AlbaCore Capital Group holds EUR 2.2bn final close for third flagship fund

Ero Partsakoulaki
05 December 2022

Tweet
Facebook
LinkedIn
Google plus
Send to

European credit specialist AlbaCore Capital Group has held a final close on its third flagship fund, AlbaCore Partners III Fund, on EUR 2.2bn, surpassing its EUR 2bn target.

Including available leverage, assets under management (AUM) for Fund III total approximately EUR 2.4bn, it said.

The firm closed its second fund, AlbaCore Partners II, on EUR 1.5bn in February 2020, according to a press release.

Fund III held an initial close in 2021, a spokesperson for AlbaCore told Unquote. The firm has already invested approximately EUR 2.6bn of capital from the fund, inclusive of recycling, according to the press release. The firm anticipates further recycling of capital through the fund's three-year investment period.

"The mix of investments has adapted to market conditions which over that time frame have varied considerably," said the spokesperson. At present, the fund is a roughly equal mix of private and opportunistic investments across a diversified sector base, with over 60% of investments in senior debt, the spokesperson added.

The firm currently has approximately EUR 8.7bn in AUM and has invested more than EUR 20bn since it launched in 2016, according to the press release.

Investors
The re-up rate between AlbaCore Partners II and III was 96%, according to a press release.

The firm's investor base includes pension funds, sovereign wealth funds, endowments, insurance companies, consultants and family offices across Europe, North America, the Middle East and Asia.

Investments
Fund III will follow a similar strategy to its predecessors, with a goal of delivering capital growth for investors through the firm's experience in private capital solutions, opportunistic credit and dislocation.

The vehicle will provide debt in the form of private senior secured financing, dislocated secondary positions and private LBO financing.

In the current market, the firm expects to find the most compelling opportunities in providing senior secured debt to companies seeking to refinance near-term maturities or to fund tactical M&A, said the spokesperson. As market opportunities evolve, the fund may also invest in the secondary market or evaluate select private junior opportunities, according to the spokesperson.

The strategy is designed to be flexible, with variation in the relative value between senior-junior, private-listed, fixed-floating and bond-loan instruments, the spokesperson added.

Most recently, the fund has focused on senior secured capital for companies seeking financing options, while other traditional credit markets are largely shut, according to the press release.

The spokesperson added that there have been several attractive primary deals lately, where senior secured risk for large, performing companies has priced at 10%-12% yields as of 30 September 2022. Alongside those opportunities, the firm is working on a number of refinancing proposals for companies with near-term (2023-2025) maturities or a near-term need for additional capital for M&A or otherwise.

"Opportunities in secondary markets remain historically attractive, though less so than the late summer when spreads were closer to 700bps," said the spokesperson. "In all situations we remain focused on companies that are equipped to weather a recessionary environment over the next 12-24 months."

AlbaCore has historically focused on larger companies with EVs in excess of USD 1bn, which, as a group, skew towards sponsor backing. However, as the firm enters its seventh year of operation, it is increasingly seeing opportunities to work directly with companies it has invested with in the past, or where it has experience with the management team, said the source.

AlbaCore typically aims to keep positions between 1% and 5% of the fund's total commitments, which accounts for between USD 20m and USD 100m, said the spokesperson. However, there is flexibility for contributions to be smaller when the fund is building positions, or larger in cases of high conviction, they added.

The firm frequently works with its underlying investors on co-investments where the ultimate size of its participation can be substantially larger, ranging from USD 300m-USD 500m in some instances. It will, however, maintain appropriate levels of concentration in individual positions and diversification across its commingled funds, said the spokesperson.

In periods of market dislocation, the firm aims to make more investments in secondary market opportunities, which tend to be smaller size positions between 1% and 2%, in order to maintain liquidity over time, said the spokesperson. In periods where markets are tight and the fund is primarily underwriting private deals, it may only invest in one to two situations a month, the spokesperson added. Once fully deployed, the strategy will typically have investments in between 40 and 60 companies.

People
AlbaCore − David Allen (managing partner, chief investment officer).