Wednesday, April 24, 2019

Apollo Crammed Down CEVA Executives It Required to Buy Stock in Affiliate

Apollo Global Management LLC purchased CEVA for $1.9 billion in November 2006.  The deal required CEVA executives to invest in their private company's stock.  Bloomberg reported:

Shortly after the CEVA purchase, Apollo acquired another logistics company, EGL Inc., for $2.1 billion, doubling the debt on the books of the merged company.

Apollo says that in 2006 and 2007 managers were given the opportunity to invest since it would give them “skin in the game.”

By 2007, CEVA’s bonds had started tumbling and Apollo began buying. From 2007 to 2011, Apollo purchased CEVA bonds for an average price of 50 cents on the dollar, according to an Apollo document.
In 2013 Apollo forced a recapitalization of CEVA as the major holder of the company's debt.  The move made CEVA's nonpublic stock worthless, including company stock executives had been forced to purchase.

CEVA rolled out a new share plan in 2013 that offered managers the possibility of recouping losses -- if they gave up the right to sue. 
CEVA went public in May 2018. In November, Apollo sold its remaining stake. Taking into account management and transaction fees, the buyout firm made a profit on the deal.
To sum up, Apollo bought two companies, CEVA and EGL, and loaded them with debt.  Shortly after completing the deal investors deemed the company a poor risk and the price of its bonds cratered.  Apollo took advantage and bought back the debt at a 50% discount.  They used that debt to zero out the companies nonpublic stock.  Apollo and other debt holders received the new equity for the firm.

In 2013, when Apollo’s debt-for-equity swap rendered CEVA executives’ shares worthless, current and former managers say they were shocked.
There is nothing shocking about the PEU boys and what they will do to fulfill their ceaseless greed.  Apollo had their sticky fingers in on every side of the deal.