US debt giant Oaktree Capital has announced it will establish a Sydney office led by former Macquarie Group director Byron Beath.
Mr Beath, who joined Oaktree this year, will be managing director, and lead investment activities in the region. He will focus on investment opportunities for Oaktree's global principal group in Australia and New Zealand.
Prior to Oaktree, Mr Beath spent 15 years with Macquarie, where he was most recently a director in the corporate and asset finance division.
Oaktree, which was part of a sweeping recapitalisation plan for Nine Entertainment Co, sold some of its holding last year.
The fund has $97 billion of assets under management and is best known for its founder, Howard Marks – one of the world's most celebrated value investors.
Oaktree is also familiar to Australian investors and some businesses.
It snapped up millions of dollars of Nine debt in the wake of the financial crisis, ultimately accumulating a large ownership stake in a debt-for-equity swap. The fund still owns as much as 7 per cent in the television network. Oaktree has also provided capital to troubled surfwear firm Billabong.
Large Australian investors
Oaktree has several large investors in Australia, including Telstra Super, Cbus, Unisuper and the Future Fund. The fund held its annual investor conference in Sydney in 2012.Oaktree Los-Angeles-based managing director and co-portfolio manager Matt Wilson said the firm decided two years ago to set up shop, given the intersection of having a big client base here and opportunities in deal flow for a number of strategies and sought to find the right person to run the office.
As Oaktree is best known for its distressed debt expertise, its arrival could be seen by some as a view that borrowers could face trouble. That's not the case, Mr Wilson said.
"We manage almost two dozen strategies – not just distressed debt. We are doing a whole bunch of credit and equity strategies, so I wouldn't suggest there is any broader economic view. We have just seen enough deal flow among our private equity, distressed, high-yield credit that it made sense," he said.
"We are looking at everything from the distressed loans of some of the Western Australian miners that have gone through some struggles as the price of iron ore declined, to new financing opportunities on relatively healthy businesses where there is need for new capital."
Mr Wilson did, however, point out that Oaktree have "just raised significant dry powder in anticipation of some dislocation to come".
"If you look at the amount of debt – high-yield bonds and bank loans – issued in the US between 2010 and 2015, it is staggering how much was issued in that time versus any other time in the history of our markets. There is a set of opportunities that is larger than it's ever been".
Mr Wilson said there was a reassessment of risk in credit markets, but regulation had also made it more expensive for investors to sell out of bonds.
No crystal ball
"No one has a crystal ball, but if you look at the US, certainly the primary debt markets in the US have become more challenging. Financing remains tight. In the secondary markets, you have seen the price of bank loans and high-yield bonds of issuers that have missed their numbers or reported softer guidance: they have been punished," he said.The Sydney office establishes a presence for the fund in 14 cities, adding to Singapore, Beijing, Hong Kong, Seoul, Tokyo and Shanghai.
Along with several other "alternative asset managers" such as Apollo, KKR and Blackstone, Oaktree is listed on the New York Stock Exchange and has a market capitalisation of $US7 billion ($9.6 billion). Oaktree also owns a stake in Jeffrey Gundlach's DoubleLine Capital, which has $84 billion of funds under management.
Oaktree has $US97 billion of assets; it is one of the pioneers of high-yield and distressed-debt investing. Founder Howard Marks is one of the most widely followed investors in the world.
"When we started, we had to explain to investors what distressed debt is, why we are not vultures, why we are not break-up artists and why we are not the source of corporate problems, but part of the solution," Marks told The Australian Financial Review in November 2012.
"Now we don't have to give that speech so often. Very few people ask us any more how we expect to make money investing in a bankrupt company. It's been demonstrated that we can."
Source: http://www.afr.com
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