from their 2021 lows,they are still in line to slightly lower than pre-Covid levels acrossboth mortgage and consumer debt(Exhibit 1).Further,household net worth h

33、as risen to record levels,supported by the rally in risk assets and rising real estate values(Exhibit 2).Exhibit 1:Household debt service ratios have increased from 2021 lows Exhibit 2:Household net worth has risen to record levels supported by the rally in marketsData as of the third quarter of 202

34、4.Source:Federal Reserve4%5%6%7%8%9%10%Debt Service RatioHousehold Net Worth($trn)2005Q12006Q12007Q12008Q12009Q12010Q12011Q12012Q12013Q12014Q12015Q12016Q12017Q12018Q12019Q12020Q12021Q12022Q12023Q12024Q1 CONSUMER MORTGAGEHousehold Net Worth($trn)2005Q12006Q12007Q12008Q12009Q12010Q12011Q12012Q12013Q12

35、014Q12015Q12016Q12017Q12018Q12019Q12020Q12021Q12022Q12023Q12024Q1Dec-87May-89Oct-90Mar-92Aug-93Jan-95Jun-96Nov-97Apr-99Sep-00Feb-02Jul-03Dec-04May-06Oct-07Mar-09Aug-10Jan-12Jun-13Nov-14Apr-16Sep-17Feb-19Jul-20Dec-21May-23$0$20$40$60$80$100$120$140$160$180Data as of the third quarter of 2024.Source:F

36、ederal ReserveWhile we remain sanguine on credit quality across corporates and consumers,there are a few pockets of risk worth monitoring.The right tail of leveraged loan issuersthose with the lowest interest coverage/highest leverage ratioscould face stress if rates remain elevated for longer or re

37、venues decline.For consumers,the rise in serious delinquency(90+days)transition rates for credit cards since the lows of 2021 has been particularly severe for the 18-29 and 30-39 age groups,leaving these cohorts particularly vulnerable to a decline in wages if the economic backdrop weakens(Exhibit 3

38、).Exhibit 3:Credit card transitions to serious delinquencies have been particularly severe for the 18-29 and 30-39 age groupsData as of the third quarter of 2024.Source:Federal Reserve02468101214160246810121416Mar-00Feb-01Jan-02Dec-02Nov-03Oct-04Sep-05Aug-06Jul-07Jun-08May-09Apr-10Mar-11Feb-12Jan-13

39、Dec-13Nov-14Oct-15Sep-16Aug-17Jul-18Jun-19May-20Apr-21Mar-22Feb-23Jan-24%balance,4Q moving sum70+60-6950-5940-4930-3918-29ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY4The information herein is provided for educational and discussion purposes only and should not be construed as

40、 financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of thi

41、s document for important disclosure information.TECHNICAL BACKDROP:STRONG AND IMPROVINGWhile credit spreads have rallied,all-in yields remain elevated,driven by the increase in Treasury yields.For instance,the US investment grade bond yield has been at its 75th percentile since 2005.This has driven

42、strong inflows into fixed income across bond funds and annuity products(Exhibit 4).Further,with improving pension funding ratios over the past few years,defined benefit pension plans have continued to increase their allocation to fixed income(Exhibit 5).Exhibit 4:Fixed income has seen strong inflows

43、 from annuity productsExhibit 5:Pension funding ratios have increased sharply over the last few yearsData as of September 2024.Sources:LIMRA,BloombergQUARTERLY FIXED ANNUITY SALES10Y TSY YIELD$0$10$20$30$40$50$60$70$80$90$100($bn)0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%YieldSep-19Dec-19Mar-20Jun

44、-20Sep-20Dec-20Mar-21Jun-21Sep-21Dec-21Mar-22Jun-22Sep-22Dec-22Mar-23Jun-23Sep-23Dec-23Mar-24Jun-24Sep-24RatioRatioFUNDING RATIOJan-07Oct-07Jul-08Apr-09Jan-10Oct-10Jul-11Apr-12Jan-13Oct-13Jul-14Apr-15Jan-16Oct-16Jul-17Apr-18Jan-19Oct-19Jul-20Apr-21Jan-22Oct-22Jul-23Apr-240.650.70.750.80.850.90.9511.

45、051.10.650.70.750.80.850.90.9511.051.1Data as of October 2024.Sources:Milliman,BloombergElevated all-in yields are likely to continue to support inflows into fixed income.Two other notable factors could also sustain demand:First,the steepening in the yield curvethe 2s/10s Treasury curve has steepene

46、d about 70 basis points in 2024,which has made US fixed income attractive for foreign buyers(Exhibit 6).Second,with the commencement of the Fed easing cycle,the correlation between stocks and bonds has reverted to its usual inverse relationship,improving the diversification benefit of fixed income i

47、n multi-asset portfolios(Exhibit 7).However,the correlation has turned positive in the last few weeks,a relationship we are monitoring closely,given the potential implications for fixed income.Exhibit 6:Steepening of the yield curve has made US fixed income attractive for foreign buyersExhibit 7:The

48、 correlation between stocks and bonds has reverted to its usual inverse relationshipData as of December 2024.Source:Bloomberg-0.2%0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%YieldJan-23Apr-23Jul-23Oct-23Jan-24Apr-24Jul-24Oct-24FX-HEDGED US IG YIELD FOR JPY INVESTORS10Y JGB YIELD-0.4-0.3-0.2-0.1 0 0.1 0.2 0.

49、3 0.4 0.5Sep-23Nov-23Jan-24Mar-24May-24Jul-24Sep-24Nov-24CorrelationData as of December 2024.Source:BloombergATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY5The information herein is provided for educational and discussion purposes only and should not be construed as financial or

50、 investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document fo

51、r important disclosure information.Exhibit 8:We have witnessed meaningful beta compression since September of last year-300-250-200-150-100-50050100150Spread Change(bp)150150-300300-500500-750750-10001000-2000Starting Spread(bp)FEB-SEP 24SEP-DEC 24Data as of December 2024.Sources:BofA Indices,Apollo

52、Key Themes for 2025Although we expect index-level valuations will be range-bound in 2025,we still anticipate that there will be a rich set of idiosyncratic opportunities,stemming in part from policies of the incoming administration.1.Elevated single-name dispersion:While CCC-rated bonds lagged durin

53、g the initial move tighter in high yield spreads that began in late 2023,there has been meaningful beta compression over the last few months.This is evident in Exhibit 8 which shows the high yield spread change between two periods in 2024:February to September,and September to December.In both perio

54、ds,high yield index spreads tightened by 15 basis points,but while the rally in the first period was driven by tighter trading/higher-rated credits,the latter has seen significant outperformance among the wider trading/lower-quality parts of the market.We believe the recent beta compression is not e

55、ntirely justified by fundamentals and likely more a result of investors stretching for yield as overall spreads compress.Indeed,as per Morgan Stanley,the count of HY/LL issuers with interest coverage below 1.5x has remained unchanged/increased slightly in the last two quarters.6 As a result,we expec

56、t the recent compression to eventually reverse,leading to relative underperformance of lower quality credits and an increase in dispersion.2.US vs.Europe:The European-US credit spread basis compressed throughout 2024 but still looks wide relative to its historical relationship.However,we prefer US c

57、redit in the current environment given the weaker growth backdrop in Europe and ongoing political uncertainty.Specifically,the wide OAT-Bund basis acts as a soft spread floor for French corporate risk which makes up about 20%of the European investment grade index.Given continued political uncertaint

58、y in France,we expect OATs will remain under pressurea headwind to tighter credit spreads in Europe.The weaker growth backdrop in Europe combined with the potentially negative impact of US tariffs will likely pressure lower-quality credit in the region as the year progresses.6 Morgan Stanley,January

59、 2025.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY6The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment d

60、ecision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.Exhibit 9:US M&A volumes were up more than 25%year-on-year in 2024Ex

61、hibit 10:but M&A volumes as a fraction of GDP are still below their long-term averageData as of December 2024.Source:Bloomberg.M&A volume based on M&A deals where the target or acquirer is US based and excludes withdrawn and terminated deals.YTD M&A Volumes($bn)$0$500$1,000$1,500$2,000$2,500$3,00020

62、10 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Dec-19Dec-20Dec-21Dec-22Dec-230%2%4%6%8%10%12%14%16%18%M&A Volume as%of GDPData as of September 2024.Source:

63、Bloomberg7 Morgan Stanley,October 2024.8 Committee for a Responsible Federal Budget,US Budget Watch 2024,September 2024.3.M&A:US M&A volumes rose more than 25%year-on-year in 2024(Exhibit 9),a trend we expect to continue in 2025,driven by robust economic growth,lower equity volatility,and a more sup

64、portive regulatory backdrop.M&A volumes as a fraction of GDP are still below their long-term average,and we expect this to normalize in 2025implying an 15%year-over-year increase in volumes,with a bias to the upside(Exhibit 10).4.Corporate taxes&tariffs:The Republican election sweep raises the possi

65、bility of a relaxation of the corporate tax regime.We expect that the limitation on interest deductibility,which was implemented as part of the 2017 tax bill and is currently set at 30%of an issuers EBIT,will be replaced with a more lenient EBITDA-based test.The easing of the interest deductibility

66、limitation can be especially helpful for leveraged issuers with low interest rate coverage ratios.Morgan Stanley estimates that for loan issuers,the disallowed interest could decline by over 50%.7 A less likely but more impactful outcome would be an overall decrease in the corporate tax rate.Trump h

67、as proposed8 a reduction in the corporate rate from 21%to 15%a potential boost to corporate after-tax free cash flow levels.Further,a lower tax rate would decrease the benefit of the interest tax shield from debt financing,potentially reducing the incentive for companies to issue debt.Trump has also

68、 positioned higher tariffs as the cornerstone of his economic policy,calling for up to a 20%across-the-board tariff on all imports as well as a 60%tariff on Chinese imports,which if implemented,would formalize a reversal in the liberalization of trade that began following World WarII.Higher tariffs

69、risk not only companies that are large importers(e.g.,retailers)but also large exporters due to the prospect of retaliation from trading partners.Higher tariffs also risk derailing the Feds fight against inflation,given at least some of the cost of higher tariffs will be borne by consumers in the fo

70、rm of higher prices.Already,Trump has threatened to impose an additional 10%tariff on goods from China and 25%tariffs on all products from Mexico and Canada.We expect more clarity on the breadth of Trumps tariff policies in the first quarter.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYIN

71、G GRAVITY7The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinion

72、s and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.5.DOGE:Since the new administration announced the creation of the Department of Government Efficiency(DOGE),we have seen some bifurc

73、ation among expected“winners”and“losers”as the market prices in sector-specific risks and opportunities.Certain industries which have relied on government demand,historically considered a dependable and recurring revenue stream,are facing uncertainty as the newly commissioned DOGE looks to identify

74、cost savings and sources of government waste and inefficiency.Sectors vulnerable to DOGE-related initiatives include:Business Services Government consultants and contractors reliant on government spending may face headline risk as more details emerge regarding DOGEs specific initiatives.Healthcare A

75、lthough the incoming administration has pledged to maintain Medicare spending,we believe Medicaid,which is one of the largest federal budgetary line items,could come under increased scrutiny,given the size and growth of the program.This in turn has prompted some Republican policymakers to call for t

76、he reform of the healthcare program.Weare also cautious on the pharmaceutical industry,which is exposed to“stroke of the pen”risk related to Medicare drug pricing policies.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY8The information herein is provided for educational and discu

77、ssion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof a

78、nd are subject to change.Please see the end of this document for important disclosure information.Exhibit 11:Nearly 87%of the IG universe is either non-callable or callable less than six months prior tomaturityData as of December 2024.Sources:BofA Indices,ApolloCall 0.5y to maturity53%Call 0.5-1y to

79、 maturity12%No call34%Other1%9 Oliver Wyman,October 2024.10 Bloomberg,2024.11 Preqin data,December 2024.12 Securities Industry and Financial Markets Association,December 2024.III)Key Areas of Focus:1)PUBLIC-PRIVATE CONVERGENCELong viewed as competitors,the relationship between banks and private cred

80、it firms has recently grown more symbiotic.Over the past 12 months,more than a dozen banks have struck deals with private credit firms to partner,up from only two such transactions announced in the preceding year.9 For instance,Barclays and AGL Credit Management announced in April that they will wor

81、k together on originating private credit loans;Apollo and Citigroup disclosed in September that they are teaming up in a partnership that will target up to$25billion worth of private credit deals over the next five years;and a news report in October indicated that JPMorgan was teaming up with Cliffw

82、ater,FS Investments,and Shenkman Capital Management in an effort to broaden its reach in the private credit market.10These ventures can enhance capital market access fora wide variety of issuers.Banks can now marry their extensive Rolodex of client relationships with the tenor and flexibility of cap

83、ital managed by private credit firms to offertailored solutions to borrowers.Further,rather than distributing these loans to a broad list of investors,banks,through these partnerships,can place these loans with a single,or select group of investors.This arrangement can allow foran expedited negotiat

84、ion process as well as more customized structures that better fit the funding requirements of certain borrowers.The emergence of these partnerships is occurring as the total assets under management(AUM)of private credit funds have increased to$1.6 trillion,up 15%over the past five years.11 Asmore is

85、suers entertain private financing options,its only natural that banks would look to leverage their strengths in order to maintain relevance in this growing part of the credit market.Most of the partnerships referenced above are currently focused on sub-IG corporates.Over time,we expect that similar

86、partnerships will extend totheIG market as well.Although funding is widely availablefor IG-rated companies in the public markets,the homogenous nature of the public IG market leaves a diverse set of borrowers with few options to customize their debt financings to meet their specific capital needs.Th

87、is has created the opportunity to provide more flexible solutions,with many IG-rated issuers increasingly looking toprivate credit as a more versatile financing source.Webelieve private credit and bank partnerships can help address this.ONE SIZE DOES NOT FIT ALL The US corporate bond market has seen

88、 tremendous growthinthe past quarter century,with the total amount ofdebt outstanding nearly tripling from$3.5 trillion to$11trillion,of which nearly 90%is IG-rated.12 One of the more curious features of the IG debt universe is the uniformity in structure:Almost all corporate IG bond debt is senior

89、unsecured that carries fixed,non-deferrable coupons with a bullet maturity.Unlike high yield bonds,most IG securities offer limited optionality for issuers to call their bonds prior to maturity.Nearly 87%of the public IG bond universe(byamount outstanding)is either non-callable or callable less than

90、 six months prior to maturity,with another 12%callable within a year of maturity,offering little flexibility to issuers(Exhibit11).Standardization is not without benefits.With a consistent debt structure applied across most IG bond issues,investors can more readily price and value bonds and assess r

91、elative value which can help the syndication and tradability of deals across a wide set of investors.This has likely been an important driver of the significant growth witnessed in the IG market.However,what has been a feature of the IG market,may now ATLWAA-20250114-4156305-131196172025 CREDIT OUTL

92、OOK:DEFYING GRAVITY9The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the curre

93、nt opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.be developing into a bug in certain situations.The IG market currently encompasses 1,300 different issuers across 19 secto

94、rs and 68sub-sectors(Exhibit 12).It includes businesses of different sizes and in different stages of their life cycle,facing varying degrees of capital intensity and with revenue profiles that exhibit a broad range of cyclicality.Further,IG issuers are domiciled in more than 50 countries,with varyi

95、ng tax laws and accounting rules.Exhibit 12:The IG market currently spans 1,300 different issuers across 19 sectors Data as of December 2024.Total may not sum to exactly 100 due to rounding.Sources:BofA Indices,ApolloBanking17%Healthcare10%Utility10%Financial Services10%Energy8%Technology&Electronic

96、s7%Consumer Goods5%Capital Goods5%Insurance5%Telecommunications4%Media4%Retail4%Basic Industry3%Real Estate3%Automotive3%Transportation2%Services1%The fact that such a diverse set of companies relies on an identical debt structure to raise funding appears highly inefficient.While more frequent issue

97、rs can at least stagger their maturities across multiple issuances,this only partially modulates the cash flow demands on a company,and less regular issuers must settle for a largely monolithic capital structure with a few bullet maturities.A bespoke solution that provides a company with more flexib

98、ility is clearly a better option for many borrowers,but it may also benefit lenders by more closely synchronizing debt servicing requirements with a companys underlying cash flow profile.Forinstance,a company with significant upfront capex needs for projects which may not generate revenue in the nea

99、r-term would benefit from the option to defer initial coupons.Conversely,a company with aging manufacturing facilitieswhich are generating steady but diminishing cash flowsmay secure increased upfront borrowing capacity through the addition of amortization payments.Companies will likely be more will

100、ing to pay for the added flexibility provided by these bespoke solutions.There may be a question then about how these options affect the underlying credit risk of an issuer.If appropriately structured,we believe these financing alternatives can empower management teams to optimize their operational

101、decision-making by more naturally matching the cash flows of their business with their funding structure,which may ultimately reduce risk versus fixed-coupon bullet-maturity debt.Furthermore,in return for more flexibility,borrowers may be willing to pledge collateral and/or provide structural senior

102、ity,enhancing downside protection.The result is a bespoke financing solution that provides borrowers with the flexibility they desire while offering investors an avenue to pick up spread over conventional IG debt in a downside protected manner.Indeed,corporate hybrid securitieswith partial equity cr

103、edit,deferrable coupons and embedded call optionsare a prime example of a flexible funding solution that is gaining popularity among IG-rated issuers.We believe that bank-private partnerships will accelerate the adoption of these alternatives,addressing the uniformity in structure across the IG-corp

104、orate bond universe.Through these alliances,banks can offer custom solutions to issuers that leverage the capital of their partners,which is typically more flexible and longer duration in nature.The bilateral relationship between the partnership and borrower can also simplify the structuring and neg

105、otiation process because terms must only address a single investors requirements as opposed to those of a broad syndicate.Furthermore,the growing AUM of private credit firms provides funding at a scale that is meaningful for IG-rated issuers.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYIN

106、G GRAVITY10The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinio

107、ns and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.CONVERGENCE OF PUBLIC AND PRIVATE CREDITWe expect to continue to see the relationship between banks and private credit firms turn m

108、ore symbiotic through alliances,which can be broadly classified into two categories:1.Forward-flow agreements:Arrangements where banks originate loans on behalf of private credit buyers.Recent examples include Oaktree-Lloyds,PNC-TCW,Centerbridge-Wells Fargo,and AGL-Barclays.13 Most of the forward-fl

109、ow agreements are currently focused on loans to middle-market companies.However,as we discussed above,we expect that similar partnerships will eventually extend to IG companies as well.2.Risk transfer trades:Existing risk on bank balance sheets is also being actively transferred to private investors

110、.Forinstance,in February 2024,Barclays announced an agreement to sell$1.1 billion of credit card receivables to Blackstone.14 More broadly,bankshave sold a significant amount of first-loss risk through Significant Risk Transfer(SRT)tradeswith some estimates indicating that as of late October,loans t

111、ied to such transactions have exceeded$1trillion15alleviating risk-weighted asset pressures on bank balance sheets.We believe these partnerships will continue to blur the distinction between public and private markets that is already underway in some segments of the credit market.In the leveraged lo

112、an space,issuers actively choose between public and private markets for a variety of reasons,including the market environment and the timing and complexity of their funding needs.Companies with more immediate capital needs/more complexity tend to choose the private market,while those with more tradi

113、tional needs opt for the public route.We expect something similar will develop in the IG credit markets:Companies will choose the broadly syndicated route for regular-way issuance but will choose to work with private lenders for more structured and complex financing solutions.13 Lloyds Bank and Oakt

114、ree Partner;Citi and Apollo;PNC and TCW;Wells Fargo-Centerbridge Partners;AGL Credit and Barclays.14 Barclays and Blackstone Credit&Insurance Agree to Sale of Credit Card Receivables-Blackstone.15 Bloomberg,October 2024.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY11The informa

115、tion herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the au

116、thors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.2)FINANCING THE DATA CENTER BOOM To read the 2025 Apollo Credit Outlook,you probably downloaded this document from the Apollo Academy website,or possibly

117、 received an email inviting you to read this paper,or perhaps those of you who are AI adopters may have prompted ChatGPT to summarize Apollos perspectives on the credit markets contained herein.Regardless of what action you took to get here,one thing is certain:it was facilitated by a data center.CU

118、RRENT LANDSCAPEThe exponential increase in data has fueled the growing need for servers and data centers in the US.With the rise of cloud computing,artificial intelligence,and the Internet of Things,businesses and consumers are generating vast amounts of data that need to be stored,processed,and ana

119、lyzed.This surge in data is further supported by the expansion of digital services,remote work,and online entertainment.As a result,cloud service providers and enterprises are investing heavily in data center infrastructure to ensure they can handle the increased data load,maintain performance,and p

120、rovide reliable services,as well as expand capacity for AI training and inference functions.The exponential growth in data has been so immense that traditional units of measurement like gigabytes or terabytes are now insufficient to capture the associated scale forcing the industry to adopt zettabyt

121、es(one quadrillion megabytes)as its preferred measure of data usage.As shown in Exhibit 13,the total amount of data created,captured,copied,and consumed globally is estimated to have reached a record 149 zettabytes in 2024 and projected to more than double to 394 zettabytes by 2028.16 Toput this int

122、o perspective,if you stored one zettabyte of music,you would have a playlist that could play continuously for 194million years without repeating a single song.1716 WHATS THE BIG DATA,How Much Data Is Generated Every Day,May 2024.17 TopTenReviews,Petabyte,Exabyte,Zettabyte,Yottabyte-just how big are

123、they?September 2020.2 5 7 9 13 16 18 26 33 41 64 84 101 123 149 182 221 291 394 0501001502002503003504004502010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028Zettabytes of Data200 x Projected Growth Over 18 YearsData as of May 2024.Source:StatistaExhibit 13

124、:Exponential growth in data has been so immense that traditional units of measurement are insufficient to capture the industryATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY12The information herein is provided for educational and discussion purposes only and should not be constru

125、ed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end o

126、f this document for important disclosure information.Looking forward,a major part of the future growth in data and computing demand will likely come from the widening use of generative AI.The inherent nature of this technology,which necessitates continuously training larger and larger foundational m

127、odels,requires significant computational power.According to some estimates,the compute demands for training frontier AI models has grown by 4-5x per year from 2010 to 2024.18 The revenue market size of generative AI companiesat$40 billion in 2022is expected to grow at a compound annual growth rate(C

128、AGR)of 42%over the next 10years and could reach$1.3 trillion by 2032.19 According to results from a survey administered by McKinsey20 in April 2023 to 1,700 participants across a variety of industries and companies,nearly one-quarter of surveyed C-suite executives said they are personally using gene

129、rative AI tools for work.Additionally,40%of respondents indicated that their organizations will increase their investment in AI overall.To illustrate what this AI-related growth could mean in terms of data center demand,consider the fact that if we were to deploy the latest ChatGPT into every search

130、 done by Google,it would require half a million servers backed by more than 4 million graphics processing units(GPUs),which carry an estimated price tag of$100 billion.21 Goldman Sachs estimates that AI will represent about 19%of data center power demand by 2028.This anticipated rise in data,storage

131、,and computational demand has positioned data centers as a critical bottleneck within the broader digital infrastructure space.FUTURE COSTS After limited growth in 2015 to 2019,data center-related power demand has doubled in the three years to 2023 and is expected to increase 160%through the rest of

132、 the decade(Exhibit 14).18 Epoch AI,Training Compute of Frontier AI Models,May 2024.19 Bloomberg Intelligence,June 2023.20 McKinsey,April 2023.21 Source:Semianalysis,February 202302004006008001,0001,200201520162017201820192020202120222023E2024E2025E2026E2027E2028E2029E2030EData Center Power Demand,T

133、WhUS ex-AIUS AIRoW ex-AIRoW AIData as of April 2024.Source:Goldman SachsExhibit 14:Data center power demand is expected to increase 160%through the rest of the decadeATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY13The information herein is provided for educational and discussion

134、 purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and ar

135、e subject to change.Please see the end of this document for important disclosure information.22 McKinsey,Digital Infrastructure Development.October 2024.23 Turner&Townsend,Data Center Cost Trends,DCCI 2024.24 Apollo analysts.25 McKinsey,September 2024.Due to intermittent generation,renewables have l

136、ow capacity factors.Additional cost is required to firm generation through the integration of battery storage and/or overbuilding capacity.26 Apollo analysts,Third Act,Plant Vogtle:The True Cost of Nuclear Power in the US.May 2024.Calculation based on the$36 billion cost for$2.4GW of unit 3 and unit

137、4 of Plant Vogtle.27 Nvidia,Semianalysis,Apollo analysts.Calculation based on compute/server costs.28 History Channel.10 Ways the Transcontinental Railroad Changed America.September 2019.29 Assuming average annual inflation of 2.1%.The meteoric rise in data consumption and processing needs has prope

138、lled the emergence of mega-scale gigawatt data centersfacilities with a power capacity of one gigawatt(a unit of power that is equal to 1 billion watts)to serve these growing compute needs.Current estimates indicate that the US will require about 80 gigawatts of data center capacity by 2030,an incre

139、ase of 60 gigawatts from 2024.22 The largest hyperscalers,including cloud service providers Amazon,Microsoft,and Google,are aggressively expanding data center capacity to support the growing demand for their services as well as their AI-related investments.The top three hyperscalers currently contro

140、l close to 15 gigawatts of capacity today and we expect 90%of data center growth will be driven by fivehyperscalersMicrosoft,Amazon,Google,Meta,and Oracleby 2030.The initial investment related to building this digital infrastructure can vary depending on the size and scope of the project.Current est

141、imates scope data center build costs at around$10billion per gigawatt of data center capacity.23 If we accept the estimates that the digital infrastructure scale-up is going to require over 60 gigawatts of capacity to be built by 2030,then the associated upfront development cost could reach nearly$6

142、00 billion.These estimates exclude the electricity generation capacity required to power these data centers as well as the GPUs and related hardware installed in these data centers.A 1.5 gigawatt newly built combined-cycle gas turbineenough power for about 1 gigawatt of critical IT loadcosts$1.6 bil

143、lion,24 a gigawatt of solar production cost$3.1billion25 and a gigawatt of nuclear power capacity in the US costs about$15-$16 billion.26 Finally,this scale-up will require fabssemiconductor fabrication facilities where chips are producedto manufacture the logic and memory chips used in serverswhich

144、 carries an expected cost of$19 billion per gigawatt of corresponding data center capacity.27 Factoring in this supporting infrastructure pushes the total cost of 60GW of data center capacity to over$2 trillion(Exhibit 15).We believe that the quantum of investment supporting this capacity buildout w

145、ill surpass any industrial scale-up in history.In comparison,the transcontinental railroad buildout in the 19th century,which involved 21,000 workers laying 1,776miles of track to connect the US from east to west,costabout$60 million28 at the time,which is equivalent to$1.4trillion in inflation-adju

146、sted dollars.29Sources:Turner&Townsend,Plant Vogtle,Apollo analysts Exhibit 15:Total cost for data center build could surpass$2 trillionData Center Built$10B$7BGPUS$19BCost per Gigawatt$36BTRILLION$2.260 GigawattsPower Built (Gas,Solar,Nuclear)ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFY

147、ING GRAVITY14The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opin

148、ions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.HOW ARE DATA CENTERS FINANCEDConstruction loans or project finance,mostly provided by banks,are typically the avenue most compani

149、es will choose when planning the construction of a new data center.The sponsorswhich can either be developers or investorsprovide equity funding which is used to acquire the land,secure the necessary permits,and provision the site with power.The sponsor can then secure a lease with a hyperscaler or

150、other creditworthy anchor customer based on their compute and geographic needs.Once the lease is signed,the sponsor can then solicit construction financing that is released based on construction milestones and loan-to-cost calculations of the buildout,with the initial security typically consisting o

151、f a first mortgage on the real asset,paid-in equity,and completion guarantees provided by the sponsor.While large tech companies have the capacity and expertise to build data centers themselves,the volume and capital that is needed is part of the reason why they choose to outsource a portion of thei

152、r data center needs to large developers,who can streamline the project management complexity through a replicable model across multiple builds,while providing an alternative source of financing through a leasing arrangement.This solution is attractive for both parties.Investors can secure an 8%-10%s

153、tabilized lease yield with a creditworthy counterparty while the tenant,typically a hyperscaler,can limit its upfront cash outlay,eliminate cost overrun risk,and reduce their ownership of long-dated real estate.Hyperscalers,including Microsoft,Google,Meta,and Amazon,have historically preferred to se

154、lf-build,but they also rely on third party data center developers to lease capacitytypically 20%-45%of their data center capacity needswith the exception of Oracle,which only leases.Construction financing is typically structured as a three-or four-year facilitydepending on the expected duration of t

155、he constructionwith extension options,that is typically refinanced via the asset-backed securities(ABS)market.ABS are pools of loans collateralized by underlying assets that generate a regular cash flow and are packaged together into investable securities.The ABS market finances a variety of assets

156、including automobile loans,credit card receivables,aircraft lease receivables,equipment leases,and music royalties in addition to digital infrastructure.This market is separate from the agency MBS and agency CMBS markets.The overall ABS market is a$1.6 trillion market and makes up 3%of the total fix

157、ed income market in the US.30 Morgan Stanley estimates that around 5%of total US data center capacity sits in ABS trusts,or about$25 billion outstanding.31 If the percentage of data centers financed by the ABS market remains constant over the next three years,this would imply growth of around 20%per

158、 year,resulting in the data center ABS market reaching$49billion by 2027.Still,given the sheer size and unique characteristics of many of these projects(the expected average useful life of a data center facility is 40 years,a power plant is almost 40 years,and a chip fab is at least 20 years),32 as

159、well as the large quantum of capital that will be needed to finance the buildout of data centers and the associated infrastructure,we believe that the current financing options and the depth of the existing capital markets will be insufficient to address the needed buildout.The key challenge with th

160、e current approach is the size of the builds.The ABS market historically has supported up to$1billion per issuance,which can scale with a master trust across issuances,but requires diversity.The newest generation of data centers can cost up to$2 billion for a single asset,which will complicate the t

161、ask of building a diverse pool of assets that the ABS market can digest.Further,the banks that originate the construction financing for these facilities are also starting to reach obligor concentration limits and will soon have to address the maturities of the 2020-2022 vintage of construction loans

162、.We think that bespoke,privately originated,investment-grade financing(Private IG)will be part of the capital solution to meet the increased demand for AI-related infrastructure,including data centers,semiconductors,and power generation,given the unique characteristics of the asset class:Data center

163、s are long-lived,durable assets that generate predictable cash flow through leasing arrangements with creditworthy counterparties.Due to the flexibility and duration of capital that can be offered by Private IG solutions,developers and tenants can creatively finance many of these projects utilizing

164、non-dilutive capital to reduce balance sheet leverage and support credit ratings.30 Guggenheim,The ABCs of Asset-Backed Securities(ABS),July 2024.31 Morgan Stanley,The AI Angle of ABS:Data Center ABS to Double by 2007.September,2024.32 Apollo analysts,S&P Global.October 2022.ATLWAA-20250114-4156305-

165、131196172025 CREDIT OUTLOOK:DEFYING GRAVITY15The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views ex

166、pressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.Exhibit 16:The 2026-2027 maturity wall is a direct result of the PE dealmaking in 2021-2022$389$4

167、83$516$471$581$663$676$576$1,185$915$645$16$97$245$376$805$606$355$386$93$16$36$0$200$400$600$800$1,000$1,200$1,4002013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20232024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 oror later($bn)PE DEAL VOLUMEHY BOND AND LEVERAGED LOAN MATURITIESData as of

168、 December 2023/August 2024.Sources:PitchBook,JPMorgan,S&P/IHS Markit 3)MATURITY WALL:RISK OR OPPORTUNITY?In March of 2024,the Organisation for Economic Co-operation and Development cautioned investors about the dangers in the bond market given the looming maturity wall,warning“market supervisors nee

169、d to monitor closely both debt sustainability in the corporate sector and overall exposures in the financial sector.”At the end of 2022,nearly$700 billion of debt was set to mature prior to 2025 across the US high yield bond and leveraged loan markets.33 Today,that figuresub-investment grade debt se

170、t to mature prior to 2025sits below$100 billion as most issuers have successfully rolled their near-dated maturities.This turn of events follows a now familiar pattern in credit markets,where investors will fixate on an upcoming maturity wall supposedly lurking over the horizon,only to see it addres

171、sed by refinancing activity in the capital markets.Looking forward,we suspect investors will soon focus on the upcoming 2026/2027 maturity walland for good reason:In2026 and 2027,over$620 billion of high yield bonds and loans are set to mature.This is a direct result of the record shattering pace of

172、 private equity(PE)deployment during and following the pandemic,fueled by ultra low interest rates.For context,PE deal making hit$1.2 trillion and$915 billion in 2021 and 2022,respectivelytwice the average annual pace over the five years preceding the pandemic(Exhibit 16).High yield and leveraged lo

173、an issuance in 2021 rose to$465 billion and$615billion,respectively,the most on record and nearly 50%of sub-investment grade debt issued that year was sponsor-backed,according to data tracked by PitchBook LCD.33 PitchBook LCD,JPMorgan,Morgan Stanley.November 2024.Despite the cyclical nature of matur

174、ity walls,we have seen some notable differences in the way the 2024/2025 cohort of maturities was digested that we think hints at a growing opportunity looking forward.Unlike earlier maturity wall extensions,over the past two years,many companies have looked beyond the syndicated markets for refinan

175、cing alternatives.Private credit,sometimes employing complex and innovative structures,along with out-of-court distressed exchanges,has played a key role in addressing these maturities for more levered issuers unable to access the broadly syndicated markets.ATLWAA-20250114-4156305-131196172025 CREDI

176、T OUTLOOK:DEFYING GRAVITY16The information herein is provided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect th

177、e current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.Exhibit 18:We believe interest rates will remain higher for longer0123456720002001200220032004200520062007200820092

178、0102011201220132014201520162017201820192020202120222023202420252026202720282029%FED FUNDS RATESOFR FUTURESMARKETS PRICING FED FUNDS TO BOTTOM AT 3.5%Data as of November 2024.Sources:Bloomberg,Apollo Chief EconomistWe estimate that since 2022,$40 billion of syndicated loans have been refinanced with

179、private credit solutions.34 Undoubtedly,a sizable portion of this activity has targeted maturities through 2025.Its also probably no coincidence that distressed debt exchange activity through the end of November 2024at$44 billionhas already set a new annual record(Exhibit17).Exhibit 17:Distressed ex

180、change activity in 2024 is at a record$36.4$20.3$4.9$0.9$4.1$0.0$3.0$15.3$9.2$2.6$1.0$7.8$11.8$3.5$21.4$27.7$43.7$0$5$10$15$20$25$30$35$40$45$502008200920102011201220132014201520162017201820192020202120222023YTDDistressed exchange volume($bn)LEVERAGED LOAN DISTRESSED EXCHANGESHIGH-YIELD BOND DISTRES

181、SED EXCHANGESData as of December 2024.Sources:JPMorgan,PitchBook Data,Bloomberg,S&P/IHS MarkitHigher rates are forcing companies to think more creatively about how they finance themselves,and we think this has created attractive opportunities for asset managers who can straddle both the public and p

182、rivate markets and provide bespoke financing solutions.While the Fed has embarked on a monetary-policy easing cyclehaving lowered the upper bound of the federal funds rate since September by 100 basis points to 4.5%we believe interest rates will stay relatively higher for longer compared to historic

183、al standards(Exhibit18).Even after this latest series of rate cuts,short-term rates are still at their highest level since 2007,excluding the most recent rate-hike cycle.34 PitchBook LCD,November 2024.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY17The information herein is prov

184、ided for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo An

185、alysts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.With yields still meaningfully higher than their 2021 lows,the coupon of high yield maturing debt is 1%-2%lower relative to the high yield index(Exhibit 19),suggesting that

186、 the cost of refinancing upcoming bond maturities will be meaningfully higher.Given this dynamic,along with a total volume of maturing high yield debt that is at its highest level in nearly 10years(Exhibit 20)and the expected higher rate environment,many issuers are likely to look for outside-the-bo

187、x alternatives.The precedent set by the explosion of out-of-court maturity extension activity and structured private credit solutions over the past two years may also serve as a tailwind for the broader adoption of these deal structures.Companies,advisors,and investors have steadily formalized the b

188、lueprint for these types of deals.We expect that this accumulated experience will push these newer deal structures and related liability management exercises(LMEs)from the vanguard toward the mainstream,potentially expanding the opportunity set in addition to the ramping maturity schedule detailed a

189、bove.We believe providing companies with bespoke solutions to address this maturity cliff amid a higher rate environment could represent one of the largest private credit and creative capital deployment opportunities in the history of the sub-investment grade market.Its magnitude will be partially d

190、ictated by the state of the capital markets over the next few years,but we expect companies will start thinking about their refinancing strategies for 2026 and 2027 maturities as 2025 unfolds.Exhibit 19:Coupon of maturing debt is lower than refinancing yieldExhibit 20:The amount of maturing high yie

191、ld debt is at the highest in nearly a decadeData as of December 2024.Source:BofA indices,Apollo-4%-3%-2%-1%0%1%2%3%4%Coupon of maturing debt less yield of HY index1-2Y2-3Y$0$50$100$150$200$250$300Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-241-2Y2-3YData as of December 2024.So

192、urce:BofA indices,Apollo$0$50$100$150$200$250$300Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-241-2Y2-3YHY Maturing Debt($bn)ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY18The information herein is provided for educational and discussion purposes only and

193、should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change

194、.Please see the end of this document for important disclosure information.About the AuthorsJohn Cortese,PartnerGlobal Head of TradingMr.Cortese is a Partner in Credit at Apollo,where he is responsible for its Global Trading business and is the Deputy Chair of its Multi-Credit Committee.Prior to join

195、ing in 2021,John was Co-Head of US Credit Trading at Barclays.Previously,he was a High Yield and Distressed credit trader at Lehman Brothers.John is a board member of the Make-A-Wish Foundations Metro&Western NY branch,as well as Dartmouth Colleges Hopkins Center for the Arts.John graduated from Dar

196、tmouth with a BA in Economics and is a CFA charterholder.Rob Bittencourt,PartnerCorporate CreditSince joining Apollo in 2006,Rob has focused on Apollos credit businesses in a variety of capacities,including as Co-Head of Liquid Opportunistic Credit,Head of Research for Global Corporate Credit,and cu

197、rrently as Co-Head of Opportunistic Credit.He has also led research coverage of a variety of sectors including consumer/retail,technology,telecom/media and chemicals.Rob currently serves as the Co-Chair of the Opportunistic Investment Committee and as a member of several investment committees across

198、 the Apollo platform.He co-founded Apollos digital asset strategy and is a member of Apollos Credit Management Committee.Rob graduated cum laude from Harvard College with a BA in economics.Akila Grewal,PartnerGlobal Head of Credit ProductAkila Grewal is a Partner in Client and Product Solutions,wher

199、e she serves as the Lead of the Institutional Product Specialist team and Co-Lead of Product Management focused on strategies in Credit across Apollos platform.As part of her role,Akila leads a global team of professionals who work closely with internal stakeholders and external partners on capital

200、formation across Credit,Private Equity,Real Assets and Infrastructure.Akila sits on several committees,including the Firms Credit Management Team,Credit Allocations Sub-Committee and the Apollo Opportunity Foundations Council.Akila also serves on the not-for-profit Bravens NYC Board as well as the P

201、K AirFinance Board.Prior to joining in 2016,Akila was on the Proprietary Trading and Risk Management team at Mariner Investment Group.Previously,she was in the Business Development group at MKP Capital and she started her career at Credit Suisse on the Hedge Fund of Funds Portfolio Management team.A

202、kila graduated from New York Universitys Stern School of Business with a BS in Finance and is a CFA charterholder.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY19The information herein is provided for educational and discussion purposes only and should not be construed as financ

203、ial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change.Please see the end of this docum

204、ent for important disclosure information.About the Authors(continued)Shobhit Gupta,Managing DirectorCorporate CreditShobhit Gupta joined Apollo in January 2024 as the Head of Multi-Credit Strategy and is responsible for identifying key themes and opportunities across global credit.Prior to joining A

205、pollo in 2024,Mr.Gupta spent 15 years at Barclays as the head of US credit strategy,covering investment grade,high yield,loans,credit derivatives,and securitized products.He also worked at Citadel for two years focusing on opportunities in subordinated capital securities.Mr.Gupta has a PhD in Operat

206、ions Research from MIT,and a Bachelors degree in Mechanical Engineering from IIT Bombay.Tal Barak Harif,PrincipalHead Credit WriterTal Barak Harif is a Principal and Head Credit Writer at Apollo,working in partnership with the Institutional Client&Product,Investing and Marketing/Branding teams on co

207、ntent creation and strategy.Prior to Apollo,Tal spent 17 years at Bloomberg News where she launched and led innovative news products,managed global teams across domains and produced exclusive agenda-setting stories on companies,industries,markets and economies.Early in her career,Tal was a financial

208、 and emerging markets reporter,editor and team leader at Bloomberg,Wall Street Journal and Dow Jones.Talgraduated from the University of Maryland,College Park with a BA in Journalism and Psychology.ATLWAA-20250114-4156305-131196172025 CREDIT OUTLOOK:DEFYING GRAVITY20The information herein is provide

209、d for educational and discussion purposes only and should not be construed as financial or investment advice,nor should any information in this document be relied on when making an investment decision.Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analy

210、sts as of the date hereof and are subject to change.Please see the end of this document for important disclosure information.20To learn more,visit ApolloA.2025 APOLLO GLOBAL MANAGEMENT,INC.ALL RIGHTS RESERVED.Important Disclosure InformationThis presentation is for educational and discussion purpose

211、s only and should not be treated as research.This presentation may not be distributed,transmitted or otherwise communicated to others,in whole or in part,without the express written consent of Apollo Global Management,Inc.(together with its subsidiaries,“Apollo”).The views and opinions expressed in

212、this presentation are the views and opinions of the authors of the content.They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice.Further,Apollo and its affiliates may have positions(long or short)or engage in securities transactions tha

213、t are not consistent with the information and views expressed in this presentation.There can be no assurance that an investment strategy will be successful.Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may

214、 differ materially,and should not be relied upon as such.This presentation does not constitute an offer of any service or product of Apollo.It is not an invitation by or on behalf of Apollo to any person to buy or sell any security or to adopt any investment strategy,and shall not form the basis of,

215、nor may it accompany nor form part of,any right or contract to buy or sell any security or to adopt any investment strategy.Nothing herein should be taken as investment advice or a recommendation to enter into any transaction.Hyperlinks to third-party websites in this presentation are provided for r

216、eader convenience only.Unless otherwise noted,information included herein is presented as of the dates indicated.This is not complete and the information contained herein may change at any time without notice.Apollo does not have any responsibility to update the presentation to account for such chan

217、ges.Apollo has not made any representation or warranty,expressed or implied,with respect to fairness,correctness,accuracy,reasonableness,or completeness of any of the information contained herein(including but not limited to information obtained from third parties unrelated to Apollo),and expressly

218、disclaims any responsibility or liability therefore.Theinformation contained herein is not intended to provide,and should not be relied upon for,accounting,legal or tax advice or investment recommendations.Investors should make an independent investigation of the information contained herein,includi

219、ng consulting their tax,legal,accounting or other advisors about such information.Apollo does not act for you and is not responsible for providing you with the protections afforded to its clients.Certain information contained herein may be“forward-looking”in nature.Due to various risks and uncertain

220、ties,actual events or results may differ materially from those reflected or contemplated in such forward-looking information.As such,undue reliance should not be placed on such information.Forward-looking statements may be identified by the use of terminology including,but not limited to,“may”,“will

221、”,“should”,“expect”,“anticipate”,“target”,“project”,“estimate”,“intend”,“continue”or“believe”or the negatives thereof or other variations thereon or comparable terminology.The Standard&Poors 500(“S&P 500”)Index is a market-capitalization-weighted index of the 500 largest US publicly traded companies

222、 by market value.The Bloomberg US Intermediate Corporate Index measures the investment grade,fixed-rate,US dollar-denominated securities.The index includes publicly issued securities by industrial,utility,and financial issuers with at least USD 300mn amount outstanding.The Bloomberg Investment Grade

223、 Corporate Index measures the investment grade,fixed-rate,taxable corporate bond market.It includes USD-denominated securities publicly issued by US and non-US industrial,utility,and financial issuers.The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investm

224、ent grade,US dollar-denominated,fixed-rate taxable bond market.The index includes Treasuries,government-related and corporate securities,fixed-rate agency MBS,ABS and CMBS(agency and non-agency).The Bloomberg US High Yield Index measures the USD-denominated,high yield,fixed-rate corporate bond market.Securities are classified as high yield if the middle rating of Moodys,Fitch and S&P is Ba1/BB+/BB+or below.Additional information may be available upon request.Past performance is not necessarily indicative of future results.ATLWAA-20250114-4156305-13119617