Oaktree Raises $380.2 Million in IPO at Bottom of Range

April 12 (Bloomberg) -- Bloomberg's Erik Schatzker, Stephanie Ruhle and Sara Eisen report that Oaktree Capital Group LLC, the world’s largest distressed-debt investor, raised $380.2 million in an initial public offering, the company said, after bringing in about 27 percent less than the firm originally sought. The valuation could impact the Carlyle Group IPO expected later this year. They speak on Bloomberg Television's "Inside Track." (Source: Bloomberg)

Oaktree Capital Group LLC (OAK), the world’s largest distressed-debt investor, raised $380.2 million in an initial public offering, the company said, after bringing in about 27 percent less than the firm originally sought.

Oaktree sold 8.84 million shares for $43 each, the bottom of the proposed range, according to a statement late yesterday. The firm and some of its stakeholders had offered to sell 11.3 million shares for as much as $46 apiece, according to regulatory filings.

Under the original terms, Oaktree planned to have about 151 million units outstanding following the offering. At the IPO price, that would value the Los Angeles-based company at about $6.5 billion, compared with $16.5 billion for Blackstone Group LP (BX) and $5.1 billion for Apollo Global Management LLC.

Investors’ appetite for newly listed companies is being tested after volatility in U.S. stocks on April 10 spiked to the highest level in a month. The Standard & Poor’s 500 (SPX) Index completed a five-day, 4.3 percent slump that day as a surge in Spanish and Italian bond yields fueled concern that Europe’s debt crisis is worsening.

“When you file to go public, you want the economy to be in good shape and you want the stock market to be in good shape,” Steven Kaplan, a professor at the University of Chicago Booth School Business, said in a telephone interview. “When these firms filed, that was all true. The question, and the uncertainty they have to deal with, is what happens to the markets after filing.”

Kim Martinez, a spokeswoman for Oaktree, declined to comment.

Carlyle Test

Stocks recouped some of the recent losses yesterday as the S&P 500 gained 0.7 percent.

Oaktree, which begins trading today on the New York Stock Exchange under the ticker symbol OAK, carried out the first IPO by an alternative-asset manager since Apollo (APO) sold stock in March 2011. Underwriters have an option to purchase as many as 1.33 million additional shares in the next 30 days, according to yesterday’s statement.

Rivals have fared poorly in the public markets since the 2008 global financial crisis. Blackstone, the world’s largest buyout firm, is trading at about half its value since its IPO in 2007 and Apollo has lost a quarter of its value.

Carlyle Group LP (CG), which has been weighing a public offering since 2007 and put those plans on hold because of the global financial crisis, may delay its IPO roadshow if investors aren’t receptive to Oaktree and if the stock market continues to decline, a person familiar with the plans said earlier this week.

Carlyle, the second-largest private-equity firm, will trade on the Nasdaq Stock Market under the symbol CG. It hasn’t set a price range or the number of shares it plans to offer.

Goldman Sachs

Carlyle is seeking a valuation of $7.5 billion to $8 billion and plans to sell a stake of about 10 percent in its IPO, according to people with knowledge of the plans. The Washington-based firm, which has been gauging public interest since last year, is targeting its share sale in early May, said another person.

Oaktree and Apollo first sold shares through a private exchange managed by Goldman Sachs Group Inc., which led Oaktree’s offering with Morgan Stanley. Apollo, based in New York, transferred the listing to the New York Stock Exchange via an IPO in March 2011.

Like other private-equity firms that have already tapped the public market, Oaktree is offering prospective shareholders a slice of profits from managing money for investors such as pensions, university endowments and sovereign-wealth funds.

Management Transition

Chairman Howard Marks and President Bruce Karsh, two of Oaktree’s co-founders, had been set to get almost 40 percent of the proceeds from the share sale. Marks and six partners from TCW Group Inc. started the firm in 1995. He and Karsh were to each be paid about $101.9 million from the IPO, based on the original terms of the offering and the expected price range, according to filings.

Other Oaktree executives also stood to benefit from the IPO. John Frank, a managing principal, was to receive $4.8 million under the original terms; Caleb Kramer, a managing director, was to get $4.3 million; and Stephen Kaplan, a principal, was to be paid $3.7 million.

The IPO may help Oaktree in its transition to new managers, which it has already begun by transferring some responsibilities. Oaktree will no longer pay Kaplan a direct share of management fees, it said in a recent filing, instead paying him fixed quarterly payments that represent about 75 percent of the amount he would otherwise have received.

KKR’s Gains

In Blackstone’s IPO, co-founder Peter G. Peterson sold most of his stake to fund his philanthropic efforts and his foundation, and his partner, Stephen Schwarzman, sold some shares.

KKR (KKR) has gained 32 percent since the New York firm listed its shares in the U.S. in July 2010. Henry Kravis and George Roberts, the cousins who are KKR co-founders and managing partners, have yet to sell stock in their New York-based firm, according to KKR’s regulatory filings.

To contact the reporters on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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