Apollo Co-President John Zito Talks Private Credit Fears

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Matt** (0:07)
Fed Governor Michael Barr warning that stress in private credit could spark, quote, psychological contagion. He told Bloomberg News, quite, people might look at private credit, they might say, wow, there seem to be cracks in our corporate sector, maybe over here in the corporate bond market. There are also cracks. Let's get reaction to that from Apollo Co-President John Zito. He's sitting down with my co-host, Dani Burger at the Milken Institute Global Conference in Beverly Hills. Dani?

**Dani Burger** (0:38)
Matt, thank you so much. And I'm so pleased to say I'm here with Co-President of Apollo, John Zito. John, thank you so much for joining.

**John Zito** (0:44)
Thanks for having me.

**Dani Burger** (0:45)
I know we have a lot to talk about, but I do want to just start on that note from Barr, this idea that there are cracks, wider spread concerns. Do you think there's any merit to that?

**John Zito** (0:53)
Look, lots of talk about private credit. I've talked about it for a long time.
For me, it's been, and for us at Apollo, it's really been what's the impact on the overall economy? It's not is it private credit or public credit? Is it private equity or public equity? There's software equities, there's several that are down 70% this year. Doesn't mean you don't invest in equities, and it doesn't mean there's cracks in the entire equity system and you shouldn't invest in any stocks. So we're in a completely different regime for investing. We're in a completely different regime for how things are going to be over the next three, four, five years if you believe in AI, if you are in fact AGI-pilled.

**Dani Burger** (1:30)
Thank you for that.

**John Zito** (1:31)
Then you, the way that you're going to have to invest, the way that you're going to have to underwrite, the way that your entire business is going to have to function will have to shift. And the valuation framework for both public market investors and private market investors is going to have to change.
And that's, I think, very exciting. I think it's very exciting for people in the industry who are adaptive and love investing and love to sing around the corner.

**Dani Burger** (1:56)
It is such a big difference, though, because it used to be an industry that loved asset light, high margins. This requires kind of the opposite of that. So much investing needs to go into that. Is this an industry prepared for it, besides the giants, the Apollos, the Blackstones of the world?

**John Zito** (2:12)
I mean, look at Intel, for example. You know, Intel for 10, 15 years, effectively, was a drag on the entire equity market. And for a decade, they were viewed as the dumb money for actually investing in their infrastructure. And we financed the deal, where when we financed the deal two years ago to finance their fab and to build new chips in Ireland, everybody hated it. Everyone called us and said, what could you possibly do to invest in Intel? And we got refinanced this year. And the story is not about us getting refinanced. It's about the stock this year, which is up 500% because the entire world's realizing that instead of wanting to be asset light, maybe it's about being asset heavy. Maybe what before was the rubric for success, it was all about code was the scarce asset, right? Now it's compute. It's data integrity, data quality. It's your talent. What kind of talent do you have?
It's all of these things. The whole framework is shifting, I think.
And again, I think it's really exciting, but it's not about private or public. It's the whole valuation rubric and how you think about where you want to be in the strategic ecosystem of your business.

**Dani Burger** (3:22)
So the valuation rubric has changed. Does the industry as a whole realize that? John, do you think everybody is going to start to have to change their mindset in this way, or is it just a select few that can participate?

**John Zito** (3:34)
I mean, look at what we've been doing. I mean, asset, we're going much closer to the asset. We bought Atlantic Aviation this year.
We financed over $10 billion of chips for SpaceX, so GPU financings, power, defense, all of the things that are going to require to grow all the CapEx needs and to go asset heavy is actually the exciting part of private credit, not the old LBO loans that people made and everyone talks about. The actual excitement is investment grade lending for all this CapEx for a lot more asset heaviness and all the sovereignty, the whole, what you're seeing both with problems out in Europe and in the Middle East is a refocus on sovereignty and sovereignty meaning, do you have your own power? Do you have your own AI sovereignty? Can you own your own compute? Can you make your own chips? All of these things are really the future of how credit orients itself around that. And as a business, it's nothing I thought we'd ever be in the middle of, but it is, I think, a really exciting thing.