Oaktree’s Marks and Karsh eye $80m payday

The firm’s co-founders will reduce their stakes in the business from 14.4% each to as little as 13.4% each as part of a secondary offering.

Distressed debt specialist Oaktree Capital Management filed to raise up to $367 million in a secondary offering Monday, a move that will deliver up to $79.9 million each to co-founders Howard Marks and Bruce Karsh.

NYSE-listed Oaktree based the offering totals off a price per share of $54.71. At the close of business on Tuesday, the Los Angeles-headquartered firm was trading at $55.62 per share. Marks and Karsh will be able to sell down their stakes from 14.4 percent each to a minimum of 13.4 percent each, according to the filing. 

Several other members of Oaktree’s senior management team will also sell stakes in the business as part of the offering, including principal and portfolio manager Sheldon Stone, also a co-founder of the firm, who will collect up to $45.7 million. Goldman Sachs, JPMorgan and Wells Fargo Securities were lead bookrunners on Monday’s secondary offering. 

Oaktree has “systematically broadened employee ownership since our founding to help align interests among employees”, according to the filing. The firm’s limited partners include 75 of the largest 100 US pension plans, approximately 400 corporations, more than 300 university, charitable and other endowments and foundations and 10 sovereign wealth funds.

Oaktree took its management company public in April of 2012, valuing the firm at $6.5 billion. It raised approximately $380 million by selling about 20 percent fewer shares than planned at $43 each, the bottom of its range. 

Marks and Karsh would have taken home up to $117.2 million each had the initial public offering gone as planned. Instead, the co-founders earned a reported $72.5 million apiece, cutting their stakes from 15.6 percent to 14.4 percent.

Oaktree’s IPO revealed some impressive stats: the firm had generated an aggregate gross IRR of 22.9 percent across its 15 distressed debt funds, and had raised more than $65 billion in the five years leading up to the offering.
Oaktree is in the process of raising its OCM Principal Opportunities Fund VI, a North American-focused buyout fund targeting $3 billion; the Oaktree Emerging Market Opportunities Fund, a mezzanine debt fund targeting $500 million, and its Oaktree European Dislocation Fund, another mezzanine fund targeting €500 million. 

Oaktree was founded in 1995 and has $78.8 billion in assets under management. The assets are split between six asset classes, with $26.4 billion in corporate debt, $24 billion in distressed investing, $15.5 billion in control investing and the remaining assets divided between convertible securities, real estate and listed equities.