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Howard Marks’s Oaktree Seeks $15 Billion for Biggest Distress Fund Ever

Oaktree Opportunities Fund XI will buy up debt in struggling companies and may seek control of businesses in restructurings.

Howard Marks’s Oaktree Seeks $15 Billion for Biggest Distress Fund Ever
Howard Marks, co-chairman of Oaktree Capital Group LLC, speaks during the Context Summits Leadership Day in Miami, Florida, U.S. (Photographer: Scott McIntyre/Bloomberg)

(Bloomberg) -- Oaktree Capital Group LLC is seeking $15 billion to start the largest-ever distressed-debt fund, aiming to profit from companies damaged by the coronavirus pandemic.

Oaktree Opportunities Fund XI will buy up debt in struggling companies and in some cases may seek control of businesses in restructurings, according to an investor presentation reviewed by Bloomberg. The sum is almost as much as the $19.4 billion in assets that Oaktree has already devoted to that strategy.

The firm co-founded by Howard Marks plans to gather a larger fund than what it raised during the financial crisis more than a decade ago because it sees even more opportunities this time around, according to the presentation.

Investment firms such as Highbridge Capital Management and Cerberus Capital Management LP are racing to gather pools of money to buy cheap assets that have been battered by falling oil prices and the economic fallout from coronavirus pandemic. During the market rout last month, distressed debt in the U.S. quadrupled in less than a week to nearly $1 trillion.

Bulking Up

Oaktree’s portfolio would dwarf some of the fundraising efforts underway at other firms. Pacific Investment Management Co. is raising at least $3 billion for its own largest-ever distressed-debt fund. Highbridge is launching two funds totaling around $2.5 billion, and Cerberus plans to almost quadruple the size of its new stressed and distressed credit fund to about $750 million.

A representative for Los Angeles-based Oaktree declined to comment.

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Companies around the world borrowed heavily in the lead-up to the current crisis, according to the presentation. “The firewood had been stacked,” and the coronavirus was the igniter, Oaktree wrote.

Oaktree sees the potential for significantly more defaults than during the last financial crisis. The firm also sees an “unprecedented” opportunity to invest in Asia, particularly China and India, since it has the largest amount of distressed debt globally amounting to more than $2.1 trillion.

The new fund would be larger than the $14.5 billion the firm raised in 2007 and 2008. Oaktree still has cash on hand from its $8.6 billion distressed debt fund from 2018.

Investors are being asked to put up at least $10 million for 10 years in the new fund, with Oaktree earning a fee of as much as 1.6%. The fund will receive $1 billion from Oaktree, its affiliates and its parent company, Brookfield Asset Management Inc.

Marks told Bloomberg Television this week that the firm was a “strong buyer” of corporate debt in March following the sell-off.

The firm invested $1.9 billion in March, making that the biggest one-month deployment since October 2008, according to the presentation. Half of the money went to purchase debt in diversified financial services, oil, gas and consumable fuels as well as hotels, restaurants and leisure industries.

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