Business Context and Reporting Period
This Form 8-K Current Report was filed by Oaktree Capital Group, LLC on August 9, 2018. The filing documents the completion of a previously announced underwritten public offering of preferred units and the associated material modifications to the rights of security holders.
Key Financial Metrics and Transaction Details
The filing details the issuance of 9,400,000 units of 6.550% Series B Preferred Units. Key terms include:
- Issuance Volume: 9,400,000 Series B Preferred Units.
- Distribution Rate: 6.550% per annum, payable quarterly (non-cumulative).
- First Payment Date: December 15, 2018.
- Redemption Price (Standard): $25.00 per unit, exercisable by Oaktree on or after September 15, 2023.
- Redemption Price (Change of Control): $25.25 per unit if redeemed within 60 days of a Change of Control Event prior to September 15, 2023.
- Redemption Price (Tax/Rating Event): $25.50 per unit if redeemed within 60 days of a Series B Tax Event or Rating Agency Event prior to September 15, 2023.
The filing text does not provide specific revenue, profit, cash flow, or total debt figures for the company, as this report focuses on the capital structure transaction rather than periodic financial performance.
Material Changes Versus Prior Period
The primary material change is the expansion of Oaktree's capital structure through the creation of the Series B Preferred Units. This issuance introduces new distribution obligations and restrictions on the payment of distributions or repurchases of Junior Units unless Series B distributions are declared and paid. Additionally, Oaktree Capital I, L.P., a subsidiary, approved a unit designation with economic terms designed to materially mirror the Series B Preferred Units.
Guidance, Outlook, and Risks
Management Commentary and Restrictions: The Unit Designation imposes a "blocker" provision: unless distributions are declared and paid on the Series B Preferred Units for a quarterly period, Oaktree cannot declare or pay distributions on any Junior Units or repurchase Junior Units during the remainder of that period. This restriction does not apply during the initial distribution period (August 9, 2018, to December 15, 2018).
Risks and Contingencies:
- Change of Control: If a Change of Control Event occurs and Oaktree does not redeem the units within 31 days, the distribution rate increases by 5.00% per annum.
- Redemption Rights: Holders have no right to require redemption; redemption is solely at Oaktree's option subject to the dates and conditions outlined above.
- Non-Cumulative Distributions: Undeclared distributions are not paid upon redemption.
Important Facts for Investor Verification
- Verify the total capital raised by multiplying the 9,400,000 units issued by the $25.00 liquidation preference per unit.
- Confirm the impact of the new 6.550% distribution obligation on the company's ability to pay distributions to common or junior unit holders.
- Review the full Unit Designation (Exhibit 3.1) for specific definitions of "Change of Control Event," "Series B Tax Event," and "Rating Agency Event."
- Note that the subsidiary unit designation details will be filed in the Form 10-Q for the quarter ending September 30, 2018.