Citi, Apollo offer new private credit option on Boeing deal

by Aaron Weinman and Ellen Schneider

Citigroup Inc. and Apollo Global Management Inc. are offering potential buyers of Boeing Co.’s Jeppesen navigation unit the option to fund the acquisition via the pair’s nascent private credit partnership, according to people familiar with the matter.

It would mark the first private staple financing, one of the people said, a form of pre-agreed funding used to facilitate an acquisition. Wall Street banks are dedicating more of their balance sheet to private credit as they compete with direct lenders in the highly competitive leveraged-finance business, particularly in providing debt to fund takeovers.

The sale could fetch Boeing approximately $7 billion, while the debt financing is estimated to be between $3 billion and $3.5 billion, said the people, who asked not to be identified because they’re not authorized to speak publicly.

The financing doesn’t guarantee that the bidders who accept it win the deal, and buyers may choose to use other lenders instead. Discussions are ongoing and terms of the deal and financing could still change, the people added.

Both corporate and private equity buyers interested in acquiring Jeppesen are being offered the private debt option, the people said. This would be a major test of the Citi-Apollo partnership, announced last September, and its ability to win over a buyer with a supporting financing package. 

Spokespeople for Citigroup and Apollo declined to comment, while a representative for Boeing said the company “does not comment on market rumors or speculation.”

Citigroup and Apollo agreed to work together on $25 billion worth of deals over the next five years. Under the arrangement, Citigroup will source new financing opportunities from its clients and pocket a fee for originating any transaction, while Apollo will provide the cash.

The carve out of Jeppesen, meanwhile, has entered its second round of bids, the people familiar said. Companies including RTX Corp. and Honeywell International Inc. have evaluated Jeppesen, while buyout firms such as Carlyle Group Inc., Thoma Bravo and Warburg Pincus, among others, have shown interest in the business, Bloomberg News reported in January.

Prospective bidders have not ruled out other funding sources to support a Jeppesen buy, including committed financings from Wall Street banks as well as loans from other private credit firms, the people said.

In recent years, banks have lost business to cash-flush private credit players, which tout their ability to complete transactions faster than their counterparts in the syndicated-loan market, and offer flexible structures like payment-in-kind options.

To compete, big banks have struck direct lending partnerships similar to Citigroup and Apollo’s agreement. Last month, JPMorgan Chase & Co. set aside $50 billion to expand direct lending, while Wells Fargo & Co. joined with Centerbridge Partners on a $5 billion direct-lending fund in 2023.