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A leading BlackRock private equity fund has lost more than $600mn on an investment in an insurance outsourcing company after the business struggled with its debt load.
A group of private credit funds led by Antares Capital, Blue Owl Capital, KKR and Goldman Sachs Asset Management have agreed to take control of the business, Alacrity. BlackRock bought a controlling stake in the business in February 2023 through its $4.3bn Long Term Private Capital strategy from private equity firm Kohlberg & Co.
BlackRock’s more than $600mn equity investment in the firm will be wiped out as part of the restructuring, according to people briefed on the matter.
The company had about $1bn of senior debt outstanding at the time of BlackRock’s investment. It also had $500mn of junior debt, lent by Goldman’s asset management arm.
Those debts will be exchanged for a new $450mn term loan as well as $250mn of preferred equity as part of the deal, the people added. The senior lenders will own 90 per cent of the company once the restructuring is finalised. Goldman Sachs Asset Management will end up with 10 per cent.
BlackRock, Blue Owl, Goldman, KKR and Kohlberg declined to comment. Antares did not respond to a request for comment.
It is the latest big restructuring to hit the burgeoning private credit industry, as the private equity-backed companies they lent money to struggle with higher interest rates.
Last year a group of private credit lenders led by Blue Owl and Ares Management suffered losses on loans they made to troubled software company Pluralsight. The restructuring also wiped out $4bn that Vista Equity Partners and other investors had put into the business.
The Alacrity takeover comes at a time when BlackRock has been working hard to build up its stable of alternative investments. It agreed to pay $28bn last year to buy big players in infrastructure, private credit and private markets data. Its private equity teams run a variety of strategies and manage $43bn in client assets.
The fund that made the Alacrity investment was marketed to investors as one that sought controlling stakes of at least $500mn. Its internal rate of return was 33 per cent through early 2024. BlackRock was marketing a second $5bn fund last year but has opted to wind it down instead.
Alacrity is the most recent of the Long Term Private Capital strategy’s seven publicly disclosed investments. At the time of BlackRock’s investment, the fund’s head, André Bourbonnais, called the company “a differentiated market leader” with “strong momentum” in insurance claims management.
However, its business suffered after BlackRock invested, and it ultimately hired advisers to lead it through restructuring talks with its creditors last year.
“Today’s announcement marks a significant stride forward,” said Jim Pearl, Alacrity’s chief executive. “We are building a stronger financial foundation that positions Alacrity Solutions to continue serving as a leader in the claims management industry to our valued carrier customers well into the future.”
