Black, owner and CEO of Apollo Global Management has recently wowed Walls Street by earning close to $10 billion profit on a single long term private-equity investment. Once again Black has shown his ability to catch the drift of future developments on a global scale as well as the desire and ability to tie up capital with an eye for the long term. This time Black’s talents have paid off for him, and his investors- big time.
/ By Albert Hecht/
Leon Black’ greatest hit was attained wheh he began to buy up chunks of debt in debt of LyondellBasell Industries, the world’s largest polypropylene manufacturer more than ten years. Apollo’s initial investment, a mere $1.4 billion made in the early Noughties, raised a few eyebrows and even more sp after which, at every opportunity, Black would snap up other parcel of the company’s debt. Wall Street mavens were shaking their heads as the company’s fortunes gradually went into decline, especially after the the financial crisis that severly hampered industry and commerce in 2008.
LyondellBasell continued to struggle, eventually filing for bankruptcy in 2009. However that particular cloud, it transpired, had a very large silver lining, allowing LyondellBasell to avoid paying clsoe to $5 billion in fines that had been levied by the Environmental Protection Agency (EPA) because of alleged pollution offices caused by the company at a number of their 23 sites spread across the United States.
When LyondellBasell declared bankruptcy, Apollo was lefta considerable creditor . However Black was not slow in converting his company’s debt into equity as he became an active part of the bankrupt company’s reorganization program , while in the meantime acquiring more stock in the company at below market prices.
As the market began to turn around, LyondellBasell began to show signs of a slow recovery, eventually emerging from Chapter 11 in April 2010, later re-floating on the New York Stock Exchange in Autumn of the same year.
Since their re-flotation, LyondellBasell stock has recovered to a tremendous extent as the improving economy has dramitically improved both their previously negative cash flow and earnings. LyondellBasell’s dramatic turnaround has been driven by unprecented demand for ethylene, a raw matrial that has a variety of industrial uses in agriculture as well as in the plastic an paint industry, with the company being one of only two in the United States capable of supplying ethelyine in the massive commercial quantities that industry demands.
In the last financial year LyondellBasell Industries posted their highest-ever profits, with their shares rising in value by two thirds in a single year, with industry forecats being that sales and profit margins are looking likely to remain constant if not to improve as limited production capacity continues to push up prices
In the light of these impressive results LyondellBasell recently authorized a stock buyback of up to 10 percent of its shares while at the same time hiking up their interim dividend by 25 percent. This sitauation has allwoed Apollo, to realize some of their profits by reducing its stake in LyondellBasell from a peak of 30 percent stake in March 2012 to almost exactly half of that figure a year later. Appolo’s stock reduction in LyondellBasell has reportedly helped them to raise around $6billion. fuelling industry speculation that Black has his eye on yet another considerable and hopefully equally profitable investment.
Stock values in Apollo have risen by 73 percent over the last 12 months, with 29 percent of that being in 2013 alone. And with investments such as the one made in LyondellBasell, the future only gets brighter for Leon Black.