As part of a strategic move, UBS and Apollo have reached a significant agreement, culminating in the conclusion of various contractual arrangements. This deal signifies a pivotal moment as Atlas SP (Atlas) finalizes its Transition Services Agreement with UBS, while simultaneously closing out UBS’s Investment Management Agreement with Atlas.
Acquisition of Senior Secured Financing Facilities
In a substantial move, Apollo will acquire USD 8 billion of senior secured financing facilities from UBS. This acquisition underscores a mutually beneficial arrangement aimed at advancing both entities’ strategic objectives.
Alignment with Strategic Objectives
This collaborative effort aligns closely with UBS’s strategic vision, particularly in the realm of winding down and simplifying its Non-Core and Legacy (NCL) portfolio. Simultaneously, it complements Apollo’s strategic momentum in expanding Atlas as an independent origination platform.
Strategic Implications for UBS
For UBS, these measures represent a concerted effort to accelerate the unwinding and simplification of its NCL portfolio. The actions taken aim to minimize client disruption while concurrently reducing risk-weighted assets and leverage ratio denominator within the NCL framework.
Financial Impact and Expectations
Anticipated financial outcomes include a net gain of approximately USD 0.3 billion for UBS Group in the first quarter of 2024. Conversely, Credit Suisse AG is expected to register a net loss of around USD 0.9 billion. These differences stem from adjustments made under IFRS as part of the purchase price allocation during the acquisition of Credit Suisse Group, alongside provisions by UBS Group in preceding quarters, not recognized under Credit Suisse AG’s US GAAP accounting policies.
Strategic Evolution for Atlas and Apollo
For Atlas and Apollo, this agreement symbolizes Atlas’ transition into a fully independent platform, with a pronounced focus on investment-grade asset-backed origination. This strategic evolution underscores Apollo’s commitment to fostering growth and innovation within the financial landscape.
Leadership Insights
Commenting on the transaction, Sergio P. Ermotti, CEO of UBS Group, emphasized the significance of the mutual agreement with Apollo. He reiterated UBS’s unwavering commitment to freeing up capital from Non-Core activities, reducing costs, and streamlining complexity as integral components of the organization’s strategic agenda.
Similarly, Marc Rowan, CEO of Apollo, expressed satisfaction with the culmination of the Atlas transition alongside UBS, highlighting the economically neutral nature of the partnership for Apollo. He underscored the milestone achieved by Atlas, characterized by record origination and capital-raising achievements, demonstrating substantial progress in the financial landscape.
Source: UBS
