Oaktree Swings to Second-Quarter Profit as Assets Climb
Oaktree Capital Group LLC (OAK), the world’s largest distressed-debt investor, posted a second- quarter profit compared with a loss in the year-earlier period as assets and fees for managing them climbed.
Net income rose to $24.7 million, or 84 cents, from a loss of $20.4 million, or 90 cents, a year earlier, Los Angeles-based Oaktree said in a statement today. Assets under management rose to $78.7 billion from $77.9 billion at the end of the first quarter as the firm attracted new commitments.
Oaktree, which went public in April, has sought to take advantage of slumping markets and Europe’s sovereign-debt crisis by buying distressed assets. It plans to close its ninth distressed-debt fund after gathering $4.9 billion in commitments, John Frank, a managing principal of the firm, said today in a telephone interview.
Strong fundraising and realizations have made the firm “well positioned to capitalize on the current market conditions,” Frank said.
Oaktree shares rose 1.4 percent to close at $37.52 in New York. The shares have fallen 13 percent since the April 11 initial public offering that raised less than the firm sought. Oaktree raised $380 million in its IPO, selling 8.84 million shares for $43 each, the bottom of the proposed range.
Adjusted net income, a measure of profit excluding some costs, rose 17 percent to $165.5 million, or 89 cents a share, from $141.3 million, or 69 cents, a year earlier, Oaktree said. Adjusted net income excludes some expenses, including non-cash equity compensation and income taxes.
Distressed debt firms such as Oaktree seek bargain-priced assets that are being shed by companies having financial difficulties, nearing default or in breach of their contracts.
Investment opportunities in Europe haven’t arisen at the pace investors expected as regulators have cut interest rates to record lows. Chairman Howard Marks told Bloomberg Television last month that actions by the European Central Bank have taken pressure off banks to sell assets such as bad loans.
“We still need the development of some events that are going to scare the hell out of people,” Marks, who co-founded Oaktree in 1995, said at the Morgan Stanley Financials Conference in June. “That’s what gives rise to that great environment where everybody wants to sell and nobody wants to buy. That’s the raw material for our greatest returns.”
Marks has also seen investment opportunities in U.S. real estate, where he is betting on a comeback in the market for single-family homes. He told Bloomberg TV last month that a general aversion to real estate by investors is “a mistake.”
Oaktree started raising money for a real estate fund in the second quarter, which has a target of $1.5 billion, according to the firm. Oaktree Opportunities Fund IX LP, the firm’s distressed-debt fund that it soon plans to close, came to market in October with a goal to raise $4 billion to $6 billion. The fund had closed on $4.6 billion as of June 30.
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