Apollo Management plows more into Realogy

Posted Mar 11th 2009 1:00PM by Zac Bissonnette
Filed under: Private Equity

Apollo Management acquired Realogy -- the parent company of real estate brokerages like Century 21 and Coldwell Banker -- at precisely the top of the real estate bubble.

So far the results have been about what you might expect. Now Apollo is pumping another $150 million in (subscription required) to keep the deal afloat through 2009. The company says that combined with the big cost cuts it's implemented over the past three years will be enough to save the company. Investors disagree, with some of the bonds trading for as little as 11.5 cents on the dollar suggesting a high probability of bankruptcy.

The issue is that Realogy is the ultimate asset-lite business: franchising. The entire value of the business is in its brands and letting the company slide into bankruptcy would do tremendous damage to the recovery value for creditors. It's not like there are significant assets that can be sold to raise cash.

For that reason, Realogy's creditors might be more willing to negotiate than they have been on other deals lately. Swapping debt for equity could look very smart once the market turns around, which could happen sooner than you might think: Home values are still tanking but transaction volume is up in a lot of the most beaten-down markets, which means more deals, more commissions, and more revenue for Realogy.

Tags: Apollo Group, ApolloGroup, Private Equity, PrivateEquity, Realogy