SBCERA rescinds $25m commitment to Alcentra

The California pension fund has said it will rescind its investment in the Alcentra European-focused direct lending fund over concerns about the leverage facility used in the fund.

A US pension fund has opted out of Alcentra’s European Direct Lending fund over concerns about its leverage facility.

The San Bernardino County Employees’ Retirement Association (SBCERA), a California pension fund with more than $8 billion of assets under management, rescinded it’s $25 million commitment to the direct lending strategy in December.

SBCERA had approved the commitment in August 2015.

In minutes of the meeting held in December, Amit Thanki, an investment officer at SBCERA, recommend the fund backtrack on its commitment. He said that the “leverage facility negotiated by Alcentra for the fund was reviewed and a concern was identified resulting in the leverage facility not meeting SBCERA’s minimum requirements”.

A spokesman for the pension fund told PDI that SBCERA “considers a number of factors when evaluating the leverage terms of a debt facility in a fund we are considering, including but not limited to cost, term and advance rate”.

According to presentation documents on the SBCERA website dated 14 July, 2015, the levered facility is a six-year term instrument with 50 percent average expected LTV, 1 percent arrangement fee and interest at Euribor +250 bps.

The spokesman confirmed that SBCERA is maintaining its investments with other Alcentra funds, including the Alcentra Strategic Credit Fund, a strategy that acquires discounted senior loan portfolios from banks. SBCERA has committed to a number of others funds managed by Alcentra in the past.

Alcentra declined to comment.

Alcentra’s European Direct Lending Fund is split into a levered and unlevered sleeve. The unlevered sleeve charges a 1.25 percent management fee on called capital and the levered sleeve charges 1.5 percent, according to SBCERA documents previously reported by PDI. SBCERA had approved a commitment to the levered sleeve.