Alterna targets $600m for Fund II

The firm, which invests in hard assets like ships, locomotives and power plants, has already raised about $300m from existing investors.

Alterna Capital Partners has launched its second fund targeting $600 million for investments in core capital assets like ships and barges, airplanes and locomotives, according to a person with knowledge of the firm.

New Mexico State Investment Council committed $25 million to Fund II earlier this year. The firm has already raised about $300 million from existing limited partners, and expects to bring on board about 95 percent of investors from the prior fund, the person said.

Alterna could not be reached for comment. Core capital assets are long-lived, physical assets that generate cash income and are vital to the transportation, industrial and energy sectors.

American
Phoenix

Alterna, founded by the former core capital assets team at Citi in 2007, raised $428 million for its debut fund. The firm had been targeting $1 billion but decided to cut short the fundraising after LPs expressed a desire for the team to be investing rather than fundraising, Harry Toll, managing partner with Alterna, told Private Equity International in a 2009 interview after Fund I had closed.

Toll founded Alterna along with fellow Citi executives Eric Press and Roger Miller, as well as Jim Furnivall, a former venture capital investor with Canaan Partners. The firm is using Atlantic-Pacific Capital as global placement agent on the fundraising.

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.

“The current yield, from a fund standpoint, helps with mitigation of the j-curve,” the person said.

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, the person said.

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 last year, the largest vessel ever built and launched in the US state of Alabama, according to an article in Marine Log.