Alcentra collects more than €2.87bn for latest European direct lending fund

The vehicle will invest in European mid-market companies that have between €20m and €100m of EBTIDA.

Alcentra is still on the road with its latest European direct lending vehicle and has invested €340 million so far.

The London-based firm’s Alcentra European Direct Lending Fund III currently has more than €2.87 billion of capital commitments, according to documents from an Orange County Employees’ Retirement System board meeting.

The fund is looking to target European mid-market companies that have between €20 million and €100 million of EBTIDA. The vehicle will deploy loans of between €40 million and €500 million that will mainly comprise first-lien and unitranche loans. Loans will generally be priced at LIBOR plus 7-9 percent and have a 2-3 percent arrangement fee. Capital will be deployed “opportunistically” to junior debt and equity strategies, the documents show.

The firm, which declined to comment, anticipates that at least half of these companies will be located in the UK, according to the documents. France, Germany and Benelux (Belgium, the Netherlands and Luxembourg) will also be countries of focus.

The fund won’t focus on a particular industry, but the meeting documents predict that business services will make up a substantial percentage of the portfolio, as it made up 25 percent of the deployment from Fund II.

Fund III will have a management fee of 1.25 percent on invested capital for the unlevered sleeve. It will have a 10 percent carried interest over a 5 percent hurdle rate and will have a four-year investment period with a total term length of seven years.

OCERS committed $75 million to Fund III after investing $110 million in Fund II. Chicago Policemen’s Annuity and Benefits Fund made a $10 million commitment and the New Hampshire Retirement System committed $50 million, re-upping its Fund II commitment of the same amount. The Government Employees Pension Service also made a commitment of an undisclosed amount to Fund III.

Fund II raised more than €4.3 billion and held a final close in March 2017. The fund has collected a net internal rate of return of 8.7 percent on its unlevered sleeve and 10.9 percent on its levered side.   

Alcentra is a global asset management firm that focuses on lending across the capital structure. The firm is part of BNY Mellon’s group of asset management boutiques. Alcentra has more than $40 billion in assets under management.