Alterna closes Fund II on $722m

The firm exceeded its $600m target for investments in hard assets like ships, locomotives and power plants. 

Alterna Capital Partners has closed its second fund for investments in core capital assets like ships and barges, airplanes and locomotives, on $722 million, according to statement. Alterna launched the fund in 2012 with a $600 million target.

Roughly 75 percent of limited partners in Fund II are new Alterna investors, according to a source with knowledge of the situation. Alterna declined to comment on the fund closing.

Atlantic-Pacific Capital acted as placement agent for Fund II. Last year, the New Mexico State Investment Council committed $25 million to the fund.

Alterna has completed two transactions from Fund II to date, committing between $140 million and $150 million in two shipping investments. Core capital assets are long-lived, physical assets that generate cash income and are vital to the transportation, industrial and energy sectors.

Alterna, founded by the former core capital assets team at Citi in 2007, raised $428 million for its debut fund.  Alterna managing partner Harry Toll founded the firm along with fellow Citi executives Eric Press and Roger Miller, as well as Jim Furnivall, a former venture capital investor with Canaan Partners.

Typically, Alterna will outsource operations of the asset; for example, the firm would outsource technical management of a ship (crew, captain, maintenance) to a larger international company that specialises in that kind of work, according to New Mexico SIC documents.

Alterna targets about a 20 percent internal rate of return, with 10 percent as current cash yield, and a 2.5x multiple on a gross basis, according to documents from the New Mexico State Investment Council and the person with knowledge of the firm.

At Citi, the core capital assets team invested in 25,000 rail cars, 450 locomotives, 70 ships and barges, 50 aircraft and 15 power plants/transmission lines.

One of Alterna’s major deals from the debut fund was the acquisition out of bankruptcy of an unfinished ship American Phoenix. After the about $12.6 million acquisition in a bankruptcy auction, which Alterna completed through a partnership with Mid-Ocean Marine, the ship was completed and launched in 2012, the largest vessel ever built and launched in the US state of Alabama, according to an article in Marine Log.