DIRECT lenders including Antares Capital, Blue Owl Capital and KKR are preparing to take over insurance claims manager Alacrity Solutions, the latest restructuring in the private credit market, according to sources with knowledge of the matter.
BlackRock is set to hand over control of the company to its lenders less than two years after it purchased a 70 per cent majority stake in the firm from Kohlberg & Co, said the sources who asked not to be identified as the details are private. BlackRock’s existing equity investment will be completely wiped out, the sources said, adding the firm invested about US$560 million in equity at the time through its Long Term Private Capital strategy.
Alacrity’s debt load, which was already in place when BlackRock purchased the stake, includes a roughly US$1 billion unitranche from direct lenders and a more than US$500 million junior capital piece from Goldman Sachs Asset Management (GSAM), the sources said.
Alacrity, which handles insurance claims through a network of adjusters, struggled as weather-related claims dwindled, Bloomberg reported. More insurance companies have also brought adjusting services in-house, curtailing the company’s client base.
Now, those same lenders are ready to become the owners. First-lien holders will end up owning around 90 per cent of the company under the restructuring plan, while the junior-capital provider GSAM will get the remaining piece, the sources said.
Antares, Blue Owl, KKR and the other lenders will convert about half of their loan into equity, while also providing about US$175 million of new debt in the form of a revolving credit facility and a delayed-draw term loan, they said. Alacrity’s capital structure will include about US$450 million term loan and US$250 million of preferred equity.
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Alacrity said it’s in a new financing accord with existing financial partners in a press release. The deal is expected to close in the first quarter, while operations will remain unaffected in the interim, according to the statement. An Alacrity spokesperson declined to provide further details on the financing.
Representatives for Antares, BlackRock, Blue Owl and GSAM declined to comment. KKR did not immediately respond to requests for comment on the additional financing details, but had declined to comment on the deal previously.
It’s the latest large restructuring to come to light in the private credit world in the past 12 months, as companies continue to grapple with higher rates and private credit managers struggle to stay ahead of potential losses. Pluralsight, an educational software company, restructured last year and lenders took the keys to the business.
Some market participants have warned of increased stress, as interest-rate relief keeps being pushed back. Private lenders are often able to stay ahead of restructurings and defaults by quietly amending loans and finding other solutions. However, even those back-door strategies have been put to the test in recent months.
BlackRock is working with Evercore, while Centerview Partners and AlixPartners are advising Alacrity, Bloomberg previously reported. The unitranche direct lenders are being advised by Latham & Watkins and FTI Consulting. BLOOMBERG
