Oaktree founders could reap up to $80 million each in stock sale

NEW YORK Tue May 21, 2013 4:46pm EDT

NEW YORK May 21 (Reuters) - Oaktree Capital LLC, the world's largest distressed debt investor, said its two founders could each receive as much as $79.9 million in a secondary offering of its shares if the firm clears net proceeds of $367.6 million.

In a regulatory filing late on Monday, Oaktree said its chairman Howard Marks and president Bruce Karsh, which founded the firm in 1995, would each cut their stake from 14.4 percent to a minimum of 13.4 percent.

The sale, to be priced late on Wednesday could earn the founders more than Oaktree's $380.3 million initial public offering in 2012, which was downsized on weak investor demand. Oaktree's shares have since rallied more than 30 percent, making cashing out more attractive.

A portion of how much fund managers make, as well as their long-term commitment to the firm, hinges on their ownership. Investors' interests are best aligned when both sides make a lot of money when deals work out, so getting money by cashing out, even in part, can be a sensitive issue among some fund investors, who pay attention to how much managers earn and how they are remunerated.

Depending on whether the underwriters exercise in full their option to purchase shares in the offering, this could raise between $69.5 million and $79.9 million for each of the two founders, Oaktree said. Marks and Karsh earned $72.5 million apiece in the firm's IPO in April 2012, when they each cut their stakes from 15.6 percent to 14.4 percent.

Oaktree said it is basing their potential reward on an offering price of $54.72 per share. Oaktree shares ended trading at $55.62 on Tuesday, down 0.5 percent.

Marks, 67, and Karsh, 57, were worth $1.7 billion each as of March 2013, according to Forbes. Other Oaktree insiders have also registered to sell shares in the secondary offering.

Oaktree had $78.8 billion in assets under management as of the end of March, including money from 75 of the 100 largest U.S. pension plans, 400 corporations, ten sovereign wealth funds and more than 300 universities, endowments and charities.

The firm invests in distressed debt, senior loans, high-yield bonds, private equity, convertible securities, real estate and listed equities.

Earlier this month, Marc Rowan and Joshua Harris, who together with Leon Black founded Oaktree rival Apollo Global Management LLC in 1990, grossed $110.6 million and $55.3 million respectively in a secondary offering of shares.

Morgan Stanley, Bank of America Merrill Lynch and Credit Suisse are acting as joint global coordinators and Goldman Sachs & Co, JPMorgan and Wells Fargo Securities are acting as joint bookrunners for Oaktree's secondary offering.

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