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Oaktree Has Third-Quarter Profit as Assets, Fees Increase

Nov. 6 (Bloomberg) -- Oaktree Capital Group LLC, the distressed-debt investor that went public in April, posted a third-quarter profit compared with a loss in the year-earlier period as assets rose and the firm gathered more fees.

Net income rose to $25.2 million, or 84 cents, from a loss of $36.5 million, or $1.61, a year earlier, Los Angeles-based Oaktree said in a statement today. Assets under management rose to $81 billion from $78.7 billion at the end of the second quarter on market gains and new commitments.

Oaktree, the world’s largest distressed-debt investor, has sought to take advantage of Europe’s sovereign debt crisis by buying distressed assets, closing its ninth distressed-debt fund during the quarter with $5 billion. The firm is also set to gather capital for its first fund dedicated to emerging-market distressed and dislocated debt, which is expected to hold its first close early next year, Oaktree said today.

“You’ve got a huge amount of lending that’s been done into the emerging markets,” John Frank, a managing principal at Oaktree, said in a telephone interview. “A lot of the historic participants in that marketplace, including the European banks, are now capital-constrained.”

Oaktree rose 0.3 percent to close at $43.32 in New York. The shares are up from Oaktree’s $43 offering price in the April 11 IPO, when it raised $380 million after selling 8.84 million shares.

Fees Rise

Adjusted net income, a measure of profit excluding some costs, rose to $157.7 million, or 88 cents a share, from $3.3 million, or a loss of 1 cent, a year ago, Oaktree said. Adjusted net income excludes some expenses, including noncash equity compensation and income taxes.

Management fees rose 5.2 percent from a year ago to $182.6 million as fee-earning assets under management increased. Investment income, the profit Oaktree makes by putting its own money into fund investments, was $62.8 million, compared with a loss of $86.1 million in the third quarter last year, as the firm benefited from rising stock markets worldwide.

“The markets were good and helpful,” Oaktree’s Frank said. “We’re excited about the fact that stock prices have picked up.”

The firm said it will pay a dividend of 55 cents a unit to shareholders on Nov. 20.

Jackson Square

The flow of distressed debt being sold by troubled European banks has increased, Frank said, allowing Oaktree to buy them at a discount. The firm bought sub- and non-performing loans worth $2.2 billion during the quarter at a “significant” discount to par value, he said.

Oaktree last month agreed to sell Jackson Square Aviation LLC to Mitsubishi UFJ Lease & Finance Co. for 100 billion yen ($1.25 billion). When it closes, the transaction will give the firm and its investors 1.7 times the money they put into the deal, Frank said.

Oaktree and private-equity firm Apollo Global Management LLC are taking control of Nine Entertainment Co. through a A$2.3 billion ($2.4 billion) debt-for-equity swap as Australia’s second-largest broadcaster restructures. The new owners have no immediate plans to sell Nine, according to a person with knowledge of the deliberations.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

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

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