A major BlackRock Inc. BLK fund is confronting a loss exceeding $600 million tied to its investment in the insurance outsourcing firm, Alacrity. This development emerges amid the company’s ongoing debt challenges.
What Happened: A consortium of private credit funds, including Antares Capital, Blue Owl Capital, KKR, and Goldman Sachs Asset Management, has agreed to take control of Alacrity. BlackRock had acquired a controlling interest in Alacrity in February 2023 through its $4.3 billion Long Term Private Capital strategy, purchasing it from private equity firm Kohlberg & Co., Financial Times reported on Thursday.
BlackRock’s equity investment in Alacrity, valued at over $600 million, will be eliminated as part of the restructuring, as reported by sources familiar with the situation. At the time of BlackRock’s investment, Alacrity had approximately $1 billion in senior debt and $500 million in junior debt, the latter provided by Goldman's asset management division.
The restructuring plan involves converting these debts into a new $450 million term loan and $250 million in preferred equity. Senior lenders will acquire 90% ownership of the company post-restructuring, while Goldman Sachs Asset Management will hold the remaining 10%.
BlackRock has yet to respond to Benzinga‘s queries.
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Why It Matters: The timing of this financial loss is critical for BlackRock as it prepares to release its fourth-quarter earnings on Jan. 15. Analysts anticipate the company will report earnings of $11.38 per share, a significant increase from $9.66 per share in the previous year. Revenue is projected to reach $5.63 billion, up from $4.63 billion a year earlier. This restructuring loss could impact investor sentiment and the company’s financial outlook.
Moreover, BlackRock’s recent definitive agreement to acquire HPS Investment Partners for approximately $12 billion underscores its strategic moves to expand its investment capabilities. The Alacrity restructuring, however, highlights the risks inherent in such large-scale investments and the challenges of managing debt-laden assets.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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