A BlackRock private equity fund has agreed to cede control of insurance claims manager Alacrity Solutions to lenders, wiping out the full $560 million equity investment made through its Long Term Private Capital strategy less than two years ago.
Already in place when BlackRock acquired its stake, Alacrity’s debt burden included a $1 billion unitranche facility plus $500 million in mezzanine debt provided by Goldman Sachs Asset Management.
Under the restructuring, senior lenders, including Antares Capital, Blue Owl Capital, and KKR, will convert roughly half their existing loans to equity. The group will walk away with a 90 percent stake, and GSAM will take remaining 10 percent.
Alacrity’s go-forward capital structure will include a $450 million term loan and $250 million in preferred equity, of which around $175 million will be new capital.
BlackRock purchased its 70 percent majority stake in 2023 at an enterprise value of $765 million, according to data from sell-side advisor Houlihan Lokey (Waller Helms). As part of the deal, prior owner Kohlberg & Co. maintained a significant minority interest.
Alacrity’s latest publicly-rated issuance in 2021 was completed at a leverage multiple of 8.1x. At the time, the expectation was that continued growth—then nearly 20 percent year-over-year—would rapidly de-lever the business.
Instead, Alacrity’s performance eventually deteriorated as weather-related claims declined and insurance carriers insourced claims management functions. With the business’ concentration in homeowners’ claims, revenue could fluctuate dramatically based on claims volumes from catastrophic events (or a lack thereof).
Alacrity was also left exposed through its dependence on a small handful of insurance carriers—its top three insurers provided more than half of the company’s revenue.
BlackRock launched LTPC in 2018 with a thesis around longer-than-normal hold periods for controlling stakes greater than $500 million. Though the firm had originally targeted a $10 billion evergreen structure, it closed a scaled-back $4.3 billion debut fund in 2019.
On paper, the strategy posted strong performance through the first half of 2024, reporting a 33 percent IRR and 2.4x MOIC. Cash distributions, however, have lagged: the fund’s DPI was just 0.6x for the same period.
That lack of distributions ultimately killed BlackRock’s LTPC plan. Despite securing $300 million in early commitments, the firm has opted to wind down marketing efforts for a planned $5 billion successor fund.
In November, Axios reported on feedback from limited partners telling BlackRock it should “focus on returning money rather than raising money.”
Alacrity was the seventh and final LTPC investment. The strategy’s 19-person team is now tasked with winding down the debut fund.
Alacrity has retained Centerview Partners and AlixPartners as restructuring advisors, while BlackRock is working with Evercore. Latham & Watkins and FTI Consulting are advising the lender group. The transaction is expected to close in the first quarter.