Data gathered by Xtract Research show that 77 percent of all loan deals in the third quarter included provisions giving borrowers the ability to block individual lenders, up from 51 percent at the end of last year. The lists can often be updated to add new investors whenever a borrower wants.
The most common explanation given for excluding potential buyers is that they have an affiliation with rivals of the borrower. There’s private information that lenders get access to -- things like financial projections -- that the borrower doesn’t want them to see.
Robert Blank, head of leveraged-loan research at Xtract in Westport, Connecticut, calls those circumstances the most “reasonable” for justifying the blacklist.
Apollo-Highland
Jonathan Kitei, head of U.S. loan sales and collateralized- loan obligation origination at Barclays Plc, said, though, that he’s seen personal animosity shape lists.
“Often times you see a sponsor put an investor on a blacklist because one partner at the firm doesn’t like the investor,” said Kitei, who is based in New York. “There are great inconsistencies in the use of blacklists.”
Leon Black’s Apollo Global Management LLC has blocked Highland from buying several loans of its takeover targets, according to a person with direct knowledge of the matter. There’s a history of feuding between the two firms: Highland sought in 2006 to stop a merger between Apollo-backed SkyTerra Communications and Motient Corp., triggering a series of court battles.
Highland, a Dallas-based money manager, was banned from deals including loans taken out by Caesars Entertainment Corp., the casino operator partly owned by Apollo, according to the person, who asked not to be identified because the matter is private.
Charles Zehren, a spokesman for New York-based Apollo at Rubenstein Associates Inc., declined to comment.
‘Shindler’s List’