DEBT OBLIGATIONS AND CREDIT FACILITIES

12 Months Ended

Dec. 31, 2019

Prior to the Restructuring, the Company’s financial statements reflected debt and debt service of the entire Oaktree Operating Group. OCM, Oaktree Capital I, Oaktree Capital II and Oaktree AIF are co-obligors and jointly and severally liable for all debt obligations listed below, however, debt obligations are reflected in the consolidated financial statements based upon the entity that actually made the borrowing and received the related proceeds. OCM has historically been the only direct borrower or issuer under credit agreements and private placement notes with third parties and made all payments of principal and interest. In connection with the Restructuring, debt obligations with a net carrying amount of $746.3 million related to OCM were transferred as part of the deconsolidation of entities effective October 1, 2019. Accordingly, the Company’s financial statements after the Restructuring generally will not reflect debt obligations, interest expense or related liabilities associated with its operating subsidiaries, until such time as Oaktree Capital I directly borrows or issues notes under such arrangements. As of December 31, 2019, Oaktree Capital I is jointly and severally liable, along with its co-obligors, for the debt obligations listed below with an aggregate outstanding principal balance of $750 million.

The Company’s debt obligations are set forth below:



	As of December 31,
	2019		2018

$250,000, 3.78%, issued in December 2017, payable on December 18, 2032	$	—	$	250,000
$250,000, variable-rate term loan, issued in March 2014, payable on March 29, 2023 ⁽¹⁾	—		150,000
$50,000, 3.91%, issued in September 2014, payable on September 3, 2024	—		50,000
$100,000, 4.01%, issued in September 2014, payable on September 3, 2026	—		100,000
$100,000, 4.21%, issued in September 2014, payable on September 3, 2029	—		100,000
$100,000, 3.69%, issued in July 2016, payable on July 12, 2031	—		100,000
Total remaining principal	—		750,000
Less: Debt issuance costs	—		(4,055		)
Debt obligations	$	—	$	745,945

(1)

On December 13, 2019, the credit facility was amended to among other things, increase the revolving loan commitment from $500 million to $650 million, provide for the refinancing of the then-outstanding $150 million term loan with revolving loans, extend the maturity date from March 29, 2023 to December 13, 2024, favorably update the commitment fee and interest rate in the corporate ratings-based pricing grid and increase the asset under management covenant threshold from $60 million to $65 million. Borrowings generally bear interest at a spread to either LIBOR or an alternative base rate. Based on the current credit ratings of OCM, the interest rate on borrowings is LIBOR plus 0.88% per annum and the commitment fee on the unused portions of the revolving credit facility is 0.08% 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 December 31, 2019, OCM had $150 million outstanding under the revolving credit facility and the Company had no outstanding borrowings under the revolving credit facility. OCM and the Company were in compliance with all financial maintenance covenants associated with its senior notes and bank credit facility as of December 31, 2019 and 2018, respectively.

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 $0.0 million and $720.3 million as of December 31, 2019 and 2018, respectively. The fair value as of December 31, 2018 utilized an average borrowing rate of 4.4%.

In July 2017, the Company agreed to guarantee a $17.5 million standby letter of credit extended to one of the investment funds that it manages, which expired in January 2018.

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:



	Outstanding Amount as of December 31,						Facility Capacity		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)	Commitment Fee Rate	L/C Fee
Credit Agreement	2019			2018			Facility Capacity		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)	Commitment Fee Rate	L/C Fee
Senior variable rate notes	$	159,411		$	870,098		$	159,411	3.42%	4.4	N/A	N/A
Less: Debt issuance costs	(934		)	(5,569		)
Total debt obligations, net	$	158,477		$	864,529

As of December 31, 2019 and 2018, the consolidated funds had debt obligations with an aggregate outstanding principal balance of $159.4 million and $870.1 million, respectively. The fair value of the senior variable rate notes is a Level III valuation and aggregated $159.1 million and $871.3 million as of December 31, 2019 and 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.

As a result of the Restructuring, senior variable rate notes and debt issuance costs of $870.7 million and $4.6 million, respectively, were transferred as part of the deconsolidation of entities effective October 1, 2019.

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.

Set forth below are the outstanding debt obligations of CLOs:



	As of December 31, 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	$	5,613,846	2.85%	8.6	$	3,976,602	2.69%	9.9
Subordinated notes ⁽²⁾	154,153		N/A	10.4	151,392		N/A	9.7
Total CLO debt obligations	$	5,767,999			$	4,127,994


(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 7 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.

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 December 31, 2019 and 2018, the fair value of CLO assets was $6.4 billion and $4.7 billion, respectively, and consisted of cash, corporate loans, corporate bonds and other securities.

As of December 31, 2019, future scheduled principal or par value payments with respect to the debt obligations of CLOs were as follows:



2020	$	204,290
2021	—
2022	—
2023	—
2024	—
Thereafter	5,622,072
Total	$	5,826,362