WHEN: Today, Monday, April 13, 2020
WHERE: CNBC's "Closing Bell"
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Chairman and CEO of Apollo Global Management Leon Black and CEO of Aramark John Zillmer on CNBC's "Closing Bell" (M-F 3PM-5PM) today, Monday, April 13th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2020/04/13/the-black-family-aramark-launch-nyc-health-heroes-to-combat-outbreak.html.
All references must be sourced to CNBC.
SARA EISEN: The Black Family is committing $20 million, which includes an initial Plans to match any additional donation up to $10 million and plans to match any additional donations, up to $10 million. Joining us now in an exclusive interview to discuss this and more, Leon Black, Chairman and CEO of Apollo Global Management and John Zillmer, CEO of Aramark. Gentlemen, good afternoon to both of you. Thanks for joining us to talk about this. Leon, how did idea come together?
LEON BLACK: Hi, Sara. First of all, thanks for having both John and I. I hope your family and friends have been faring well through this difficult time. I want to thank John of Aramark for joining me here today. Because we think this is a very important initiative. It started out, really, over the last two and a half weeks, when my wife Deborah and I were looking to do something for the frontline health care workers who were doing such amazing, incredible service under dangerous conditions across all five boroughs in New York City. We're New Yorkers. We see what's happening. We're born and raised here. And we're just in awe of the incredible heroic health care professionals putting their own health on the line to care for others during this pandemic. So, basically, seeing all these great people who are stepping up, a mutual friend introduced me to John Zillmer at Aramark and suggested we team up to help 100,000 or so health care workers on the front lines across all five boroughs. So, as you already said, our Health Care Heros Program is going to provide between 300,000 and 500,000 packages of shelf-stable food, household cleaning and personal care products as well as over the counter medication, to alleviate the burden of health care professionals have to shop for themselves and their families. The whole goal is to reduce stress and be a net-positive. So, we also teamed with the New York City Department of Emergency Management and the Greater New York Hospitals Association to make sure all the logistics were coordinated, and that distribution runs smoothly and safely. Aramark is handling supply chain procurement, packing the bags and distribution to the hardest hit hospitals. The deliveries will be made at different times to accommodate shift schedules. And the Red Cross has also teamed up with us to help with direct distribution at the hospital sites to workers, while ensuring proper social distancing. Robinhood also came on as our partner to manage a match component to a part of our gift because we know people in New York are looking to make a difference. We have already received significant donation pledges, thanks in large part to many of my Apollo Partners and other friends. And they're well on their way to the $30 million program goal. So, with this match, just $30 buys a package for a health care professional. That includes 60 to $70 worth of food and household supplies, but any amount is welcome.
SARA EISEN: And we're flashing the details on the screen as you speak, Leon. It's good to hear that you're raising more money. John, talk a little bit more about your role and your broader role in this crisis, how you've transitioned uniform factories, for instance, into making PPE, and what else you're doing at Aramark.
JOHN ZILLMER: Sure. Thank you very much. First off, on behalf of all of Aramark, let me thank Deborah and Leon for their generous donation to support this initiative. And as Leon said, this is an extremely difficult time for the health care professionals on the front line in New York City. And we're hoping these packages make their lives a little easier. As you said, Aramark is the largest U.S.-based provider of food and facility services. And we have a number of employees that are being re-engaged to go ahead and support this program. People we've had to furlough as a result of the lack of activity. So, we've re-engaged our workforce to go ahead and provide these services. We've got a long history of addressing urgent needs, supporting others in times of crisis – from people at the Astrodome during Hurricane Katrina, to the Chilean miners trapped deep underground. And as you mentioned, this morning we announced we're converting some of our manufacturing facilities on the uniform side to manufacture personal protection equipment for both the health care and foodservice industries. So, we've been significantly--
SARA EISEN: John—
JOHN ZILLMER: I'm sorry. Go ahead.
SARA EISEN: No, no. And maybe this is where you were going. But just curious how your businesses has been hit when so many of your customers from NBA teams, stadiums, schools and other corporations are essentially shut down right now?
JOHN ZILLMER: Yeah. That's absolutely right. You know, we have been significantly impacted across a range of our businesses. But we do provide services in several sectors that are continuing to operate, both in the health care community, K-12. We're serving over 700,000 meals a day on a free and reduced-base to school districts across the country, with over a quarter of a million a day in the city of Chicago. We're also providing facility services to many other companies that need deep cleaning, hygiene services, as the businesses continue to operate, as you would imagine, at full tilt. Then we're in a couple of other businesses that continue to be very active. Our traditional business dining, campus services, and sports and entertainment are significantly impacted. But at this point and time, campus dining was really beginning to close down for the balance of the year. So, we're hopeful that universities will continue to operate going forward in the fall. And we're looking forward to hopefully a whole school year then. And in the meantime, we're scheming activities for our individual customers. We have a lot of clients who need services of some time, so we're scheming our operations in order to go ahead and serve their unique needs to the degree that they need them. And, in the meantime, we've got a very flexible, low-cost, low-fixed cost operating model. And as a result, we're able to manage through this I think pretty effectively. We've got a very strong capital structure, a good balance sheet. And so, we're poised for a recovery and waiting like everybody else for that day.
SARA EISEN: Yeah. Leon, it's a reminder hearing John talk about some of his clients, of the sudden stop that we are in right now. How are you thinking about just how severe and long-lasting this recession is going to be?
LEON BLACK: Well, certainly, it's a challenging environment. I'm fundamentally an optimist, but it's really far too early to make predictions. You know, when we founded Apollo thirty-years-ago, we set out to create a value-oriented firm that could manage successfully for our investors across private equity, across credit and across real estate and do it through market cycles. You know, we're continuing to work hard for our investors in this environment, as we have, you know, really through the last four or five major downturns since 1990. One, to protect the pensions and retirements of those on the front lines, which includes police officers, firefighters, teachers, government workers. And clearly, the last few weeks have shown us the benefit of our, Apollo's value-oriented approach, which has always emphasized downside protection and less leverage use and also to really be able to navigate cycles. And you know, clearly, the first and foremost thing we do is to protect our own portfolio for our investors. But because we have a very strong balance sheet and a lot of dry powder, we also try to be opportunistic and find ways also to serve the same investors in this downturn. But I think, as we all know, this is a two-part play. The first part, I think the government, the Congress, the Treasury, the Fed have actually done a very good job. And that was basically to make sure the financial system didn't collapse. Because I think there was that concern three weeks ago. And by injecting so much liquidity into the system, I think: one, it helps all the workers that are being furloughed, but it also gives real confidence, which is incredibly needed to stop a real panic. That's really only the first part of the equation or part one of two-act play. Clearly, the big question is, you know, how quickly can we get workers back of work, generate demand, generate revenues, and make sure that this is a recession and not a depression. And so clearly, we're modeling, you know, coming out of this in six months, in 12 months, in 18 months and to try to deal with each scenario appropriately.
SARA EISEN: So, you said you were being opportunistic. I think during the last recession, financial crisis, you bought a lot of distressed debt. Where are you seeing those kinds of opportunities present themselves right now?
LEON BLACK: Well, you know, I think the markets are incredibly volatile. You see them one week and they're gone the next week. So, you have to be prepared. You have to have done your work. Clearly, we try to deal with industries that we know well, with capital structures that we've studied well to figure out, you know, where we want to be at what price levels. And I think that takes real patience. You know, there was a quick high-grade opportunity a few weeks ago and that basically bounced back. So, I think it was a one-week window. And now, I think it will be a much longer patient, you know, study of many, many different credits. And it's not just a matter of buying debt. It's also being able to supply capital to industries that are in real need. Or businesses --
SARA EISEN: Where are you doing that?
LEON BLACK: -- helping a lot of great American companies who don't have access to liquidity right now.
SARA EISEN: Are you talking about hospitality and leisure companies, cruise lines offering, what, bridge loans to those companies?
LEON BLACK: We're -- all of the above. We're looking at leisure, we're looking at entertainment. You know, but we're looking at you know, areas in insurance. We're looking at companies that we've followed, you know, basically we have the largest alternative credit platform in the world. And we've been one of the greatest, I think, providers of return in the private equity business and that covers, you know, 20 different industries.
WILFRED FROST: Leon, I wanted to ask, if I may, about what your views are on how any government bailouts if they happen, should be shaped. If a company does take government funds on board, and I'm talking more about bigger companies than the smaller ones, do you think it's fair there's -- of some sort to the equity holders? And do you think it's fair that the government gets exposure to future upside, however, which way that's structured?
LEON BLACK: You know, I don't think I'm smart enough to give you an intelligent answer on that. I remember the last downturn, the TALF program, I think, was very successful. There was 200 billion that was made available. I think of which 70 was used. And every penny was returned without a lot of government equity upside. I think this quite different from the past. In the past, I think some businesses maybe were over-levered. They were maybe not managed as well. But, you have so many great businesses today, through no fault of their own, that were doing terrifically as recently as a few months ago, where the bottom has fallen out because of a global pandemic. So, I think the government is doing what they need do right now, which is to make sure that the economy is -- really the financial system is well oiled and there's enough liquidity out there. And then it will have to look industry-by-industry, whether it's in airlines or in other transportation, and clearly, our auto industry is awfully important to us. So, I don't quite view this in the same bailout lens that was used 13 years ago.
WILFRED FROST: You mentioned, Leon, that you've got lots of dry powder. That you're biding your time and essentially should be able to make some investments that long-term make you a profit during this time. Do you think, therefore, that it is unfair for companies that are owned by private equity companies, like your own, to receive government help? If you've got dry powder, should that be going towards companies that are feeling the stress that you own, as opposed to fresh investments?
LEON BLACK: Well, I think we are using our dry powder. As I mentioned earlier, first and foremost, is to serve our investors. I view that as kind of a sacred trust. Teachers, as I said, policemen, firemen. So, the first thing we do is to protect our portfolio, use our capital for that. And then we also try to get better returns for those investors and pension funds. You know, we've made recommendations, you know, as have many, basically, to help the economy. When the economy is helped, we're helped, as are many, many others. I don't quite, again, view it as private equity versus the rest of the world. Most of the recommendations, or all of them that we made, were to help the investment-grade market. It wasn't for private equity. So, you know, again, we're all in this together. And it's pretty important that we have a healthy economy.
SARA EISEN: Speaking of your performance and your firm, Leon, we don't get the chance to talk to you about this every day, so wanted to ask you everything is doing. And I know you've sent a companywide e-mail last year following Jeffrey Epstein's indictment, contextualizing your relationship with him. Has that had any impact on the firm?
LEON BLACK: I don't believe that has had an impact on the firm. You know, it was a professional relationship that we had. It never involved Apollo. And it really never affected any of our investments or any of our investors or any of the new money that's been raised, which was raised at the greatest clip we've raised since then.
SARA EISEN: Wanted to ask you, finally, about energy. Because I know you've got some exposure there and we've seen this unbelievable one-two punch. What do you think the sector of the U.S. economy is going to look like when we come out of this?
LEON BLACK: Well, it's hard to tell. I mean, fortunately, I think our exposure Apollo has not been great. It's in low single digits in terms of our investment portfolios. You know, it's taken a few lumps, but nothing terribly dramatic. You know, those markets are very hard the gauge, you know, right now. You've seen the agreement between Saudi and Russia. And I think it's a good thing. I think probably shale will be kicking in, also reductions. But it's going to take some time to create parity, in terms of supply and demand. Because it's so volatile in terms of what really is the demand. You know, it's --- we've never been through dramatic jolts such as this pandemic on a worldwide basis has generated.
SARA EISEN: And you think we have seen the worst of the market panic around it?
LEON BLACK: I'm not smart enough to know that.
SARA EISEN: Leon Black, we appreciate the interview. And we appreciate all you're doing for the health care workers in New York City. Thank you for joining us. John Zillmer, thanks to you as well, of Aramark, and your participation in that effort
LEON BLACK: Thank you.
JOHN ZILLMER: Sara, have a good day. Take care. Bye.
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