Apollo sets sights on British high street

Apollo Global Management is setting its sights on the British high street with a new joint venture to invest in struggling retailers.

The US private equity group has teamed up with Gavin George, former chief executive of GA Europe, the turnround specialist that carried out about 25 deals and revived footwear chain Shoon. GA also had advisory roles in a number of large restructurings, including running the stores of Comet, the electricals retailer, while they were in administration.

The new partnership, known as Alteri Investors, will focus on the retail sector in the UK and Germany and will invest through both debt and equity transactions, typically in the £10m-£50m range. Structured as a joint venture between Apollo’s credit funds and Mr George, Alteri will invest across performing, stressed and distressed retailers.

All of its investments are, however, likely to involve retailers under an element of stress, where the joint venture “can take the business through to the other side”, said Mr George.

Alteri will also consider acquiring stakes in retailers and lending to store chains directly through Apollo’s credit funds.

The last few years have seen a string of restructurings and insolvencies across UK retail, including Comet, Game Group – reborn as Game Digital – Peacocks, Clinton Cards and JJB Sports. The most recent failures have been Phones4U and La Senza.

However, the launch of Alteri comes with UK economy strengthening. Sales of clothing and footwear in August rose at their fastest rate since December 2011, according to the British Retail Consortium, although September is expected to be weaker. PwC and the Local Data Company last week said the net store closure rate had fallen from 20 a day two years ago, to 16 a day in the first half of 2014.

But Mr George said he saw opportunities arising from retailers continuing to grapple with their physical store bases, as demand shifted from outlets on high streets or retail parks to the internet.

“The bottom line is, the physical space you need [today] is very different to what it was five, 10, or 15 years ago,” he said. “What was an asset is now a bit of a liability.”

Meanwhile, some retailers will need to refinance debt over the next few years. “The reality is, if you look at the number of refinancings that are coming up in the next five to six years, there is still a problem that has not been resolved,” he said.

Mr George said the joint venture was also targeting Germany, because of recent changes to the rules governing restructuring and expectations that the country will follow the UK in a reduction in its retail capacity.

Apollo Credit had total assets under management of $106bn as of June this year.