Oaktree Launches Oaktree Lending Partners to Pursue Opportunities in Sponsor-Backed Lending

Oaktree Capital Management, L.P. has announced the launch of private credit-focused Oaktree Lending Partners and its related vehicles (OLP). OLP is targeting $10 billion in equity commitments from institutional investors. 

OLP will seek to originate senior secured loans of $500 million or more to private equity-owned U.S. companies, typically with over $100 million in EBITDA. Oaktree believes this market is especially attractive now, given the limited availability of debt capital to finance large leveraged buyouts (LBOs) and the record-high levels of committed private equity capital yet to be deployed, requiring financing. In Oaktree’s view, this imbalance has been driven by (a) the retreat of banks from this form of lending and (b) the constrained capacity of non-bank lenders that are fully invested and/or managing issues with prior investments.

Yields on large LBO loans have increased significantly in the last year, averaging 12.4% at year-end. This is primarily due to the dramatic spike in base rates during 2022 and the shortage of funding for large LBOs as described above. The companies that are the subject of these transactions often have critical mass and established track records, positioning them well to weather economic cycles. Thus, Oaktree believes the risk-adjusted return potential available in this segment of the market is currently more compelling [than that of many other sectors].