Apollo Invests $9 Billion in ONEOK with Plans for Debt Conversion

Apollo Global Management is making a significant investment in pipeline operator ONEOK through a $9 billion equity deal that will eventually convert to debt. The transaction aims to provide growth capital for ONEOK's acquisition of Brazos Midstream's natural gas gathering and processing assets, while also helping the company pay down existing debt.

The structure of the deal is designed to eventually become investment-grade debt, with returns capped at 7% internal rate of return for the first nine years. Excess distributions will gradually amortize Apollo's capital contributions, making it possible for the firm to repurpose its investment as high-quality debt for clients.

For ONEOK, this deal provides growth capital without diluting existing shareholders. The company will use $5 billion of Apollo's capital to pay down existing debt, targeting a leverage ratio of 3.25 times debt-to-EBITDA by 2027. This is comfortably within investment-grade territory for a midstream energy company.