LBO France hits hard-cap with debt fund

Paris-headquartered private equity firm LBO France has raised its second ‘Altercap’ credit opportunities fund after less than a year on the road.

The fund, Altercap II, garnered €200 million in commitments and met its hard-cap. LBO France’s first debt fund raised €160 million in 2009.

LBO France decided earlier this year to postpone the launch of its next mid-market buyout fund due to market conditions, as exclusively revealed by Private Equity International.

However, the firm appears to have correctly judged increased appetite from investors for debt-related funds.

Laurent Bouvier, a partner in LBO France’s Altercap team, told PEI: “It took institutional investors 18 to 24 months to view secondary LBO debt as an asset class in itself. Now many more investors are looking at this space with great interest.”

The firm diversified its LP base for Altercap II, bringing on board its first US investor and increasing the proportions of LPs based outside France to nearly more than a third, up from 19 percent in Altercap I.

The firm said funds of funds accounted for 34 percent of commitments to the new fund, followed by insurers (25 percent), banks (14 percent), private banks (13 percent) and family offices (7 percent). LBO France’s GP commitment was 7 percent.

Bouvier said the fund’s strategy of buying discounted buyout debt on sound small to mid-cap European companies (where the discount mainly stems from technical reasons linked to the seller rather than the quality of the underlying asset) had gained significant traction with investors.

Another attraction was its minimal J-curve, he said. “We invest the capital very quickly, and the debt pays out a coupon – typically 8 percent per annum. So as an investor, you have a cash return almost immediately, together with any capital gains in addition to that.”

The fund is targeting an IRR of between 15 and 20 percent, and a gross multiple of 1.8 to 2x the capital invested, Bouvier said.