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Oaktree founders eye $234m payday

Howard Marks and Bruce Karsh will collect about $117m each from the firm’s IPO, a filing for which revealed details including gross IRR on the firm's distressed debt funds.

Oaktree Capital Management filed to raise up to $517.5 million in its initial public offering Friday, a move that will deliver up to $117.2 million each to co-founders Howard Marks and Bruce Karsh. The Los Angeles-headquartered asset manager priced its IPO at a range of between $43 and $46 per share.

Oaktree set out the strategy behind the IPO last June, explaining that it would allow Marks and Karsh to realise their stakes in the business.

“We believe that at some point Oaktree must be independent of its founders. To accomplish this, generational transfer of ownership is necessary. Public ownership is the most widely accepted way to go beyond an entrepreneur-led or family-owned company to one able to live on indefinitely,” the firm said in the filing.

Howard Marks

“We want to continue the transfer of ownership in the firm to key employees, but we also want a mechanism that will enable the founders to realise value from their remaining stakes over time. Thus we have decided to continue issuing equity to employees and also to sell part to the public.”

We believe that at some point Oaktree must be independent of its founders. To accomplish this, generational transfer of ownership is necessary.

Oaktree's SEC filing

Oaktree employs a broad employee ownership structure, with about 70 percent of the equity interests in the Oaktree Operating Group “indirectly” owned by over 160 professionals, according to the filing.  The firm has approximately $75 billion of assets under management across various business lines, as of 31 December 2011, 32 percent of which is in distressed debt, with another 28 percent in corporate debt, the filing said.

Oaktree’s 15 distressed debt funds launched prior to 2011 have an aggregate gross IRR of 22.9 percent, according to the filing. Funds VII, VIIb and VIII were returning 9.4 percent, 23.3 percent and 7.6 percent, respectively, as of 31 December 2011. Fund VIIIb began investing last August and “did not have a meaning full IRR as of 31 December, the firm said.

Oaktree said that post-IPO, it intends to preserve the current management structure. The offering follows listings by peers The Blackstone Group, The Carlyle Group, Kohlberg Kravis Roberts and Apollo Management.

Oaktree already has shares listed on a quasi-public platform set up by Goldman Sachs in 2007. Goldman, together with Morgan Stanley, will act as lead bookrunner for the IPO. If the bookrunners exercise an option to purchase an additional 15 percent of shares, the amount raised could reach $595 million, according to the filing.

Oaktree has more than doubled its assets under management over the last five years, and has more than 650 employees in 13 offices worldwide, according to the filing.