Private lenders will quickly take over debt restructuring

(Bloomberg) — Direct lenders including Antares Capital, Blue Owl Capital Inc and KKR & Co are preparing to take over insurance claims manager Alacrity Solutions, according to people familiar with the matter, in the latest shakeup in the private credit market.

BlackRock Inc. will hand over control of the company to Kohlberg & Co. less than two years after buying a 70% majority stake in the company, the people said, asking not to be identified because the details are private. Lender. . BlackRock’s existing equity investments will be wiped out, the people said, adding that the firm had invested about $560 million in equity through a long-term private capital strategy at the time.

Alacrity’s debt load, which was already in place when BlackRock purchased the stake, includes about $1 billion in unified loans from direct lenders and a junior capital tranche of more than $500 million from Goldman Sachs Asset Management, people familiar with the matter said.

Alacrity, which processes insurance claims through a network of adjusters, is in trouble as weather-related claims decline, Bloomberg reported. Increasingly, insurance companies are also introducing in-house adjustment services, reducing the company’s customer base.

Now, these lenders are ready to become owners. Under the restructuring plan, first-lien holders will ultimately own about 90% of the company, while junior capital provider GSAM will get the remainder, people familiar with the matter said.

Antares, Blue Owl, KKR and other lenders said they would convert about half of the loan into equity, while also providing about $175 million in new debt in the form of a revolving credit facility and a delayed-draw term loan. Alacrity’s capital structure will include approximately $450 million in term loans and $250 million in preferred stock.

Alacrity said in a press release that it is entering into new financing agreements with existing financial partners. The deal is expected to close in the first quarter and operations will not be affected during that period, the statement said. An Alacrity spokesman declined to provide further details about the financing.

Representatives for Antares, BlackRock, Blue Owl and GSAM declined to comment. KKR did not immediately respond to a request for comment on the details of the additional financing, but has previously declined to comment on the deal.

It is the latest major shakeup to come to light in the private credit world over the past 12 months, as businesses continue to grapple with rising interest rates and private credit managers grapple with potential losses. Pluralsight Inc., an education software company, restructured last year with lenders taking over the keys to the business.

Some market participants warned that pressure would intensify as interest rate relief continues to be delayed. Private lenders are often able to stay ahead of restructurings and defaults by quietly modifying loans and finding other solutions. However, even these backdoor tactics have been put to the test in recent months.

BlackRock is partnering with Evercore Inc., while Centerview Partners and AlixPartners are advising Alacrity, Bloomberg previously reported. Latham & Watkins and FTI Consulting Inc. provided consulting services to Uniform Direct Lenders.

(Updated from second paragraph to provide further financing details.)

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