Oaktree Capital Management has raised the largest-ever distressed debt fund of all time.
The credit manager collected about $16 billion—including co-investments and affiliated vehicles—for its latest fund targeting cash-strapped companies, which closed Feb 11. The fund, dubbed Oaktree Opportunities Fund XII, surpassed its predecessor, which closed at $15.9 billion in 2021, and marks the largest distressed debt vehicle ever raised, according to PitchBook data.
Despite booming demand for private credit in recent years, the subset focused on pure distressed debt investments hasn’t attracted the same level of investor interest. Just five distressed debt funds closed last year, totaling $7.3 billion, according to PitchBook data. With Oaktree’s new fund, the total capital committed to distressed debt has already more than doubled 2024’s total.
Due to the ample dry power held by private credit funds, corporate borrowers were able to push back upcoming debt maturities through so-called liability management exercises, resulting in historically low payment default rates. However, with interest rates staying elevated, more borrowers are expected to grapple with refinancing challenges in the near term.
Oaktree says it has deployed more than $7 billion out of Fund XII across a variety of opportunities. It provided rescue financing for Irish-based manufacturer Trinseo, which attempted to refinance its upcoming debt obligations, including a loan that matured last year and an unsecured bond coming due in 2025, according to marketing material released by Oaktree.
The new fund also provided rescue financing for Tulsa, Okla.-based energy infrastructure platform Blue Racer Midstream and Stamford, Conn.-based technology company Pitney Bowes.
Fund XII targets a net internal rate of return of 16% to 22%, without using leverage.
Featured image by Jackal Pan/Getty Images
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