(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
N/A | ||
x | Accelerated filer | ☐ | |||
Non-accelerated filer | o | Smaller reporting company | |||
Emerging growth company |
Page | ||
PART I – FINANCIAL INFORMATION | ||
• | “management fee-generating assets under management,” or “management fee-generating AUM,” is a forward-looking metric and generally reflects the beginning AUM on which we will earn management fees in the following quarter, as more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures—Assets Under Management—Management Fee-generating Assets Under Management.” |
• | “incentive-creating assets under management,” or “incentive-creating AUM,” refers to the AUM that may eventually produce incentive income, as more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures—Assets Under Management—Incentive-creating Assets Under Management.” |
• | our U.S. High Yield Bond strategy, to the FTSE US High-Yield Cash-Pay Capped Index; |
• | our Global High Yield Bond strategy, to an Oaktree custom global high yield index that represents 60% ICE BofAML High Yield Master II Constrained Index and 40% ICE BofAML Global Non-Financial High Yield European Issuers 3% Constrained, ex-Russia Index – USD Hedged from inception through December 31, 2012, and the ICE BofAML Non-Financial Developed Markets High Yield Constrained Index – USD Hedged thereafter; |
• | our European High Yield Bond strategy, to the ICE BofAML Global Non-Financial High Yield European Issuers excluding Russia 3% Constrained Index (USD Hedged); |
• | our U.S. Senior Loan strategy (with the exception of the closed-end funds), to the Credit Suisse Leveraged Loan Index; |
• | our European Senior Loan strategy, to the Credit Suisse Western European Leveraged Loan Index (EUR Hedged); |
• | our U.S. Convertible Securities strategy, to an Oaktree custom convertible index that represents the Credit Suisse Convertible Securities Index from inception through December 31, 1999, the Goldman Sachs/Bloomberg Convertible 100 Index from January 1, 2000 through June 30, 2004, and the ICE BofAML All U.S. Convertibles Index thereafter; |
• | our non-U.S. Convertible Securities strategy, to an Oaktree custom non-U.S. convertible index that represents the JACI Global ex-U.S. (Local) Index from inception through December 31, 2014 and the Thomson Reuters Global Focus ex-U.S. (USD hedged) Index thereafter; |
• | our High Income Convertible Securities strategy, to the FTSE US High-Yield Market Index; and |
• | our Emerging Markets Equities strategy, to the Morgan Stanley Capital International Emerging Markets Index (Net). |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Cash and cash-equivalents | $ | $ | |||||
U.S. Treasury and other securities | |||||||
Corporate investments (includes $50,461 and $74,899 measured at fair value as of September 30, 2019 and December 31, 2018, respectively) | |||||||
Due from affiliates | |||||||
Deferred tax assets | |||||||
Operating lease assets | |||||||
Other assets | |||||||
Assets of consolidated funds: | |||||||
Cash and cash-equivalents | |||||||
Investments, at fair value | |||||||
Dividends and interest receivable | |||||||
Due from brokers | |||||||
Receivable for securities sold | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Unitholders’ Capital | |||||||
Liabilities: | |||||||
Accrued compensation expense | $ | $ | |||||
Accounts payable, accrued expenses and other liabilities | |||||||
Due to affiliates | |||||||
Debt obligations | |||||||
Operating lease liabilities | |||||||
Liabilities of consolidated funds: | |||||||
Accounts payable, accrued expenses and other liabilities | |||||||
Payables for securities purchased | |||||||
Securities sold short, at fair value | |||||||
Distributions payable | |||||||
Borrowings under credit facilities | |||||||
Debt obligations of CLOs | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 17) | |||||||
Non-controlling redeemable interests in consolidated funds | |||||||
Unitholders’ capital: | |||||||
Series A preferred units, 7,200,000 units issued and outstanding as of September 30, 2019 and December 31, 2018 | |||||||
Series B preferred units, 9,400,000 units issued and outstanding as of September 30, 2019 and December 31, 2018 | |||||||
Class A units, no par value, unlimited units authorized, 97,967,255 and 71,661,623 units issued and outstanding as of September 30, 2019 and December 31, 2018, respectively | |||||||
Class B units, no par value, unlimited units authorized, 62,145,608 and 85,471,937 units issued and outstanding as of September 30, 2019 and December 31, 2018, respectively | |||||||
Paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive income | ( | ) | |||||
Unitholders’ capital attributable to Oaktree Capital Group, LLC | |||||||
Non-controlling interests in consolidated subsidiaries | |||||||
Total unitholders’ capital | |||||||
Total liabilities and unitholders’ capital | $ | $ |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Management fees | $ | $ | $ | $ | |||||||||||
Incentive income | |||||||||||||||
Total revenues | |||||||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Equity-based compensation | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Incentive income compensation | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total compensation and benefits expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Consolidated fund expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other income (loss): | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Interest and dividend income | |||||||||||||||
Net realized gain (loss) on consolidated funds’ investments | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments | ( | ) | ( | ) | |||||||||||
Investment income | |||||||||||||||
Other income, net | |||||||||||||||
Total other income | |||||||||||||||
Income (loss) before income taxes | ( | ) | |||||||||||||
Income taxes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income (loss) | ( | ) | |||||||||||||
Less: | |||||||||||||||
Net (income) loss attributable to non-controlling interests in consolidated funds | ( | ) | ( | ) | ( | ) | |||||||||
Net (income) loss attributable to non-controlling interests in consolidated subsidiaries | ( | ) | ( | ) | ( | ) | |||||||||
Net income (loss) attributable to Oaktree Capital Group, LLC | ( | ) | |||||||||||||
Net income attributable to preferred unitholders | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income (loss) attributable to Oaktree Capital Group, LLC Class A unitholders | $ | ( | ) | $ | $ | $ | |||||||||
Distributions declared per Class A unit | $ | $ | $ | $ | |||||||||||
Net income per Class A unit (basic and diluted): | |||||||||||||||
Net income per Class A unit | $ | ( | ) | $ | $ | $ | |||||||||
Weighted average number of Class A units outstanding |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) | $ | ( | ) | $ | $ | $ | |||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | |||||||||||
Other comprehensive income (loss), net of tax | ( | ) | ( | ) | |||||||||||
Total comprehensive income | ( | ) | |||||||||||||
Less: | |||||||||||||||
Comprehensive (income) loss attributable to non-controlling interests in consolidated funds | ( | ) | ( | ) | ( | ) | |||||||||
Comprehensive (income) loss attributable to non-controlling interests in consolidated subsidiaries | ( | ) | ( | ) | ( | ) | |||||||||
Comprehensive income attributable to OCG | ( | ) | |||||||||||||
Comprehensive income attributable to preferred unitholders | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income (loss) attributable to OCG Class A unitholders | $ | ( | ) | $ | $ | $ |
Nine months ended September 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||
Adoption of revenue recognition standard | |||||||
Investment income | ( | ) | ( | ) | |||
Depreciation and amortization | |||||||
Equity-based compensation | |||||||
Net realized and unrealized (gain) loss from consolidated funds’ investments | ( | ) | |||||
Amortization (accretion) of original issue and market discount of consolidated funds’ investments, net | ( | ) | ( | ) | |||
Income distributions from corporate investments in funds and companies | |||||||
Other non-cash items | |||||||
Cash flows due to changes in operating assets and liabilities: | |||||||
(Increase) decrease in other assets | ( | ) | |||||
Decrease in net due from affiliates | |||||||
Decrease in accrued compensation expense | ( | ) | ( | ) | |||
Increase (decrease) in accounts payable, accrued expenses and other liabilities | ( | ) | |||||
Cash flows due to changes in operating assets and liabilities of consolidated funds: | |||||||
Increase in dividends and interest receivable | ( | ) | ( | ) | |||
Decrease in due from brokers | |||||||
(Increase) decrease in receivables for securities sold | ( | ) | |||||
Increase in other assets | ( | ) | ( | ) | |||
Increase in accounts payable, accrued expenses and other liabilities | |||||||
Increase (decrease) in payables for securities purchased | ( | ) | |||||
Purchases of securities | ( | ) | ( | ) | |||
Proceeds from maturities and sales of securities | |||||||
Net cash used in operating activities | ( | ) | ( | ) | |||
Cash flows from investing activities: | |||||||
Purchases of U.S. Treasury and other securities | ( | ) | ( | ) | |||
Proceeds from maturities and sales of U.S. Treasury and other securities | |||||||
Corporate investments in funds and companies | ( | ) | ( | ) | |||
Distributions and proceeds from corporate investments in funds and companies | |||||||
Purchases of fixed assets | ( | ) | ( | ) | |||
Net cash provided by (used in) investing activities | ( | ) |
Nine months ended September 30, | |||||||
2019 | 2018 | ||||||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of Class A units | $ | $ | |||||
Purchase of OCGH units | ( | ) | |||||
Repurchase and cancellation of units | ( | ) | ( | ) | |||
Distributions to Class A unitholders | ( | ) | ( | ) | |||
Distributions to preferred unitholders | ( | ) | ( | ) | |||
Distributions to OCGH unitholders | ( | ) | ( | ) | |||
Distributions to non-controlling interests | ( | ) | ( | ) | |||
Net proceeds from issuance of preferred units | |||||||
Payment of debt issuance costs | ( | ) | |||||
Cash flows from financing activities of consolidated funds: | |||||||
Contributions from non-controlling interests | |||||||
Distributions to non-controlling interests | ( | ) | ( | ) | |||
Proceeds from debt obligations issued by CLOs | |||||||
Payment of debt issuance costs | ( | ) | ( | ) | |||
Repayment on debt obligations issued by CLOs | ( | ) | ( | ) | |||
Borrowings on credit facilities | |||||||
Repayments on credit facilities | ( | ) | |||||
Net cash provided by financing activities | |||||||
Effect of exchange rate changes on cash | ( | ) | |||||
Net increase (decrease) in cash and cash-equivalents | ( | ) | |||||
Deconsolidation of funds | ( | ) | ( | ) | |||
Cash and cash-equivalents, beginning balance | |||||||
Cash and cash-equivalents, ending balance | $ | $ | |||||
Reconciliation of cash and cash-equivalents | |||||||
Cash and cash-equivalents – Oaktree | $ | $ | |||||
Cash and cash-equivalents – Consolidated Funds | |||||||
Total cash and cash-equivalents | $ | $ | |||||
Oaktree Capital Group, LLC Condensed Consolidated Statements of Changes in Unitholders’ Capital (Unaudited) (in thousands) | |||||||||||||||||||||||||||||||||
Oaktree Capital Group, LLC | Non-controlling Interests in Consolidated Subsidiaries | Total Unitholders’ Capital | |||||||||||||||||||||||||||||||
Class A Units | Class B Units | Series A Preferred Units | Series B Preferred Units | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||
Unitholders’ capital as of June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Activity for the three months ended: | |||||||||||||||||||||||||||||||||
Issuance of units | — | — | — | — | — | — | |||||||||||||||||||||||||||
Cancellation of units | ( | ) | ( | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||
Repurchase and cancellation of units | ( | ) | ( | ) | — | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||
Deferred tax effect resulting from the purchase of units in connection with the Merger | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | — | ( | ) | |||||||||||||||||||||||||
Capital increase related to equity-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||
Distributions declared | — | — | ( | ) | ( | ) | ( | ) | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||
Net income | — | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Unitholders’ capital as of September 30, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
Oaktree Capital Group, LLC | Non-controlling Interests in Consolidated Subsidiaries | Total Unitholders’ Capital | |||||||||||||||||||||||||||||||
Class A Units | Class B Units | Series A Preferred Units | Series B Preferred Units | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||
Unitholders’ capital as of December 31, 2018 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Activity for the nine months ended: | |||||||||||||||||||||||||||||||||
Issuance of units | — | — | — | — | — | — | |||||||||||||||||||||||||||
Cancellation of units | ( | ) | ( | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||
Repurchase and cancellation of units | ( | ) | ( | ) | — | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||
Deferred tax effect resulting from the purchase of units in connection with the Merger | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | — | ( | ) | |||||||||||||||||||||||||
Capital increase related to equity-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||
Distributions declared | — | — | ( | ) | ( | ) | ( | ) | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||
Unitholders’ capital as of September 30, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ |
Oaktree Capital Group, LLC Condensed Consolidated Statements of Changes in Unitholders’ Capital (Unaudited) (in thousands) | |||||||||||||||||||||||||||||||||||||
Oaktree Capital Group, LLC | Non-controlling Interests in Consolidated Subsidiaries | Non-controlling Interests in Consolidated Funds | Total Unitholders’ Capital | ||||||||||||||||||||||||||||||||||
Class A Units | Class B Units | Series A Preferred Units | Series B Preferred Units | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||
Unitholders’ capital as of June 30, 2018 | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Activity for the three months ended: | |||||||||||||||||||||||||||||||||||||
Issuance of units | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Cancellation of units | ( | ) | ( | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Repurchase and cancellation of units | ( | ) | ( | ) | — | — | ( | ) | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
Purchase of non-controlling interests in subsidiary | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | — | ( | ) | — | ||||||||||||||||||||||||||||
Capital increase related to equity-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Distributions declared | — | — | ( | ) | — | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Unitholders’ capital as of September 30, 2018 | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Oaktree Capital Group, LLC | Non-controlling Interests in Consolidated Subsidiaries | Non-controlling Interests in Consolidated Funds | Total Unitholders’ Capital | ||||||||||||||||||||||||||||||||||
Class A Units | Class B Units | Series A Preferred Units | Series B Preferred Units | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||
Unitholders’ capital as of December 31, 2017 | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Activity for the nine months ended: | |||||||||||||||||||||||||||||||||||||
Cumulative-effect adjustment from adoption of accounting guidance | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Issuance of units | — | — | — | — | |||||||||||||||||||||||||||||||||
Cancellation of units | ( | ) | ( | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Repurchase and cancellation of units | ( | ) | ( | ) | — | — | ( | ) | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
Purchase of non-controlling interests in subsidiary | — | — | — | — | ( | ) | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||
Deferred tax effect resulting from the purchase of OCGH units | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | — | ( | ) | — | ||||||||||||||||||||||||||||
Capital increase related to equity-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Distributions declared | — | — | ( | ) | — | — | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | ( | ) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Unitholders’ capital as of September 30, 2018 | $ | $ | $ | $ | $ | $ | $ | $ |
• | Level I – Quoted unadjusted prices for identical instruments in active markets to which the Company has access at the date of measurement. The types of investments in Level I include exchange-traded equities, debt and derivatives with quoted prices. |
• | Level II – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are directly or indirectly observable. Level II inputs include interest rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates. The types of investments in Level II generally include corporate bonds and loans, government and agency securities, less liquid and restricted equity investments, over-the-counter traded derivatives, debt obligations of consolidated CLOs, and other investments where the fair value is based on observable inputs. |
• | Level III – Valuations for which one or more significant inputs are unobservable. These inputs reflect the Company’s assessment of the assumptions that market participants use to value the investment based on the best available information. Level III inputs include prices of quoted securities in markets for which there are few transactions, less public information exists or prices vary among brokered market makers. The types of investments in Level III include non-publicly traded equity, debt, real estate and derivatives. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Management Fees | |||||||||||||||
Closed-end | $ | $ | $ | $ | |||||||||||
Open-end | |||||||||||||||
Evergreen | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Incentive Income | |||||||||||||||
Closed-end | $ | $ | $ | $ | |||||||||||
Evergreen | |||||||||||||||
Total | $ | $ | $ | $ |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Receivables (1) | $ | $ | |||||
Contract assets (1) | |||||||
Contract liabilities (2) | ( | ) | ( | ) |
(1) | The changes in the balances primarily related to accruals, net of payments received. |
(2) | Revenue recognized in the three months and nine months ended September 30, 2019 from amounts included in the contract liability balance were $ |
Carrying Value as of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Corporate investments | $ | $ | |||||
Due from affiliates | |||||||
Maximum exposure to loss | $ | $ |
As of | |||||||
Corporate Investments | September 30, 2019 | December 31, 2018 | |||||
Equity-method investments: | |||||||
Funds | $ | $ | |||||
Companies | |||||||
Other investments, at fair value | |||||||
Total corporate investments | $ | $ |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
Investment Income (Loss) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Equity-method investments: | |||||||||||||||
Funds | $ | ( | ) | $ | $ | $ | |||||||||
Companies | |||||||||||||||
Other investments, at fair value | |||||||||||||||
Total investment income | $ | $ | $ | $ |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
Statements of Operations | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenues / investment income | $ | $ | $ | $ | |||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net realized and unrealized gain (loss) on investments | ( | ) | |||||||||||||
Net income (loss) | $ | ( | ) | $ | $ | $ |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Realized gain (loss) | $ | $ | $ | $ | |||||||||||
Net change in unrealized gain (loss) | |||||||||||||||
Total gain (loss) | $ | $ | $ | $ |
Fair Value as of | Fair Value as a Percentage of Investments of Consolidated Funds as of | ||||||||||||
Investments | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | |||||||||
United States: | |||||||||||||
Debt securities: | |||||||||||||
Communication services | $ | $ | % | % | |||||||||
Consumer discretionary | |||||||||||||
Consumer staples | |||||||||||||
Energy | |||||||||||||
Financials | |||||||||||||
Health care | |||||||||||||
Industrials | |||||||||||||
Information technology | |||||||||||||
Materials | |||||||||||||
Real estate | |||||||||||||
Utilities | |||||||||||||
Total debt securities (cost: $5,124,603 and $4,019,823 as of September 30, 2019 and December 31, 2018, respectively) | |||||||||||||
Equity securities: | |||||||||||||
Communication services | |||||||||||||
Consumer discretionary | |||||||||||||
Energy | |||||||||||||
Financials | |||||||||||||
Health care | |||||||||||||
Industrials | |||||||||||||
Utilities | |||||||||||||
Total equity securities (cost: $138,533 and $6,117 as of September 30, 2019 and December 31, 2018, respectively) | |||||||||||||
Real estate: | |||||||||||||
Real estate | |||||||||||||
Total real estate securities (cost: $213,228 and $0 as of September 30, 2019 and December 31, 2018, respectively) |
Fair Value as of | Fair Value as a Percentage of Investments of Consolidated Funds as of | ||||||||||||
Investments | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | |||||||||
Europe: | |||||||||||||
Debt securities: | |||||||||||||
Communication services | $ | $ | % | % | |||||||||
Consumer discretionary | |||||||||||||
Consumer staples | |||||||||||||
Energy | |||||||||||||
Financials | |||||||||||||
Health care | |||||||||||||
Industrials | |||||||||||||
Information technology | |||||||||||||
Materials | |||||||||||||
Real estate | |||||||||||||
Utilities | |||||||||||||
Total debt securities (cost: $2,618,439 and $2,477,821 as of September 30, 2019 and December 31, 2018, respectively) | |||||||||||||
Equity securities: | |||||||||||||
Consumer discretionary | |||||||||||||
Consumer staples | |||||||||||||
Health care | |||||||||||||
Real estate | |||||||||||||
Total equity securities (cost: $58,869 and $320 as of September 30, 2019 and December 31, 2018, respectively) | |||||||||||||
Asia and other: | |||||||||||||
Debt securities: | |||||||||||||
Communication services | |||||||||||||
Consumer discretionary | |||||||||||||
Consumer staples | |||||||||||||
Energy | |||||||||||||
Financials | |||||||||||||
Government | |||||||||||||
Health care | |||||||||||||
Industrials | |||||||||||||
Information technology | |||||||||||||
Materials | |||||||||||||
Real estate | |||||||||||||
Utilities | |||||||||||||
Total debt securities (cost: $169,761 and $233,603 as of September 30, 2019 and December 31, 2018, respectively) |
Fair Value as of | Fair Value as a Percentage of Investments of Consolidated Funds as of | ||||||||||||
Investments | September 30, 2019 | December 31, 2018 | September 30, 2019 | December 31, 2018 | |||||||||
Asia and other: | |||||||||||||
Equity securities: | |||||||||||||
Consumer discretionary | $ | $ | % | % | |||||||||
Consumer staples | |||||||||||||
Energy | |||||||||||||
Financials | |||||||||||||
Industrials | |||||||||||||
Information technology | |||||||||||||
Materials | |||||||||||||
Total equity securities (cost: $3,880 and $22,977 as of September 30, 2019 and December 31, 2018, respectively) | |||||||||||||
Total debt securities | |||||||||||||
Total equity securities | |||||||||||||
Total real estate | |||||||||||||
Total investments, at fair value | $ | $ | % | % | |||||||||
Securities Sold Short | |||||||||||||
Equity securities (proceeds: $0 and $2,644 as of September 30, 2019 and December 31, 2018, respectively) | $ | $ | ( | ) |
Three months ended September 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | ||||||||||||
Investments and other financial instruments | $ | $ | ( | ) | $ | ( | ) | $ | |||||||
CLO liabilities (1) | ( | ) | ( | ) | |||||||||||
Foreign-currency forward contracts (2) | ( | ) | ( | ) | |||||||||||
Options and futures (2) | ( | ) | |||||||||||||
Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ |
Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | ||||||||||||
Investments and other financial instruments | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
CLO liabilities (1) | ( | ) | ( | ) | |||||||||||
Foreign-currency forward contracts (2) | ( | ) | |||||||||||||
Total-return and interest-rate swaps (2) | |||||||||||||||
Options and futures (2) | ( | ) | |||||||||||||
Total | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) |
(1) | Represents the net change in the fair value of CLO liabilities based on the more observable fair value of CLO assets, as measured under the CLO measurement guidance. Please see note 2 for more information. |
(2) |
As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||||||||||||||||||
Level I | Level II | Level III | Total | Level I | Level II | Level III | Total | ||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
U.S. Treasury and other securities (1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Corporate investments | |||||||||||||||||||||||||||||||
Foreign-currency forward contracts (2) | |||||||||||||||||||||||||||||||
Cross-currency swap (2) | |||||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
Contingent liability (3) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
Foreign-currency forward contracts (4) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Total liabilities | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(1) | Carrying value approximates fair value due to the short-term nature. |
(2) | Amounts are included in other assets in the condensed consolidated statements of financial condition, except for $ |
(3) | Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition. |
(4) | Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition, except for $ |
Three months ended September 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
Corporate Investments | Contingent Liability | Corporate Investments | Contingent Liability | ||||||||||||
Beginning balance | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Contributions or additions | |||||||||||||||
Distributions | ( | ) | |||||||||||||
Net gain (loss) included in earnings | ( | ) | |||||||||||||
Ending balance | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Net change in unrealized gains (losses) attributable to financial instruments still held at end of period | $ | $ | $ | ( | ) | $ |
Nine months ended September 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
Corporate Investments | Contingent Liability | Corporate Investments | Contingent Liability | ||||||||||||
Beginning balance | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Contributions or additions | |||||||||||||||
Distributions | ( | ) | ( | ) | |||||||||||
Net gain (loss) included in earnings | |||||||||||||||
Ending balance | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Net change in unrealized gains (losses) attributable to financial instruments still held at end of period | $ | $ | $ | $ |
Fair Value as of | Significant Unobservable Input | |||||||||||||||
Financial Instrument | September 30, 2019 | December 31, 2018 | Valuation Technique | Range | Weighted Average | |||||||||||
Corporate investment – Limited partnership interests | $ | $ | Market approach (value of underlying assets) | Not applicable | Not applicable | Not applicable | ||||||||||
Contingent liability | ( | ) | ( | ) | Discounted cash flow | Assumed % of total potential contingent payments | 0% – 100% |
As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||||||||||||||||||
Level I | Level II | Level III | Total | Level I | Level II | Level III | Total | ||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||
Investments: | |||||||||||||||||||||||||||||||
Corporate debt – bank debt | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Corporate debt – all other | |||||||||||||||||||||||||||||||
Equities – common stock | |||||||||||||||||||||||||||||||
Equities – preferred stock | |||||||||||||||||||||||||||||||
Real estate | |||||||||||||||||||||||||||||||
Total investments | |||||||||||||||||||||||||||||||
Derivatives: | |||||||||||||||||||||||||||||||
Foreign-currency forward contracts | |||||||||||||||||||||||||||||||
Options and futures | |||||||||||||||||||||||||||||||
Total derivatives (1) | |||||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
CLO debt obligations: | |||||||||||||||||||||||||||||||
Senior secured notes | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
Subordinated notes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Total CLO debt obligations (2) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Securities sold short: | |||||||||||||||||||||||||||||||
Equity securities | ( | ) | ( | ) | |||||||||||||||||||||||||||
Derivatives: | |||||||||||||||||||||||||||||||
Foreign-currency forward contracts | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Total derivatives (3) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Total liabilities | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
(1) | Amounts are included in other assets under “assets of consolidated funds” in the condensed consolidated statements of financial condition. |
(2) | The fair value of CLO liabilities is classified based on the more observable fair value of CLO assets. Please see notes 2 and 10 for more information. |
(3) | Amounts are included in accounts payable, accrued expenses and other liabilities under “liabilities of consolidated funds” in the condensed consolidated statements of financial condition |
Corporate Debt – Bank Debt | Corporate Debt – All Other | Equities – Common Stock | Equities – Preferred Stock | Real Estate | Total | |||||||||||||||||||
Three Months Ended September 30, 2019 | ||||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Deconsolidation of funds | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Transfers into Level III | ||||||||||||||||||||||||
Transfers out of Level III | — | |||||||||||||||||||||||
Purchases | ||||||||||||||||||||||||
Sales | ( | ) | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||||
Realized gains (losses), net | ( | ) | — | — | ||||||||||||||||||||
Unrealized appreciation (depreciation), net | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||
Three Months Ended September 30, 2018 | ||||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Transfers into Level III | ||||||||||||||||||||||||
Transfers out of Level III | ( | ) | ( | ) | ||||||||||||||||||||
Purchases | ||||||||||||||||||||||||
Sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Realized gains (losses), net | ||||||||||||||||||||||||
Unrealized appreciation (depreciation), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ |
Corporate Debt – Bank Debt | Corporate Debt – All Other | Equities – Common Stock | Equities – Preferred Stock | Real Estate | Total | |||||||||||||||||||
Nine months Ended September 30, 2019 | ||||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Deconsolidation of funds | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Transfers into Level III | ||||||||||||||||||||||||
Transfers out of Level III | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Purchases | ||||||||||||||||||||||||
Sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Realized gains (losses), net | ( | ) | ( | ) | ||||||||||||||||||||
Unrealized appreciation (depreciation), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
Nine Months Ended September 30, 2018 | ||||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Deconsolidation of funds | ( | ) | ( | ) | ||||||||||||||||||||
Transfers into Level III | ||||||||||||||||||||||||
Transfers out of Level III | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
Purchases | ||||||||||||||||||||||||
Sales | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
Realized gains (losses), net | ||||||||||||||||||||||||
Unrealized appreciation (depreciation), net | ( | ) | ( | ) | ||||||||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) attributable to assets still held at end of period | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ |
Investment Type | Fair Value | Valuation Technique | Significant Unobservable Inputs (1)(2) | Range | Weighted Average (3) | |||||||
Credit-oriented investments: | ||||||||||||
Consumer discretionary: | $ | Recent market information (5) | Quoted prices | Not applicable | Not applicable | |||||||
Discounted cash flow (4) | Discount rate | 10% – 18% | ||||||||||
Financials: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 8% – 12% | ||||||||||
Health care: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 16% – 18% | ||||||||||
Real estate: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 17% – 19% | ||||||||||
Other: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 8% – 18% | ||||||||||
Equity investments: | ||||||||||||
Recent transaction price (8) | Quoted prices | Not applicable | Not applicable | |||||||||
Discounted cash flow (4) | Discount rate | 8% – 15% | ||||||||||
Market approach (comparable companies) (6) | Earnings multiple (7) | 4x – 10x | 6x | |||||||||
Market approach (comparable companies) (6) | Revenue multiple (9) | 2x – 4x | 3x | |||||||||
Real estate investments: | ||||||||||||
Recent transaction price (8) | Quoted prices | Not applicable | Not applicable | |||||||||
Discounted cash flow (4) | Discount rate | 5% – 7% | ||||||||||
Total Level III investments | $ |
Investment Type | Fair Value | Valuation Technique | Significant Unobservable Inputs (1)(2) | Range | Weighted Average (3) | |||||||
Credit-oriented investments: | ||||||||||||
Communication services: | $ | Recent market information (5) | Quoted prices | Not applicable | Not applicable | |||||||
Discounted cash flow (4) | Discount rate | 12% – 14% | ||||||||||
Financials: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 9% – 15% | ||||||||||
Health care: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 10% – 16% | ||||||||||
Real estate: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 12% – 23% | ||||||||||
Other: | Recent market information (5) | Quoted prices | Not applicable | Not applicable | ||||||||
Discounted cash flow (4) | Discount rate | 8% – 15% | ||||||||||
Recent transaction price (8) | Not applicable | Not applicable | Not applicable | |||||||||
Equity investments: | ||||||||||||
Discounted cash flow (4) | Discount rate | 10% – 30% | ||||||||||
Market approach (comparable companies) (6) | Earnings multiple (7) | 4x – 10x | 7x | |||||||||
Total Level III investments | $ |
(1) | The discount rate is the significant unobservable input used in the fair-value measurement of performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments and real estate loan portfolios. An increase (decrease) in the discount rate would result in a lower (higher) fair-value measurement. |
(2) | Multiple of either earnings or underlying assets is the significant unobservable input used in the market approach for the fair-value measurement of distressed credit-oriented investments, credit-oriented investments in which the consolidated funds have a controlling interest in the underlying issuer, equity investments and certain real estate-oriented investments. An increase (decrease) in the multiple would result in a higher (lower) fair-value measurement. |
(3) | The weighted average is based on the fair value of the investments included in the range. |
(4) | A discounted cash-flow method is generally used to value performing credit-oriented investments in which the consolidated funds do not have a controlling interest in the underlying issuer, as well as certain equity investments, real estate-oriented investments and real estate loan portfolios. |
(5) | Certain investments are valued using vendor prices or broker quotes for the subject or similar securities. Generally, investments valued in this manner are 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. |
(6) | A market approach is generally used to value distressed investments and investments in which the consolidated funds have a controlling interest in the underlying issuer. |
(7) | Earnings multiples are based on comparable public companies and transactions with comparable companies. The Company typically utilizes multiples of EBITDA; however, in certain cases the Company may use other earnings multiples believed to be most relevant to the investment. The Company typically applies the multiple to trailing twelve-months’ EBITDA. However, in certain cases other earnings measures, such as pro forma EBITDA, may be utilized if deemed to be more relevant. |
(8) | Certain investments are valued based on recent transactions, generally defined as investments 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. |
(9) | Revenue multiples are based on comparable public companies and transactions with comparable companies. The Company typically applies the multiple to trailing twelve-months’ revenue. However, in certain cases other revenue measures, such as pro forma revenue, may be utilized if deemed to be more relevant. |
Assets | Liabilities | ||||||||||||||
Notional | Fair Value | Notional | Fair Value | ||||||||||||
As of September 30, 2019 | |||||||||||||||
Foreign-currency forward contracts | $ | $ | $ | ( | ) | $ | ( | ) | |||||||
Cross-currency swap | |||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ( | ) | |||||||
As of December 31, 2018 | |||||||||||||||
Foreign-currency forward contracts | $ | $ | $ | ( | ) | $ | ( | ) | |||||||
Cross-currency swap | |||||||||||||||
Total | $ | $ | $ | ( | ) | $ | ( | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Investment income | $ | $ | $ | $ | ( | ) | |||||||||
General and administrative expense (1) | ( | ) | |||||||||||||
Total | $ | $ | $ | $ | ( | ) |
(1) | To the extent that the Company’s freestanding derivatives are utilized to hedge its foreign-currency exposure to investment income and management fees earned from consolidated funds, the related hedged items are eliminated in consolidation, with the derivative impact (a positive number reflects a reduction in expenses) reflected in consolidated general and administrative expense. |
Three Months Ended September 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | ||||||||||||
Foreign-currency forward contracts | $ | ( | ) | $ | ( | ) | $ | $ | |||||||
Options and futures | ( | ) | |||||||||||||
Total | $ | ( | ) | $ | ( | ) | $ | $ |
Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | Net Realized Gain (Loss) on Investments | Net Change in Unrealized Appreciation (Depreciation) on Investments | ||||||||||||
Foreign-currency forward contracts | $ | ( | ) | $ | $ | $ | |||||||||
Total-return and interest-rate swaps | |||||||||||||||
Options and futures | ( | ) | |||||||||||||
Total | $ | ( | ) | $ | $ | $ | ( | ) |
Gross and Net Amounts of Assets (Liabilities) Presented | Gross Amounts Not Offset in Statements of Financial Condition | Net Amount | |||||||||||||
As of September 30, 2019 | Derivative Assets (Liabilities) | Cash Collateral Received (Pledged) | |||||||||||||
Derivative Assets: | |||||||||||||||
Foreign-currency forward contracts | $ | $ | $ | $ | |||||||||||
Cross-currency swap | |||||||||||||||
Subtotal | |||||||||||||||
Derivative assets of consolidated funds: | |||||||||||||||
Foreign-currency forward contracts | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Derivative Liabilities: | |||||||||||||||
Foreign-currency forward contracts | ( | ) | ( | ) | |||||||||||
Derivative liabilities of consolidated funds: | |||||||||||||||
Foreign-currency forward contracts | ( | ) | ( | ) | |||||||||||
Total | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
Gross and Net Amounts of Assets (Liabilities) Presented | Gross Amounts Not Offset in Statements of Financial Condition | Net Amount | |||||||||||||
As of December 31, 2018 | Derivative Assets (Liabilities) | Cash Collateral Received (Pledged) | |||||||||||||
Derivative Assets: | |||||||||||||||
Foreign-currency forward contracts | $ | $ | $ | $ | |||||||||||
Cross-currency swap | |||||||||||||||
Subtotal | |||||||||||||||
Derivative assets of consolidated funds: | |||||||||||||||
Foreign-currency forward contracts | |||||||||||||||
Options and futures | |||||||||||||||
Subtotal | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Derivative Liabilities: | |||||||||||||||
Foreign-currency forward contracts | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||
Derivative liabilities of consolidated funds: | |||||||||||||||
Foreign-currency forward contracts | ( | ) | ( | ) | |||||||||||
Total | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Furniture, equipment and capitalized software | $ | $ | |||||
Leasehold improvements | |||||||
Corporate aircraft | |||||||
Other | |||||||
Fixed assets | |||||||
Accumulated depreciation | ( | ) | ( | ) | |||
Fixed assets, net | $ | $ |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Contractual rights | $ | $ | |||||
Accumulated amortization | ( | ) | ( | ) | |||
Intangible assets, net | $ | $ |
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total | $ |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
$250,000, 3.78%, issued in December 2017, payable on December 18, 2032 | $ | $ | |||||
$250,000, variable-rate term loan, issued in March 2014, payable on March 29, 2023 (1) | |||||||
$50,000, 3.91%, issued in September 2014, payable on September 3, 2024 | |||||||
$100,000, 4.01%, issued in September 2014, payable on September 3, 2026 | |||||||
$100,000, 4.21%, issued in September 2014, payable on September 3, 2029 | |||||||
$100,000, 3.69%, issued in July 2016, payable on July 12, 2031 | |||||||
Total remaining principal | |||||||
Less: Debt issuance costs | ( | ) | ( | ) | |||
Debt obligations | $ | $ |
(1) | The credit facility consists of a $ |
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total | $ |
Outstanding Amount as of | Facility Capacity | Weighted Average Interest Rate | Weighted Average Remaining Maturity (years) | Commitment Fee Rate | L/C Fee | ||||||||||||||
Credit Agreement | September 30, 2019 | December 31, 2018 | |||||||||||||||||
Senior variable rate notes | $ | $ | $ | N/A | N/A | ||||||||||||||
Less: Debt issuance costs | ( | ) | ( | ) | |||||||||||||||
Total debt obligations, net | $ | $ |
As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||
Fair Value (1) | Weighted Average Interest Rate | Weighted Average Remaining Maturity (years) | Fair Value (1) | Weighted Average Interest Rate | Weighted Average Remaining Maturity (years) | ||||||||||
Senior secured notes | $ | $ | |||||||||||||
Subordinated notes (2) | N/A | N/A | |||||||||||||
Total CLO debt obligations | $ | $ |
(1) | 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 6 for more information. |
(2) | The subordinated notes do not have a contractual interest rate; instead, they receive distributions from the excess cash flows generated by the CLO. |
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total | $ |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||
Operating lease cost | $ | $ | |||||
Sublease income | ( | ) | ( | ) | |||
Total lease cost | $ | $ |
Nine Months Ended September 30, 2019 | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows used for operating leases | $ | ||
Weighted average remaining lease term for operating leases (in years) | |||
Weighted average discount rate for operating leases | % |
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total lease payments | |||
Less: imputed interest | ( | ) | |
Total operating lease liabilities | $ |
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Beginning balance | $ | $ | |||||
Initial consolidation of a fund | |||||||
Deconsolidation of a fund | ( | ) | |||||
Contributions | |||||||
Distributions | ( | ) | ( | ) | |||
Net income | |||||||
Change in distributions payable | ( | ) | |||||
Foreign currency translation and other | ( | ) | ( | ) | |||
Ending balance | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Weighted average Oaktree Operating Group units outstanding (in thousands): | |||||||||||||||
OCGH non-controlling interest | |||||||||||||||
Class A unitholders | |||||||||||||||
Total weighted average units outstanding | |||||||||||||||
Oaktree Operating Group net income (loss): | |||||||||||||||
Net income attributable to preferred unitholders (1) | $ | $ | $ | $ | |||||||||||
Net income (loss) attributable to OCGH non-controlling interest | ( | ) | |||||||||||||
Net income (loss) attributable to OCG Class A unitholders | ( | ) | |||||||||||||
Oaktree Operating Group net income (loss) (2) | $ | ( | ) | $ | $ | $ | |||||||||
Net income (loss) attributable to OCG Class A unitholders: | |||||||||||||||
Oaktree Operating Group net income (loss) attributable to OCG Class A unitholders | $ | ( | ) | $ | $ | $ | |||||||||
Non-Operating Group income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income tax benefit (expense) of Intermediate Holding Companies | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income (loss) attributable to OCG Class A unitholders | $ | ( | ) | $ | $ | $ |
(1) | Represents distributions declared, if any, on the preferred units. |
(2) | Oaktree Operating Group net income does not include amounts attributable to other non-controlling interests, which amounted to $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) attributable to OCG Class A unitholders | $ | ( | ) | $ | $ | $ | |||||||||
Equity reallocation between controlling and non-controlling interests | |||||||||||||||
Change from net income attributable to OCG Class A unitholders and transfers from non-controlling interests | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) per Class A unit (basic and diluted): | (in thousands, except per unit amounts) | ||||||||||||||
Net income (loss) attributable to OCG Class A unitholders | $ | ( | ) | $ | $ | $ | |||||||||
Weighted average number of Class A units outstanding (basic and diluted) | |||||||||||||||
Basic and diluted net income (loss) per Class A unit | $ | ( | ) | $ | $ | $ |
• | Messrs. Howard Marks, Bruce Karsh, Jay Wintrob, John Frank, Sheldon Stone, Richard Masson and Larry Keele can, for the Open Period beginning in 2022, exchange up to |
• | Current employees other than those included in the group named in the preceding bullet can, for the Open Period beginning in 2022, sell up to |
• | Brookfield is not obligated to permit Exchanges that, in the aggregate together with Exchanges requested by all other OCGH limited partners, exceed certain maximum amounts per year. These maximum amounts are: |
• | In the event that OCGH limited partners wish to sell or exchange units in excess of the maximum amount for a given year, OCGH will reallocate the exchangeable units among the OCGH limited partners in its sole discretion so that the amount exchanged does not exceed the maximum amount for such year. |
Converted Class A Units (1) | OCGH Units | ||||||||||||
Number of Units | Weighted Average Grant Date Fair Value | Number of Units | Weighted Average Grant Date Fair Value | ||||||||||
Balance as of December 31, 2018 | $ | $ | |||||||||||
Granted | |||||||||||||
Vested | ( | ) | ( | ) | |||||||||
Forfeited | ( | ) | |||||||||||
Balance as of September 30, 2019 | $ | $ |
(1) | At the Effective Time, each unvested Class A Unit held by current, or in certain cases former, employees, officers and directors of Oaktree and its subsidiaries was converted into one unvested OCGH Unit (each, a “Converted Class A Unit”) and will thereafter be subject to the terms and conditions of the OCGH limited partnership agreement. The Converted Class A Units will (i) be subject to the same vesting terms that were applicable to such units prior to the Effective Time, (ii) be entitled to receive ongoing distributions in respect of earnings, but not capital distributions and (iii) upon vesting, receive the accumulated value of capital distributions that accrued while such units were unvested. However, in 2020 and 2021, Converted Class A Units will be valued at $ |
Transaction | Total Future Payments | Payments Through Fiscal Year | |||
2007 private offering | $ | 2029 | |||
Initial public offering | 2034 | ||||
May 2013 offering | 2035 | ||||
March 2014 offering | 2036 | ||||
March 2015 offering | 2037 | ||||
February 2018 offering | 2040 | ||||
Total | $ |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Due from affiliates: | |||||||
Loans | $ | $ | |||||
Amounts due from unconsolidated funds | |||||||
Management fees and incentive income due from unconsolidated funds | |||||||
Payments made on behalf of unconsolidated entities | |||||||
Non-interest bearing advances made to certain non-controlling interest holders and employees | |||||||
Total due from affiliates | $ | $ | |||||
Due to affiliates: | |||||||
Due to OCGH unitholders in connection with the tax receivable agreement (please see note 16) | $ | $ | |||||
Amounts due to senior executives, certain non-controlling interest holders and employees | |||||||
Total due to affiliates | $ | $ |
Equity-based Compensation Expense | Remainder of 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Estimated expense from equity grants awarded through September 2019 | $ | 21.8 | $ | 64.6 | $ | 47.8 | $ | 30.4 | $ | 18.5 | $ | 35.8 | $ | 218.9 |
• | Net Income Attributable to Non-controlling Interests in Consolidated Funds. This category represents the economic interests of the unaffiliated investors in the consolidated funds, as well as the equity interests held by third-party investors in CLOs that had not yet priced as of the respective period end. Those interests are primarily driven by the investment performance of the consolidated funds. In comparison to net income, this measure excludes our operating results and other items solely attributable to the Company; and |
• | Net Income Attributable to Non-controlling Interests in Consolidated Subsidiaries. This category primarily represents the economic interest in the Oaktree Operating Group owned by OCGH (“OCGH non-controlling interest”), as well as the economic interest in certain consolidated subsidiaries held by third parties. The OCGH non-controlling interest is determined at the Oaktree Operating Group level based on the weighted average proportionate share of Oaktree Operating Group units held by the OCGH unitholders. Inasmuch as the number of outstanding Oaktree Operating Group units corresponds with the total number of outstanding Class A and OCGH units, changes in the economic interest held by the OCGH unitholders are driven by our additional issuances of Class A and OCGH units, as well as repurchases and forfeitures of, and exchanges between, Class A and OCGH units. Certain of our expenses, such as income tax and related administrative expenses of Oaktree Capital Group, LLC and its Intermediate Holding Companies, are solely attributable to the Class A unitholders. Please see note 13 to our condensed consolidated financial statements included elsewhere in this quarterly report for additional information on the economic interest in the Oaktree Operating Group owned by OCGH. |
• | Management Fee-generating Assets Under Management. Management fee-generating AUM is a forward-looking metric and generally reflects the beginning AUM on which we will earn management fees in the following quarter, as well as our pro-rata portion of the fee basis of DoubleLine’s AUM. Our closed-end funds typically pay management fees based on committed capital, drawn capital or cost basis during the investment period, without regard to changes in NAV, and during the liquidation period on the lesser of (a) total funded capital or (b) the cost basis of assets remaining in the fund. Certain closed-end funds pay management fees based on gross assets or NAV. The annual management fee rate generally remains unchanged from the investment period through the liquidation period. Our open-end and evergreen funds typically pay management fees based on their NAV, our CLOs pay management fees based on the aggregate par value of collateral assets and principal cash, as defined in the applicable CLO indentures, our publicly-traded BDCs pay management fees based on gross assets (including assets acquired with leverage), net of cash, and DoubleLine funds typically pay management fees based on NAV. |
• | Incentive-creating Assets Under Management. Incentive-creating AUM refers to the AUM that may eventually produce incentive income. It generally represents the NAV of our funds for which we are entitled to receive an incentive allocation, excluding CLOs and investments made by us and our employees and directors (which are not subject to an incentive allocation), gross assets (including assets acquired with leverage), net of cash, for our publicly-traded BDCs, and our pro-rata portion of DoubleLine’s incentive-creating AUM. All funds for which we are entitled to receive an incentive allocation are included in incentive-creating AUM, regardless of whether or not they are currently above their preferred return or high-water mark and therefore generating incentives. Incentive-creating AUM does not include undrawn capital commitments. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands, except per unit data) | |||||||||||||||
Revenues: | |||||||||||||||
Management fees | $ | 179,761 | $ | 175,195 | $ | 524,798 | $ | 538,706 | |||||||
Incentive income | 25,429 | 66,032 | 260,290 | 253,125 | |||||||||||
Total revenues | 205,190 | 241,227 | 785,088 | 791,831 | |||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | (111,281 | ) | (101,787 | ) | (334,919 | ) | (315,614 | ) | |||||||
Equity-based compensation | (22,779 | ) | (14,747 | ) | (59,756 | ) | (44,614 | ) | |||||||
Incentive income compensation | (11,427 | ) | (27,294 | ) | (136,849 | ) | (127,327 | ) | |||||||
Total compensation and benefits expense | (145,487 | ) | (143,828 | ) | (531,524 | ) | (487,555 | ) | |||||||
General and administrative | (86,851 | ) | (38,051 | ) | (184,592 | ) | (110,459 | ) | |||||||
Depreciation and amortization | (6,602 | ) | (6,459 | ) | (19,732 | ) | (19,412 | ) | |||||||
Consolidated fund expenses | (6,540 | ) | (2,829 | ) | (12,994 | ) | (9,383 | ) | |||||||
Total expenses | (245,480 | ) | (191,167 | ) | (748,842 | ) | (626,809 | ) | |||||||
Other income (loss): | |||||||||||||||
Interest expense | (59,883 | ) | (39,456 | ) | (149,643 | ) | (115,504 | ) | |||||||
Interest and dividend income | 101,882 | 74,490 | 278,782 | 205,089 | |||||||||||
Net realized gain (loss) on consolidated funds’ investments | (3,664 | ) | (9,812 | ) | (9,036 | ) | (12,509 | ) | |||||||
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments | (40,964 | ) | 10,552 | 17,967 | (34,939 | ) | |||||||||
Investment income | 26,819 | 58,196 | 121,804 | 149,682 | |||||||||||
Other income, net | — | 5,629 | 58 | 7,240 | |||||||||||
Total other income | 24,190 | 99,599 | 259,932 | 199,059 | |||||||||||
Income before income taxes | (16,100 | ) | 149,659 | 296,178 | 364,081 | ||||||||||
Income taxes | (4,798 | ) | (6,568 | ) | (11,148 | ) | (17,832 | ) | |||||||
Net income | (20,898 | ) | 143,091 | 285,030 | 346,249 | ||||||||||
Less: | |||||||||||||||
Net (income) loss attributable to non-controlling interests in consolidated funds | 4,208 | (14,427 | ) | (82,234 | ) | (17,792 | ) | ||||||||
Net (income) loss attributable to non-controlling interests in consolidated subsidiaries | 6,871 | (72,005 | ) | (109,259 | ) | (187,945 | ) | ||||||||
Net (income) loss attributable to OCG | (9,819 | ) | 56,659 | 93,537 | 140,512 | ||||||||||
Net income attributable to preferred unitholders | (6,829 | ) | (3,909 | ) | (20,487 | ) | (3,909 | ) | |||||||
Net income (loss) attributable to OCG Class A unitholders | $ | (16,648 | ) | $ | 52,750 | $ | 73,050 | $ | 136,603 | ||||||
Distributions declared per Class A unit | $ | 3.13 | $ | 0.55 | $ | 4.93 | $ | 2.27 | |||||||
Net income (loss) per Class A unit (basic and diluted): | |||||||||||||||
Net income (loss) per Class A unit | $ | (0.22 | ) | $ | 0.74 | $ | 0.99 | $ | 1.95 | ||||||
Weighted average number of Class A units outstanding | 75,995 | 71,369 | 74,005 | 70,167 |
As of or for the Three Months Ended September 30, | As of or for the Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Non-GAAP Results: (1) | (in thousands, except per unit data or as otherwise indicated) | ||||||||||||||
Distributable earnings revenues | $ | 252,739 | $ | 319,822 | $ | 1,233,808 | $ | 1,084,141 | |||||||
Distributable earnings | 86,245 | 143,940 | 458,480 | 452,199 | |||||||||||
Distributable earnings per Class A unit | 0.57 | 0.88 | 2.88 | 2.74 | |||||||||||
Fee revenues | 201,557 | 197,056 | 589,695 | 595,938 | |||||||||||
Fee-related earnings | 57,371 | 56,286 | 141,328 | 165,648 | |||||||||||
Fee-related earnings per Class A unit | 0.35 | 0.34 | 0.86 | 0.99 | |||||||||||
Weighted Average Units: | |||||||||||||||
OCGH | 83,666 | 85,775 | 84,796 | 86,675 | |||||||||||
Class A | 75,995 | 71,369 | 74,005 | 70,167 | |||||||||||
Total units | 159,661 | 157,144 | 158,801 | 156,842 | |||||||||||
Operating Metrics: | |||||||||||||||
Assets under management (in millions): | |||||||||||||||
Assets under management | $ | 121,940 | $ | 123,516 | $ | 121,940 | $ | 123,516 | |||||||
Management fee-generating assets under management | 102,061 | 100,693 | 102,061 | 100,693 | |||||||||||
Incentive-creating assets under management | 35,765 | 33,626 | 35,765 | 33,626 | |||||||||||
Uncalled capital commitments | 19,336 | 21,435 | 19,336 | 21,435 | |||||||||||
Accrued incentives (fund level): | |||||||||||||||
Incentives created (fund level) | 77,330 | 134,966 | 176,664 | 365,468 | |||||||||||
Incentives created (fund level), net of associated incentive income compensation expense | 36,742 | 59,278 | 90,441 | 172,497 | |||||||||||
Accrued incentives (fund level) | 1,345,718 | 1,924,410 | 1,345,718 | 1,924,410 | |||||||||||
Accrued incentives (fund level), net of associated incentive income compensation expense | 642,186 | 914,886 | 642,186 | 914,886 |
(1) | Beginning with the first quarter of 2019, the Company has determined that distributable earnings is the primary financial measure used by management to make operating decisions and assess the performance of our business. In connection with this determination, the definition of distributable earnings was modified to include the deduction for preferred unit distributions and exclude costs related to the Brookfield transaction. For comparability, prior periods have been recast for this change, as applicable. |
As of | |||||||||||
September 30, 2019 | June 30, 2019 | September 30, 2018 | |||||||||
Assets Under Management: | (in millions) | ||||||||||
Closed-end funds | $ | 56,762 | $ | 55,718 | $ | 57,734 | |||||
Open-end funds | 26,564 | 27,359 | 32,454 | ||||||||
Evergreen funds | 9,247 | 9,284 | 8,672 | ||||||||
DoubleLine (1) | 29,367 | 28,007 | 24,656 | ||||||||
Total | $ | 121,940 | $ | 120,368 | $ | 123,516 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Change in Assets Under Management: | (in millions) | ||||||||||||||
Beginning balance | $ | 120,368 | $ | 121,584 | $ | 119,560 | $ | 123,930 | |||||||
Closed-end funds: | |||||||||||||||
Capital commitments/other (2) | 4,133 | 2,205 | 8,100 | 5,268 | |||||||||||
Distributions for a realization event/other (3) | (1,778 | ) | (1,478 | ) | (6,108 | ) | (5,561 | ) | |||||||
Change in uncalled capital commitments for funds entering or in liquidation (4) | (4 | ) | 90 | (645 | ) | (142 | ) | ||||||||
Foreign-currency translation | (369 | ) | (41 | ) | (396 | ) | (266 | ) | |||||||
Change in market value (5) | 178 | 745 | 1,159 | 1,701 | |||||||||||
Change in applicable leverage | (1,116 | ) | (81 | ) | (2,454 | ) | (137 | ) | |||||||
Open-end funds: | |||||||||||||||
Contributions | 1,319 | 841 | 2,856 | 2,456 | |||||||||||
Redemptions | (2,182 | ) | (1,745 | ) | (8,758 | ) | (5,436 | ) | |||||||
Foreign-currency translation | (217 | ) | (49 | ) | (237 | ) | (241 | ) | |||||||
Change in market value (5) | 285 | 583 | 2,922 | 234 | |||||||||||
Evergreen funds: | |||||||||||||||
Contributions or new capital commitments (6) | 298 | 306 | 688 | 809 | |||||||||||
Redemptions or distributions (7) | (164 | ) | (205 | ) | (357 | ) | (636 | ) | |||||||
Foreign-currency translation | — | 1 | — | — | |||||||||||
Change in market value (5) | (171 | ) | 144 | 358 | 583 | ||||||||||
DoubleLine: | |||||||||||||||
Net change in DoubleLine | 1,360 | 616 | 5,252 | 954 | |||||||||||
Ending balance | $ | 121,940 | $ | 123,516 | $ | 121,940 | $ | 123,516 |
(1) | DoubleLine AUM reflects our pro-rata portion (based on our 20% ownership stake) of DoubleLine’s total AUM. |
(2) | These amounts include capital commitments, as well as the aggregate par value of collateral assets and principal cash related to new CLO formations. |
(3) | These amounts include distributions for a realization event, tax-related distributions, reductions in the par value of collateral assets and principal cash resulting from the repayment of debt as return of principal by CLOs, and recallable distributions at the end of the investment period. |
(4) | The change in uncalled capital commitments generally reflects declines attributable to funds entering their liquidation periods, as well as capital contributions to funds in their liquidation periods for deferred purchase obligations or other reasons. |
(5) | The change in market value reflects the change in NAV of our funds, less management fees and other fund expenses, as well as changes in the aggregate par value of collateral assets and principal cash held by CLOs and other levered funds. |
(6) | These amounts include contributions and capital commitments, and for our publicly-traded BDCs, issuances of equity or debt capital. |
(7) | These amounts include redemptions and distributions, and for our publicly-traded BDCs, dividends, repurchases of equity capital or repayment of debt. |
As of | |||||||||||
September 30, 2019 | June 30, 2019 | September 30, 2018 | |||||||||
Management Fee-generating AUM: | (in millions) | ||||||||||
Closed-end funds: | |||||||||||
Senior Loans | $ | 7,037 | $ | 7,525 | $ | 8,297 | |||||
Other closed-end funds | 30,946 | 30,440 | 28,054 | ||||||||
Open-end funds | 26,355 | 27,106 | 32,120 | ||||||||
Evergreen funds | 8,356 | 8,357 | 7,566 | ||||||||
DoubleLine | 29,367 | 28,007 | 24,656 | ||||||||
Total | $ | 102,061 | $ | 101,435 | $ | 100,693 |
Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Change in Management Fee-generating AUM: | 2019 | 2018 | 2019 | 2018 | |||||||||||
(in millions) | |||||||||||||||
Beginning balance | $ | 101,435 | $ | 100,547 | $ | 98,108 | $ | 104,287 | |||||||
Closed-end funds: | |||||||||||||||
Capital commitments to funds that pay fees based on committed capital/other (1) | 1,743 | 465 | 5,078 | 465 | |||||||||||
Capital drawn by funds that pay fees based on drawn capital, NAV or cost basis | 1,329 | 608 | 2,422 | 1,552 | |||||||||||
Change attributable to funds in liquidation (2) | (902 | ) | (1,052 | ) | (2,128 | ) | (3,628 | ) | |||||||
Change in uncalled capital commitments for funds entering or in liquidation that pay fees based on committed capital (3) | (5 | ) | (174 | ) | (5 | ) | (174 | ) | |||||||
Distributions by funds that pay fees based on NAV / other (4). | (757 | ) | (95 | ) | (1,770 | ) | (449 | ) | |||||||
Foreign-currency translation | (297 | ) | (36 | ) | (314 | ) | (242 | ) | |||||||
Change in market value (5). | (23 | ) | 63 | 123 | 115 | ||||||||||
Change in applicable leverage | (1,070 | ) | (78 | ) | (2,358 | ) | (133 | ) | |||||||
Open-end funds: | |||||||||||||||
Contributions | 1,272 | 791 | 2,807 | 2,355 | |||||||||||
Redemptions | (2,092 | ) | (1,721 | ) | (8,620 | ) | (5,412 | ) | |||||||
Foreign-currency translation | (217 | ) | (49 | ) | (236 | ) | (241 | ) | |||||||
Change in market value | 286 | 579 | 2,901 | 230 | |||||||||||
Evergreen funds: | |||||||||||||||
Contributions or capital drawn by funds that pay fees based on drawn capital or NAV (6) | 288 | 302 | 737 | 999 | |||||||||||
Redemptions or distributions (7) | (167 | ) | (206 | ) | (363 | ) | (558 | ) | |||||||
Change in market value (5). | (122 | ) | 133 | 427 | 573 | ||||||||||
Change in applicable leverage | — | — | — | — | |||||||||||
DoubleLine: | |||||||||||||||
Net change in DoubleLine | 1,360 | 616 | 5,252 | 954 | |||||||||||
Ending balance | $ | 102,061 | $ | 100,693 | $ | 102,061 | $ | 100,693 |
(1) | These amounts include capital commitments to funds that pay fees based on committed capital, as well as the aggregate par value of collateral assets and principal cash related to new CLO formations. |
(2) | These amounts include the change for funds that pay fees based on the lesser of funded capital or cost basis during the liquidation period, as well as recallable distributions at the end of the investment period. For most closed-end funds, management fees are charged during the liquidation period on the lesser of (a) total funded capital or (b) the cost basis of assets remaining in the fund, with the cost basis of assets generally calculated by excluding cash balances. Thus, changes in fee basis during the liquidation period are not dependent on distributions made from the fund; rather, they are tied to the cost basis of the fund’s investments, which typically declines as the fund sells assets. |
(3) | The change in uncalled capital commitments reflects declines attributable to funds entering their liquidation periods, as well as capital contributions to funds in their liquidation periods for deferred purchase obligations or other reasons. |
(4) | These amounts include distributions by funds that pay fees based on NAV, as well as reductions in the par value of collateral assets and principal cash resulting from the repayment of debt as return of principal by CLOs. |
(5) | The change in market value reflects certain funds that pay management fees based on NAV and leverage, as applicable, as well as changes in the aggregate par value of collateral assets and principal cash held by CLOs and other levered funds. |
(6) | These amounts include contributions and capital commitments, and for our publicly-traded BDCs, issuances of equity or debt capital. |
(7) | These amounts include redemptions and distributions, and for our publicly-traded BDCs, dividends, repurchases of equity capital or repayment of debt. |
As of | |||||||||||
Reconciliation of AUM to Management Fee-generating AUM: | September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||
(in millions) | |||||||||||
Assets under management | $ | 121,940 | $ | 120,368 | $ | 123,516 | |||||
Difference between assets under management and committed capital or the lesser of funded capital or cost basis for applicable closed-end funds (1) | (1,397 | ) | (1,601 | ) | (3,040 | ) | |||||
Undrawn capital commitments to closed-end funds that have not yet commenced their investment periods | (9,485 | ) | (9,133 | ) | (10,098 | ) | |||||
Undrawn capital commitments to funds for which management fees are based on drawn capital, NAV or cost basis | (4,125 | ) | (4,081 | ) | (5,263 | ) | |||||
Oaktree’s general partner investments in management fee-generating funds | (1,548 | ) | (1,598 | ) | (1,798 | ) | |||||
Funds that pay no management fees (2) | (3,324 | ) | (2,520 | ) | (2,624 | ) | |||||
Management fee-generating assets under management | $ | 102,061 | $ | 101,435 | $ | 100,693 |
(1) | This difference is not applicable to closed-end funds that pay management fees based on NAV or leverage. |
(2) | This includes funds that are no longer paying management fees, co-investments that pay no management fees, certain accounts that pay administrative fees intended to offset Oaktree’s costs related to the accounts, and CLOs in the warehouse stage or with extended management fee start dates that currently pay no management fees. |
As of | ||||||||
Weighted Average Annual Management Fee Rates: | September 30, 2019 | June 30, 2019 | September 30, 2018 | |||||
Closed-end funds: | ||||||||
Senior Loans | 0.45 | % | 0.47 | % | 0.50 | % | ||
Other closed-end funds | 1.39 | 1.41 | 1.46 | |||||
Open-end funds | 0.44 | 0.45 | 0.45 | |||||
Evergreen funds (1) | 1.16 | 1.17 | 1.19 | |||||
All Oaktree funds (2) | 0.93 | 0.93 | 0.90 |
(1) | Fee rates reflect the applicable asset-based management fee rates, exclusive of quarterly incentive fees on investment income that are included in management fees. |
(2) | Excludes DoubleLine funds. |
As of | |||||||||||
September 30, 2019 | June 30, 2019 | September 30, 2018 | |||||||||
Incentive-creating AUM: | (in millions) | ||||||||||
Closed-end funds | $ | 28,411 | $ | 28,521 | $ | 26,801 | |||||
Evergreen funds | 6,726 | 6,822 | 6,236 | ||||||||
DoubleLine | 628 | 657 | 589 | ||||||||
Total | $ | 35,765 | $ | 36,000 | $ | 33,626 |
As of or for the Three Months Ended September 30, | As of or for the Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Accrued Incentives (Fund Level): | (in thousands) | ||||||||||||||
Beginning balance | $ | 1,294,866 | $ | 1,863,932 | $ | 1,722,120 | $ | 1,920,339 | |||||||
Incentives created (fund level): | |||||||||||||||
Closed-end funds | 88,049 | 115,659 | 145,147 | 315,815 | |||||||||||
Evergreen funds | (11,768 | ) | 18,787 | 26,917 | 49,033 | ||||||||||
DoubleLine | 1,049 | 520 | 4,600 | 620 | |||||||||||
Total incentives created (fund level) | 77,330 | 134,966 | 176,664 | 365,468 | |||||||||||
Less: incentive income recognized by us | (26,478 | ) | (74,488 | ) | (553,066 | ) | (361,397 | ) | |||||||
Ending balance | $ | 1,345,718 | $ | 1,924,410 | $ | 1,345,718 | $ | 1,924,410 | |||||||
Accrued incentives (fund level), net of associated incentive income compensation expense | $ | 642,186 | $ | 914,886 | $ | 642,186 | $ | 914,886 |
Three Months Ended September 30, | Nine months ended September 30, 2019 | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Revenues: | |||||||||||||||
Management fees | $ | 201,557 | $ | 197,056 | $ | 589,695 | $ | 595,938 | |||||||
Incentive income | 26,478 | 74,488 | 553,066 | 361,397 | |||||||||||
Realized investment income proceeds | 24,704 | 48,278 | 91,047 | 126,806 | |||||||||||
Total distributable earnings revenues | $ | 252,739 | $ | 319,822 | $ | 1,233,808 | $ | 1,084,141 |
Three Months Ended September 30, | Nine months ended September 30, 2019 | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | $ | (108,489 | ) | $ | (100,589 | ) | $ | (329,946 | ) | $ | (309,001 | ) | |||
Incentive income compensation | (11,427 | ) | (31,508 | ) | (293,015 | ) | (182,934 | ) | |||||||
General and administrative | (33,289 | ) | (37,963 | ) | (111,273 | ) | (114,508 | ) | |||||||
Depreciation and amortization | (2,408 | ) | (2,218 | ) | (7,148 | ) | (6,781 | ) | |||||||
Total adjusted expenses | $ | (155,613 | ) | $ | (172,278 | ) | $ | (741,382 | ) | $ | (613,224 | ) |
Three Months Ended September 30, | Nine months ended September 30, 2019 | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Interest expense, net of interest income (1) | $ | (1,705 | ) | $ | (2,197 | ) | $ | (3,257 | ) | $ | (8,006 | ) | |||
Preferred unit distributions | (6,829 | ) | (3,909 | ) | (20,487 | ) | (3,909 | ) | |||||||
Operating Group income taxes | 1,175 | (222 | ) | (1,258 | ) | (5,108 | ) | ||||||||
Other income (expense), net | (3,522 | ) | 2,724 | (8,944 | ) | (1,695 | ) | ||||||||
Distributable earnings (2) | $ | 86,245 | $ | 143,940 | $ | 458,480 | $ | 452,199 |
(1) | Interest income was $4.5 million and $15.4 million for the three and nine months ended September 30, 2019, respectively, and $4.0 million and $9.9 million for the three and nine months ended September 30, 2018, respectively. |
(2) | Reflects the sum of total distributable earnings revenues, adjusted expenses, net interest expense, preferred unit distributions, Operating Group income taxes and other income (expense). |
Three months ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Management fees: | |||||||
Closed-end funds | $ | 122,159 | $ | 114,236 | |||
Open-end funds | 30,774 | 36,201 | |||||
Evergreen funds | 29,565 | 28,269 | |||||
DoubleLine | 19,059 | 18,350 | |||||
Total management fees | $ | 201,557 | $ | 197,056 |
• | Closed-end funds. Management fees attributable to closed-end funds increased $8.0 million, or 7.0%, to $122.2 million for the third quarter of 2019, from $114.2 million for the third quarter of 2018. The increase reflected an aggregate increase of $25.6 million principally from closed-end funds in their investment periods, partially offset by an aggregate decline of $17.6 million primarily attributable to closed-end funds in liquidation. |
• | Open-end funds. Management fees attributable to open-end funds decreased $5.4 million, or 14.9%, to $30.8 million for the third quarter of 2019, from $36.2 million for the third quarter of 2018. The decrease was primarily attributable to net outflows. |
• | Evergreen funds. Management fees attributable to evergreen funds increased $1.3 million, or 4.6%, to $29.6 million for the third quarter of 2019, from $28.3 million for the third quarter of 2018, primarily reflecting net inflows. |
• | DoubleLine. Management fees attributable to DoubleLine increased $0.7 million, or 3.8%, to $19.1 million for the third quarter of 2019, from $18.4 million for the third quarter of 2018, primarily driven by AUM growth. |
Three months ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Incentive Income: | |||||||
Closed-end funds | $ | 25,335 | $ | 73,576 | |||
Evergreen funds | 94 | 392 | |||||
DoubleLine | 1,049 | 520 | |||||
Total | $ | 26,478 | $ | 74,488 |
Three months ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Oaktree funds: | |||||||
Credit | $ | 13,845 | $ | 11,575 | |||
Private Equity | 4,179 | 6,023 | |||||
Real Assets | 1,930 | 4,061 | |||||
Listed Equities | 3,394 | 14,375 | |||||
Non-Oaktree | 1,356 | 12,244 | |||||
Total realized investment income proceeds | $ | 24,704 | $ | 48,278 |
Nine months ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Management fees: | |||||||
Closed-end funds | $ | 353,770 | $ | 352,718 | |||
Open-end funds | 93,666 | 111,399 | |||||
Evergreen funds | 89,940 | 77,758 | |||||
DoubleLine | 52,319 | 54,063 | |||||
Total management fees | $ | 589,695 | $ | 595,938 |
• | Closed-end funds. Management fees attributable to closed-end funds increased $1.1 million, or 0.3%, to $353.8 million for the first nine months of 2019, from $352.7 million for the first nine months of 2018. The increase reflected an aggregate increase of $60.5 million principally from closed-end funds in their investment periods, partially offset by an aggregate decline of $59.4 million primarily attributable to closed-end funds in liquidation. |
• | Open-end funds. Management fees attributable to open-end funds decreased $17.7 million, or 15.9%, to $93.7 million for the first nine months of 2019, from $111.4 million for the first nine months of 2018. The decrease was primarily attributable to net outflows. |
• | Evergreen funds. Management fees attributable to evergreen funds increased $12.1 million, or 15.6%, to $89.9 million for the first nine months of 2019, from $77.8 million for the first nine months of 2018, primarily attributable to AUM growth. |
• | DoubleLine. Management fees attributable to DoubleLine decreased $1.8 million, or 3.3%, to $52.3 million for the first nine months of 2019, from $54.1 million for the first nine months of 2018, primarily reflecting higher expenses. |
Nine months ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Incentive Income: | |||||||
Closed-end funds | $ | 545,034 | $ | 357,029 | |||
Evergreen funds | 3,432 | 3,748 | |||||
DoubleLine | 4,600 | 620 | |||||
Total | $ | 553,066 | $ | 361,397 |
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Oaktree funds: | |||||||
Credit | $ | 57,805 | $ | 39,816 | |||
Private Equity | 3,069 | 25,918 | |||||
Real Assets | 9,510 | 12,329 | |||||
Listed Equities | 11,192 | 19,926 | |||||
Non-Oaktree | 9,471 | 28,817 | |||||
Total realized investment income proceeds | $ | 91,047 | $ | 126,806 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Net income attributable to OCG Class A unitholders | $ | (16,648 | ) | $ | 52,750 | $ | 73,050 | $ | 136,603 | ||||||
Incentive income (1) | — | 7,935 | 288,176 | 107,581 | |||||||||||
Incentive income compensation (1) | — | (4,214 | ) | (156,166 | ) | (55,607 | ) | ||||||||
Investment income | 4,349 | (51,796 | ) | (86,618 | ) | (94,567 | ) | ||||||||
Realized investment income proceeds (2) | 24,704 | 48,278 | 91,047 | 126,806 | |||||||||||
Equity-based compensation (3) | 22,779 | 14,747 | 59,756 | 44,614 | |||||||||||
Foreign-currency hedging (4) | (634 | ) | (247 | ) | (525 | ) | (3,110 | ) | |||||||
Acquisition-related items (5) | 56,385 | 1,703 | 82,087 | 443 | |||||||||||
Other expense, net (6) | (2,745 | ) | (2,745 | ) | (8,235 | ) | (8,235 | ) | |||||||
Income taxes | 5,973 | 6,346 | 9,890 | 12,724 | |||||||||||
Non-Operating Group (income) expenses (7) | 19 | 321 | 177 | 629 | |||||||||||
Non-controlling interests (7) | (7,937 | ) | 70,862 | 105,841 | 184,318 | ||||||||||
Distributable earnings (8) | 86,245 | 143,940 | 458,480 | 452,199 | |||||||||||
Incentive income | (26,478 | ) | (74,488 | ) | (553,066 | ) | (361,397 | ) | |||||||
Incentive income compensation | 11,427 | 31,508 | 293,015 | 182,934 | |||||||||||
Realized investment income proceeds | (24,704 | ) | (48,278 | ) | (91,047 | ) | (126,806 | ) | |||||||
Interest expense, net of interest income | 1,705 | 2,197 | 3,257 | 8,006 | |||||||||||
Preferred unit distributions | 6,829 | 3,909 | 20,487 | 3,909 | |||||||||||
Other expense, net | 3,522 | (2,724 | ) | 8,944 | 1,695 | ||||||||||
Operating Group income taxes | (1,175 | ) | 222 | 1,258 | 5,108 | ||||||||||
Fee-related earnings (8) | $ | 57,371 | $ | 56,286 | $ | 141,328 | $ | 165,648 |
(1) | This adjustment relates to unrealized incentive income which is excluded from distributable earnings revenues and incentive income compensation expense. |
(2) | This adjustment reflects the portion of distributions received from funds characterized as realized investment income or loss. In general, the income or loss component of a distribution from a fund is calculated by multiplying the amount of the distribution by the ratio of our investment’s undistributed income or loss to our remaining investment balance. In addition, if the distribution is made during the investment period, it is generally not reflected in distributable earnings until after the investment period ends. |
(3) | This adjustment adds back the effect of equity-based compensation expense, which is excluded from distributable earnings because it is a non-cash charge that does not affect our financial position. |
(4) | This adjustment removes the effect of unrealized gains and losses related to foreign-currency hedging activities. |
(5) | This adjustment adds back the effect of acquisition-related items associated with the amortization of intangibles, changes in the contingent consideration liability and costs related to the Brookfield transaction, which are excluded from distributable earnings. |
(6) | For distributable earnings, the $22 million make-whole premium charge that was included in net income attributable to OCG Class A unitholders in the fourth quarter of 2017 in connection with the early repayment of our 2019 Notes is amortized through the original maturity date of December 2019. |
(7) | Because distributable earnings is calculated at the Operating Group level, this adjustment adds back the effect of items applicable to OCG, its Intermediate Holding Companies or non-controlling interests. |
(8) | Per Class A unit amounts are calculated to evaluate the portion of distributable earnings and fee-related earnings attributable to Class A unitholders. Reconciliations of distributable earnings to distributable earnings per Class A unit and fee-related earnings to fee-related earnings per Class A unit are presented below. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands, except per unit data) | |||||||||||||||
Distributable earnings | $ | 86,245 | $ | 143,940 | $ | 458,480 | $ | 452,199 | |||||||
OCGH non-controlling interest | (45,195 | ) | (78,568 | ) | (246,352 | ) | (250,726 | ) | |||||||
Non-Operating Group income (expense) | (19 | ) | (321 | ) | (177 | ) | (629 | ) | |||||||
Distributable earnings-Class A income taxes | 6,068 | 1,687 | 12,919 | 3,327 | |||||||||||
Tax receivable agreement | (3,827 | ) | (4,008 | ) | (11,481 | ) | (11,874 | ) | |||||||
Distributable earnings-Class A | $ | 43,272 | $ | 62,730 | $ | 213,389 | $ | 192,297 | |||||||
Distributable earnings per Class A unit | $ | 0.57 | $ | 0.88 | $ | 2.88 | $ | 2.74 | |||||||
Weighted average number of Class A units outstanding | 75,995 | 71,369 | 74,005 | 70,167 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands, except per unit data) | |||||||||||||||
Fee-related earnings | $ | 57,371 | $ | 56,286 | $ | 141,328 | $ | 165,648 | |||||||
OCGH non-controlling interest | (30,064 | ) | (30,723 | ) | (75,307 | ) | (91,614 | ) | |||||||
Non-Operating Group expense | (140 | ) | (239 | ) | (810 | ) | (984 | ) | |||||||
Fee-related earnings-Class A income taxes | (594 | ) | (1,170 | ) | (1,328 | ) | (3,324 | ) | |||||||
Fee-related earnings-Class A | $ | 26,573 | $ | 24,154 | $ | 63,883 | $ | 69,726 | |||||||
Fee-related earnings per unit | $ | 0.35 | $ | 0.34 | $ | 0.86 | $ | 0.99 | |||||||
Weighted average number of total units outstanding | 75,995 | 71,369 | 74,005 | 70,167 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
GAAP revenues | $ | 205,190 | $ | 241,227 | $ | 785,088 | $ | 791,831 | |||||||
Consolidated funds (1) | 2,737 | 3,512 | 12,578 | 3,240 | |||||||||||
Management fees (2) | 19,059 | 18,350 | 52,319 | 54,063 | |||||||||||
Incentive income (3) | 1,049 | 8,455 | 292,776 | 108,201 | |||||||||||
Realized investment income proceeds | 24,704 | 48,278 | 91,047 | 126,806 | |||||||||||
Distributable earnings revenues | 252,739 | 319,822 | 1,233,808 | 1,084,141 | |||||||||||
Incentive income | (26,478 | ) | (74,488 | ) | (553,066 | ) | (361,397 | ) | |||||||
Realized investment income proceeds | (24,704 | ) | (48,278 | ) | (91,047 | ) | (126,806 | ) | |||||||
Fee revenues | $ | 201,557 | $ | 197,056 | $ | 589,695 | $ | 595,938 |
(1) | This adjustment represents amounts attributable to the consolidated funds that were eliminated in consolidation, the reclassification of gains and losses related to foreign-currency hedging activities from general and administrative expense to revenues, the elimination of non-controlling interests from adjusted revenues, and certain compensation and administrative related expense reimbursements netted with expenses. |
(2) | This adjustment reclassifies the portion of the earnings from the management fees attributable to our 20% ownership interest in DoubleLine, which is included in consolidated investment income in our GAAP statements of operations to revenues. |
(3) | This adjustment relates to unrealized incentive income which is excluded from distributable earnings revenues and reclassifies the portion of the earnings from the performance fees attributable to our 20% ownership interest in DoubleLine, which is included in consolidated investment income in our GAAP statements of operations to revenues. |
For the Three Months Ended September 30, 2019 | |||||||||||
Consolidated | Adjustments | Distributable Earnings | |||||||||
(in thousands) | |||||||||||
Management fees (1) | $ | 179,761 | $ | 21,796 | $ | 201,557 | |||||
Incentive income (1) | 25,429 | 1,049 | 26,478 | ||||||||
Realized investment income proceeds (2) | — | 24,704 | 24,704 | ||||||||
Total expenses (3) | (245,480 | ) | 89,867 | (155,613 | ) | ||||||
Interest expense, net (4) | (59,883 | ) | 58,178 | (1,705 | ) | ||||||
Investment income (2) | 26,819 | (26,819 | ) | — | |||||||
Other income (expense), net (5) | — | (3,522 | ) | (3,522 | ) | ||||||
Other income of consolidated funds (6) | 57,254 | (57,254 | ) | — | |||||||
Income taxes | (4,798 | ) | 5,973 | 1,175 | |||||||
Net income attributable to non-controlling interests in consolidated funds | 4,208 | (4,208 | ) | — | |||||||
Net income attributable to non-controlling interests in consolidated subsidiaries | 6,871 | (6,871 | ) | — | |||||||
Net income attributable to preferred unitholders | (6,829 | ) | — | (6,829 | ) | ||||||
Net income attributable to OCG Class A unitholders / Distributable earnings | $ | (16,648 | ) | $ | 102,893 | $ | 86,245 |
(1) | The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $19,059 to management fees and $1,049 to incentive income, and (c) for management fees, reclassifies $865 of net gains related to foreign-currency hedging activities from general and administrative expense and $4,579 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings. |
(2) | Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies. |
(3) | The expense adjustment consists of (a) equity-based compensation expense of $22,779, (b) consolidated fund expenses of $6,704, (c) expenses incurred by the Intermediate Holding Companies of $140, (d) $1,976 of acquisition-related items, (e) $54,409 related to the Brookfield transaction, (f) $720 of net losses related to foreign-currency hedging activities, and (g) $4,579 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings. |
(4) | The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds. |
(5) | The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $778 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses. |
(6) | The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net. |
For the Three Months Ended September 30, 2018 | |||||||||||
Consolidated | Adjustments | Distributable Earnings | |||||||||
(in thousands) | |||||||||||
Management fees (1) | $ | 175,195 | $ | 21,861 | $ | 197,056 | |||||
Incentive income (1) | 66,032 | 8,456 | 74,488 | ||||||||
Realized investment income proceeds (2) | — | 48,278 | 48,278 | ||||||||
Total expenses (3) | (191,167 | ) | 18,889 | (172,278 | ) | ||||||
Interest expense, net (4) | (39,456 | ) | 37,259 | (2,197 | ) | ||||||
Investment income (2) | 58,196 | (58,196 | ) | — | |||||||
Other income (expense), net (5) | 5,629 | (2,905 | ) | 2,724 | |||||||
Other income of consolidated funds (6) | 75,230 | (75,230 | ) | — | |||||||
Income taxes | (6,568 | ) | 6,346 | (222 | ) | ||||||
Net income attributable to non-controlling interests in consolidated funds | (14,427 | ) | 14,427 | — | |||||||
Net income attributable to non-controlling interests in consolidated subsidiaries | (72,005 | ) | 72,005 | — | |||||||
Net income attributable to preferred unitholders | (3,909 | ) | — | (3,909 | ) | ||||||
Net income attributable to OCG Class A unitholders / Distributable earnings | $ | 52,750 | $ | 91,190 | $ | 143,940 |
(1) | The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $18,350 to management fees and $520 to incentive income, (c) for management fees, reclassifies $46 of net losses related to foreign-currency hedging activities from general and administrative expense and $2,835 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $7,395 related to unrealized incentive income. |
(2) | Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies. |
(3) | The expense adjustment consists of (a) equity-based compensation expense of $14,747, (b) consolidated fund expenses of $3,620, (c) expenses incurred by the Intermediate Holding Companies of $239, (d) incentive income compensation expense related to unrealized incentive income of $4,214, (e) $1,703 of acquisition-related items, (f) $41 of net gains related to foreign-currency hedging activities, and (g) $2,835 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings. |
(4) | The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds. |
(5) | The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $160 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses. |
(6) | The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net. |
For the Nine Months Ended September 30, 2019 | |||||||||||
Consolidated | Adjustments | Distributable Earnings | |||||||||
(in thousands) | |||||||||||
Management fees (1) | $ | 524,798 | $ | 64,897 | $ | 589,695 | |||||
Incentive income (1) | 260,290 | 292,776 | 553,066 | ||||||||
Realized investment income proceeds (2) | — | 91,047 | 91,047 | ||||||||
Total expenses (3) | (748,842 | ) | 7,460 | (741,382 | ) | ||||||
Interest expense, net (4) | (149,643 | ) | 146,386 | (3,257 | ) | ||||||
Investment income (2) | 121,804 | (121,804 | ) | — | |||||||
Other income (expense), net (5) | 58 | (9,002 | ) | (8,944 | ) | ||||||
Other income of consolidated funds (6) | 287,713 | (287,713 | ) | — | |||||||
Income taxes | (11,148 | ) | 9,890 | (1,258 | ) | ||||||
Net income attributable to non-controlling interests in consolidated funds | (82,234 | ) | 82,234 | — | |||||||
Net income attributable to non-controlling interests in consolidated subsidiaries | (109,259 | ) | 109,259 | — | |||||||
Net income attributable to preferred unitholders | (20,487 | ) | — | (20,487 | ) | ||||||
Net income attributable to OCG Class A unitholders / Distributable earnings | $ | 73,050 | $ | 385,430 | $ | 458,480 |
(1) | The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $52,319 to management fees and $4,600 to incentive income, (c) for management fees, reclassifies $2,582 of net gains related to foreign-currency hedging activities from general and administrative expense and $9,543 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $288,176 related to unrealized incentive income. |
(2) | Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies. |
(3) | The expense adjustment consists of (a) equity-based compensation expense of $59,756, (b) consolidated fund expenses of $13,767 (c) expenses incurred by the Intermediate Holding Companies of $810, (d) incentive income compensation expense related to unrealized incentive income of $156,166, (e) $10,895 of acquisition-related items, (f) $71,196 related to the Brookfield transaction, (g) $2,338 of net losses related to foreign-currency hedging activities, and (h) $9,543 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings. |
(4) | The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds. |
(5) | The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $768 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses. |
(6) | The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net. |
For the Nine Months Ended September 30, 2018 | |||||||||||
Consolidated | Adjustments | Distributable Earnings | |||||||||
(in thousands) | |||||||||||
Management fees (1) | $ | 538,706 | $ | 57,232 | $ | 595,938 | |||||
Incentive income (1) | 253,125 | 108,272 | 361,397 | ||||||||
Realized investment income proceeds (2) | — | 126,806 | 126,806 | ||||||||
Total expenses (3) | (626,809 | ) | 13,585 | (613,224 | ) | ||||||
Interest expense, net (4) | (115,504 | ) | 107,498 | (8,006 | ) | ||||||
Investment income (2) | 149,682 | (149,682 | ) | — | |||||||
Other income (expense), net (5) | 7,240 | (8,935 | ) | (1,695 | ) | ||||||
Other income of consolidated funds (6) | 157,641 | (157,641 | ) | — | |||||||
Income taxes | (17,832 | ) | 12,724 | (5,108 | ) | ||||||
Net income attributable to non-controlling interests in consolidated funds | (17,792 | ) | 17,792 | — | |||||||
Net income attributable to non-controlling interests in consolidated subsidiaries | (187,945 | ) | 187,945 | — | |||||||
Net income attributable to preferred unitholders | (3,909 | ) | — | (3,909 | ) | ||||||
Net income attributable to OCG Class A unitholders / Distributable earnings | $ | 136,603 | $ | 315,596 | $ | 452,199 |
(1) | The adjustment (a) adds back amounts earned from the consolidated funds, (b) reclassifies DoubleLine investment income of $54,063 to management fees and $620 to incentive income, (c) for management fees, reclassifies $4,234 of net losses related to foreign-currency hedging activities from general and administrative expense and $9,508 of expense reimbursements grossed-up for GAAP reporting, but netted with expenses for distributable earnings, and (d) adds back the effect of $107,581 related to unrealized incentive income. |
(2) | Distributable earnings excludes investment income or loss and includes the portion of income or loss on distributions received from funds and companies. |
(3) | The expense adjustment consists of (a) equity-based compensation expense of $44,614, (b) consolidated fund expenses of $11,819, (c) expenses incurred by the Intermediate Holding Companies of $984, (d) incentive income compensation expense related to unrealized incentive income of $55,607, (e) $443 of acquisition-related items, (f) $1,824 of net losses related to foreign-currency hedging activities, and (g) $9,508 of reimbursements grossed-up as revenues for GAAP reporting, but netted with expenses for distributable earnings. |
(4) | The interest expense adjustment removes interest expense of the consolidated funds and reclassifies interest income from other income of consolidated funds. |
(5) | The adjustment to other income (expense), net represents adjustments related to (a) the reclassification of $700 in net losses related to foreign-currency hedging activities from general and administrative expense and the amortization of make-whole premium expenses. |
(6) | The adjustment to other income of consolidated funds removes interest, dividend and other investment income attributable to third-party investors in our consolidated funds, and reclassifies interest income to interest expense, net. |
As of September 30, 2019 | |||||||||||||||
Oaktree and Operating Subsidiaries | Consolidated Funds | Eliminations | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Assets: | |||||||||||||||
Cash and cash-equivalents | $ | 356,431 | $ | — | $ | — | $ | 356,431 | |||||||
U.S. Treasury and other securities | 24,025 | — | — | 24,025 | |||||||||||
Corporate investments | 1,985,916 | — | (844,684 | ) | 1,141,232 | ||||||||||
Deferred tax assets | 441,322 | — | — | 441,322 | |||||||||||
Operating lease assets | 102,608 | — | — | 102,608 | |||||||||||
Receivables and other assets | 679,795 | — | (3,747 | ) | 676,048 | ||||||||||
Assets of consolidated funds | — | 8,997,529 | — | 8,997,529 | |||||||||||
Total assets | $ | 3,590,097 | $ | 8,997,529 | $ | (848,431 | ) | $ | 11,739,195 | ||||||
Liabilities and Capital: | |||||||||||||||
Liabilities: | |||||||||||||||
Accounts payable and accrued expenses | $ | 403,238 | $ | — | $ | (1,362 | ) | $ | 401,876 | ||||||
Due to affiliates | 179,478 | — | — | 179,478 | |||||||||||
Debt obligations | 746,343 | — | — | 746,343 | |||||||||||
Operating lease liabilities | 131,282 | — | — | 131,282 | |||||||||||
Liabilities of consolidated funds | — | 7,252,625 | (183,627 | ) | 7,068,998 | ||||||||||
Total liabilities | 1,460,341 | 7,252,625 | (184,989 | ) | 8,527,977 | ||||||||||
Non-controlling redeemable interests in consolidated funds | — | — | 1,081,462 | 1,081,462 | |||||||||||
Capital: | |||||||||||||||
Capital attributable to OCG preferred unitholders | 400,584 | — | — | 400,584 | |||||||||||
Capital attributable to OCG Class A unitholders | 1,165,087 | 405,960 | (405,960 | ) | 1,165,087 | ||||||||||
Non-controlling interest in consolidated subsidiaries | 564,085 | 257,482 | (257,482 | ) | 564,085 | ||||||||||
Non-controlling interest in consolidated funds | — | 1,081,462 | (1,081,462 | ) | — | ||||||||||
Total capital | 2,129,756 | 1,744,904 | (1,744,904 | ) | 2,129,756 | ||||||||||
Total liabilities and capital | $ | 3,590,097 | $ | 8,997,529 | $ | (848,431 | ) | $ | 11,739,195 |
As of | |||||||||||
September 30, 2019 | June 30, 2019 | September 30, 2018 | |||||||||
(in thousands) | |||||||||||
Oaktree funds: | |||||||||||
Credit | $ | 1,153,930 | $ | 1,014,918 | $ | 1,026,207 | |||||
Private Equity | 311,368 | 283,377 | 296,224 | ||||||||
Real Assets | 433,388 | 366,615 | 239,208 | ||||||||
Listed Equities | 51,050 | 65,700 | 94,258 | ||||||||
Non-Oaktree | 41,759 | 65,618 | 63,936 | ||||||||
Total corporate investments – Non-GAAP | 1,991,495 | 1,796,228 | 1,719,833 | ||||||||
Adjustments (1) | (5,579 | ) | 7,389 | 33,850 | |||||||
Total corporate investments – Oaktree and operating subsidiaries | 1,985,916 | 1,803,617 | 1,753,683 | ||||||||
Eliminations | (844,684 | ) | (649,164 | ) | (698,332 | ) | |||||
Total corporate investments – Consolidated | $ | 1,141,232 | $ | 1,154,453 | $ | 1,055,351 |
(1) | This adjusts CLO investments carried at amortized cost to fair value for GAAP reporting. |
• | raising capital from third-party investors; |
• | using the capital provided by us and third-party investors to fund investments and operating expenses; |
• | financing certain investments with indebtedness; |
• | generating cash flows through the realization of investments, as well as the collection of interest and dividend income; and |
• | distributing net cash flows to fund investors and to us. |
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Funds | $ | 898,560 | $ | 469,702 | |||
Eliminated in consolidation | (644,082 | ) | (257,275 | ) | |||
Total investments | $ | 254,478 | $ | 212,427 |
Nine months Ended September 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Funds | $ | 695,110 | $ | 356,702 | |||
Eliminated in consolidation | (321,194 | ) | (110,901 | ) | |||
Total proceeds | $ | 373,916 | $ | 245,801 |
Remainder of 2019 | 2020-2021 | 2022-2023 | Thereafter | Total | |||||||||||||||
(in thousands) | |||||||||||||||||||
Oaktree and Operating Subsidiaries: | |||||||||||||||||||
Operating lease obligations (1) | $ | 4,874 | $ | 36,419 | $ | 33,689 | $ | 84,617 | $ | 159,599 | |||||||||
Debt obligations payable (2) | — | — | 150,000 | 600,000 | 750,000 | ||||||||||||||
Interest obligations on debt (3) | 6,968 | 55,897 | 52,448 | 148,671 | 263,984 | ||||||||||||||
Tax receivable agreement | — | 28,305 | 39,639 | 110,096 | 178,040 | ||||||||||||||
Contingent consideration (4) | 6,405 | — | — | — | 6,405 | ||||||||||||||
Commitments to Oaktree and third-party funds (5) | 365,148 | — | — | — | 365,148 | ||||||||||||||
Subtotal | 383,395 | 120,621 | 275,776 | 943,384 | 1,723,176 | ||||||||||||||
Consolidated Funds: | |||||||||||||||||||
Debt obligations payable (2) | — | — | — | 976,470 | 976,470 | ||||||||||||||
Interest obligations on debt (3) | 8,271 | 66,168 | 66,168 | 147,589 | 288,196 | ||||||||||||||
Debt obligations of CLOs (2) | 600,481 | 169,372 | — | 4,822,368 | 5,592,221 | ||||||||||||||
Interest on debt obligations of CLOs (3) | 39,512 | 268,589 | 267,511 | 844,228 | 1,419,840 | ||||||||||||||
Commitments to fund investments (6) | 21,421 | — | — | — | 21,421 | ||||||||||||||
Total | $ | 669,685 | $ | 504,129 | $ | 333,679 | $ | 6,790,655 | $ | 8,298,148 |
(1) | We lease our office space under agreements that expire periodically through 2031. The table includes both guaranteed and expected minimum lease payments for these leases and does not project other lease-related payments. These leases are classified as operating leases for financial statement purposes and as are recorded as operating lease right-of-use assets and operating lease liabilities in our consolidated statements of financial condition. |
(2) | These obligations represent future principal payments, gross of debt issuance costs, and for CLOs, the par value. |
(3) | Interest obligations include accrued interest on outstanding indebtedness. Where applicable, current interest rates are applied to estimate future interest obligations on variable-rate debt. |
(4) | This represents the undiscounted contingent consideration obligation as of September 30, 2019. Due to uncertainty in the timing of payment, if any, the entire amount is presented in the 2019 column. Please see note 17 to our condensed consolidated financial statements for more information. |
(5) | These obligations represent commitments by us to provide general partner capital funding to our funds and limited partner capital funding to funds managed by unaffiliated third parties. These amounts are generally due on demand and are therefore presented in the 2019 column. Capital commitments are expected to be called over a period of several years. |
(6) | These obligations represent commitments by our funds to make investments or fund uncalled contingent commitments. These amounts are generally due either on demand or by various contractual dates that vary by investment and are therefore presented in the 2019 column. Capital commitments are expected to be called over a period of several years. |
As of September 30, 2019 | Level I | Level II | Level III | Total | |||||||||||
Closed-end funds | $ | — | $ | 6,940,821 | $ | 336,826 | $ | 7,277,647 | |||||||
Open-end funds | 476 | 646,710 | 37,753 | 684,939 | |||||||||||
Evergreen funds | 2,662 | 118,002 | 184,460 | 305,124 | |||||||||||
Total | $ | 3,138 | $ | 7,705,533 | $ | 559,039 | $ | 8,267,710 | |||||||
CLO debt obligations | $ | — | $ | (5,553,144 | ) | $ | — | $ | (5,553,144 | ) |
As of December 31, 2018 | Level I | Level II | Level III | Total | |||||||||||
Closed-end funds | $ | — | $ | 5,331,300 | $ | 93,428 | $ | 5,424,728 | |||||||
Open-end funds | 1,386 | 790,203 | 183,965 | 975,554 | |||||||||||
Evergreen funds | 21,311 | 60,475 | 48,529 | 130,315 | |||||||||||
Total | $ | 22,697 | $ | 6,181,978 | $ | 325,922 | $ | 6,530,597 | |||||||
CLO debt obligations | $ | — | $ | (4,127,994 | ) | $ | — | $ | (4,127,994 | ) |
• | our management fees (relating to (a) and (b) above) would have increased by $7.3 million; |
• | our operating expenses would have increased by $12.2 million; |
• | OCGH interest in net income of consolidated subsidiaries would have decreased by $2.6 million; and |
• | our income tax expense would have decreased by $0.6 million. |
As of September 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Investment Period | Total Committed Capital | % Invested (1) | % Drawn (2) | Fund Net Income Since Inception | Distri- butions Since Inception | Net Asset Value | Manage- ment Fee-gener- ating AUM | Incentive Income Recog- nized (Non-GAAP) | Accrued Incentives (Fund Level) (3) | Unreturne-d Drawn Capital Plus Accrued Preferred Return (4) | IRR Since Inception (5) | Multiple of Drawn Capital (6) | |||||||||||||||||||||||||||||||||||||
Start Date | End Date | Gross | Net | ||||||||||||||||||||||||||||||||||||||||||||||
Credit | (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
Distressed Debt | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund Xb (7)(13) | TBD | — | $ | 8,872 | 37 | % | 13 | % | $ | (150 | ) | $ | — | $ | 1,042 | $ | 1,166 | $ | — | $ | — | $ | 1,286 | nm | nm | 0.9x | |||||||||||||||||||||||
Oaktree Opportunities Fund X (7) | Jan. 2016 | Jan. 2019 | 3,603 | 86 | 86 | 1,122 | 618 | 3,584 | 2,917 | 72 | 148 | 3,108 | 20.4 | % | 12.2 | % | 1.5 | ||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund IX (7) | Jan. 2014 | Jan. 2017 | 5,066 | nm | 100 | 948 | 2,178 | 3,835 | 3,652 | — | — | 5,188 | 6.1 | 3.7 | 1.3 | ||||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund VIIIb | Aug. 2011 | Aug. 2014 | 2,692 | nm | 100 | 997 | 2,669 | 1,019 | 1,228 | 52 | — | 1,418 | 8.8 | 6.1 | 1.5 | ||||||||||||||||||||||||||||||||||
Special Account B | Nov. 2009 | Nov. 2012 | 1,031 | nm | 100 | 616 | 1,660 | 67 | 65 | 16 | 1 | — | 13.5 | 11.1 | 1.6 | ||||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund VIII (7) | Oct. 2009 | Oct. 2012 | 4,507 | nm | 100 | 2,559 | 6,771 | 294 | 339 | 452 | 46 | — | 12.8 | 9.0 | 1.7 | ||||||||||||||||||||||||||||||||||
OCM Opportunities Fund VIIb | May 2008 | May 2011 | 10,940 | nm | 90 | 9,033 | 18,582 | 295 | — | 1,705 | 49 | — | 21.8 | 16.5 | 2.0 | ||||||||||||||||||||||||||||||||||
OCM Opportunities Fund VII | Mar. 2007 | Mar. 2010 | 3,598 | nm | 100 | 1,486 | 4,908 | 176 | — | 87 | — | 384 | 10.2 | 7.4 | 1.5 | ||||||||||||||||||||||||||||||||||
Legacy funds (8) | Various | Various | 12,748 | nm | 100 | 10,773 | 23,500 | 22 | — | 1,626 | — | — | 23.6 | 18.5 | 1.8 | ||||||||||||||||||||||||||||||||||
21.9 | % | 15.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Private/Alternative Credit | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree European Capital Solutions Fund (7)(10) | Dec. 2015 | Dec. 2018 | €703 | 99 | % | 91 | % | €100 | €278 | €458 | € | 457 | € | 5 | € | 9 | €412 | 14.9 | % | 10.3 | % | 1.2x | |||||||||||||||||||||||||||
Oaktree European Dislocation Fund (10) | Oct. 2013 | Oct. 2016 | €294 | nm | 62 | €39 | €203 | €18 | € | 17 | € | 3 | € | 3 | €— | 18.6 | 13.0 | 1.3 | |||||||||||||||||||||||||||||||
Special Account E (10) | Oct. 2013 | Apr. 2015 | €379 | nm | 69 | €64 | €321 | €4 | € | 3 | € | 9 | € | 1 | €— | 14.2 | 11.0 | 1.3 | |||||||||||||||||||||||||||||||
15.2 | % | 10.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Mezzanine Fund IV (9) | Oct. 2014 | Oct. 2019 | $ | 852 | 95 | % | 90 | % | $ | 161 | $ | 347 | $ | 582 | $ | 568 | $ | 6 | $ | 16 | $ | 560 | 11.4 | % | 8.4 | % | 1.2x | ||||||||||||||||||||||
Oaktree Mezzanine Fund III (11) | Dec. 2009 | Dec. 2014 | 1,592 | nm | 89 | 479 | 1,837 | 65 | 51 | 34 | 16 | — | 15.3 | 10.4 / 9.3 | 1.4 | ||||||||||||||||||||||||||||||||||
OCM Mezzanine Fund II | Jun. 2005 | Jun. 2010 | 1,251 | nm | 88 | 480 | 1,694 | 37 | — | — | — | 138 | 10.8 | 7.2 | 1.5 | ||||||||||||||||||||||||||||||||||
OCM Mezzanine Fund (12) | Oct. 2001 | Oct. 2006 | 808 | nm | 96 | 302 | 1,075 | — | — | 38 | — | — | 15.4 | 10.8 / 10.5 | 1.5 | ||||||||||||||||||||||||||||||||||
13.0 | % | 8.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Emerging Markets Debt | |||||||||||||||||||||||||||||||||||||||||||||||||
Special Account H (13) | Sep. 2018 | Jul. 2022 | $ | 351 | 49 | % | 49 | % | $ | (27 | ) | $ | — | $ | 146 | $ | 142 | $ | — | $ | — | $ | 180 | nm | nm | 0.9x | |||||||||||||||||||||||
Oaktree Emerging Markets Opportunities Fund II (13) | TBD | — | 344 | 41 | 41 | (23 | ) | 3 | 114 | 132 | — | — | 142 | nm | nm | 0.9 | |||||||||||||||||||||||||||||||||
Oaktree Emerging Market Opportunities Fund | Sep. 2013 | Sep. 2017 | 384 | nm | 78 | 131 | 341 | 88 | 70 | 9 | 14 | 37 | 15.9 | % | 10.9 | % | 1.5 | ||||||||||||||||||||||||||||||||
Special Account F | Jan. 2014 | Sep. 2017 | 253 | nm | 96 | 85 | 275 | 52 | 52 | 7 | 9 | 19 | 15.6 | 11.2 | 1.4 | ||||||||||||||||||||||||||||||||||
12.8 | % | 7.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Private Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporate Private Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree European Principal Fund IV (7)(10)(13) | Jul. 2017 | Jul. 2022 | €1,119 | 99 | % | 97 | % | €302 | €206 | €1,181 | € | 1,082 | € | — | € | 58 | €1,000 | nm | nm | 1.3x | |||||||||||||||||||||||||||||
Oaktree European Principal Fund III (10) | Nov. 2011 | Nov. 2016 | €3,164 | nm | 87 | €2,588 | €2,511 | €2,827 | € | 2,500 | € | 154 | € | 347 | €1,603 | 17.5 | % | 12.0 | % | 2.1 | |||||||||||||||||||||||||||||
OCM European Principal Opportunities Fund II (10) | Dec. 2007 | Dec. 2012 | €1,759 | nm | 100 | €204 | €1,913 | €22 | € | — | € | 29 | € | — | €769 | 6.7 | 2.2 | 1.3 | |||||||||||||||||||||||||||||||
OCM European Principal Opportunities Fund | Mar. 2006 | Mar. 2009 | $ | 495 | nm | 96 | $ | 454 | $ | 927 | $ | — | $ | — | $ | 87 | $ | — | $ | — | 11.7 | 8.9 | 2.1 | ||||||||||||||||||||||||||
13.1 | % | 8.6 | % |
As of September 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Investment Period | Total Committed Capital | % Invested (1) | % Drawn (2) | Fund Net Income Since Inception | Distri- butions Since Inception | Net Asset Value | Manage- ment Fee-gener- ating AUM | Incentive Income Recog- nized (Non-GAAP) | Accrued Incentives (Fund Level) (3) | Unreturned Drawn Capital Plus Accrued Preferred Return (4) | IRR Since Inception (5) | Multiple of Drawn Capital (6) | |||||||||||||||||||||||||||||||||||||
Start Date | End Date | Gross | Net | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Power Opportunities Fund V (13) | Apr. 2019 | Apr. 2024 | $ | 1,400 | 13 | % | 12 | % | $ | (16 | ) | $ | — | $ | 153 | $ | 1,390 | $ | — | $ | — | $ | 177 | nm | nm | 1.0x | |||||||||||||||||||||||
Oaktree Power Opportunities Fund IV | Nov. 2015 | Nov. 2020 | 1,106 | 94 | 94 | 222 | 112 | 1,154 | 1,078 | — | 11 | 1,139 | 11.8 | % | 8.2 | % | 1.3 | ||||||||||||||||||||||||||||||||
Oaktree Power Opportunities Fund III | Apr. 2010 | Apr. 2015 | 1,062 | nm | 73 | 505 | 1,045 | 239 | 322 | 50 | 46 | — | 20.4 | 13.1 | 1.8 | ||||||||||||||||||||||||||||||||||
Legacy funds (8) | Various | Various | 1,470 | nm | 63 | 1,687 | 2,615 | (4 | ) | — | 123 | — | — | 35.1 | 27.4 | 2.8 | |||||||||||||||||||||||||||||||||
34.2 | 25.8 | ||||||||||||||||||||||||||||||||||||||||||||||||
Special Situations | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Special Situations Fund II (7)(13) | TBD | — | $ | 2,204 | 11 | % | 4 | % | $ | — | $ | 9 | $ | 76 | $ | 234 | $ | — | $ | — | $ | 36 | nm | nm | 1.0x | ||||||||||||||||||||||||
Oaktree Special Situations Fund (7) | Nov. 2015 | Nov. 2018 | 1,377 | 100 | 86 | 184 | 190 | 1,175 | 1,115 | — | 12 | 1,168 | 14.4 | % | 8.2 | % | 1.2x | ||||||||||||||||||||||||||||||||
Other funds: | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Principal Continuation Fund V (13) | — | — | $ | 886 | nm | 80 | % | $ | 146 | $ | — | $ | 853 | $ | 711 | $ | — | $ | 14 | $ | 708 | nm | nm | 1.2x | |||||||||||||||||||||||||
Oaktree Principal Fund V | Feb. 2009 | Feb. 2015 | 2,827 | nm | 91 | 312 | 2,388 | 510 | 613 | 50 | — | 2,308 | 5.9 | % | 1.9 | % | 1.3 | ||||||||||||||||||||||||||||||||
Special Account C | Dec. 2008 | Feb. 2014 | 505 | nm | 91 | 102 | 490 | 72 | 235 | 21 | — | 295 | 7.2 | 3.5 | 1.4 | ||||||||||||||||||||||||||||||||||
OCM Principal Opportunities Fund IV | Oct. 2006 | Oct. 2011 | 3,328 | nm | 100 | 2,900 | 6,166 | 63 | — | 554 | 11 | — | 12.2 | 8.8 | 2.0 | ||||||||||||||||||||||||||||||||||
Legacy funds (8) | Various | Various | 3,701 | nm | 100 | 2,718 | 6,404 | 15 | — | 407 | — | — | 14.4 | 11.1 | 1.8 | ||||||||||||||||||||||||||||||||||
12.8 | % | 9.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Real Assets | |||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Real Estate Opportunities Fund VII (14) | Jan. 2016 | Jan. 2020 | $ | 2,921 | 92 | % | 92 | % | $ | 716 | $ | 666 | $ | 2,746 | $ | 2,794 | $ | — | $ | 148 | $ | 2,189 | 44.8 | % | 25.7 | % | 1.3x | ||||||||||||||||||||||
Oaktree Real Estate Opportunities Fund VI | Aug. 2012 | Aug. 2016 | 2,677 | nm | 100 | 1,440 | 2,887 | 1,230 | 983 | 90 | 188 | 812 | 14.4 | 9.3 | 1.7 | ||||||||||||||||||||||||||||||||||
Oaktree Real Estate Opportunities Fund V | Mar. 2011 | Mar. 2015 | 1,283 | nm | 100 | 972 | 2,106 | 150 | 96 | 157 | 29 | — | 16.9 | 12.5 | 1.9 | ||||||||||||||||||||||||||||||||||
Special Account D | Nov. 2009 | Nov. 2012 | 256 | nm | 100 | 207 | 435 | 36 | — | 17 | 4 | — | 14.6 | 12.7 | 1.8 | ||||||||||||||||||||||||||||||||||
Oaktree Real Estate Opportunities Fund IV | Dec. 2007 | Dec. 2011 | 450 | nm | 100 | 390 | 805 | 36 | — | 66 | 8 | — | 15.6 | 10.6 | 2.0 | ||||||||||||||||||||||||||||||||||
Legacy funds (8) | Various | Various | 2,341 | nm | 99 | 2,010 | 4,326 | — | — | 232 | — | — | 15.2 | 11.9 | 1.9 | ||||||||||||||||||||||||||||||||||
15.5 | % | 11.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Real Estate Debt Fund II (9)(13) | Mar. 2017 | Mar. 2020 | $ | 2,087 | 69 | % | 39 | % | $ | 123 | $ | 114 | $ | 823 | $ | 1,403 | $ | — | $ | 18 | $ | 756 | nm | nm | 1.2x | ||||||||||||||||||||||||
Oaktree Real Estate Debt Fund | Sep. 2013 | Oct. 2016 | 1,112 | nm | 83 | 219 | 994 | 150 | 162 | 12 | 19 | 11 | 19.2 | % | 14.3 | % | 1.3 | ||||||||||||||||||||||||||||||||
Oaktree PPIP Fund (15) | Dec. 2009 | Dec. 2012 | 2,322 | nm | 48 | 457 | 1,570 | — | — | 47 | — | — | 28.2 | % | n/a | 1.4 | |||||||||||||||||||||||||||||||||
Special Account G (Real Estate Income) (9) | Oct. 2016 | Oct. 2020 | $ | 615 | 99 | % | 99 | % | $ | 161 | $ | 100 | $ | 669 | $ | 574 | $ | — | $ | 31 | $ | 603 | 14.7 | % | 10.7 | % | 1.3x | ||||||||||||||||||||||
Infrastructure | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Transportation Infrastructure Fund (13) | Dec. 2018 | Dec. 2023 | $ | 1,518 | 33 | % | 33 | % | $ | (17 | ) | $ | 11 | $ | 466 | $ | 1,296 | $ | — | $ | — | $ | 507 | nm | nm | 1.0x | |||||||||||||||||||||||
Highstar III Successor Funds (13) | — | — | 1,081 | 87 | 87 | (8 | ) | 2 | 931 | 945 | — | — | 1,687 | nm | nm | 1.0 | |||||||||||||||||||||||||||||||||
Highstar Capital IV (16) | Nov. 2010 | Nov. 2016 | 2,000 | nm | 100 | (38 | ) | 1,512 | 857 | 1,160 | — | — | 1,645 | 3.9 | % | — | % | 1.1 | |||||||||||||||||||||||||||||||
29,937 | (10) | 1,295 | (10) | ||||||||||||||||||||||||||||||||||||||||||||||
Other (17) | 7,988 | 11 | |||||||||||||||||||||||||||||||||||||||||||||||
Total (18) | $ | 37,925 | $ | 1,306 |
(1) | For our incentive-creating closed-end funds in their investment periods, this percentage equals invested capital divided by committed capital. Invested capital for this purpose is the sum of capital drawn from fund investors plus net borrowings outstanding under a fund-level credit facility (if any), where such borrowings were made in lieu of drawing capital from fund investors. |
(2) | Represents capital drawn from fund investors, net of distributions to such investors of uninvested capital, divided by committed capital. The aggregate change in drawn capital for the three months ended September 30, 2019 was $2.5 billion. |
(3) | Accrued incentives (fund level) exclude non-GAAP incentive income previously recognized. |
(4) | Unreturned drawn capital plus accrued preferred return reflects the amount the fund needs to distribute to its investors as a return of capital and a preferred return (as applicable) before Oaktree is entitled to receive incentive income (other than tax distributions) from the fund. |
(5) | The internal rate of return (“IRR”) is the annualized implied discount rate calculated from a series of cash flows. It is the return that equates the present value of all capital invested in an investment to the present value of all returns of capital, or the discount rate that will provide a net present value of all cash flows equal to zero. Fund-level IRRs are calculated based upon the actual timing of cash contributions/distributions to investors and the residual value of such investor’s capital accounts at the end of the applicable period being measured. Gross IRRs reflect returns before allocation of management fees, expenses and any incentive allocation to the fund’s general partner. To the extent material, gross returns include certain transaction, advisory, directors or other ancillary fees (“fee income”) paid directly to us in connection with our funds’ activities (we credit all such fee income back to the respective fund(s) so that our funds’ investors share pro rata in the fee income’s economic benefit). Net IRRs reflect returns to non-affiliated investors after allocation of management fees, expenses and any incentive allocation to the fund’s general partner. |
(6) | Multiple of drawn capital is calculated as drawn capital plus gross income and, if applicable, fee income before fees and expenses divided by drawn capital. |
(7) | Fund data include the performance of the main fund and any associated fund-of-one accounts, except the gross and net IRRs presented reflect only the performance of the main fund. Certain fund-of-one accounts pay management fees based on cost basis, rather than committed capital. |
(8) | Legacy funds represent certain predecessor funds within the relevant strategy or product that have substantially or completely liquidated their assets, including funds managed by certain Oaktree investment professionals while employed at the Trust Company of the West prior to Oaktree’s founding in 1995. When these employees joined Oaktree upon, or shortly after, its founding, they continued to manage the fund through the end of its term pursuant to a sub-advisory relationship between the Trust Company of the West and Oaktree. |
(9) | Management fees during the investment period are calculated on drawn capital or cost basis, rather than committed capital. As a result, as of September 30, 2019 management fee-generating AUM included only that portion of committed capital that had been drawn. |
(10) | Aggregate IRRs or totals are based on the conversion of cash flows or amounts, respectively, from euros to USD using the September 30, 2019 spot rate of $1.09. |
(11) | The fund’s partnership interests are divided into Class A and Class B interests, with the Class A interests having priority with respect to the distribution of current income and disposition proceeds. The net IRR for Class A interests was 10.4% and Class B interests was 9.3%. The combined net IRR for Class A and Class B interests was 9.9%. |
(12) | The fund’s partnership interests are divided into Class A and Class B interests, with the Class A interests having priority with respect to the distribution of current income and disposition proceeds. The net IRR for Class A interests was 10.8% and Class B interests was 10.5%. The combined net IRR for the Class A and Class B interests was 10.6%. |
(13) | The IRR is not considered meaningful (“nm”) as the period from the initial capital contribution through September 30, 2019 was less than 36 months. |
(14) | A portion of this fund pays management fees based on drawn, rather than committed, capital. |
(15) | Due to differences in the allocation of income and expenses to this fund’s two primary limited partners, the U.S. Treasury and Oaktree PPIP Private Fund, a combined net IRR is not presented. Of the $2,322 million in capital commitments, $1,161 million related to the Oaktree PPIP Private Fund, whose gross and net IRR were 24.7% and 18.6%, respectively. |
(16) | The fund follows the American-style distribution waterfall, whereby the general partner may receive an incentive allocation as soon as it has returned the drawn capital and paid a preferred return on the fund’s realized investments (i.e., on a deal-by-deal basis). However, such cash distributions of incentives may be subject to repayment, or clawback. As of September 30, 2019, Oaktree had not recognized any incentive income from this fund. The accrued incentives (fund level) for this fund represents Oaktree’s effective 8% of the potential incentives generated by this fund in accordance with the terms of the Highstar acquisition. |
(17) | This includes our closed-end Senior Loan funds, CLOs, a non-Oaktree fund and certain separate accounts and co-investments. |
(18) | The total excludes one closed-end fund with management fee-generating AUM of $58 million as of September 30, 2019, which has been included as part of the Strategic Credit strategy within the evergreen funds table. |
Manage- ment Fee-gener- ating AUM as of September 30, 2019 | Twelve Months Ended September 30, 2019 | Since Inception through September 30, 2019 | |||||||||||||||||||||||||
Strategy Inception | Rates of Return (1) | Annualized Rates of Return (1) | Sharpe Ratio | ||||||||||||||||||||||||
Oaktree | Rele- vant Bench- mark | Oaktree | Rele- vant Bench- mark | Oaktree Gross | Rele- vant Bench- mark | ||||||||||||||||||||||
Gross | Net | Gross | Net | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Credit | |||||||||||||||||||||||||||
High Yield Bonds | |||||||||||||||||||||||||||
U.S. High Yield Bonds | 1986 | $ | 11,454 | 5.7 | % | 5.2 | % | 5.6 | % | 9.0 | % | 8.5 | % | 8.2 | % | 0.78 | 0.56 | ||||||||||
Global High Yield Bonds | 2010 | 2,469 | 5.6 | 5.0 | 6.3 | 6.8 | 6.3 | 6.6 | 1.05 | 1.05 | |||||||||||||||||
European High Yield Bonds | 1999 | 421 | 9.5 | 8.9 | 7.9 | 8.0 | 7.5 | 6.4 | 0.74 | 0.47 | |||||||||||||||||
Convertibles | |||||||||||||||||||||||||||
U.S. Convertibles | 1987 | 273 | 0.3 | (0.2 | ) | 4.0 | 9.1 | 8.6 | 8.3 | 0.49 | 0.39 | ||||||||||||||||
Non-U.S. Convertibles | 1994 | 602 | 1.6 | 1.1 | 2.1 | 7.9 | 7.3 | 5.2 | 0.75 | 0.38 | |||||||||||||||||
High Income Convertibles | 1989 | 1,037 | 4.5 | 3.9 | 5.7 | 10.9 | 10.1 | 8.0 | 1.05 | 0.60 | |||||||||||||||||
Senior Loans | |||||||||||||||||||||||||||
U.S. Senior Loans | 2008 | 503 | 2.2 | 1.7 | 3.1 | 5.7 | 5.2 | 5.1 | 1.05 | 0.65 | |||||||||||||||||
European Senior Loans | 2009 | 1,091 | 3.4 | 2.9 | 2.3 | 7.0 | 6.5 | 7.5 | 1.64 | 1.61 | |||||||||||||||||
Multi-Strategy Credit | |||||||||||||||||||||||||||
Multi-Strategy Credit (2) | Various | 3,278 | nm | nm | nm | nm | nm | nm | nm | nm | |||||||||||||||||
Listed Equities | |||||||||||||||||||||||||||
Emerging Markets Equities | |||||||||||||||||||||||||||
Emerging Markets Equities | 2011 | 5,227 | 4.1 | 3.3 | (2.0 | ) | 2.5 | 1.7 | 0.8 | 0.10 | 0.01 | ||||||||||||||||
Total | $ | 26,355 |
(1) | Returns represent time-weighted rates of return, including reinvestment of income, net of commissions and transaction costs. The returns for Relevant Benchmarks are presented on a gross basis. |
(2) | Includes Global Credit Fund and individual accounts across various strategies with different investment mandates. As such, a combined performance measure is not considered meaningful (“nm”). |
As of September 30, 2019 | Twelve Months Ended September 30, 2019 | Since Inception through September 30, 2019 | |||||||||||||||||||||||
AUM | Manage- ment Fee-gener- ating AUM | Accrued Incen- tives (Fund Level) | |||||||||||||||||||||||
Strategy Inception | Rates of Return (1) | Annualized Rates of Return (1) | |||||||||||||||||||||||
Gross | Net | Gross | Net | ||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||
Credit | |||||||||||||||||||||||||
Private/Alternative Credit | |||||||||||||||||||||||||
Strategic Credit (2). | 2012 | $ | 5,445 | $ | 5,271 | $ | 10 | 1.4 | % | 1.1 | % | 8.6 | % | 6.4 | % | ||||||||||
Distressed Debt | |||||||||||||||||||||||||
Value Opportunities | 2007 | 990 | 947 | 1 | (1.2 | ) | (2.0 | ) | 9.2 | 5.6 | |||||||||||||||
Emerging Markets Debt | |||||||||||||||||||||||||
Emerging Markets Debt (3) | 2015 | 1,197 | 860 | — | (6.1 | ) | (7.0 | ) | 9.4 | 6.8 | |||||||||||||||
Listed Equities | |||||||||||||||||||||||||
Value/Other Equities | |||||||||||||||||||||||||
Value Equities (4) | 2012 | 733 | 508 | 7 | 2.5 | 0.9 | 18.3 | 13.2 | |||||||||||||||||
7,586 | 18 | ||||||||||||||||||||||||
Other (5) | 828 | 18 | |||||||||||||||||||||||
Restructured funds | — | 4 | |||||||||||||||||||||||
Total (2) | $ | 8,414 | $ | 40 |
(1) | Returns represent time-weighted rates of return. |
Oaktree Capital Group, LLC | ||
By: | /s/ Daniel D. Levin | |
Name: | Daniel D. Levin | |
Title: | Chief Financial Officer and Authorized Signatory |
Exhibit No. | Description of Exhibit |
3.1 | |
3.2 | |
10.1 | |
10.2 | |
10.3 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | XBRL Instance Document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
Period | Amount (Senior Service Partners Group) | Amount (Non-Senior Service Partners) |
At any time following January 1, 2022 | Up to 20% of Merger Closing Units Amount held collectively by Senior Service Partners Group | Up to 12.5% of Merger Closing Units Amount held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2023 | Up to 40% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Senior Service Partners Group | Up to 25% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2024 | Up to 60% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Senior Service Partners Group | Up to 37.5% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2025 | Up to 80% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Senior Service Partners Group | Up to 50% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2026 | Up to 100% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Senior Service Partners Group | Up to 62.5% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2027 | Up to 100% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Senior Service Partners Group | Up to 75% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2028 | Up to 100% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Senior Service Partners Group | Up to 87.5% of Merger Closing Units Amount (inclusive of prior Exchanges) held collectively by Non-Senior Service Partners Group |
At any time following January 1, 2029 | Up to 100% of Merger Closing Units Amount held collectively by Senior Service Partners Group | Up to 100% of Merger Closing Units Amount held collectively by Non-Senior Service Partners Group |
A. | each Exchanging LP participating in such Closing shall deliver, or shall instruct the delivery of on its behalf, to the Paying Agent either (I) an IRS Form W-9 or (II) a certification from OCGH dated as of the Exchange Date which complies with the requirements of Section 7.03 of IRS Notice 2018-29 or any corresponding requirements of any superseding Treasury Regulations or other official guidance, certifying the amount of the OCGH Limited Partner’s share of OCGH’s partnership liabilities (which certification, if OCGH is not the Paying Agent, OCGH may deliver directly to Brookfield on behalf of the Exchanging LP); |
B. | OCGH shall deliver, or shall instruct the delivery of on its behalf, to the Paying Agent a certificate from OCGH dated as of the Exchange Date which complies with the requirements of Treasury Regulation Section 1.1445-11T(d)(2), certifying that the transactions contemplated hereby are exempt from withholding under Section 1445 of the Code; and |
C. | the Paying Agent shall (or if the Paying Agent is not OCGH, the parties shall direct the Paying Agent to) deliver to Brookfield, upon receipt, the forms and/or certificates delivered by the OCGH Limited Partners and OCGH pursuant to Section 2.2(d)(i)(A) and/or Section 2.2(d)(i)(B). |
A. | each OCGH Limited Partner participating in such Closing shall deliver, or shall instruct the delivery of on its behalf, to the Paying Agent the number of OCGH Units to be sold by such OCGH Limited Partner; |
B. | Brookfield and OCGH, as applicable, shall deliver, or cause to be delivered, in each case to the extent applicable, (1) to the Paying Agent its pro rata portion of the Exchange Consideration (in cash, ExchangeCo Units, Atlas Notes or a combination of the foregoing) for the number of OCGH Units being acquired by Brookfield or OCGH, as applicable and (2) to the applicable OCGH Limited Partner, as directed by OCGH, its pro rata portion of the Exchange Consideration in Class A Shares, in each case as determined pursuant to Section 2.1(f); and |
C. | OCGH shall deliver to the Paying Agent, to the extent certificated, the certificate or certificates representing a number of Class B OCG Units and Class B AOH Units in each case equal to the number of OCGH Units being acquired by Brookfield or OCGH. |
I. | RESTRUCTURING |
1. | Oslo Holdings Contribution (“Step 5”). Immediately prior to the Effective Time: |
a. | pursuant to one or more power of attorneys granted by such OCGH LP to OCGH, OCGH, on behalf of each OCGH LP, hereby contributes, transfers, assigns, conveys and delivers to Oslo Holdings, such OCGH LP’s right, title and interest in and to the number of OCGH units set forth on the books and records of OCGH, which in the aggregate represent 25.3 million OCGH units (each, a “Contributed OCGH Unit”), and as consideration therefor, Oslo Holdings hereby issues to such OCGH LP a number of “Common Units” (as defined in the limited liability company agreement of Oslo Holdings, an “Oslo Holdings Unit”) equal to the number of such OCGH LP’s Contributed OCGH Units, free and clear of all liens (other than liens under the organizational documents of Oslo Holdings and securities laws); and |
b. | pursuant to one or more power of attorneys granted by such OCGH LP to OCGH, OCGH, on behalf of each OCGH LP, hereby joins such OCGH LP to the Amended and Restated Limited Liability Agreement of Oslo Holdings LLC, dated as of September 30, 2019, as a “Member” thereof; and |
c. | OCGH hereby resigns as a member of Oslo Holdings and all of OCGH’s limited liability company interests (if any) in Oslo Holdings are hereby cancelled for no consideration and shall cease to exist. |
2. | Oslo Holdings Merger Sub Assignment (“Step 5b”). Effective as of immediately following the Effective Time but prior to Step 8 (as defined below): |
a. | Oaktree Holdings, LLC, a Delaware limited liability company (“Oaktree Holdings, LLC”), hereby contributes, transfers, assigns, conveys and delivers its right, title and interest in and to Oslo Holdings Merger Sub to OCM Holdings I, LLC, a Delaware limited liability company (“OCM Holdings I, LLC”) as a capital contribution increasing the paid in capital of Oaktree Holdings, LLC in OCM Holdings I, LLC. |
b. | Each of Oaktree Holdings, Ltd., a Cayman Islands company (“Oaktree Holdings, Ltd.”), Oaktree Holdings, Inc., a Delaware corporation (“Oaktree Holdings, Inc.”), Oaktree AIF Holdings, Inc., a Delaware corporation (“Oaktree AIF Holdings, Inc.”), and OCM Holdings I, LLC hereby, pursuant to the limited liability company agreement of Oslo Holdings Merger Sub, appoints OCM Holdings I, LLC as the “Manager” thereunder and removes Oaktree Holdings, LLC as the “Manager” thereunder. |
3. | Contribution of Cash & Issuance of Exchange Note (“Step 8”) |
a. | Contribution to Intermediate Holding Companies (“Step 8a”). Effective as of immediately following the Effective Time: |
i. | OCG LLC hereby contributes, transfers, assigns, conveys and delivers its right, title and interest in and to (each an “OCG Cash Contributed Amount”) (A) $211,002,439 in cash to Oaktree Holdings, LLC, (B) $23,444,715 in cash to Oaktree Holdings, Ltd., (C) $523,598,644 in cash to Oaktree Holdings, Inc. and (D) $23,444,715 in cash to Oaktree AIF Holdings, Inc., which in each case is a capital contribution increasing the paid in capital of OCG LLC in each entity set forth in clauses (A)-(D). |
ii. | Immediately following the consummation of clause (i) above, Oaktree Holdings, LLC hereby contributes, transfers, assigns, conveys and delivers the applicable OCG Cash Contributed Amount received by it to OCM Holdings I, LLC as a capital contribution increasing the paid in capital of Oaktree Holdings, LLC in OCM Holdings I, LLC. |
b. | Oslo Holdings Merger Sub Subscription (“Step 8b”). Effective immediately following the consummation of Step 8a, OCM Holdings I, LLC, Oaktree Holdings, Ltd., Oaktree Holdings, Inc. and Oaktree AIF Holding, Inc. (collectively, the “Intermediate Holding Companies”) hereby contribute all of the OCG Cash Contributed Amounts received by them in Step 8a above, representing an aggregate of $781,490,513, to Oslo Holdings Merger Sub as a capital contribution increasing the paid in capital of each such Person in Oslo Holdings Merger Sub, and Exhibit A of the limited liability company agreement of Oslo Holdings Merger Sub shall be updated to reflect initial “Membership Percentages” of 27%, 3%, 67% and 3%, respectively, for each such Intermediate Holding Company, which shall be updated within 60 days of the Effective Date to reflect such Membership Percentages as mutually agreed upon by BAM and OCG LLC . |
c. | Funding Agreement by and between Oslo Holdings Merger Sub and BAM (“Step 8c”). Effective immediately following the completion of Step 8b: |
i. | Oslo Holdings Merger Sub hereby issues a note (the “BAM Shares Exchange Note”), in the form attached hereto as Exhibit A, to BAM and BAM hereby acquires and accepts the BAM Shares Exchange Note; |
ii. | BAM hereby agrees to: (x) issue 10,072,152 class A limited voting shares of BAM (“BAM Class A Shares”), as fully paid and non-assessable shares, to American Stock Transfer & Trust Company and (y) direct American Stock Transfer & Trust Company to transfer the 10,072,152 BAM Class A Shares to the unitholders of Oslo Holdings, on behalf of Oslo Holdings Merger Sub, at the Subsequent Effective Time, in consideration for the issuance by Oslo Holdings Merger Sub to BAM of the BAM Shares Exchange Note; and |
iii. | the Parties hereto agree that the agreement by BAM to effect the issuance and transfer of the BAM Class A Shares set forth in this Step 8c constitutes full payment of the issuance price of the BAM Shares Exchange Note. |
d. | Cash Payment Direction Instructions. For ease of administration, the Parties agree that the OCG Cash Contributed Amount shall be paid by OCG LLC to American Stock Transfer & Trust Company, on behalf of Oslo Holdings Merger Sub, which payment shall be in satisfaction of the payments set forth in Step 8a and Step 8b. |
4. | Contribution of BAM Shares Exchange Note (“Step 9”) |
a. | Contribution to BUSI (“Step 9a”). Effective immediately following the completion of Step 8c, BAM hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the BAM Shares Exchange Note to BUSI and, as consideration therefor, BUSI hereby issues to BAM 537,993 shares of class A common stock, par value $0.01, of BUSI (the “BUSI Subscription Interests”). |
b. | Contribution to Atlas Holdings (“Step 9b”). Effective immediately following the completion of Step 9a, BUSI hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the BAM Shares Exchange Note to Atlas Holdings, and, as consideration therefor, Atlas Holdings hereby issues to BUSI 5,379,931 common shares of Atlas Holdings. |
c. | Contribution to OCG LLC (“Step 9c”). Effective immediately following the completion of Step 9b, Atlas Holdings hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the BAM Shares Exchange Note to OCG LLC and, as consideration therefor, OCG LLC hereby issues to Atlas Holdings 9,352,045 Class A Units of OCG LLC (the “OCG LLC Subscription Interests”). |
d. | Contribution to Intermediate Holding Companies (“Step 9d”). Effective immediately following the completion of Step 9c: |
i. | OCG LLC hereby contributes, transfers, assigns, conveys and delivers 27%, 3%, 67% and 3% of its right, title and interest in and to the BAM Shares Exchange Note to (A) Oaktree Holdings, LLC, (B) Oaktree Holdings, Ltd., (C) Oaktree Holdings, Inc. and (D) Oaktree AIF Holdings, Inc., respectively, as a capital contribution increasing the paid in capital of OCG LLC in each such Person. |
ii. | Effective immediately upon the consummation of clause (i) above, Oaktree Holdings, LLC hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the BAM Shares Exchange Note received in clause (i) above to OCM Holdings I, LLC as a capital contribution increasing the paid in capital of Oaktree Holdings, LLC in OCM Holdings I, LLC. |
e. | Contribution to Oslo Holdings Merger Sub (“Step 9e”). Effective immediately following the completion of Step 9d, each Intermediate Holding Company hereby contributes, transfers, assigns, conveys and delivers all of such Intermediate Holding Company’s right, title and interest in and to the BAM Shares Exchange Note to Oslo Holdings Merger Sub as a capital contribution increasing the paid in capital of each such Person in Oslo Holdings Merger Sub, thereby extinguishing the BAM Shares Exchange Note. |
f. | Contribution to BHCI (“Step 9f”). Effective immediately following the completion of Step 9e, BAM hereby contributes, transfers, assigns, conveys and delivers the BUSI Subscription Interests received in Step 9a to BHCI and, as consideration therefor, BHCI hereby issues to BAM 5,379,931 common shares in the capital of BHCI (the “BHCI Subscription Interests”) as fully paid and non-assessable shares. |
g. | Contribution to BUSHI (“Step 9g”). Effective immediately following the completion of Step 9f, BHCI hereby contributes, transfers, assigns, conveys and delivers the BUSI Subscription Interests received in Step 9f to BUSHI and, as consideration therefor, BUSHI hereby issues to BHCI 5,379,931 common shares in the capital of BUSHI (the “BUSHI Subscription Interests”) as fully paid and non-assessable shares. |
h. | Notwithstanding any provision of the BAM Shares Exchange Note, upon the contribution and transfer of the BAM Shares Exchange Note pursuant to Step 9a, Step 9b, Step 9c, Step 9d and Step 9e, the applicable transferee shall become the noteholder of the BAM Shares Exchange Note and such transferee shall be bound by the terms and conditions of the BAM Shares Exchange Note, and the Parties hereto hereby agree that (x) such contribution and transfer of the BAM Shares Exchange Note and (y) the applicable transferee becoming the noteholder of the BAM Shares Exchange Note shall, in either case of clauses (x) or (y), not cancel or otherwise affect the BAM Shares Exchange Note. |
5. | Liquidation of Oslo Holdings Merger Sub (“Step 11”) |
a. | Distribution of Contributed OCGH Units. Effective immediately following the Subsequent Merger Effective Time, the Intermediate Holding Companies hereby agree to wind up Oslo Holdings Merger Sub and, in furtherance thereof, Oslo Holdings Merger Sub hereby distributes to each Intermediate Holding Company, representing all of the members of Oslo Holdings Merger Sub, its pro rata portion of the Contributed OCGH Units received in Step 5, representing all of the assets held by Oslo Holdings Merger Sub. |
b. | Dissolution of Oslo Holdings Merger Sub. Following the consummation of the distribution set forth in clause (a) above, the Intermediate Holding Companies shall cause a certificate of cancellation in respect of Oslo Holdings Merger Sub to be filed with the Secretary of State of the State of Delaware. |
6. | Redemption of OCGH Units (“Step 12”). Effective immediately following the completion of Step 11: |
a. | OCM Holdings I, LLC. OCGH hereby transfers, assigns, conveys and delivers 6,830,760 limited partnership units of each of (i) Oaktree Capital I, LP, (ii) Oaktree Capital Management (Cayman), LP, (iii) Oaktree Capital II, LP, (iv) Oaktree Investment Holdings, LP, (v) Oaktree Capital Management, LP and (vi) Oaktree AIF Investments, LP to OCM Holdings I, LLC and, as consideration therefor, OCM Holdings I, LLC hereby transfers, assigns, conveys and delivers 6,830,760 OCGH Units to OCGH, representing all of the Contributed OCGH Units received by OCM Holdings I, LLC in Step 11. |
b. | Oaktree Holdings, Ltd. OCGH hereby transfers, assigns, conveys and delivers 758,973 limited partnership units of each of (i) Oaktree Capital I, LP, (ii) Oaktree Capital Management (Cayman), LP, (iii) Oaktree Capital II, LP, (iv) Oaktree Investment Holdings, LP, (v) Oaktree Capital Management, LP and (vi) Oaktree AIF Investments, LP to Oaktree Holdings, Ltd. and, as consideration therefor, Oaktree Holdings, Ltd. hereby transfers, assigns, conveys and delivers 758,973 OCGH Units to OCGH, representing all of the Contributed OCGH Units received by Oaktree Holdings, Ltd. in Step 11. |
c. | Oaktree Holdings, Inc. OCGH hereby transfers, assigns, conveys and delivers 16,950,404 limited partnership units of each of (i) Oaktree Capital I, LP, (ii) Oaktree Capital Management (Cayman), LP, (iii) Oaktree Capital II, LP, (iv) Oaktree Investment Holdings, LP, (v) Oaktree Capital Management, LP and (vi) Oaktree AIF Investments, LP to Oaktree Holdings, Inc. and, as consideration therefor, Oaktree Holdings, Inc. hereby transfers, assigns, conveys and delivers 16,950,404 OCGH Units to OCGH, representing all of the Contributed OCGH Units received by Oaktree Holdings, Inc. in Step 11. |
d. | Oaktree AIF Holdings, Inc. OCGH hereby transfers, assigns, conveys and delivers 758,973 limited partnership units of each of (i) Oaktree Capital I, LP, (ii) Oaktree Capital Management (Cayman), LP, (iii) Oaktree Capital II, LP, (iv) Oaktree Investment Holdings, LP, (v) Oaktree Capital Management, LP and (vi) Oaktree AIF Investments, LP to Oaktree AIF Holdings, Inc. and, as consideration therefor, Oaktree AIF Holdings, Inc. hereby transfers, assigns, conveys and delivers 758,973 OCGH Units to OCGH, representing all of the Contributed OCGH Units received by Oaktree AIF Holdings, Inc. in Step 11. |
e. | Cancellation of OCGH Units. Notwithstanding any provision of the limited partnership agreement of OCGH, upon the transfer, assignment, conveyance and delivery of the OCGH Units pursuant to this Step 12, each Intermediate Holding Company shall cease to be a limited partner of OCGH. To the extent permitted by applicable law, each Intermediate Holding Company hereby irrevocably appoints any officer of OCGH as its attorney-in-fact solely to cause the distribution and transfer of such OCGH Units on the books and records of OCGH with full power of substitution in the premises. Upon receipt of the OCGH units by OCGH pursuant to this Step 12, such OCGH Units shall be cancelled and shall cease to exist. |
7. | Rebalancing of Operating Group Units (“Step 13”) |
a. | OCM Holdings I, LLC. OCM Holdings I, LLC hereby transfers, assigns, conveys and delivers (i) 6,830,760 limited partnership units of Oaktree Capital Management (Cayman), LP to Oaktree Holdings, Ltd., (ii) 6,830,760 limited partnership units of each of (A) Oaktree Capital II, LP, (B) Oaktree Investment Holdings, LP, and (C) Oaktree Capital Management, LP to Oaktree Holdings, Inc. and (iii) 6,830,760 limited partnership units of Oaktree AIF Investments, LP to Oaktree AIF Holdings, Inc. |
b. | Oaktree Holdings, Ltd. Oaktree Holdings, Ltd. hereby transfers, assigns, conveys and delivers (i) 758,973 limited partnership units of Oaktree Capital I, LP to OCM Holdings I, LLC, (ii) 758,973 limited partnership units of each of (A) Oaktree Capital II, LP, (B) Oaktree Investment Holdings, LP, and (C) Oaktree Capital Management, LP to Oaktree Holdings, Inc., and (iii) 758,973 limited partnership units of Oaktree AIF Investments, LP to Oaktree AIF Holdings, Inc. |
c. | Oaktree Holdings, Inc. Oaktree Holdings, Inc. hereby transfers, assigns, conveys and delivers (i) 16,950,404 limited partnership units of Oaktree Capital I, LP to OCM Holdings I, LLC, (ii) 16,950,404 limited partnership units of Oaktree Capital Management (Cayman), LP to Oaktree Holdings, Ltd., and (iii) 16,950,404 limited partnership units of Oaktree AIF Investments, LP to Oaktree AIF Holdings, Inc. |
d. | Oaktree AIF Holdings, Inc. Oaktree AIF Holdings, Inc. hereby transfers, assigns, conveys and delivers (i) 758,973 limited partnership units of Oaktree Capital I, LP to OCM Holdings I, LLC, (ii) 758,973 limited partnership units of Oaktree Capital Management (Cayman), LP to Oaktree Holdings, Ltd., (iii) 758,973 limited partnership units of each of (A) Oaktree Capital II, LP, (B) Oaktree Investment Holdings, LP, (C) Oaktree Capital Management, LP to Oaktree Holdings, Inc. |
8. | Post-Closing Distribution (“Step 14”) |
a. | Distributions from Oaktree Capital I, LP to OCM Holdings I, LLC and OCGH (“Step 14a”). Immediately following Step 13: |
i. | Oaktree Capital I, LP hereby distributes to OCM Holdings I, LLC, and OCM Holdings I, LLC hereby accepts from Oaktree Capital I, LP, $122,467,424. |
ii. | Oaktree Capital I, LP hereby distributes to OCGH, and OCGH hereby accepts from Oaktree Capital I, LP, $77,532,576. |
b. | Distributions from Oaktree Capital II, LP to Oaktree Holdings, Inc. and OCGH (“Step 14b”). Immediately following Step 14a: |
i. | Oaktree Capital II, LP hereby distributes to Oaktree Holdings, Inc., and Oaktree Holdings, Inc. hereby accepts from Oaktree Capital II, LP, $97,973,938. |
ii. | Oaktree Capital II, LP hereby distributes to OCGH, and OCGH hereby accepts from Oaktree Capital II, LP, $62,026,062. |
c. | Distributions from Oaktree Investment Holdings LP to Oaktree Holdings, Inc. and OCGH (“Step 14c”). Immediately following Step 14b: |
i. | Oaktree Investment Holdings LP hereby distributes to Oaktree Holdings, Inc., and Oaktree Holdings, Inc. hereby accepts from Oaktree Investment Holdings LP, $24,493,485. |
ii. | Oaktree Investment Holdings LP hereby distributes to OCGH, and OCGH hereby accepts from Oaktree Investment Holdings LP, $15,506,515. |
d. | Distributions from Oaktree Capital Management LP to Oaktree Holdings, Inc. and OCGH (“Step 14d”). Immediately following Step 14c: |
i. | Oaktree Capital Management LP hereby distributes to Oaktree Holdings, Inc., and Oaktree Holdings, Inc. hereby accepts from Oaktree Capital Management LP, $30,616,856. |
ii. | Oaktree Capital Management LP hereby distributes to OCGH, and OCGH hereby accepts from Oaktree Capital Management LP, $19,383,144. |
e. | Distributions from Oaktree AIF Investments LP to Oaktree AIF Holdings, Inc. and OCGH (“Step 14e”). Immediately following Step 14d: |
i. | Oaktree AIF Investments LP hereby distributes to Oaktree AIF Holdings, Inc., and Oaktree AIF Holdings, Inc. hereby accepts from Oaktree AIF Investments LP, $30,616,856. |
ii. | Oaktree AIF Investments LP hereby distributes to OCGH, and OCGH hereby accepts from Oaktree AIF Investments LP, $19,383,144. |
f. | Distribution from OCM Holdings I, LLC to Oaktree Holdings LLC and distribution from Oaktree Holdings LLC to OCG LLC (“Step 14f”). Immediately following Step 14e: |
i. | OCM Holdings I, LLC hereby distributes to Oaktree Holdings LLC, and Oaktree Holdings LLC hereby accepts from OCM Holdings I, LLC, the $122,222,489 received by OCM Holdings I, LLC in Step 14a. |
ii. | OCM Holdings I, LLC hereby distributes to Oaktree Holdings, Ltd. and Oaktree Holdings, Ltd. hereby accepts from OCM Holdings I, LLC, the $244,935 received by OCM Holdings I, LLC in Step 14a. |
iii. | Oaktree Holdings LLC hereby distributes to OCG LLC, and OCG LLC hereby accepts from Oaktree Holdings LLC, the $122,222,489 received by Oaktree Holdings LLC in Step 14f. |
iv. | Oaktree Holdings, Ltd. hereby contributes to OCG LLC, and OCG LLC hereby accepts from Oaktree Holdings, Ltd., the $244,935 received by Oaktree Holdings Ltd. received in Step 14f. |
g. | Oaktree Holdings, Inc. transfers to OCG LLC the $153,084,279 received by Oaktree Holdings, Inc. in Steps 14b, 14c and 14d, as partial repayment of the Note issued by Oaktree Holdings, Inc. to OCG dated as of April 17, 2012, the Note issued by Oaktree Holdings, Inc. to OCG dated as of June 5, 2013, the Note issued by Oaktree Holdings, Inc. to OCG dated as of March 11, 2015, the Note issued by Oaktree Holdings, Inc. to OCG dated as of October 15, 2017, the Note issued by Oaktree Holdings, Inc. to OCG dated as of December 15, 2017, or the Note issued by Oaktree Holdings, Inc. to OCG dated as of February 12, 2018 (“Step 14g”). |
h. | Oaktree AIF Holdings, Inc. hereby distributes to OCG LLC, and OCG LLC hereby accepts from Oaktree AIF Holdings, Inc. as a distribution the $30,616,856 received by Oaktree AIF Holdings, Inc. in Step 14e (“Step 14h”). |
i. | Distribution from OCG LLC to Atlas Holdings (“Step 14i”). Immediately following Step 14h, OCG LLC hereby distributes to Atlas Holdings, and Atlas Holdings hereby accepts from OCG LLC the $306,168,559 received by OCG LLC in Steps 14f, 14g and 14h. |
j. | Transfer from Atlas Holdings to BUSHI (“Step 14j”). Immediately following Step 14i, Atlas Holdings hereby transfers to BUSHI, and BUSHI hereby accepts from Atlas Holdings the $306,168,559 received by Atlas Holdings in Step 14i, as partial repayment of the interest bearing demand loan issued by Atlas Holdings to BUSHI in the form attached hereto as Exhibit B (the “Intercompany Note”). |
k. | Distribution from BUSHI to BHCI as a return of capital (“Step 14k”). Immediately following Step 14j, BUSHI hereby transfers to BHCI, and BHCI hereby accepts and acknowledges receipt from BUSHI of the amount of $306,168,559, representing a return of capital declared by BUSHI on the issued common shares of BUSHI on the date hereof. |
l. | Transfer from BHCI to BAM (“Step 14l”). Immediately following Step 14k, BHCI hereby transfers to BAM, and BAM hereby accepts from BHCI, the $306,168,559 received by BHCI in Step 14k, as partial repayment of the Canadian Dollar denominated interest-free note in the form attached hereto as Exhibit C (the “BHCI Interest Free Note”). |
m. | Cash Payment Direction Instructions. For ease of administration, the Parties agree that the amounts set forth in Steps 14a through Step 14i, other than the amounts to be paid to OCGH in Steps 14a through 14e, shall be paid by Oaktree Capital I, LP, Oaktree Capital II, LP, Oaktree Investment Holdings LP, Oaktree Capital Management LP and Oaktree AIF Investments LP, respectively, directly to Atlas Holdings, which payment shall be in satisfaction of the payments set forth in Steps 14a through 14i, other than the amounts to be paid to OCGH in Steps 14a through 14e. |
9. | Governance Structuring (“Step 15”) |
a. | Contribution from BUSI to Atlas Holdings (“Step 15a”). Effective promptly following BAM’s and OCG LLC’s receipt of approval from the Federal Energy Regulatory Commission to the transfer of jurisdictional assets in the Contemplated Transaction pursuant to Section 203 of the Federal Power Act, as amended, and in no event before (i) the completion of Step 14 and (ii) 12:01 AM on October 1, 2019 , BUSI hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to all of the issued and outstanding equity interests of Atlas OCM Holdings (the “Atlas OCM Contributed Interests”) as a capital contribution increasing the paid in capital of BUSI to Atlas Holdings. |
b. | Contribution from Atlas Holdings to OCG LLC (“Step 15b”). Effective immediately following the completion of Step 15a, Atlas Holdings hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the Atlas OCM Contributed Interests to OCG LLC as a capital contribution increasing the paid in capital of Atlas Holdings to OCG LLC. |
c. | Contribution from OCG LLC to Oaktree Holdings, Inc. (“Step 15c”). Effective immediately following the completion of Step 15b, OCG LLC hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the Atlas OCM Contributed Interests to Oaktree Holdings, Inc., as a capital contribution increasing the paid in capital of OCG LLC in Oaktree Holdings, Inc. |
d. | Contribution of Oaktree Capital Management LP (“Step 15d”). Effective immediately following the completion of Step 15c, Oaktree Holdings, Inc. hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the general partnership interests and limited partnership interests in Oaktree Capital Management, LP (the “Oaktree Capital Management Contributed Interests”) to Atlas OCM Holdings, and, as consideration for the Oaktree Capital Management Contributed Interests, Atlas OCM Holdings hereby issues to Oaktree Holdings, Inc., a number of class A units of Atlas OCM Holdings equal to the number of Class A Units of OCG LLC held by Atlas Holdings after the Effective Time, which shall be duly and validly issued (the “Atlas OCM Class A Subscription Interests”). |
e. | Issuance of Atlas OCM Units (“Step 15e”). Effective immediately following the completion of Step 15d, Atlas OCM Holdings hereby issues a number of class B units of Atlas OCM Holdings equal to the number of Class B Units of OCG LLC held by OCGH (the “Atlas OCM Class B Subscription Interests”) to OCGH. |
f. | Amendment and Restatement of Operating Agreement (“Step 15f”). Concurrently with the completion of Step 15e, Atlas OCM Holdings shall amend and restate its operating agreement to be in the form attached hereto as Exhibit D. |
g. | Formation of New GPs (“Step 15g”). Concurrently with the completion of Step 15f, OCGH hereby transfers, assigns, conveys and delivers all of its right, title and interest in and to Oaktree Investment Holdings GP LLC, a Delaware limited liability company, to Atlas OCM Holdings for no consideration. |
h. | Contribution of Oaktree Capital Management LP (“Step 15h”). Immediately following the consummation of Step 15g, Atlas OCM Holdings hereby contributes, transfers, assigns, conveys and delivers all of its right, title and interest in and to the general partnership interests and limited partnership interests in Oaktree Capital Management LP to Oaktree Capital Management GP LLC; |
i. | Resignation of Oaktree Holdings, Inc. (“Step 15i”). Effective immediately following the completion of Step 15h, (i) Oaktree Holdings, Inc. hereby resigns as the general partner of Oaktree Capital II LP, and Oaktree Capital II GP LLC is hereby appointed as general partner of Oaktree Capital II LP and (ii) Oaktree Holdings, Inc. hereby resigns as the general partner of Oaktree Investment Holdings LP, and Oaktree Investment Holdings GP LLC is hereby appointed as general partner of Oaktree Investment Holdings LP. |
j. | Resignation of Oaktree AIF Holdings, Inc. (“Step 15j”). Effective immediately following the completion of Step 15i, Oaktree AIF Holdings, Inc. hereby resigns as the general partner of Oaktree AIF Investments LP, and Oaktree AIF Investment GP LLC is hereby appointed as general partner of Oaktree AIF Investments LP. |
10. | Distributions of U.S. Blockers (“Step 16”). Effective as of October 1, 2019, OCG LLC hereby distributes to Atlas Holdings all of the issued and outstanding shares of common stock of Oaktree Holdings, Inc., and all of the issued and outstanding shares of common stock of Oaktree AIF Holdings Inc., (the “Oaktree Holdings and Oaktree AIF Holdings Transferred Interests”), and Atlas Holdings hereby acquires and accepts the conveyance, transfer, assignment and delivery of, the Oaktree Holdings and Oaktree AIF Holdings Transferred Interests. |
11. | OCGH LP Transfer of Class B Voting Shares (“Step 17”). Effective immediately following the completion of Step 16, OCGH hereby transfers, assigns, conveys and delivers all of its right, title and interest in and to the class B interests of Oaktree AIF Holdings, Inc. to Atlas Holdings for no consideration. |
12. | Repayment of Intercompany Notes (“Step 18”). Effective immediately following the completion of Step 17, (i) OCG LLC hereby distributes to Atlas Holdings all of OCG LLC’s rights and obligations with respect to intercompany notes payable by Oaktree Holdings, Inc. and (ii) Atlas Holdings hereby transfers, assigns, conveys and delivers all of its right, title and interest in and to all of the class A units of OCG LLC to BUSHI in consideration for the partial repayment of the Intercompany Note issued by Atlas Holdings to BUSHI. |
13. | U.S. Blocker Restructuring (“Step 19”). Effective immediately following the completion of Step 18, the parties set forth therein shall enter into the Agreement and Plan of Merger attached hereto as Exhibits E and F and, upon the effectiveness of the mergers contemplated therein, (i) Oaktree New Holdings LLC hereby distributes all of its limited partnership interests in Oaktree Capital II LP and Oaktree Investment Holdings LP to Atlas Holdings and (ii) immediately thereafter, Atlas Holdings hereby contributes all of the equity interests of Oaktree New Holdings LLC to Atlas Holdings II LLC, a Delaware limited liability company (“Atlas Holdings II”) and, in consideration therefor, Atlas Holdings II hereby issues to Atlas Holdings (i) a number of common shares in the capital of Atlas Holdings II (the “Atlas Holdings II Subscription Interests”) as fully paid and non-assessable shares and (ii) a note in the form attached hereto as Exhibit G (the “Atlas Holdings Note”). |
II. | Miscellaneous. |
1. | Further Assurances. Each Party will take any and all actions, including the execution of consents, certificates, documents or instruments, necessary or appropriate to give effect to the transactions contemplated by this Agreement. |
2. | Stock or Other Interest Power. To the extent permitted by applicable law, with respect to any conveyance or distribution of equity interests (the “Transferred Interests”) of a Person (the “Issuer”) pursuant to the provisions hereof having certificated or uncertificated equity, this Agreement constitutes an irrevocable stock or other interest power and power of attorney of the applicable transferor with respect to such Transferred Interests, and the applicable transferor hereby irrevocably appoints any officer of such Issuer as its attorney-in-fact solely to cause the distribution and/or transfer of the applicable Transferred Interests on the books and records of such Issuer, with full power of substitution in the premises. Upon receipt by such Issuer of (i) this Agreement and the certificate(s), if any, representing such Transferred Interests, (ii) this Agreement and an affidavit of lost stock or other interest certificate for such Transferred Interests, if applicable, or (iii) this Agreement, if such Transferred Interests are uncertificated, the distribution and/or transfer of such Transferred Interests shall be recorded on the books and records of the applicable Issuer. |
3. | Assignment and Admission. Notwithstanding any provision of the governing documents of any Issuer, upon the transfer and/or distribution of the applicable Transferred Interests in an Issuer which is a limited partnership or limited liability company, the applicable transferee as set forth herein shall be admitted to such as a partner or member, as applicable, of such Issuer and shall be bound by the terms and conditions of the governing documents of such Issuer, and the applicable transferor shall cease to be a partner or member, as applicable, of such Issuer and shall cease to have or exercise any right or power as a partner or member, as applicable, of such Issuer. The Parties hereto agree that (i) the assignment of any Transferred Interests, (ii) the admission of any transferee as provided herein as a partner or member, as applicable, and (iii) the cessation of the transferor as a partner or member, as applicable, shall not dissolve the Issuer and such Issuer shall continue its legal existence. Subject to the terms of the governing documents of such Issuer, the governing documents of such Issuer shall be amended to reflect the assignment of the applicable Transferred Interests hereunder. |
4. | Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party or, in the case of a waiver, by each Party against whom the waiver is to be effective. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the Parties hereto. |
5. | Binding Effect; Benefit; Assignment. |
6. | No Third-Party Beneficiaries. This Agreement is for the sole benefit of the Parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. |
7. | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law that would cause the application of the laws of any jurisdiction other than the State of Delaware. The Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any Party or any of its affiliates or against any Party or any of its affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. |
8. | Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. |
9. | Counterparts; Effectiveness. This Agreement may be executed in one or more counterparts (including by facsimile or other electronic means), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by all of the other Parties. Until and unless each Party has received a counterpart hereof signed by each other Party, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). |
10. | Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other governmental authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. |
11. | Entire Agreement. This Agreement is being executed and delivered pursuant to the Merger Agreement and effects the restructuring contemplated therein. This Agreement (including any exhibits and schedules attached hereto) and the Merger Agreement represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings between the parties hereto with respect to such subject matter. In the event of a conflict between any provision of this Agreement and any provision of the Merger Agreement, the provisions of the Merger Agreement shall prevail; provided, however, that this Agreement shall control with respect to the determination of assets that are transferred, exchanged, contributed, distributed, assigned and conveyed between the parties hereto. |
12. | Interpretation. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Merger Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections and Exhibits are to Articles, Sections and Exhibits of this Agreement unless otherwise specified. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any applicable law shall be deemed to refer to such applicable law as amended from time to time and, if applicable, to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References to “$” and “dollars” are to the currency of the United States. |
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 of Oaktree Capital Group, LLC; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay S. Wintrob |
Jay S. Wintrob |
Chief Executive Officer |
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 of Oaktree Capital Group, LLC; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Daniel D. Levin |
Daniel D. Levin |
Chief Financial Officer |
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods presented. |
/s/ Jay S. Wintrob |
Jay S. Wintrob |
Chief Executive Officer |
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods presented. |
/s/ Daniel D. Levin |
Daniel D. Levin |
Chief Financial Officer |
(Principal Financial Officer) |
DERIVATIVES AND HEDGING (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Net Forward Currency Sell Contracts Under Freestanding Derivatives | The fair value of freestanding derivatives consisted of the following:
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Summary of Impact of Freestanding Derivative Instruments on Condensed Consolidated Statement of Operations | The following tables summarize net gains (losses) from derivatives held by the consolidated funds:
Realized and unrealized gains and losses arising from freestanding derivatives were recorded in the condensed consolidated statements of operations as follows:
(1) To the extent that the Company’s freestanding derivatives are utilized to hedge its foreign-currency exposure to investment income and management fees earned from consolidated funds, the related hedged items are eliminated in consolidation, with the derivative impact (a positive number reflects a reduction in expenses) reflected in consolidated general and administrative expense.
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Balance Sheet Offsetting Assets | The table below sets forth the setoff rights and related arrangements associated with derivatives held by the Company. The “gross amounts not offset in statements of financial condition” columns represent derivatives that management has elected not to offset in the consolidated statements of financial condition even though they are eligible to be offset in accordance with applicable accounting guidance.
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Balance Sheet Offsetting Liabilities | The table below sets forth the setoff rights and related arrangements associated with derivatives held by the Company. The “gross amounts not offset in statements of financial condition” columns represent derivatives that management has elected not to offset in the consolidated statements of financial condition even though they are eligible to be offset in accordance with applicable accounting guidance.
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LEASES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Lease Expense | The components of lease expense included in general and administrative expense were as follows:
Supplemental cash flow information related to leases was as follows:
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Maturities of Operating Lease Liabilities | As of September 30, 2019, maturities of operating lease liabilities were as follows:
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LEASES |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES The Company has operating leases related to office space and certain equipment with remaining lease terms expiring within one year through 2031, some of which include options to extend the leases for up to five years and some of which include options to terminate the leases within one year. As of September 30, 2019, there were no finance leases outstanding and no additional operating leases that have not yet commenced. The components of lease expense included in general and administrative expense were as follows:
Supplemental cash flow information related to leases was as follows:
As of September 30, 2019, maturities of operating lease liabilities were as follows:
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DERIVATIVES AND HEDGING |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVES AND HEDGING | DERIVATIVES AND HEDGING The fair value of freestanding derivatives consisted of the following:
Realized and unrealized gains and losses arising from freestanding derivatives were recorded in the condensed consolidated statements of operations as follows:
There were no derivatives outstanding that were designated as hedging instruments for accounting purposes as of September 30, 2019 and December 31, 2018. Derivatives Held By Consolidated Funds Certain consolidated funds utilize derivatives in their ongoing investment operations. These derivatives primarily consist of foreign-currency forward contracts and options utilized to manage currency risk, interest-rate swaps to hedge interest-rate risk, options and futures used to hedge certain exposures for specific securities, and total-return swaps utilized mainly to obtain exposure to leveraged loans or to participate in foreign markets not readily accessible. The primary risk exposure for options and futures is price, while the primary risk exposure for total-return swaps is credit. None of the derivative instruments are accounted for as a hedging instrument utilizing hedge accounting. The following tables summarize net gains (losses) from derivatives held by the consolidated funds:
Balance Sheet Offsetting The Company recognizes all derivatives as assets or liabilities at fair value in its condensed consolidated statements of financial condition. In connection with its derivative activities, the Company generally enters into agreements subject to enforceable master netting arrangements that allow the Company to offset derivative assets and liabilities in the same currency by specific derivative type or, in the event of default by the counterparty, to offset derivative assets and liabilities with the same counterparty. While these derivatives are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities based on gross fair value in its condensed consolidated statements of financial condition. The table below sets forth the setoff rights and related arrangements associated with derivatives held by the Company. The “gross amounts not offset in statements of financial condition” columns represent derivatives that management has elected not to offset in the consolidated statements of financial condition even though they are eligible to be offset in accordance with applicable accounting guidance.
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REVENUES |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUES | REVENUES Revenues disaggregated by fund structure is set forth below. Revenues are affected by economic factors related to the asset class composition of the holdings and the contractual terms such as the basis for calculating the management fees and investors’ ability to redeem.
Contract Balances The Company receives management fees monthly or quarterly in accordance with its contracts with customers. Incentive income is received when the fund makes a distribution. Contract assets relate to the Company’s conditional right to receive payment for its performance completed under the contract. Receivables are recorded when the right to consideration becomes unconditional (i.e., only requires the passage of time). Contract liabilities (i.e., deferred revenues) relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenues when the Company provides investment management services. The table below sets forth contract balances for the periods indicated:
(2) Revenue recognized in the three months and nine months ended September 30, 2019 from amounts included in the contract liability balance were $5.4 million and $17.1 million.
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NON-CONTROLLING REDEEMABLE INTERESTS IN CONSOLIDATED FUNDS (Details) - USD ($) $ in Thousands |
9 Months Ended | |
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Sep. 30, 2019 |
Sep. 30, 2018 |
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Non-Controlling Redeemable Interests in Consolidated Funds [Abstract] | ||
Beginning balance | $ 961,622 | $ 860,548 |
Initial consolidation of a fund | 54,964 | 0 |
Deconsolidation of a fund | (424,603) | 0 |
Contributions | 519,684 | 107,962 |
Distributions | (107,071) | (214,096) |
Net income | 82,234 | 18,399 |
Change in distributions payable | 4,652 | (75,196) |
Foreign currency translation and other | (10,020) | (1,310) |
Ending balance | $ 1,081,462 | $ 696,307 |
DEBT OBLIGATIONS AND CREDIT FACILITIES - Debt Obligations of CLOs (Details) - Consolidated Funds - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
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Sep. 30, 2019 |
Dec. 31, 2018 |
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Debt Instrument [Line Items] | ||
Fair Value | $ 5,553,144 | $ 4,127,994 |
Senior secured notes | ||
Debt Instrument [Line Items] | ||
Fair Value | $ 5,354,638 | $ 3,976,602 |
Weighted Average Interest Rate | 2.95% | 2.69% |
Weighted Average Remaining Maturity (years) | 9 years 1 month 6 days | 9 years 10 months 24 days |
Subordinated note | ||
Debt Instrument [Line Items] | ||
Fair Value | $ 198,506 | $ 151,392 |
Weighted Average Remaining Maturity (years) | 8 years 7 months 6 days | 9 years 8 months 12 days |
EARNINGS PER UNIT - Computations of Net Income (Loss) Per Unit (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Earnings Per Share [Abstract] | ||||
Net income (loss) attributable to OCG Class A unitholders | $ (16,648) | $ 52,750 | $ 73,050 | $ 136,603 |
Weighted average number of Class A units outstanding (basic and diluted) (in shares) | 75,995 | 71,369 | 74,005 | 70,167 |
Basic and diluted net income (loss) per Class A unit (in dollars per share) | $ (0.22) | $ 0.74 | $ 0.99 | $ 1.95 |
EQUITY-BASED COMPENSATION - Equity Value Units (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Apr. 26, 2017 |
Sep. 30, 2019 |
|
Equity Value Units, Equity Settled | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of awards outstanding (in shares) | 1,000,000 | |
Equity Value Units, Cash Settled | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of awards outstanding (in shares) | 1,000,000 | |
Equity Value Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Recapitalization percentage | 33.33% | |
Number of units granted (in shares) | 225,000 | |
Unrecognized compensation cost | $ 0.3 | |
Weighted average remaining service term | 3 months |
LEASES - Supplemental Cash Flow Information (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows used for operating leases | $ 14,628 |
Weighted average remaining lease term for operating leases (in years) | 9 years 6 months |
Weighted average discount rate for operating leases | 4.40% |
INVESTMENTS - Equity-method Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Schedule of Equity Method Investments [Line Items] | ||||
Revenues / investment income | $ 353,289 | $ 489,240 | $ 1,584,552 | $ 1,423,993 |
Interest expense | (54,329) | (70,803) | (185,227) | (203,418) |
Other expenses | (157,878) | (210,752) | (639,180) | (628,109) |
Net realized and unrealized gain (loss) on investments | (204,820) | 832,725 | 916,097 | 2,178,524 |
Net income (loss) | $ (63,738) | $ 1,040,410 | $ 1,676,242 | $ 2,770,990 |
Maximum | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Ownership percentage | 2.50% | 2.50% | ||
Double Line | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Ownership percentage | 20.00% | 20.00% |
FIXED ASSETS FIXED ASSETS (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Property, Plant and Equipment | ||
Fixed assets | $ 172,927 | $ 167,594 |
Accumulated depreciation | (68,457) | (61,879) |
Fixed assets, net | 104,470 | 105,715 |
Furniture, equipment and capitalized software | ||
Property, Plant and Equipment | ||
Fixed assets | 28,781 | 26,345 |
Leasehold improvements | ||
Property, Plant and Equipment | ||
Fixed assets | 72,724 | 70,270 |
Corporate aircraft | ||
Property, Plant and Equipment | ||
Fixed assets | 66,120 | 66,120 |
Other | ||
Property, Plant and Equipment | ||
Fixed assets | $ 5,302 | $ 4,859 |
RELATED-PARTY TRANSACTIONS - Amounts Due from and Due to Affiliates (Details) - Oaktree Capital Group Excluding Consolidated Funds - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Due from affiliates: | ||
Loans | $ 6,416 | $ 3,857 |
Amounts due from unconsolidated funds | 66,490 | 72,588 |
Management fees and incentive income due from unconsolidated funds | 76,106 | 362,971 |
Payments made on behalf of unconsolidated entities | 3,220 | 3,469 |
Non-interest bearing advances made to certain non-controlling interest holders and employees | 0 | 27 |
Total due from affiliates | 152,232 | 442,912 |
Due to affiliates: | ||
Due to OCGH unitholders in connection with the tax receivable agreement (please see note 16) | 178,040 | 187,872 |
Amounts due to senior executives, certain non-controlling interest holders and employees | 1,438 | 495 |
Total due to affiliates | $ 179,478 | $ 188,367 |
DERIVATIVES AND HEDGING - Fair Value of Freestanding Derivatives (Details) - Not Designated as Hedging Instrument - Oaktree Capital Group Excluding Consolidated Funds - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Assets, Notional | $ 417,683 | $ 300,704 |
Assets, Fair Value | 16,930 | 4,038 |
Liabilities, Notional | (65,140) | (77,156) |
Liabilities, Fair Value | (2,071) | (2,318) |
Foreign-currency forward contracts | ||
Derivative [Line Items] | ||
Assets, Notional | 184,856 | 58,254 |
Assets, Fair Value | 3,856 | 1,654 |
Liabilities, Notional | (65,140) | (77,156) |
Liabilities, Fair Value | (2,071) | (2,318) |
Cross-currency swap | ||
Derivative [Line Items] | ||
Assets, Notional | 232,827 | 242,450 |
Assets, Fair Value | 13,074 | 2,384 |
Liabilities, Notional | 0 | 0 |
Liabilities, Fair Value | $ 0 | $ 0 |
EQUITY-BASED COMPENSATION - Deferred Equity Units (Details) - OCGH Units $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Exchange ratio | 1 |
Vesting period | 10 years |
Nonvested units outstanding (in shares) | 807,307,000 |
Unrecognized compensation cost | $ | $ 1.4 |
Awards expected to vest (in shares) | 39,808,000 |
Weighted average period of recognition non-vested equity-based awards | 5 years 6 months |
Lack-of-marketability discount | 17.50% |
RELATED-PARTY TRANSACTIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amounts Due from and Due to Affiliates | Amounts due from and to affiliates are set forth below. The fair value of amounts due from and to affiliates is a Level III valuation and was valued based on a discounted cash-flow analysis. The carrying value of amounts due from affiliates approximated fair value due to their short-term nature or because their average interest rate approximated the Company’s cost of debt. The fair value of amounts due to affiliates approximated $94,043 and $95,953 as of September 30, 2019 and December 31, 2018, respectively, based on a discount rate of 10.0%.
|
REVENUES - Contract Balances (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | |||
Receivables | $ 76,106 | $ 76,106 | $ 74,795 |
Contract assets | 0 | 0 | 288,176 |
Contract liabilities | (26,383) | (26,383) | $ (26,549) |
Revenue recognized from amounts included in contract liability balance | $ 5,400 | $ 17,100 |
SEGMENT REPORTING |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTINGAs a global investment manager, the Company provides investment management services through funds and separate accounts. The Company earns revenues from the management fees and incentive income generated by the funds that it manages. Management uses a consolidated approach to assess performance and allocate resources. As such, the Company’s business is comprised of one segment, the investment management business. The Company conducts its investment management business primarily in the United States, where substantially all of its revenues are generated. |
EQUITY-BASED COMPENSATION |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Noncash Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY-BASED COMPENSATION | EQUITY-BASED COMPENSATION Restated Exchange Agreement At the closing of the Mergers, Oaktree entered into a Third Amended and Restated Exchange Agreement that will, among other things, allow limited partners of OCGH to exchange (“Exchanges”) certain vested limited partnership units of OCGH (“OCGH Units”) for cash, Brookfield Class A Shares, notes issued by a Brookfield subsidiary or equity interests in a subsidiary of OCGH that will entitle such limited partners to the proceeds from a note, or a combination of the foregoing. Either of such notes will have a three-year maturity and will accrue interest at the then-current 5-year treasury note rate plus 3%. Only Converted Class A Units, OCGH Units issued and outstanding at the time of the closing of the Mergers, OCGH Units issued after the closing of the Mergers pursuant to agreements in effect on March 13, 2019, OCGH Units issuable upon vesting of certain phantom equity awards (“Phantom Units”) and other OCGH Units consented-to by Brookfield will be, when vested, eligible to participate in an Exchange. The form of the consideration in an Exchange is generally in the discretion of Brookfield, subject to certain limitations. In general, OCGH limited partners will be entitled to provide an election notice to participate in an Exchange with respect to eligible vested OCGH Units during the first 60 calendar days of each year beginning January 1, 2022 (an “Open Period”). However, holders of Converted Class A Units and Phantom Units will be eligible to provide an election notice with respect to their vested units beginning as early as 2020 and each year thereafter subject to certain limitations. Each Exchange will thereafter be consummated within the first 155 days of such calendar year, subject to extension in certain circumstances. Valuation Except as described below, each OCGH Unit will be valued (i) by applying a 13.5x multiple to the trailing three-year average (or two-year average for Exchanges in 2022) of fee-related earnings less stock-based compensation at grant value and excluding depreciation and amortization and a 6.75x multiple to the trailing three-year average of net incentives created, and (ii) adding 100% of the value of net cash (defined as cash less the face value of debt and preferred stock, other than certain preferred stock issued in connection with certain Exchanges), 100% of the value of corporate investments and 75% of fund-level net accrued incentives as of December 31 of the prior year, in each case subject to certain adjustments. Amounts received in respect of each OCGH Unit will be reduced by the amount of any non-tax related distributions received in the calendar year in which the Exchange occurs, but increased by an amount accruing daily from January 1 of such year to the date of the closing of the Exchange at a rate per annum equal to the 5-year treasury note rate as of December 31 of the prior year plus 3%. However, in 2020 and 2021, Converted Class A Units and Phantom Units will be valued at $49.00 per unit, less the amount of any capital distributions received upon vesting. Thereafter any such Converted Class A Units and Phantom Units will be valued using the same methodology applied to all other OCGH Units. Annual Limits Exchanges of OCGH Units, other than Converted Class A Units and Phantom Units, will be subject to certain annual caps and limitations as follows:
time of the exchange. They will be entitled to exchange 100% of their OCGH Units beginning during the Open Period in 2029 (subject to yearly caps).
With respect to Exchanges of Converted Class A Units and Phantom Units, OCGH limited partners will not be entitled to exchange such units to the extent the aggregate exchange consideration payable in respect thereof, in any given Exchange, would exceed an amount equal to (i) the amount of exchange consideration that would have been payable in respect of Converted Class A Units and Phantom Units that were eligible for participation in the applicable Open Period in accordance with their original vesting schedule as of the date the notice for such Exchange was delivered plus (ii) $20 million; and in the event that OCGH limited partners deliver election notices that would result in such excess, OCGH will reallocate such units among the OCGH limited partners in its sole discretion. In the event that OCGH limited partners would, following an Exchange, beneficially own less than 1% of the equity of the Oaktree Operating Group (as defined in the operating agreement of Oaktree, as amended from time to time), Brookfield can require that all remaining OCGH Units be exchanged on 36-months’ notice. In addition, following the 8th anniversary of the Closing Date, Brookfield can discontinue the Exchange rights on 36-months’ notice. In the event that OCGH limited partners would, following the final Exchange pursuant to a discontinuation notice, beneficially own less than 5% of the equity of the Oaktree Operating Group, Brookfield can require that all remaining OCGH Units be exchanged in such final Exchange. As a result of the foregoing, the earliest the exchange rights can be terminated is the 11th anniversary of the Closing Date. Following the delivery of a discontinuation notice, the caps and limits set forth above will cease to be in effect. Revisions to the terms of the exchange agreement governing post-vesting restrictions and exchange consideration described above and to the terms of the operating agreement of the Company and the partnership agreement of OCGH resulted in a Type I modification of unvested Class A and OCGH units. There was no incremental compensation cost resulting from the modifications. Class A and OCGH Unit Awards During the nine months ended September 30, 2019, the Company granted 1,494,324 Class A units and 1,873,155 restricted OCGH units to its employees and directors, subject to annual vesting over a weighted average period of approximately 5.9 years. The grant date fair value of OCGH units awarded during the nine months ended September 30, 2019 was determined by applying a 17.5% discount to the Class A unit trading price on the New York Stock Exchange as of the grant date. With respect to forfeitures, the Company has made an accounting policy election to account for forfeitures when they occur. Accordingly, no forfeitures have been assumed in the calculation of compensation expense. As of September 30, 2019, the Company expected to recognize compensation expense on its unvested OCGH unit awards of $217.1 million over a weighted average period of 4.4 years. A summary of the status of the Company’s unvested OCGH unit awards and changes for the period presented are set forth below (actual dollars per unit):
Equity Value Units OCGH equity value units (“EVUs”) represent special limited partnership units in OCGH that entitle the holder the right to receive special distributions that will be settled in OCGH units, based on value created during a specified period in excess of a fixed “Base Value.” The value created will be measured on a per unit basis, based on the appreciation of the Class A units and certain components of quarterly distributions with respect to OCGH units over the period beginning on January 1, 2015 and ending on each of December 31, 2019, December 31, 2020 and December 31, 2021, with one-third of the EVUs recapitalizing on each such date. As of September 30, 2019, the value created did not exceed the Base Value. EVUs also give the holder the right, subject to service vesting and Oaktree performance relative to the accreting Base Value, to receive certain quarterly distributions from OCGH. EVUs do not entitle the holder to any voting rights. The value received under the EVUs will be reduced by (i) distributions received by the holder on 225,000 OCGH units granted to the holder on April 26, 2017, (ii) the value of the portion of profit sharing payments received by the holder attributable to the net incentive income received from certain funds, and (iii) the full value of the OCGH units granted to the holder on April 26, 2017. To the extent that the reduction relates to the value of any such OCGH units that are unvested at the time of the reduction, such OCGH units will vest at that time. Certain EVUs provide the holder with liquidity rights in respect of the special distributions, if any, that will be settled in OCGH units. The Company accounts for EVUs with liquidity rights as liability-classified awards. As of September 30, 2019, there were 1,000,000 equity-classified EVUs and 1,000,000 liability-classified EVUs outstanding. As of September 30, 2019, the Company expected to recognize $0.3 million of compensation expense on its unvested EVUs over the next 0.25 years. Equity-classified EVUs that require future service are expensed on a straight-line basis over the requisite service period. Liability-classified EVUs are remeasured at the end of each quarter. The fair value of EVUs was determined using a Monte Carlo simulation model. The fair value is affected by the Class A unit trading price and assumptions regarding certain complex and subjective variables, including the expected Class A unit trading price volatility, distributions and exercise timing, and the risk-free interest rate. Deferred Equity Units A deferred equity unit represents a special unit award that, when vested, will be settled with an unvested OCGH unit on a one-for-one basis. The number of deferred equity units that will vest is based on the achievement of certain performance targets measured through 2024. Once a performance target has been met, the applicable number of OCGH units will be issued and begin to vest over periods of up to 10.0 years. The holder of a deferred equity unit is not entitled to any distributions until settled by the issuance of an OCGH unit. As of September 30, 2019, there were 807,307 deferred equity units outstanding. As of September 30, 2019, the Company expected to recognize compensation expense of $1.4 million on 39,808 deferred equity units over a weighted average period of 5.5 years. The fair value of the deferred equity units issued in the nine months ended September 30, 2019 was determined at the grant date based on the then-prevailing Class A unit trading price and reflected a 17.5% lack-of-marketability discount for the OCGH units that will be issued upon vesting.
|
SEGMENT REPORTING (Details) |
9 Months Ended |
---|---|
Sep. 30, 2019
segment
| |
Segment Reporting [Abstract] | |
Number of segments | 1 |
DERIVATIVES AND HEDGING - Summary of Freestanding Derivative Instruments on Income (Details) - Not Designated as Hedging Instrument - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains and losses from freestanding derivative instruments | $ 21,480 | $ 1,348 | $ 16,716 | $ (2,272) |
Investment income | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains and losses from freestanding derivative instruments | 16,206 | 419 | 11,429 | (1,898) |
General and administrative expense | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains and losses from freestanding derivative instruments | $ 5,274 | $ 929 | $ 5,287 | $ (374) |
GOODWILL AND INTANGIBLES GOODWILL AND INTANGIBLES - Carrying Value of Intangible Assets (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Dec. 31, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill, Impairment Loss | $ 0 | |
Goodwill | 69,300,000 | $ 69,300,000 |
Carrying Value of Intangible Assets | ||
Contractual rights | 347,452,000 | 347,452,000 |
Accumulated amortization | (45,755,000) | (33,173,000) |
Intangible assets, net | $ 301,697,000 | $ 314,279,000 |
INCOME TAXES AND RELATED PAYMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected Estimated Future Payments to OCGH Agreements | Assuming no further material changes in the relevant tax law and that the Company earns sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, the expected estimated future payments to OCGH unitholders under the Original TRA, as of September 30, 2019, are set forth below:
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REVENUES - Revenues Disaggregated by Fund Structure (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 205,190 | $ 241,227 | $ 785,088 | $ 791,831 |
Management Fees | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 179,761 | 175,195 | 524,798 | 538,706 |
Closed-end | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 120,462 | 112,415 | 345,091 | 353,225 |
Open-end | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 29,990 | 34,942 | 90,480 | 109,051 |
Evergreen | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 29,309 | 27,838 | 89,227 | 76,430 |
Incentive Income | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 25,429 | 66,032 | 260,290 | 253,125 |
Closed-end | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 25,335 | 65,661 | 257,778 | 249,447 |
Evergreen | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 94 | $ 371 | $ 2,512 | $ 3,678 |
SUBSEQUENT EVENTS |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Class A Unit Distribution A distribution of $0.03 per Class A unit will be paid on November 12, 2019 to holders of record at the close of business on October 31, 2019. Preferred Unit Distributions A distribution of $0.414063 per Series A preferred unit will be paid on December 16, 2019 to Series A preferred unitholders of record at the close of business on December 1, 2019. A distribution of $0.409375 per Series B preferred unit will be paid on December 16, 2019 to Series B preferred unitholders of record at the close of business on December 1, 2019. Restructuring Transaction |
INCOME TAXES AND RELATED PAYMENTS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES AND RELATED PAYMENTS | INCOME TAXES AND RELATED PAYMENTS Oaktree is a publicly traded partnership and Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc., two of its Intermediate Holding Companies, are wholly-owned corporate subsidiaries. Income earned by these corporate subsidiaries is subject to U.S. federal and state income taxation and taxed at prevailing rates. Income earned by non-corporate subsidiaries is not subject to U.S. federal corporate income tax and is allocated to the Oaktree Operating Group’s unitholders. The Company’s effective tax rate is dependent on many factors, including the estimated nature of many amounts and the mix of revenues and expenses between the subsidiaries that are or are not subject to income tax; consequently, from period to period the effective tax rate is subject to significant variation. The Company’s effective tax rate used for interim periods is based on the estimated full-year income tax rate. Certain future items that cannot be reliably estimated, such as incentive income, are excluded from the estimated annual effective tax rate. The tax expense or benefit stemming from these items is recognized in the same period as the underlying income or expense. Tax authorities currently are examining certain income tax returns of Oaktree, with certain of these examinations at an advanced stage. Over the next four quarters ending September 30, 2020, the Company believes that it is reasonably possible that one outcome of these examinations and expiring statutes of limitation on other items may be the release of up to approximately $3.0 million of previously accrued Operating Group income taxes. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to its tax examinations and that any settlements related thereto will not have a material adverse effect on the Company’s consolidated financial statements; however, there can be no assurances as to the ultimate outcomes. Tax Receivable Agreement Prior to the consummation of the Mergers, subject to certain restrictions and the approval of the Company’s board of directors, each holder of OCGH units had the right to exchange his or her vested units for, at the option of the Company’s board of directors, Class A units, an equivalent amount of cash based on then-prevailing market prices and/or other consideration of equal value. Certain of the Oaktree Operating Group entities made an election under Section 754 of the U.S. Internal Revenue Code, as amended, which have resulted in an adjustment to the tax basis of the assets owned by the Oaktree Operating Group at the time of any such exchange. These exchanges have resulted in increases in tax deductions and tax basis that would reduce the amount of tax that Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc. would otherwise be required to pay in the future. Oaktree Holdings, Inc. and Oaktree AIF Holdings, Inc. previously entered into a tax receivable agreement (the “Original TRA”) with OCGH unitholders that, as amended, provided for the payment to an exchanging or selling OCGH unitholder of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that they actually realized (or were deemed to realize in the case of an early termination payment by Oaktree Holdings, Inc. or Oaktree AIF Holdings, Inc., or a change of control) as a result of an increase in the tax basis of the assets owned by the Oaktree Operating Group. When an exchange of OCGH units resulted in an increase to the tax basis of the assets owned by the Oaktree Operating Group, a deferred tax asset and an associated liability for payments to OCGH unitholders under the tax receivable agreement are recorded, subject to realizability considerations. The establishment of a deferred tax asset increases additional paid-in capital because the transactions are between Oaktree and its unitholders. Upon the closing of the Mergers, Oaktree entered into a Third Amended and Restated Tax Receivable Agreement (the “TRA Amendment”), which amended and restated the Original TRA. Pursuant to the TRA Amendment, the Original TRA no longer applies and no Tax Benefit Payments (as defined in the TRA Amendment) will be made with respect to any exchanges of OCGH Units that occur on or after March 13, 2019. With respect to any exchanges of OCGH Units that occurred prior to March 13, 2019, the TRA Amendment provides that Tax Benefit Payments will continue to be made with respect to such exchanges in accordance with the Original TRA (as amended in certain respects, including that such payments will be calculated without taking into account any tax attributes of Brookfield). Upon the closing of the Mergers, the tax basis of the assets owned by the Oaktree Operating Group increased and as a result the Company recorded an increase of $212.0 million to its total deferred tax assets. In accordance with the above, there was no associated tax receivable agreement liability recorded with this exchange and the entire amount resulted in a corresponding increase to additional paid-in capital. On each of the first, second and third anniversaries of the closing date, Brookfield will pay $66 million in the aggregate to the OCGH limited partners in consideration for certain tax benefits delivered upon the exchange of OCGH Units on the closing date and for future exchanges of OCGH Units following the closing date, which will be allocated among OCGH’s limited partners as set forth in the Exchange Agreement. Assuming no further material changes in the relevant tax law and that the Company earns sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, the expected estimated future payments to OCGH unitholders under the Original TRA, as of September 30, 2019, are set forth below:
For the nine months ended September 30, 2019, $10.0 million was paid under the Original TRA.
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FAIR VALUE (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, by Balance Sheet Grouping | The Company’s other financial assets and financial liabilities by fair-value hierarchy level are set forth below. Please see notes 10 and 18 for the fair value of the Company’s outstanding debt obligations and amounts due from/to affiliates, respectively.
(4) Amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition, except for $3 as of December 31, 2018, which is included within corporate investments in the condensed consolidated statements of financial condition.
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Summary of Changes in Fair Value of Level III Investments | The table below sets forth a summary of changes in the fair value of Level III financial instruments:
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Summary of Changes in Fair Value of Level III Investments | The following tables set forth a summary of changes in the fair value of Level III investments:
The table below sets forth a summary of changes in the fair value of Level III financial instruments:
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Summary of Valuation Techniques and Quantitative Information | The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of September 30, 2019:
The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of December 31, 2018:
(9) Revenue multiples are based on comparable public companies and transactions with comparable companies. The Company typically applies the multiple to trailing twelve-months’ revenue. However, in certain cases other revenue measures, such as pro forma revenue, may be utilized if deemed to be more relevant. The table below sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the Company’s Level III financial instruments:
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Valuation of Investments and Other Financial Instruments | The table below summarizes the investments and other financial instruments of the consolidated funds by fair-value hierarchy level:
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DEBT OBLIGATIONS AND CREDIT FACILITIES (Tables) |
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Obligations | The Company’s debt obligations are set forth below:
(1) The credit facility consists of a $150 million term loan and a $500 million revolving credit facility. Borrowings 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 revolving credit facility is 0.10% per annum. The credit agreement contains customary financial covenants and restrictions, including ones regarding a maximum leverage ratio and a minimum required level of assets under management (as defined in the credit agreement, as amended above). As of September 30, 2019, the Company had no outstanding borrowings under the revolving credit facility.
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Future Principal Payments of Debt Obligations | As of September 30, 2019, future scheduled principal payments of debt obligations were as follows:
As of September 30, 2019, future scheduled principal or par value payments with respect to the debt obligations of CLOs were as follows:
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Schedule of Collateralized Loan Obligation | Outstanding debt obligations of CLOs were as follows:
The consolidated funds had the following debt obligations outstanding:
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FIXED ASSETS |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FIXED ASSETS | FIXED ASSETS Fixed assets, which consist of furniture and equipment, capitalized software, office leasehold improvements, and company-owned aircraft, are included in other assets in the condensed consolidated statements of financial position. The following table sets forth the Company’s fixed assets and accumulated depreciation:
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VARIABLE INTEREST ENTITIES |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The Company consolidates VIEs for which it is the primary beneficiary. VIEs include funds managed by Oaktree and CLOs for which Oaktree acts as collateral manager. The purpose of these VIEs is to provide investment opportunities for investors in exchange for management fees and, in certain cases, performance-based fees. While the investment strategies of the funds and CLOs differ by product, in general the fundamental risks of the funds and CLOs have similar characteristics, including loss of invested capital and reduction or absence of management and performance-based fees. As general partner or collateral manager, respectively, Oaktree generally considers itself the sponsor of the applicable fund or CLO. The Company does not provide performance guarantees and, other than capital commitments, has no financial obligation to provide funding to VIEs. Consolidated VIEs As of September 30, 2019, the Company consolidated 23 VIEs for which it was the primary beneficiary, including 10 funds managed by Oaktree, 12 CLOs for which Oaktree serves as collateral manager, and Oaktree AIF Holdings, Inc., which was formed to hold certain assets for regulatory and other purposes. Two of the consolidated funds, Oaktree Enhanced Income Retention Holdings III, LLC and Oaktree CLO RR Holder, LLC, were formed to satisfy risk retention requirements under Section 15G of the Exchange Act. As of December 31, 2018, the Company consolidated 23 VIEs. As of September 30, 2019, the assets and liabilities of the 22 consolidated VIEs representing funds and CLOs amounted to $8.2 billion and $6.9 billion, respectively. The assets of these consolidated VIEs primarily consisted of investments in debt and equity securities, while their liabilities primarily represented debt obligations issued by CLOs. The assets of these VIEs may be used only to settle obligations of the same VIE. In addition, there is no recourse to the Company for the VIEs’ liabilities. In exchange for managing either the funds’ or CLOs’ collateral, the Company typically earns management fees and may earn performance fees, all of which are eliminated in consolidation. As of September 30, 2019, the Company’s investments in consolidated VIEs had a carrying value of $606.5 million, which represented its maximum risk of loss as of that date. The Company’s investments in CLOs are generally subordinated to other interests in the CLOs and entitle the Company to receive a pro-rata portion of the residual cash flows, if any, from the CLOs. Please see note 10 for more information on CLO debt obligations. Unconsolidated VIEs The Company holds variable interests in certain VIEs in the form of direct equity interests that are not consolidated because it is not the primary beneficiary, inasmuch as its fee arrangements are considered at-market and it does not hold interests in those entities that are considered more than insignificant. The carrying value of the Company’s investments in VIEs that were not consolidated are shown below.
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NON-CONTROLLING REDEEMABLE INTERESTS IN CONSOLIDATED FUNDS |
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Non-Controlling Redeemable Interests in Consolidated Funds [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NON-CONTROLLING REDEEMABLE INTERESTS IN CONSOLIDATED FUNDS | NON-CONTROLLING REDEEMABLE INTERESTS IN CONSOLIDATED FUNDS The following table sets forth a summary of changes in the non-controlling redeemable interests in the consolidated funds. Dividends reinvested and in-kind contributions or distributions are non-cash in nature and have been presented on a gross basis in the table below.
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LEASES - Components of Lease Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2019 |
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Leases [Abstract] | ||
Operating lease cost | $ 4,739 | $ 14,226 |
Sublease income | (278) | (535) |
Total lease cost | $ 4,461 | $ 13,691 |
LEASES - Maturity of Operating Lease Liabilities (Details) $ in Thousands |
Sep. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Remainder of 2019 | $ 4,874 |
2020 | 18,717 |
2021 | 17,702 |
2022 | 17,135 |
2023 | 16,554 |
Thereafter | 84,617 |
Total lease payments | 159,599 |
Less: imputed interest | (28,317) |
Total operating lease liabilities | $ 131,282 |
GOODWILL AND INTANGIBLES - Expected Future Amortization (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization | $ 4,200 | $ 4,200 | $ 12,600 | $ 12,600 |
Remainder of 2019 | 4,198 | 4,198 | ||
2020 | 16,780 | 16,780 | ||
2021 | 15,112 | 15,112 | ||
2022 | 12,777 | 12,777 | ||
2023 | 12,777 | 12,777 | ||
Thereafter | 240,053 | 240,053 | ||
Total | $ 301,697 | $ 301,697 |
DEBT OBLIGATIONS AND CREDIT FACILITIES - Credit Facilities of Consolidated Funds (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Dec. 31, 2018 |
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Debt Instrument [Line Items] | ||
Less: Debt issuance costs | $ (4,616,000) | $ (5,569,000) |
Total debt obligations, net | 971,854,000 | 864,529,000 |
Credit Agreement | Senior variable rate notes | ||
Debt Instrument [Line Items] | ||
Senior variable rate notes | 976,470,000 | $ 870,098,000 |
Facility Capacity | $ 976,470,000 | |
Weighted Average Interest Rate | 3.39% | |
Weighted Average Remaining Maturity (years) | 8 years 8 months 12 days |
UNITHOLDERS' CAPITAL - Changes in Company Ownership Interest (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Stockholders' Equity Note [Abstract] | ||||
Net income (loss) attributable to OCG Class A unitholders | $ (16,648) | $ 52,750 | $ 73,050 | $ 136,603 |
Equity reallocation between controlling and non-controlling interests | 267,715 | 4,514 | 304,280 | 78,269 |
Change from net income attributable to OCG Class A unitholders and transfers from non-controlling interests | $ 251,067 | $ 57,264 | $ 377,330 | $ 214,872 |
INVESTMENTS - Other Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Schedule of Investments [Line Items] | ||||
Realized gain (loss) | $ (3,664) | $ (9,812) | $ (9,036) | $ (12,509) |
Net change in unrealized gain (loss) | (40,964) | 10,552 | 17,967 | (34,939) |
Total gain (loss) | 8,931 | (47,448) | ||
Other Investments at Fair Value | ||||
Schedule of Investments [Line Items] | ||||
Realized gain (loss) | 1,345 | 104 | 7,656 | 1,072 |
Net change in unrealized gain (loss) | 17,472 | 181 | 12,018 | 2,067 |
Total gain (loss) | $ 18,817 | $ 285 | $ 19,674 | $ 3,139 |
EARNINGS PER UNIT (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of Net Income (Loss) Per Unit | The computation of net income (loss) per Class A unit is set forth below:
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VARIABLE INTEREST ENTITIES - Additional Information (Details) - Consolidated VIEs $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2019
USD ($)
entity
|
Dec. 31, 2018
entity
|
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Variable Interest Entity [Line Items] | ||
Number of VIE's consolidated (in entity) | 23 | 23 |
Consolidated VIEs representing funds and CLOs, assets | $ | $ 8,200.0 | |
Consolidated VIEs representing funds and CLOs, liabilities | $ | 6,900.0 | |
Maximum exposure to loss | $ | $ 606.5 | |
Number of fund managed by Oaktree | ||
Variable Interest Entity [Line Items] | ||
Number of VIE's consolidated (in entity) | 10 | |
Number of CLO's for which Oaktree acts as collateral manager | ||
Variable Interest Entity [Line Items] | ||
Number of VIE's consolidated (in entity) | 12 | |
Number of consolidated funds formed to satisfy risk retention requirements | ||
Variable Interest Entity [Line Items] | ||
Number of VIE's consolidated (in entity) | 2 | |
Number of remaining variable interest entities | ||
Variable Interest Entity [Line Items] | ||
Number of VIE's consolidated (in entity) | 22 |
FAIR VALUE - Consolidated Funds Additional Information (Details) - investment |
3 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
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Consolidated Funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Number of investments that changed valuation technique | 0 | 0 |
REVENUES (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Disaggregated by Fund Structure | Revenues disaggregated by fund structure is set forth below. Revenues are affected by economic factors related to the asset class composition of the holdings and the contractual terms such as the basis for calculating the management fees and investors’ ability to redeem.
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Contract Balances | The table below sets forth contract balances for the periods indicated:
(2) Revenue recognized in the three months and nine months ended September 30, 2019 from amounts included in the contract liability balance were $5.4 million and $17.1 million.
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RELATED-PARTY TRANSACTIONS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED-PARTY TRANSACTIONS | RELATED-PARTY TRANSACTIONS The Company considers its senior executives, employees and unconsolidated Oaktree funds to be affiliates (as defined in the FASB ASC Master Glossary). Amounts due from and to affiliates are set forth below. The fair value of amounts due from and to affiliates is a Level III valuation and was valued based on a discounted cash-flow analysis. The carrying value of amounts due from affiliates approximated fair value due to their short-term nature or because their average interest rate approximated the Company’s cost of debt. The fair value of amounts due to affiliates approximated $94,043 and $95,953 as of September 30, 2019 and December 31, 2018, respectively, based on a discount rate of 10.0%.
Loans Loans primarily consist of interest-bearing loans made to certain non-controlling interest holders, primarily certain employees, to meet tax obligations related to vesting of equity awards. The loans, which are generally recourse to the borrower or secured by vested equity and other collateral, typically bear interest at the Company’s cost of debt and generated interest income of $18 and $66 for the three and nine months ended September 30, 2019, respectively, and $22 and $193 for the three and nine months ended September 30, 2018, respectively. Due From Oaktree Funds and Portfolio Companies In the normal course of business, the Company advances certain expenses on behalf of Oaktree funds. Amounts advanced on behalf of consolidated funds are eliminated in consolidation. Certain expenses paid by the Company, which typically are employee travel and other costs associated with particular portfolio company holdings, are reimbursed to the Company by the portfolio companies. Revenues Earned From Oaktree Funds Management fees and incentive income earned from unconsolidated Oaktree funds totaled $184.7 million and $719.3 million for the three and nine months ended September 30, 2019, respectively, and $218.0 million and $719.6 million for the three and nine months ended September 30, 2018, respectively. Other Investment Transactions The Company’s senior executives, directors and senior professionals are permitted to invest their own capital (or the capital of family trusts or other estate planning vehicles they control) in Oaktree funds, for which they pay the particular fund’s full management fee but not its incentive allocation. To facilitate the funding of capital calls by funds in which employees are invested, the Company periodically advances on a short-term basis the capital calls on certain employees’ behalf. These advances are reimbursed generally toward the end of the calendar quarter in which the capital calls occurred. Amounts advanced by the Company are included within “non-interest bearing advances made to certain non-controlling interest holders and employees” in the table above. Aircraft Services The Company owns an aircraft for business purposes. Howard Marks, the Company’s co-chairman, may use this aircraft for personal travel and will reimburse the Company to the extent his use of the aircraft for personal travel exceeds a certain threshold pursuant to a Company policy. The Company also provides certain senior executives a personal travel allowance for private aircraft usage up to a certain threshold pursuant to the same Company policy. Additionally, the Company occasionally makes use of an aircraft owned by one of its senior executives for business purposes at a price to the Company that is based on market rates. Special Allocations Certain senior executives receive special allocations based on a percentage of profits of the Oaktree Operating Group. These special allocations, which are recorded as compensation expense, are made on a current basis for so long as they remain senior executives of the Company, with limited exceptions. Leases The Company leases certain office space from affiliates of Brookfield. Rent expense associated with these leases was $1.1 million and $3.4 million for the three and nine months ended September 30, 2019, respectively, and $1.2 million and $3.6 million for the three and nine months ended September 30, 2018, respectively. Future lease obligations associated with these leases are $63.2 million for the remaining lease commitments through 2030.
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EARNINGS PER UNIT |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER UNIT | EARNINGS PER UNIT The computation of net income (loss) per Class A unit is set forth below:
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DEBT OBLIGATIONS AND CREDIT FACILITIES |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT OBLIGATIONS AND CREDIT FACILITIES | DEBT OBLIGATIONS AND CREDIT FACILITIES The Company’s debt obligations are set forth below:
As of September 30, 2019, future scheduled principal payments of debt obligations were as follows:
The Company was in compliance with all financial maintenance covenants associated with its senior notes and bank credit facility as of September 30, 2019 and December 31, 2018. 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 $806.3 million and $720.3 million as of September 30, 2019 and December 31, 2018, respectively, utilizing an average borrowing rate of 2.8% and 4.4%, respectively. As of September 30, 2019, a 10% increase in the assumed average borrowing rate would lower the estimated fair value to $788.9 million, whereas a 10% decrease would increase the estimated fair value to $824.2 million. Credit Facilities of the Consolidated Funds Certain consolidated funds may maintain revolving credit facilities that are secured by the assets of the fund or may issue 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 consolidated funds had the following debt obligations outstanding:
As of September 30, 2019 and December 31, 2018, the consolidated funds had debt obligations with an aggregate outstanding principal balance of $976.5 million. The fair value of the senior variable rate notes is a Level III valuation and aggregated $976.8 million and $871.3 million as of September 30, 2019 and December 31, 2018, respectively, using prices obtained from pricing vendors. 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. Debt Obligations of CLOs Debt obligations of CLOs represent amounts due to holders of debt securities issued by the CLOs, as well as term loans of CLOs that had not priced as of period end. Outstanding debt obligations of CLOs were as follows:
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 September 30, 2019 and December 31, 2018, the fair value of CLO assets was $6.3 billion and $4.7 billion, respectively, and consisted of cash, corporate loans, corporate bonds and other securities. As of September 30, 2019, future scheduled principal or par value payments with respect to the debt obligations of CLOs were as follows:
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FAIR VALUE |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | FAIR VALUE Fair Value of Financial Assets and Liabilities The short-term nature of cash and cash-equivalents, receivables and accounts payable causes each of their carrying values to approximate fair value. The fair value of short-term investments included in cash and cash-equivalents is a Level I valuation. The Company’s other financial assets and financial liabilities by fair-value hierarchy level are set forth below. Please see notes 10 and 18 for the fair value of the Company’s outstanding debt obligations and amounts due from/to affiliates, respectively.
The table below sets forth a summary of changes in the fair value of Level III financial instruments:
The table below sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the Company’s Level III financial instruments:
Fair Value of Financial Instruments Held By Consolidated Funds The short-term nature of cash and cash-equivalents held at the consolidated funds causes their carrying value to approximate fair value. The fair value of cash-equivalents is a Level I valuation. Derivatives may relate to a mix of Level I, II or III investments, and therefore their fair-value hierarchy level may not correspond to the fair-value hierarchy level of the economically hedged investment. The table below summarizes the investments and other financial instruments of the consolidated funds by fair-value hierarchy level:
The following tables set forth a summary of changes in the fair value of Level III investments:
Total realized and unrealized gains and losses recorded for Level III investments are included in net realized gain on consolidated funds’ investments or net change in unrealized appreciation (depreciation) on consolidated funds’ investments in the condensed consolidated statements of operations. Transfers out of Level III are generally attributable to certain investments that experienced a more significant level of market trading activity or completed an initial public offering during the respective period and thus were valued using observable inputs. Transfers into Level III typically reflect either investments that experienced a less significant level of market trading activity during the period or portfolio companies that undertook restructurings or bankruptcy proceedings and thus were valued in the absence of observable inputs. The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of September 30, 2019:
The following table sets forth a summary of the valuation techniques and quantitative information utilized in determining the fair value of the consolidated funds’ Level III investments as of December 31, 2018:
A significant amount of judgment may be required when using unobservable inputs, including assessing the accuracy of source data and the results of pricing models. The Company assesses the accuracy and reliability of the sources it uses to develop unobservable inputs. These sources may include third-party vendors that the Company believes are reliable and commonly utilized by other marketplace participants. As described in note 2, other factors beyond the unobservable inputs described above may have a significant impact on investment valuations. During the three months ended September 30, 2019 and September 30, 2018, there were no changes in the valuation techniques for Level III securities.
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VARIABLE INTEREST ENTITIES (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value of the Company's investments in VIEs | The carrying value of the Company’s investments in VIEs that were not consolidated are shown below.
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ORGANIZATION AND BASIS OF PRESENTATION |
9 Months Ended |
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Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | ORGANIZATION AND BASIS OF PRESENTATION Oaktree Capital Group, LLC (“OCG”, together with its subsidiaries, “Oaktree” or the “Company”) is a leader among global investment managers specializing in alternative investments. Oaktree emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. Funds managed by Oaktree (the “Oaktree funds”) include commingled funds, separate accounts, collateralized loan obligation vehicles (“CLOs”) and publicly-traded business development companies (“BDCs”). Commingled funds include open-end and closed-end limited partnerships in which the Company makes an investment and for which it serves as the general partner. CLOs are structured finance vehicles in which the Company typically makes an investment and for which it serves as collateral manager. Oaktree Capital Group, LLC is a Delaware limited liability company that was formed on April 13, 2007. The Company is owned by its Class A and Class B unitholders and its preferred unitholders. As of September 30, 2019, Oaktree Capital Group Holdings GP, LLC acts as the Company’s manager and is the general partner of Oaktree Capital Group Holdings, L.P. (“OCGH”), which owns 100% of the Company’s outstanding Class B units. OCGH is owned by the Company’s senior executives, current and former employees and certain other investors (collectively, the “OCGH unitholders”). The Company’s operations are conducted through a group of operating entities collectively referred to as the “Oaktree Operating Group.” OCGH has a direct economic interest in the Oaktree Operating Group and the Company has an indirect economic interest in the Oaktree Operating Group. The interests in the Oaktree Operating Group are referred to as the “Oaktree Operating Group units.” An Oaktree Operating Group unit is not a separate legal interest but represents one limited partnership interest in each of the Oaktree Operating Group entities. Class A units are entitled to one vote per unit. Class B units are entitled to ten votes per unit and do not represent an economic interest in the Company. The number of Class B units held by OCGH increases or decreases in response to corresponding changes in OCGH’s economic interest in the Oaktree Operating Group; consequently, the OCGH unitholders’ economic interest in the Oaktree Operating Group is reflected within non-controlling interests in consolidated subsidiaries in the accompanying condensed consolidated financial statements. Basis of Presentation The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. Certain of the Oaktree funds consolidated by the Company are investment companies that follow a specialized basis of accounting established by GAAP. All intercompany transactions and balances have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2019. Brookfield Merger On March 13, 2019, Oaktree, Brookfield Asset Management Inc., a corporation incorporated under the laws of the Province of Ontario (“Brookfield”), Berlin Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”) and a wholly-owned subsidiary of Brookfield, Oslo Holdings LLC, a Delaware limited liability company (“SellerCo”) and a wholly-owned subsidiary of OCGH, and Oslo Holdings Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Oaktree (“Seller MergerCo”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Brookfield would acquire 61.2% of Oaktree’s business in a stock and cash transaction. Pursuant to the terms and conditions set forth in the Merger Agreement, on September 30, 2019, (i) Merger Sub merged with and into Oaktree (the “Merger”), with Oaktree continuing as the surviving entity, and (ii) immediately following the Merger, SellerCo merged with and into Seller MergerCo (the “Subsequent Merger” and together with the Merger, the “Mergers”), with Seller MergerCo continuing as the surviving entity. Following the closing of the Mergers on September 30, 2019, the remaining 38.8% of the business continues to be owned by OCGH, whose unitholders consist primarily of Oaktree’s founders and certain other members of management and current and former employees. At the effective time of the Merger (the “Effective Time”) on September 30, 2019, each Class A Unit of Oaktree (“Class A Unit”) (other than unvested Class A Units), issued and outstanding immediately prior to the Effective Time, at the election (or deemed election) of the holder, was converted (subject to pro-rations as described below) into the right to receive either $49.00 in cash (the “Cash Consideration”) or 1.0770 Class A Limited Voting Shares of Brookfield (“Brookfield Class A Shares”), together with any dividends or distributions thereon payable in accordance with the Merger Agreement (the “Share Consideration” and together with the Cash Consideration, the “Merger Consideration”), without interest. Oaktree Class A unitholders’ and OCGH unitholders’ elections were made on a per unit basis and subject to pro-ration such that the total consideration paid by Brookfield was 50% cash and 50% Brookfield Class A Shares. At the effective time of the Subsequent Merger (the “Subsequent Effective Time”) on September 30, 2019, each unit of equity interest in SellerCo (a “SellerCo Unit”), at the election (or deemed election) of the holder, was converted into the right to receive either Cash Consideration or Share Consideration. Based on the elections made (or deemed to have been made), the Share Consideration was oversubscribed and former holders of Class A Units and participating OCGH units who elected (or were deemed to have elected) to receive Share Consideration with respect to all or a portion of their units instead received approximately 0.6173 Limited Voting Shares of Brookfield and $20.92 in cash with respect to each such unit. The aggregate amount of cash payable to Oaktree Class A unitholders and OCGH unitholders in the transaction was approximately $2.4 billion and approximately 52.8 million Brookfield Class A shares were issued in the Mergers. In connection with the closing of the Merger, Oaktree Class A units were delisted from the New York Stock Exchange. At the Effective Time, each unvested Class A Unit held by current, or in certain cases former, employees, officers and directors of Oaktree and its subsidiaries was converted into one unvested OCGH Unit (each, a “Converted Class A Unit”) and will thereafter be subject to the terms and conditions of the OCGH limited partnership agreement. The Converted Class A Units will (i) be subject to the same vesting terms that were applicable to such units prior to the Effective Time, (ii) be entitled to receive ongoing distributions in respect of earnings, but not capital distributions and (iii) upon vesting, receive the accumulated value of capital distributions that accrued while such units were unvested. No unvested Class A Units or Converted Class A Units vested in connection with the Mergers. Please see note 15 for more information.
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FIXED ASSETS (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Assets and Accumulated Depreciation | The following table sets forth the Company’s fixed assets and accumulated depreciation:
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NON-CONTROLLING REDEEMABLE INTERESTS IN CONSOLIDATED FUNDS (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Controlling Redeemable Interests in Consolidated Funds [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Non-controlling Redeemable Interests in Consolidated Funds | The following table sets forth a summary of changes in the non-controlling redeemable interests in the consolidated funds. Dividends reinvested and in-kind contributions or distributions are non-cash in nature and have been presented on a gross basis in the table below.
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