The $170 billion alternative investment specialist Oaktree Capital Management raised $10 billion in equity commitments for the launch of its private credit-focused Oaktree Lending Partners.
The fund will originate senior secured loans of $500 million or more to private equity-owned U.S. companies with over $100 million in EBITDA. This embrace of backing leveraged buyouts comes at a time when there is limited availability of debt capital and record-high levels of private equity capital yet to be deployed. The imbalance is enhanced by the retreat of banks from this type of lending and the constrained capacity of nonbank lenders that are fully invested and/or managing issues with previous investments.
“The need for this type of lending is significant, but we anticipate limited competition given the retreat of banks from this area and the dearth of nonbank lenders with the requisite scale, flexibility and credit expertise. We feel this creates opportunities to lend at attractive rates for deals with strong covenants and low leverage ratios,” said Howard Marks, co-chairman of Oaktree.
“Our approach to direct lending has always been grounded in the first tenet of Oaktree’s investment philosophy: the primacy of risk control,” Marks added. “We believe this to be one of the most attractive opportunities we’ve ever seen in direct lending.”
Oaktree’s private credit business totals roughly $24 billion in assets across global, U.S., and European private debt strategies as well as its 17Capital NAV-based financing business. LBO loan yields have increased to an average of 12.4% at the end of 2022, according to stats gathered by Pitchbook.
Oaktree’s Head of Performing Credit Armen Panossian said the firm’s partnership with 17Capital helps differentiates Oaktree’s lending approach from that of other lenders.
“We believe these strengths, combined with our deep sponsor relationships developed over 20 years in the business of direct lending, enabled us to consistently source high-quality, proprietary investment opportunities,” Panossian added. “We look forward to working with our investors and borrowers to deliver mutually beneficial financing solutions.”
