Marks’s Oaktree Files for IPO to Join U.S.-Listed Buyout Rivals
Oaktree Capital Management LP, the world’s largest distressed-debt investor, filed to sell shares in an initial public offering, following private-equity rival Apollo Global Management LLC (APO) which went public in March.
The firm, which hasn’t set a price range or the number of shares it will sell, registered for an IPO of $100 million. That is probably a placeholder to calculate filing fees, and the final amount may vary. Proceeds from the sale by Howard Marks’s firm will be used to buy interests from principals, employees and investors, Los Angeles-based Oaktree said yesterday in a filing with the U.S. Securities and Exchange Commission.
Oaktree, which managed more than $80 billion as of March 31, according to the filing, is pursuing an offering after mixed results from leveraged-buyout firms Blackstone Group LP (BX), Apollo and KKR & Co. (KKR) since going public. Oaktree raised about $1 billion in May 2007 when it sold a 15 percent stake on the private exchange run by Goldman Sachs Group Inc. (GS), a transaction valuing the company at $6.3 billion.
Oaktree was started in 1995 by Chairman Marks and six partners from Los Angeles-based investment firm TCW Group Inc. Marks, 65, a billionaire who owns about one-sixth of Oaktree, named the firm for the English translation of his Santa Barbara, California, weekend home, Las Encinitas.
The firm’s 17 distressed-debt funds averaged annual gains of 19 percent after fees for the past 22 years, about 7 percentage points better than its peers tracked by Boston-based consulting firm Cambridge Associates LLC.
Blackstone, the world’s largest private-equity firm, garnered $4.1 billion in its 2007 IPO, a year before the failures of Bear Stearns Cos. and Lehman Brothers Holdings Inc. jolted financial markets. The shares have fallen 46 percent below their IPO price, even after gaining 18 percent year-to-date. Apollo has declined 16 percent from its March 29 offering that generated $565 million. KKR, which gained a U.S. listing in July 2010, has risen 48 percent in New York trading.
All three competitors are based in New York.
Opportunities for making money in distressed investing dwindled in the past few years as the economy improved.
“There are times when it is important to invest cautiously, and there are times when it’s important to invest aggressively,” Marks said in an interview before the filing. “A big part of the job is knowing where we are and choosing between those two. We believe that compared to one year, two years, maybe three years ago, this is the time to invest cautiously.”
In January and April, Marks returned a total of $4.4 billion to investors in his $11 billion OCM Opportunities Fund VIIB, the largest distressed-debt pool in history. Oaktree had invested about $6 billion in the most senior debt of failing companies during the 15 weeks following Lehman Brothers’ bankruptcy in September 2008, generating a gross annual return of 31 percent for the fund since its inception.
About 40 percent of Oaktree’s assets are in distressed debt, 25 percent are in corporate bonds and 18 percent are devoted to so-called control investing, under which Oaktree takes ownership of firms by buying their debt or equity. Oaktree runs 16 strategies and has invested in troubled media company Tribune Co. (TRBAA), movie-theater chain Regal Entertainment Group (RGC) and CIT Group Inc. (CIT), the small-business lender that came out of bankruptcy in December 2009.
Thirty-nine percent of the money Oaktree oversees comes from public pools led by pensions and sovereign-wealth funds, and 29 percent is from corporations. The firm’s other clients include endowments, foundations, insurance companies, wealthy individuals and mutual funds.
Goldman Sachs and Morgan Stanley are listed as the IPO underwriters. The shares will trade on the New York Stock Exchange under the ticker symbol OAK.
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