DEBT OBLIGATIONS AND CREDIT FACILITIES

The Company’s debt obligations are set forth below:



	As of
	June 30, 2016			December 31, 2015

$50,000, 6.09%, issued in June 2006, payable on June 6, 2016	$	—		$	50,000
$50,000, 5.82%, issued in November 2006, payable on November 8, 2016	50,000			50,000
$250,000, 6.75%, issued in November 2009, payable on December 2, 2019	250,000			250,000
$250,000, rate as described below, term loan issued in March 2014, payable on March 31, 2021	250,000			250,000
$50,000, 3.91%, issued in September 2014, payable on September 3, 2024	50,000			50,000
$100,000, 4.01%, issued in September 2014, payable on September 3, 2026	100,000			100,000
$100,000, 4.21%, issued in September 2014, payable on September 3, 2029	100,000			100,000
Total remaining principal	800,000			850,000
Less: Debt issuance costs	(4,042		)	(3,646		)
Debt obligations	$	795,958		$	846,354

In June 2016, the Company paid the full maturing principal balance of $50.0 million on its 6.09% senior notes. As of June 30, 2016, future scheduled principal payments of debt obligations were as follows:



Last six months of 2016	$	50,000
2017	—
2018	—
2019	250,000
2020	—
Thereafter	500,000
Total	$	800,000

The Company was in compliance with all financial maintenance covenants associated with its senior notes and bank credit facility as of June 30, 2016 and December 31, 2015.

The fair value of the Company’s debt obligations, which are carried at amortized cost, is a Level III valuation that is estimated based on a discounted cash-flow calculation using estimated rates that would be offered to Oaktree for debt of similar terms and maturities. The fair value of these debt obligations, gross of debt issuance costs, was $812.5 million and $855.3 million as of June 30, 2016 and December 31, 2015, respectively, utilizing an average borrowing rate of 3.4% and 3.7%, respectively. As of June 30, 2016, a 10% increase in the assumed average borrowing rate would lower the estimated fair value to $798.0 million, whereas a 10% decrease would increase the estimated fair value to $827.6 million.

In April 2016, the Company received commitments from certain accredited investors (collectively, the “Investors”) to purchase $100 million of 3.69% senior notes (the “Notes”) to be issued by our indirect subsidiary, Oaktree Capital Management, L.P. (the “Issuer”), and guaranteed by our indirect subsidiaries, Oaktree Capital I, L.P., Oaktree Capital II, L.P. and Oaktree AIF Investments, L.P. (the “Guarantors” and together with the Issuer, the “Obligors”), with a maturity of 15 years. On July 12, 2016, the Company issued and sold the Notes, maturing on July 12, 2031, to the Investors. The Company used the proceeds from the sale of the Notes to simultaneously repay $100 million of its $250 million term loan due March 31, 2021. The Notes are senior unsecured obligations of the Issuer, jointly and severally guaranteed by the Guarantors.

In March 2016, Oaktree Capital Management, L.P., Oaktree Capital II, L.P., Oaktree AIF Investments, L.P., and Oaktree Capital I, L.P. (collectively, the “Borrowers”) entered into the Second Amendment to Credit Agreement (the “Second Amendment”), which amended the credit agreement dated as of March 31, 2014 (as amended through and including the Second Amendment, the “Credit Agreement”). The Credit Agreement consists of a $250 million fully-funded term loan (the “Term Loan”) and a $500 million revolving credit facility (the “Revolver”). The Second Amendment extended the maturity date of the Credit Agreement from March 31, 2019 to March 31, 2021, at which time the entire principal amount of $250 million is due, and provides the Borrowers with the option to extend the new maturity date by one year if the lenders holding at least 50% of the aggregate amount of the term loan and the revolving loan commitment thereunder on the date of the Borrowers’ extension request consent to such extension. Borrowings under the Credit Agreement generally bear interest at a spread to either LIBOR or an alternative base rate. Based on the current credit ratings of Oaktree Capital Management, L.P., the interest rate on borrowings is LIBOR plus 1.00% per annum and the commitment fee on the unused portions of the Revolver is 0.125% per annum. Utilizing interest-rate swaps, the majority of the Term Loan’s annual interest rate is fixed at 2.22% through January 2017, based on our current credit ratings. The Credit Agreement contains customary financial covenants and restrictions, including ones regarding a maximum leverage ratio of 3.0-to-1.0 and a minimum required level of assets under management (as defined in the credit agreement). The Second Amendment increased the minimum level of assets under management to $60 billion and made certain other amendments to the provisions of the Credit Agreement. As of June 30, 2016, the Company had no outstanding borrowings under its $500 million revolving credit facility and was able to draw the full amount available without violating any financial maintenance covenants.

Credit Facilities of the Consolidated Funds

Certain consolidated funds may maintain revolving credit facilities to fund investments between, or in advance of, capital drawdowns. These facilities generally (a) are collateralized by the unfunded capital commitments of the consolidated funds’ limited partners, (b) are subject to an annual commitment fee based on unfunded commitments, and (c) contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments, and portfolio asset dispositions. Additionally, certain consolidated funds may have issued senior variable rate notes to fund investments on a longer term basis, generally up to ten years. The obligations of the consolidated funds are nonrecourse to the Company.

The Company adopted the new consolidation guidance as of January 1, 2016, resulting in the deconsolidation of substantially all of Oaktree’s investment funds as of that date. As of June 30, 2016, the consolidated funds had one credit facility with an outstanding balance of $65.7 million. Prior to adoption, as of December 31, 2015, the consolidated funds had credit facilities and senior variable rate notes with an aggregate outstanding balance of $6.5 billion. The fair value of the revolving credit facilities is a Level III valuation and approximated carrying value due to their short-term nature. The fair value of the credit facilities and senior variable rate notes is a Level III valuation and aggregated $3.7 billion as of December 31, 2015, using prices obtained from pricing vendors. The fair value of the credit facility as of June 30, 2016 approximated carrying value due to its recent issuance date. Financial instruments that are valued using quoted prices for the security or similar securities are generally classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions.

The consolidated funds had the following revolving credit facilities and term loans outstanding:

Outstanding Amount as of

Facility Capacity

LIBOR

Margin ⁽¹⁾

Maturity

Commitment Fee Rate

L/C Fee

Credit Agreement

June 30, 2016

December 31, 2015

Credit facilities

65,700

⁽²⁾

2,381,324

450,000

1.25%

4/19/2019

N/A

Revolving credit facilities

—

2,718,394

N/A

Senior variable rate notes

—

1,363,044

N/A

Total debt obligations

65,700

6,462,762

Less: Debt issuance costs

—

(20,020

)

Total debt obligations, net

65,700

6,442,742


(1)	The facility bears interest at an annual rate of LIBOR plus the applicable margin.


(2)	The credit facility is collateralized by the portfolio investments and cash and cash-equivalents of the borrower.

Debt Obligations of CLOs

Debt obligations of CLOs represent amounts due to holders of debt securities issued by the CLOs, including term loans that had not priced as of period end. The table below sets forth the outstanding debt obligations of CLOs as of the date indicated.



	As of June 30, 2016				As of December 31, 2015
	Carrying Value ⁽¹⁾		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)	Carrying Value			Fair Value ⁽²⁾		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)
Senior secured notes ⁽³⁾	$	455,509	2.63%	8.8	$	457,196		$	447,460	2.37%	9.3
Senior secured notes ⁽⁴⁾	456,770		2.81%	10.5	454,423			446,558		2.52%	11.0
Senior secured notes ⁽⁵⁾	73,833		2.97%	2.5	79,914			78,632		2.96%	3.0
Senior secured notes ⁽⁶⁾	372,735		2.26%	11.2	363,709			357,626		2.26%	11.7
Senior secured notes ⁽⁷⁾	457,846		2.72%	11.5	455,295			448,933		2.54%	12.0
Senior secured notes ⁽⁸⁾	373,649		2.29%	11.8	361,142			359,914		2.29%	12.3
Senior secured notes ⁽⁹⁾	404,499		2.28%	12.9	—			—		—	—
Subordinated note ⁽¹⁰⁾	10,758		N/A	10.5	25,500			16,400		N/A	11.0
Subordinated note ⁽¹⁰⁾	17,896		N/A	11.2	21,183			15,876		N/A	11.7
Subordinated note ⁽¹⁰⁾	18,125		N/A	11.5	25,500			18,337		N/A	12.0
Subordinated note ⁽¹⁰⁾	14,766		N/A	11.8	17,924			11,928		N/A	12.3
Subordinated note ⁽¹⁰⁾	22,180		N/A	12.9	12,036			12,036		N/A	1.6
Term loan	—		—	—	81,238			81,238		1.20%	1.6
Total CLO debt obligations	2,678,566				2,355,060			$	2,294,938
Less: Debt issuance costs	—				(24,701		)
Total CLO debt obligations, net	$	2,678,566			$	2,330,359

(1)

The Company adopted the measurement alternative guidance for collateralized financing entities on a modified retrospective approach as of January 1, 2016. Upon adoption, the Company elected the fair value option for the financial liabilities of the consolidated CLOs and determined that the fair value of the CLO assets was more observable than the fair value of the CLO liabilities. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (a) the fair value of any beneficial interests held by the Company and (b) the carrying value of any beneficial interests that represent compensation for services. Please see notes 2 and 5 for more information.

(2)

The debt obligations of the CLOs are Level III valuations and were valued using prices obtained from pricing vendors or recent transactions. Financial instruments that are valued using quoted prices for the subject or similar securities are generally classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions. Financial instruments that are valued based on recent transactions are generally defined as securities purchased or sold within six months of the valuation date. The fair value may also be based on a pending transaction expected to close after the valuation date. For certain recently issued debt obligations, the carrying value approximates fair value.


(3)	The weighted average interest rate is based on LIBOR plus 2.01%.


(4)	The weighted average interest rate is based on LIBOR plus 2.17%.


(5)	The interest rate was LIBOR plus a margin determined based on a formula as defined in the respective borrowing agreements, which incorporate different borrowing values based on the characteristics of collateral investments purchased. The weighted average unused commitment fee rate ranged from 0% to 2.0%.


(6)	The weighted average interest rate is based on EURIBOR (subject to a zero floor) plus 2.26%.


(7)	The weighted average interest rate is based on LIBOR plus 2.09%.


(8)	The weighted average interest rate is based on EURIBOR (subject to a zero floor) plus 2.29%.


(9)	The weighted average interest rate is based on EURIBOR (subject to a zero floor) plus 2.28%.


(10)	The subordinated notes do not have a contractual interest rate; instead, they receive distributions from the excess cash flows generated by the CLO.

The debt obligations of CLOs are nonrecourse to the Company and are backed by the investments held by the respective CLO. Assets of one CLO may not be used to satisfy the liabilities of another. As of June 30, 2016 and December 31, 2015, the fair value of CLO assets was $3.1 billion and $2.6 billion, respectively, and consisted of cash, corporate loans, corporate bonds and other securities.

As of June 30, 2016, future scheduled principal payments with respect to the debt obligations of CLOs were as follows:



Last six months of 2016	$	—
2017	—
2018	73,833
2019	—
2020	—
Thereafter	2,652,551
Total	$	2,726,384