Sept. 10 (Bloomberg) -- Oaktree Capital Management LLC said it is ready to renew discussions with New City Residence Investment Corp. creditors who rejected a plan from Lone Star Funds to take control of Japan’s first failed property trust.

“We remain ready, willing and able to re-engage the discussion with the New City creditors,” Robert Zulkoski, head of Oaktree’s special situations and real estate team in Asia, said in an e-mailed reply to queries from Bloomberg News today. He didn’t give more details.

Creditors voted down yesterday Lone Star’s revised offer of 12.4 billion yen ($134 million) for New City, after an initial plan was rejected in July, opening the way for rival bids. The Dallas-based buyout fund in April beat investors including Daiwa House Industry Co. and Oaktree in the bidding contest for New City, subject to creditor and shareholder approval.

Daiwa House-managed property trust BLife Investment Corp. said it will propose its own rehabilitation plan, reiterating yesterday a proposal to merge with New City.

Zulkoski said in an interview on Sept. 1 that Oaktree would be prepared to combine its Tokyo-based property trust, Japan Rental Housing Investments Inc., with New City should creditors reject the receivership plan from Lone Star.

Oaktree, a Los Angeles-based private-equity fund with about $61 billion of assets, is exploring merger opportunities for Japan Rental Housing with other Japanese real estate investment trusts, Zulkoski said then.

“We’ve always shown flexibility in terms of paying down New City Residence’s debt and fairly rescheduling the balance of the debt,” Singapore-based Zulkoski said at the time.

Bankruptcy Protection

New City, which earns rental income from more than 6,700 apartments it manages across Japan, sought bankruptcy protection on Oct. 9, saying its failure was caused by difficulties in raising funds and selling properties because of the global financial crisis. New City’s liabilities were 112.4 billion yen as of August 2008, according to the firm.

The Tokyo Stock Exchange REIT Index has gained 19 percent since April, when Lone Star was selected by New City.

A New City investor group, which claims to represent holders of more that 50 percent of the outstanding units, on Sept. 1 said a merger with BLife would provide the “best long- term value” to unit-holders and creditors.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net

Last Updated: September 10, 2009 01:13 EDT