10-K: Oaktree Capital Amends Note Purchase Agreement, Adds Cayman Entity as Obligor

Oaktree Capital Management and its affiliates have amended their note purchase agreement to include Oaktree Cayman as an obligor and affiliate guarantor, while also updating financial reporting and covenant compliance terms.

Summary

• Oaktree Capital Management and several of its related entities have entered into a third amendment and joinder to their note purchase agreement.
• This amendment adds Oaktree Capital Management (Cayman), L.P. as an obligor and affiliate guarantor.
• The agreement also updates financial reporting requirements, including the timing for quarterly and annual statements.
• Covenant compliance sections have been amended to include detailed calculations of financial metrics.
• The amendment also modifies sections related to liens, restricted payments, combined leverage ratio, minimum assets under management, restrictive agreements, and consent in contemplation of transfer.
• Several defined terms have been added, amended, and restated, including '17C Certificate', '17Capital', '17Capital Fund', '17Capital Group', 'AIFM', 'Oaktree Cayman', 'Retention Financing Arrangements', 'Affiliate Guarantor', 'Assets Under Management', 'CLO Subsidiary', 'Combined EBITDA', 'Combined Interest Expense', 'Combined Net Income', 'Combined Total Debt', 'Consolidated Total Assets', 'Controlled Entity', 'GAAP', 'Indebtedness', 'Material Credit Facility', 'Oaktree Capital II', 'Obligor', 'Officers Certificate', 'Person', 'Responsible Officer', 'Senior Financial Officer', 'Subsidiary', and 'Wholly-Owned Subsidiary'.
• The amendment includes an attachment listing designated non-CLO subsidiaries and a schedule of limited partners of Oaktree Cayman.
• The effectiveness of the amendment is subject to several conditions, including the accuracy of representations and warranties, delivery of executed counterparts, receipt of certificates and opinions, and payment of legal fees.
• The amendment is executed pursuant to the original note purchase agreement and does not waive any rights or remedies of the note holders.
• The agreement allows for electronic contracting and signatures.
• The agreement is governed by the laws of the State of New York.

Sentiment

Score: 7

Explanation: The document is a standard amendment to a note purchase agreement, with no significant positive or negative implications. The sentiment is neutral to slightly positive due to the inclusion of Oaktree Cayman as an obligor, which may be seen as a positive step for note holders.

Positives

• The inclusion of Oaktree Cayman as an obligor strengthens the note purchase agreement.
• Updated financial reporting requirements provide more timely information to note holders.
• The detailed calculations of financial metrics enhance transparency and accountability.
• The amendment clarifies the definition of Assets Under Management, providing a more precise metric.
• The amendment provides more flexibility in the management of CLO subsidiaries.
• The amendment provides more flexibility in the management of restricted payments.

Risks

• The amendment introduces new defined terms and complex calculations, which may increase the risk of misinterpretation or non-compliance.
• The inclusion of Oaktree Cayman as an obligor may increase the overall risk profile of the note purchase agreement.
• The amendment modifies several key financial covenants, which may impact the financial flexibility of the Obligors.
• The amendment includes complex definitions of Combined EBITDA and Combined Total Debt, which may be difficult to interpret and apply consistently.

Future Outlook

The document does not contain any specific forward-looking statements or guidance.

Industry Context

This amendment reflects ongoing adjustments and refinements in the financial agreements of alternative investment managers, particularly in response to evolving market conditions and regulatory requirements. The inclusion of Oaktree Cayman as an obligor and affiliate guarantor is a strategic move to consolidate and streamline the financial structure of the Oaktree group.

Comparison to Industry Standards

• The amendment of financial reporting requirements to align with GAAP is consistent with industry standards for transparency and accountability.
• The inclusion of detailed calculations of financial metrics is a common practice in debt agreements to ensure compliance with covenants.
• The amendment of the definition of Assets Under Management to include a pro rata portion of assets managed by entities accounted for using the equity method is a common practice in the alternative investment industry.
• The amendment of the definition of Combined EBITDA to include adjustments equivalent to those made by OCG in its 2018 Form 10-K is a common practice in the alternative investment industry to provide a more accurate measure of operating performance.
• The amendment of the definition of Combined Total Debt to exclude Non-Recourse CLO Subsidiary Indebtedness is a common practice in the alternative investment industry to provide a more accurate measure of the Obligors leverage.

Stakeholder Impact

• Note holders will benefit from the inclusion of Oaktree Cayman as an obligor and affiliate guarantor.
• Note holders will benefit from the updated financial reporting requirements.
• Note holders will benefit from the detailed calculations of financial metrics for covenant compliance.
• The amendment may impact the financial flexibility of the Obligors.

Next Steps

• The Obligors will need to comply with the updated financial reporting requirements.
• The Obligors will need to ensure ongoing compliance with the amended covenants.
• The Holders will need to monitor the Obligors compliance with the amended terms.

Key Dates

Keywords

Note Purchase Agreement, Oaktree Capital Management, Oaktree Cayman, Senior Notes, Obligor, Affiliate Guarantor, Financial Reporting, Covenant Compliance, Assets Under Management, Combined Leverage Ratio, Restricted Payments, Liens, CLO Subsidiary, Combined EBITDA, Combined Total Debt, Subsidiary, 17Capital, AIFM, Retention Financing Arrangements