Mfw wen no DPI

[Mfw wen no DPI @Yep2498]

@junkbondinvest On the reporting side, it’s maybe something along the lines of “here’s a few heavily adjusted quarterly metrics to show that covenants aren’t busted, oh and don’t bother asking about MD&A and outlook”

[Mfw wen no DPI @Yep2498]

@junkbondinvest Overall market reputation impact is about neutral though. We are talking about Jefferies here

[Mfw wen no DPI @Yep2498]

I don’t think $NP is a very relevant comp in this situation, as $NP is in its own league across almost every headline KPI and other key factors (organic growth, EBITDA, margin, loss ratio track record, carrier capacity partner expansion, tech-enabled mode, relatively simple structure vs. $AMBC’s, etc.)

[Mfw wen no DPI @Yep2498]

Anyone that has some combo of (1) notable asset duration < liability duration and (2) book yields well below new money yields can still get some nice uplift…

…So that probably describes a chunk of longer tail liability names that have been rolling short duration credit over the past few years

Interesting to see casualty names like $JRVR, $MKL, and $BOW pretty far to the left on the chart

[Mfw wen no DPI @Yep2498]

Totally agree that TBV doesn’t seem to be relevant. It’s a big price (EBITDA multiple narrative is nonsense of course), so post-close performance needs to be excellent.

It could take a while to see how things shake out, but I feel like how “levered” the fee income is to underlying syndicate performance might be getting under-appreciated. That income not as “risk free” as say retail brokerage commissions.

Also, the skeptical part of me wonders if this “new economy” niche that Apollo seems to be really leaning into could turn into $JRVR Uber book 2.0…

[Mfw wen no DPI @Yep2498]

So let me get this straight - a dividend recap for LPs in a fund in which the GP may use fund-level leverage / LoCs while investing in GPs (including the likes of Clearlake, self explanatory) that may also use their own fund-level leverage / LoCs to help fund equity checks into levered shit cos (with some of the shit cos’ leverage potentially being provided by a Blue Owl credit fund) that are probably marked well above true FMV?

We needed an emergency 100 bps rate HIKE yesterday

[Mfw wen no DPI @Yep2498]

@Restructuring__ - Spain (self explanatory)
- 7x leverage
- +475 bps spread
- 99 OID

Shameless capital deployment desperation / zero spine by the lenders

[Mfw wen no DPI @Yep2498]

I’d need to check my scratch math again, but does this bake in the impact of goodwill (well, I guess the excess $555mm consideration above the ~$200mm estimated target book value) on pro forma $SKWD book value?
- Those 1Q26 numbers imply an annualized ROE around / close to 30% (vs. sort of the high teens-to-low 20s range $SKWD has been reporting). The fee income is “capital efficient”, but I’d think that’s also baked into the premium that was paid for the deal. If PF $SKWD ROE gets that much uplift from the deal, that’s a massive failure by those at Apollo with any fiduciary duty (board, mgmt., etc.)
- Simple INCREMENTAL book value math in my head is purchase price ($555mm from investor deck, which I suspect is net of estimated fees based on uploaded deal docs that note a $565mm consideration figure) less cash consideration ($371mm), so like +$184mm of incremental book value (i.e, the stock consideration value), but TBV tanks because cash consideration is greater than the ~$200mm of existing Apollo book value.

On the ~$15mm of quarterly Apollo earnings, investor deck points to $63mm 2025E Apollo p/t income (all based on hitting what might be an ambitious 91% combined ratio). $63mm net of say a 25% UK corporate tax rate is like $47mm, which is ~$12mm a quarter (assuming no seasonality for simplicity). Curious how the $15mm is derived.

My initial suspicion - pro forma $SKWD ROE is neutral-to-slightly better vs. status quo (so a decent deal for $SKWD taking their forward numbers at face value) and that PF ROTE becomes inflated / irrelevant (for now) because of what happens to TBV, but TBV per share does get slammed from the aforementioned decline in TBV PLUS the impact of new shares issued.

All that being said, I think this gives very little-to-no room for Apollo to produce bad results under $SKWD ownership because TBV could become a more relevant valuation anchor on the margin in the worst case scenario (e.g., the newer Apollo syndicate blows up from bad underwriting while prioritizing growth).

Bad underwriting would hit Apollo’s underwriting income AND the large profit share portion of fee income (the fee income isn’t really “risk free” from that lens). Also, fee income would be sensitive to any capital injections / withdrawals by third-party investors that provide a majority of the capital to the Apollo syndicates. If a syndicate blows up, third-party investors pull capital out -> underwriting capacity and GPW tanks -> fee income tanks ($SKWD / Apollo could inject capital but ROE still tanks)

[Mfw wen no DPI @Yep2498]

@junkbondanalyst @junkbondinvest DB made money on something??????

[Mfw wen no DPI @Yep2498]

Here’s some SUPER ROUGH M&A math I was thinking through yday. Would welcome any feedback / thoughts l.

Unless I screwed up the numbers, at the ~$50 share price that $SKWD is hovering around, P/TBV expanded over a full turn between pre-announcement and pro forma combined basis post-announcement. I imagine this may contribute to mgmt. focusing on EPS accretion

[Mfw wen no DPI @Yep2498]

Investor deck seems to have some interesting tidbits. Here’s some of my rough scratch math for how I’m trying to think about it: (P&L amounts based on ‘25E figures in the pic unless otherwise noted):

- $555mm headline value. They try to position it as ~8.5x ‘25 EBITDA, but illustratively assuming $555mm is equity value too (didn’t see anything that really looked like substantial traditional interest bearing debt in Companies House filings from a quick glance)

- A/T u/w + investment income of $26.3mm (assuming standard UK 25% tax rate). 7-9x multiple (believe thats where names like Beazely, Hiscox, and Lancashire hover around) -> $184-236mm implied value

- Above implies A/T fee income of $20.3mm (assuming 25% tax rate) is valued at $319-371mm (16-18x). US brokers are around 20x on ‘25E basis, but I think a lot of what the Apollo calls “fee income” is profit commission based on u/w profitability (which is not as sticky as true fee income and should get a much lower multiple)

One thing that I noticed is they adjusted out bad reserve development from the 2022 year of account (i.e., 2022 u/w year) in CY 2024 amounts (95% combined ratio unadjusted in CY 2024 vs. 91% in the table from the pic). I wonder how normalized that 91% ratio is for CY 2025E and how much it could get hit from bad reserve development given it’s already Sep-25 (biz seems to have a track record of posting bad reserve development most of the time…

[Mfw wen no DPI @Yep2498]

@piktoggle_ “Capital will flow by EOD Monday”

Have ppl really gotten this lazy when it comes to LARPing?

[Mfw wen no DPI @Yep2498]

15x fwd is similar ballpark to the public brokers that I’d guess are near peak rate cycle margin and struggling to keep organic growth LSD-MSD. Even with the monoline dynamic (but they have 30+ capacity providers, which is great), $NP’s insane margin (30% ish net commission rate helps and is best in class + there’s decent margin of safety on the 40% ish gross commission rate even if loss ratios deteriorate a bit) and organic growth that’s 30-40% ish, 15x fwd feels a little light imo

[Mfw wen no DPI @Yep2498]

Any idea on the rough multiple FTV / Bregal entered at? Gonna guess much much higher than the high quality public brokers.

Seems like organic growth + margin uplift have been great but curious how public mkt treats an effectively monoline name with no direct public peers and has at least some exposure to NFIP somehow deviating from its current pricing model (i.e., political risk where both dems and reps have historically disregarded private market pricing). CIAB data shows flood rates have been flattish-slightly positive recently, but tough to see what rate Neptune is pushing at initial glance (think you can only imply combined exposure + rate % based on policy and premium retention data).

It operates in E&S, and the S-1 talks about AI, so maybe it’s easiest to just turn the brain off and bid it around initial IPO lol. Gonna guess it’ll generate a fair bit of interest given uniqueness (in business model + end market exposures) vs. what’s public currently

[Mfw wen no DPI @Yep2498]

@junkbondanalyst ANOTHER $20+ MILLION TO DAVIS POLK AND PERELLA

[Mfw wen no DPI @Yep2498]

@CedarStResearch The beating continues! Must have been something in the 10-Q that made folks puke (or maybe it was some sell-side revision)

[Mfw wen no DPI @Yep2498]

@CedarStResearch That related party dynamic sounds like one those obvious “duh” moments in hindsight post a blow up