Stuart Haigh
Spire Capital (Spire) and Oaktree Capital Management (Oaktree) have worked collaboratively to develop a solution for Australian Wholesale investors to access Oaktree’s flagship opportunistic credit and turnaround- orientated (special situations) investments, creating the Spire Oaktree Special Opportunities Fund (Fund). Oaktree manages US $172 billion across their stable of funds with more than US $48 billion committed to opportunistic credit and special situations.
This new Fund builds on a successful partnership formed in 2020 with Spire committing in excess of AU $340 million into Oaktree opportunistic credit strategies on behalf of Australian private investors and their advisors (‘Qualified Purchasers’).
The Fund has been created at an opportune time to enable Australian Wholesale investors to take advantage of current market conditions and focus on what Howard Marks, Co-Founder of Oaktree, describes as ‘bargain hunting’. On the back of rapid interest rate rises, businesses are feeling the pressures of higher interest costs, input-cost inflation and slowing demand. Corporate default rates are rising, rescue financing is proliferating, and discounts have widened across secondary transactions.
In a dedicated Memo to Spire clients, Mr Marks noted, “I’m personally excited that Oaktree and Spire are extending their very constructive relationship through the creation of the Spire Oaktree Special Opportunities Fund”. He further remarked “the Fund is focused on bargain hunting, the outlook for which is much improved. Bargains generally result from investor disillusionment, and the potential for this – like the level of interest rates – is more in the investor’s favor than was the case in recent history.”
The Fund has been designed to capitalise on the ‘sea change’ in markets as outlined in Marks’ recent Memo to investors and has been structured for Australian investors. The investment strategy combines Oaktree’s flagship ‘good business, bad balance sheet’ approach with a special situations strategy targeted at operational turnarounds.
Stuart Haigh, Director and Head of Investments at Spire, said, “We are delighted to be expanding the partnership with Oaktree at a time when the opportunity set is expanding rapidly. In monitoring credit markets alongside Oaktree, we have observed a clear pattern for over-levered companies. The company:
- borrowed too much low-quality, floating-rate debt
- failed to hedge its floating-rate exposure
- made overly aggressive EBITDA (earnings) adjustments
- now has razor-thin interest coverage ratios
- needs to address an imminent debt maturity at a significantly higher interest rate
- is faced with fewer financing options.
With a global network, deep restructuring expertise and a wide range of flexible lending solutions, Oaktree has proven to generate strong returns through the cycle, particularly in times of distress. Spire is proud to be supporting local private investors and their advisors to diversify into asymmetric sources of returns.”
The Fund recently opened for applications and is expected to move to Final Close on 17 November 2023. It has been awarded a Superior rating from SQM Research and is accessible directly or through major investment platforms, including Netwealth, Hub24 and Macquarie Wrap.
As always, Spire will be making a principal investment to the Fund and is inviting Australian wholesale investors and their advisors to review due diligence materials for the two Unit Classes on offer:
- AUD Hedged (capital called upfront)
- USD (capital progressively called).