Oaktree closes $4bn hung bridge fund(2)

Oaktree Capital Management closed its $4 billion (€2.7 billion) hung bridge fund in October – just two months after deciding to raise the specialised debt vehicle.

“We started talking about it on August the 13th and we had the first close on September the 13th,” Howard Marks, the firm’s chairman and co-founder, told PEO.

The idea to raise a fund for hung bridges, or loans banks were unable to syndicate, stemmed from the liquidity crisis that seized markets in 2007, Marks said.

“The market environment kind of fell apart between mid-July and mid-August,” he said. “Risk was re-priced, which meant that the things that the Street guaranteed to place earlier in the year, they couldn’t sell after July.”

The vehicle, Oaktree Loan Fund, had an initial target of $3 billion to $5 billion and was marketed to the firm’s existing investors.

“We did this very quickly so we did it almost entirely within the family of existing Oaktree clients,” Marks said. The fund’s limited partners include the Los Angeles City Employees’ Retirement System and the New Jersey Division of Investment, according to sister division and data provider PE Connect.

Marks noted that the fund has already made investments and continues to see good opportunities. “In a chaotic market, you might be able to get a bargain,” he said.

A handful of other firms have had the same idea: The Blackstone Group closed a $1.3 billion “credit liquidity” fund in December, while Lehman Brothers raised $670 million. TPG is also said to be raising a $1 billion vehicle, and KKR Financial, a listed REIT of Kohlberg Kravis Roberts, is also raising $1 billion from investors for a debt fund, building on its own cornerstone investment of $1.5 billion.