Brookfield Oaktree Holdings, LLC current report, 21 December 2012

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.