Oaktree Capital Management has decided to help loosen some of the “hung bridges” that are currently strangling Wall Street. Sources tell me that the Los Angeles-based firm is raising between $3 billion and $5 billion for a new fund that will buy up LBO-related debt that banks have been unable to place. It is being marketed with a small management fee and no carry — which stands in stark contrast to the 20% carry Goldman Sachs is employing for its $1 billion-targeted fund bridge fund (as first reported here two weeks ago).
Oaktree plans to spend most of the fund capital on current hung bridges, which means that it could be effectively committed within months of a final close (expect fundraising to go very quickly). That said it’s also holding a pool of approximately 20% for opportunistic deals that fall outside of the bank debt bailiwick. The fund has a one-year recycle and up to a seven-year liquidation. One important caveat is that it’s unlikely to do any European deals, as Oaktree already has a separate vehicle for such transactions (which does have a carry).
In addition to Oaktree and Goldman, there is a report today from The Deal that Lehman Brothers is also raising more than $2 billion for its own hung bridge fund. You’ve also got a variety of hedge funds raising similar pools – plus numerous private equity firms using existing fund capital in select situations.