Oaktree closes €1.8bn European fund

The distressed investment specialist will particularly target European companies that are casualties of the last cycle’s ‘private equity miracle’, according to firm founder Howard Marks. Earlier this year Oaktree closed the largest distressed investment fund raised to date on $10.9bn.

Oaktree Capital Management has closed its second European distressed investment fund on roughly €1.8 billion, surpassing its target by about one-third. The firm closed its first Europe-focused fund on $550 million in 2006.

OCM European Principal Opportunities Fund II began marketing roughly a year ago and attracted commitments mainly from existing Oaktree investors.

Europe was visited by the ‘private equity miracle’ and when it turns out not to have been a complete miracle that will create opportunities in distress.

Howard Marks

Asked to describe the fundraising climate, firm founder and chairman Howard Marks said: “On the one hand it’s tougher than usual for a variety of well known reasons, but on the other hand, this is a fund that expects to capitalise on distress, which is what people want.”

The global financial crisis has allowed Los Angeles-headquartered Oaktree to attract a significant amount of capital over the last year.

In May, it closed the largest distressed investment fund raised to date on $10.9 billion with $10.6 billion in commitments from heavy-hitting LPs including the Illinois Teachers’ Retirement System, the Oregon Investment Council and the Pennsylvania State Employees' Retirement System.

Earlier in the year it raised $4 billion in just two months for a hung bridge fund, or a fund to invest in LBO debt banks were unable to syndicate, while last year it closed its first Asian distressed investment fund on $577 million.

Howard Marks

The European fund will seek opportunities arising from the past cycle’s excesses, with a main focus on private equity deals that were over-leveraged or purchased at high prices, Marks said.

“Europe was visited by the ‘private equity miracle’ and when it turns out not to have been a complete miracle that will create opportunities in distress,” he said.

Debevoise & Plimpton advised Oaktree on the fund formation.

Oaktree has offices in locations including Los Angeles, New York, London, Paris, Frankfurt, Beijing, Singapore, Hong Kong and Tokyo.