Oaktree closes Fund VIIIb on $2.5bn

The firm’s ‘spillover’ distressed debt fund will begin deploying capital after Fund VIII has been invested and will not incur management fees until capital is deployed.

Oaktree Capital Management has closed its supplemental distressed debt fund on approximately $2.5 billion, a source with knowledge of the situation told Private Equity International.

Oaktree’s Fund VIII closed on roughly $4.5 billion in early 2010. Because the firm was “overwhelmed with capital”, according to the source, Fund VIIIb was devised as a “spillover” fund that would not be capped and not incur management fees unless and until capital was drawn. Oaktree is believed to have invested around half of Fund VIII to date.

The firm declined to comment on fundraising activity.

Oaktree was originally considering investing Fund VIIIb at the same time as Fund VIII, provided there was a “significant supply of distressed debt,” the source said, but in light of the current environment  the firm decided to deploy Fund VIII before beginning to invest Fund VIIIb. Both funds will employ the same strategy of investing in distressed debt.  

In February, Oaktree’s record setting “OCM Opportunities Fund VIIb” had returned $3 billion to limited partners. The fund, which began investing in May 2008, had raised $10.9 billion and went on to invest the bulk of its capital in the period between the Lehman Brothers bankruptcy and the end of 2008.