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Tuesday, 24 January 2017
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Jul 30 2014 | 10:36am ET
Sabrina Willmer and Devin Banerjee (Bloomberg) -- Bill Sacher, the head of Oaktree Capital Group LLC’s mezzanine business, has left the world’s biggest distressed-debt firm because of disagreements over the future of its lending strategies.
Sacher, who ran the Los Angeles-based firm’s mezzanine funds for 13 years, departed as Oaktree gathers capital for the strategy’s fourth pool, according to a letter sent to clients this month from Chairman Howard Marks, President Bruce Karsh and John Frank, the managing principal. Sacher will be replaced by managing directors Raj Makam and Bill Casperson, according to the letter, a copy of which was obtained by Bloomberg News.
The departure was “the result of our differing views as to how to develop an integrated mezzanine and private debt business that will best position us going forward,” the executives wrote. “While we have respect for Bill and wish him well, we’re confident that both the mezz effort and our plans to expand in direct lending are on a sound path.”
Mezzanine financing, a hybrid of debt and equity often used by struggling or expanding companies, is a small part of Oaktree’s business, with the group raising $3.6 billion for three funds since 2001, according to the firm’s first-quarter earnings statement. The team provides mezzanine capital in deals from $30 million to $150 million in size.
Oaktree oversaw $91.1 billion in assets as of June 30. Its shares gained 0.4 percent to $49.92 at 9:58 a.m. in New York, after losing 12 percent this year through yesterday, including reinvested dividends.
Sacher is listed as a so-called key man on the third mezzanine fund, and Oaktree is asking the pool’s investors for approval to amend the provision with Makam’s and Casperson’s names to continue investing, according to two people with knowledge of the matter. The fund was about 83 percent invested as of March 31.
The other key men on the fund are Marks and Sheldon Stone, who leads the firm’s high-yield business, said the people, who requested anonymity because those details weren’t announced. The provision is a common feature in private-equity contracts that governs what happens when managers considered essential leave a fund or change role.
Sacher, reached by telephone, declined to comment. Alyssa Linn, a spokeswoman for Oaktree at public-relations firm Sard Verbinnen & Co., declined to comment.
Before joining Oaktree in 2001, Sacher was co-head of the high-yield origination group at JPMorgan Chase & Co., where he structured and underwrote high-yield bonds, mezzanine debt and leveraged loans, according to a biography on Oaktree’s website. He previously worked at NationsBanc Montgomery Securities LLC and Bear Stearns & Co.
Oaktree began raising money for its fourth mezzanine fund earlier this year, which it expects to be similar in size to the $1.6 billion predecessor, Frank said on a Feb. 13 conference call with investors and analysts. Oaktree has told limited partners who have already committed to the pool that they may reconsider their investment following Sacher’s departure, one of the people said.
The third fund, which started investing in December 2009, produced an 8.8 percent net internal rate of return and generated 1.2 times investors’ money as of March 31, according to the earnings statement. Its predecessor, raised in 2005, had a 7.7 percent net IRR and 1.5 times multiple of invested capital as of the same date.
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