Business Context and Reporting Period
This Form 8-K filing by Oaktree Capital Group, LLC (the "Company") reports on events occurring on March 31, 2014. The filing details the entry into a new material definitive agreement and the termination of a prior credit facility by the Company's indirect subsidiaries (the "Borrowers").
Key Financial Metrics and Debt Structure
The filing focuses on the restructuring of the Company's debt facilities rather than operational financial performance metrics such as revenue or profit.
- New Term Loan: $250 million unsecured term loan, fully funded at closing.
- New Revolving Credit Facility: Up to $500 million (undrawn at closing), with an accordion option to increase to $750 million.
- Letter of Credit Subfacility: $50 million included within the Revolver.
- Maturity Date: March 2019, with an option to extend by one year subject to lender consent.
- Interest Rates: LIBOR plus 1.0% per annum based on current credit ratings; unused commitment fee of 0.125% per annum.
- Interest Rate Swaps: Existing swaps fix the majority of the Term Loan's annual rate at 2.69% through January 2016 and 2.22% for the subsequent thirteen months.
Material Changes Versus Prior Period
The new Credit Agreement replaces the Prior Credit Facility dated December 21, 2012.
- Refinancing: The new Term Loan replaced the prior term loan balance of $218.8 million.
- Capacity Increase: The new Revolver ($500 million) replaced the prior undrawn revolving facility, which was part of a $750 million senior unsecured facility.
- Maturity Extension: The new facility matures in March 2019, extending the maturity from the prior facility's December 2017 date.
- Termination: The Prior Credit Facility was formally terminated on March 31, 2014.
Outlook, Management Commentary, and Risks
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 relating to the Borrowers' combined leverage ratio and minimum assets under management.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Risks include volatility in revenue and income, changes in investment values, the pace of raising new funds, tax impacts on carried interest, and general economic conditions. Events of default could lead to the acceleration of debt and termination of commitments.
Important Facts for Investor Verification
- Verify the specific terms of the financial covenants (leverage ratio and minimum assets under management) in the full Credit Agreement (Exhibit 10.1).
- Confirm the current credit ratings of Oaktree Capital Management, L.P., as these directly dictate the interest rate spread (currently LIBOR + 1.0%).
- Monitor the utilization of the $500 million Revolver and the $50 million letter of credit subfacility.
- Review the Company's ability to maintain the minimum assets under management required to avoid covenant breaches.
- Note that the filing does not provide specific revenue, profit, or cash flow figures for the period; these are not the subject of this 8-K.