Why is the $60 billion Oaktree Capital Management shaking the money tree? It needs the capital. The private equity and distressed debt shop run by credit guru Howard Marks has set out to raise $11 billion in hybrid distressed funds to finance its latest ambitions.
The firm is introducing three new strategies to capitalize on myriad distressed opportunities, including middle-market lending and participation in the government’s Public-Private Investment Program. OCM Opportunities Fund VIII, which has raised $1 billion and is targeting $5 billion to $6 billion, is a trading vehicle focused on the securities of distressed companies with a market capitalization of $2.5 billion or more. The vehicle has a 10-year lock, while an offshoot of that fund—with a target size of $1 billion—comes with a three-year lock up of capital and the option to redeem some capital earlier. A spokeswoman for Oaktree declined to comment.
The new OCM principal opportunities vehicle will make control investments in distressed companies with a market cap of less than $2.5 billion. That fund has raised half of the $4 billion target size.
Oaktree needs the money. In partnership with Alaska’s Inupiat people, the firm was one of nine asset managers chosen in July to participate in PPIP. Each fund manager must raise $500 million within the program’s first 12 weeks.
Oaktree also sees opportunities in middle-market lending, a result of the paucity of financing available to small businesses. Oaktree was one of several hedge funds to provide rescue financing in July to CIT, the country’s largest middle-market commercial lender, when it couldn’t roll over its debt. Should CIT go into bankruptcy, Oaktree and the other funds will be in a positon to take over.
As of August, the Los Angeles firm was nearly a third of the way to its $11 billion goal. If successful, the fundraising would boost Oaktree’s overall assets by 15% and its hedge fund assets (currently $2.5 billion) by 40%. The new capital would also inch Oaktree closer in size to the $100 billion Trust Company of the West, Marks’ alma mater. TCW is also participating in PPIP. CS
