Business Context and Reporting Period
Company: Oaktree Capital Group, LLC (filing on behalf of indirect subsidiaries: Oaktree Capital Management, L.P., Oaktree Capital II, L.P., Oaktree AIF Investments, L.P., and Oaktree Capital I, L.P.)
Filing Type: Form 8-K (Current Report)
Date of Report: December 21, 2012
Event: Entry into a new Material Definitive Agreement (Credit Agreement) and termination of the prior credit facility.
Key Financial Metrics and Debt Structure
This filing details a refinancing transaction rather than operational financial results. Key debt metrics include:
- New Term Loan: $250 million (unsecured), fully funded at closing.
- New Revolving Credit Facility: Up to $500 million (unsecured), undrawn at closing.
- Letter of Credit Subfacility: $20 million included within the Revolver.
- Maturity Date: December 2017.
- Amortization: Quarterly payments equal to 2.5% of the original $250 million principal.
- Interest Rate (Term Loan): LIBOR + 1.0% per annum (based on current credit ratings).
- Interest Rate (Revolver Commitment): 0.125% per annum on unused portions.
- Interest Rate Swap: Existing swap fixes the Term Loan annual rate at 2.69% through January 2016.
Material Changes Versus Prior Period
The new Credit Agreement replaces the "Prior Credit Facility" dated January 7, 2011. Material changes include:
- Facility Size Increase: The total facility capacity increased from $550 million under the prior agreement to $750 million ($250M term + $500M revolver) under the new agreement.
- Revolving Capacity Expansion: The undrawn revolving loan capacity doubled from $250 million to $500 million.
- Term Extension: The maturity date was extended from January 2014 to December 2017.
- Refinancing: The new Term Loan replaced the $247.5 million outstanding balance of the prior term loan.
Guidance, Outlook, Risks, and Unusual Items
Use of Proceeds: Borrowings will be used for working capital, general corporate purposes, capital contributions to investment funds, permitted distributions, equity repurchases, and repayment of the prior term loan.
Covenants: The agreement includes affirmative and negative covenants, specifically financial covenants regarding combined leverage ratio, combined fixed charge coverage ratio, combined net worth, and minimum assets under management.
Risks and Contingencies:
- Events of Default: Standard events of default apply, with automatic termination and acceleration of debt in cases of insolvency-related defaults.
- Forward-Looking Statements: The filing includes standard disclaimers regarding risks such as volatile revenue, changes in investment values, fund raising pace, tax impacts on carried interest, and general economic conditions.
- Related Party Transactions: Certain lenders or their affiliates may perform investment banking or advisory services for the Company in the ordinary course of business.
Financial Results: The filing text does not provide specific values for revenue, profit, cash flow, or margins for the reporting period.
Investor Verification Checklist
- Verify the full text of the Credit Agreement (Exhibit 10.1) for specific covenant thresholds and definitions.
- Confirm the current credit rating of Oaktree Capital Management, L.P., as interest rates are tied to this rating.
- Review the Company's most recent Form 10-Q or 10-K for actual leverage ratios and fixed charge coverage to assess compliance with new covenants.
- Monitor the status of the interest-rate swap and potential additional swaps for the final two years of the loan term.
- Check for any subsequent filings regarding the utilization of the new $500 million Revolver.