Fitch Expects to Rate Oaktree Capital Management's Unsecured Debt 'A'

  Fitch Expects to Rate Oaktree Capital Management's Unsecured Debt 'A'

Business Wire

NEW YORK -- June 12, 2014

Fitch Ratings expects to assign an unsecured debt rating of 'A' to the $250
million of senior unsecured private placement notes offered by Oaktree Capital
Management, L.P., an indirect subsidiary of Oaktree Capital Group, LLC. The
offering is expected to close on Sept. 3, 2014. A portion of the net proceeds
are expected to be used to effectively refinance notes maturing in June 2016,
while remaining proceeds are expected to be used for working capital and
general corporate purposes.

KEY RATING DRIVERS

The expected rating on the new unsecured notes reflects joint and several
guarantees on indebtedness by the various subsidiaries which collect
substantially all of the fee, carry, and investment income earned by Oaktree.
Therefore the rating of the unsecured notes is expected to be equalized with
the Issuer Default Rating (IDR) of Oaktree.

At March 31, 2014, Oaktree's leverage (debt/FEBITDA) was 2.35x, on a trailing
12 month (TTM) basis, which was below the peer average of approximately 2.97x.
Leverage will increase to 3.31x with this issuance, or 2.88x assuming proceeds
are used to refinance 2014 and 2016 debt maturities. Fitch believes leverage
could increase further by YE14, as fee-related EBITDA (FEBITDA) will likely
decline from 2013 levels given the pace of fund distributions from closed-end
funds in recent quarters. However, Fitch expects the firm's leverage to
decline in coming years as incremental fees are earned from more recent
fundraising and investment activity. Longer-term, Fitch believes Oaktree's
leverage will be at-or-below the agency's general 'A' category tolerance of
2.5x.

The Stable Rating Outlook assigned to Oaktree's IDR reflects Fitch's belief
that fundamentals will remain strong given the locked-in nature of the
majority of the fee streams. Furthermore, Oaktree's scale and diversity and
its highly variable cost structure are expected to mute periodic fee
variability to some extent.

The Outlook also incorporates the expectation that Oaktree will produce
consistent investment performance to support future fundraising and
fee-earning assets under management (FAUM) expansion, operate with relatively
low leverage, and retain a solid liquidity profile in order to cover operating
expenses and meet co-investment commitments to funds.

RATING SENSITIVITIES

The rating of the unsecured notes is expected to be equalized with the Issuer
Default Rating of Oaktree. Therefore, any change in Oaktree's rating would
have a commensurate impact on the rating of the unsecured notes.

Declines in investment performance, a key man event, and/or legislative risk
which negatively impact the company's ability to raise FAUM and generate fees,
meaningful increases in leverage, and/or impairment of the liquidity profile
could result in negative rating action.

Fitch believes positive rating momentum for Oaktree is limited, given its
current rating levels and the nature and risk profile of the business,
including the impact that key man events and/or reputational damage can have
on the franchise and future fundraising prospects.

Oaktree is a global alternative investment management firm with a focus on
credit and contrarian, value-oriented investing. FAUM amounted to $74 billion
at March 31, 2014 and total assets under management (AUM) were $86.2 billion.
The company's Class A units are listed on the NYSE under the ticker 'OAK'.

Fitch has assigned the following expected rating:

Oaktree Capital Management, L.P.

--Unsecured Debt 'A(EXP)'.

Existing ratings for Oaktree are as follows:

Oaktree Capital Group, LLC

Oaktree Capital Group Holdings, L.P.

Oaktree Capital I, L.P.

Oaktree Capital II, L.P.

Oaktree AIF Investments, L.P.

-- Long-term IDR 'A'.

Oaktree Capital Management, L.P.

-- Long-term IDR 'A'; and

-- Unsecured debt 'A'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

-- 'Global Financial Institutions Criteria' (January 2014);

-- 'Investment Manager and Alternative Funds Criteria' (December 2013).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725057

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=834315

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Contact:

Fitch Ratings
Primary Analyst Meghan Neenan, CFA
Senior Director
+1-212-908-9121
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Nathan Flanders
Managing Director
+1-212-908-0827
or
Committee Chairperson
Joo-Yung Lee
Managing Director +1-212-908-0560
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com
 
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