Business Context and Reporting Period
This Form 8-K Current Report was filed by Oaktree Capital Group, LLC on May 17, 2018. The filing documents the completion of a previously announced underwritten public offering and the associated amendments to the company's operating agreements.
Key Financial Metrics and Transaction Details
- Issuance: 7,200,000 units of 6.625% Series A Preferred Units.
- Dividend Rate: 6.625% per annum (non-cumulative).
- Payment Schedule: Quarterly on March 15, June 15, September 15, and December 15, commencing September 15, 2018.
- Redemption Price (Standard): $25.00 per unit, exercisable by Oaktree on or after June 15, 2023.
- Redemption Price (Change of Control): $25.25 per unit if redeemed prior to June 15, 2023.
- Redemption Price (Tax/Rating Event): $25.50 per unit if redeemed prior to June 15, 2023.
The filing text does not provide specific values for total revenue, net profit, operating cash flow, or existing debt levels, as this report focuses on a specific capital transaction rather than periodic financial performance.
Material Changes and Rights Modifications
On May 17, 2018, Oaktree amended and restated its Third Amended and Restated Operating Agreement (now the Fourth Amended and Restated Operating Agreement) to establish the rights of the Series A Preferred Units. Additionally, the limited partnership agreement of Oaktree Capital I, L.P. was amended to create preferred interests mirroring the economic terms of the Series A Preferred Units.
Distribution Restrictions: Unless distributions are declared and paid (or set apart) on the Series A Preferred Units, Oaktree is restricted from declaring distributions on or repurchasing any Junior Units. This restriction does not apply during the initial period from May 17, 2018, to September 15, 2018.
Outlook, Risks, and Unusual Items
- Change of Control Penalty: If a Change of Control Event occurs and Oaktree fails to redeem the units within 30 days, the distribution rate increases by 5.00% (to 11.625%) starting on the 31st day following the event.
- Redemption Rights: Holders of the Series A Preferred Units have no right to require redemption; redemption is solely at Oaktree's option subject to the terms outlined above.
- Legal Opinions: The company filed legal opinions from Simpson Thacher & Bartlett LLP regarding the validity of the units and related tax matters.
Investor Verification Checklist
- Verify the total capital raised by calculating 7,200,000 units multiplied by the $25.00 liquidation preference.
- Review the Fourth Amended and Restated Operating Agreement (Exhibit 3.1) for detailed definitions of "Change of Control Event," "Series A Tax Event," and "Rating Agency Event."
- Confirm the impact of the new preferred units on the company's overall leverage and liquidity position in subsequent 10-Q filings.
- Monitor the declaration of the first quarterly distribution scheduled for September 15, 2018.