Omni Bridgeway Limited (ASX:OBL) Announces Major Continuation Fund Transaction
Omni Bridgeway Limited (OBL) has announced a significant partnership with Ares Management Corporation, establishing a continuation fund named Fund 9. This move involves Ares acquiring a 70% interest for an upfront cash consideration of approximately A$310 million, positioning OBL for enhanced liquidity and a reduced debt burden.
Transaction Overview
The continuation fund will include over 150 investments across several of OBL’s prior funds and one remaining balance sheet investment. OBL will retain a 30% interest in Fund 9, with the upfront cash expected to provide a multiple on invested capital of about 3.2 times. This conversion represents a fair value rate of approximately 80% on the associated assets.
Strategic Objectives Achieved
This transition aligns with OBL’s strategy toward a capital-light funds management model, achieving immediate value realization and significantly decreasing co-invest obligations on legacy funds. Ares’ investment validates OBL’s fair value framework, enhancing the company’s cost coverage and overall liquidity by about A$60 million post-deleveraging.
Managing Director and CEO Raymond van Hulst stated, “This transaction delivers on all of our stated strategic objectives at once: validating the fair value of our book and improving the cost coverage rate.” He expressed positive sentiments on Ares joining as a capital provider, reinforcing OBL’s role as a leader in legal asset fund management.
Financial Implications
Upon closing, which is subject to standard approvals, OBL will utilize the initial A$275 million payment to retire all outstanding debts, bringing the debt level to zero. This will result in significant savings on interest payments, further strengthening the company’s balance sheet. OBL will continue to manage the Fund 9 assets while earning an ongoing management fee of 2% from the Fund.
Jan-Paul Kobarg from Ares Management highlighted their enthusiasm for the investment, stating they were impressed with the quality of the OBL team. The initiation of Fund 9 not only secures liquidity for OBL but also creates a robust structure for future investments.
Looking Ahead
The final valuation of Fund 9 and proceeds will be confirmed in early 2025, with further details to be disclosed during OBL’s HY 2025 results presentation. This strategic move is anticipated to facilitate the ongoing fundraising efforts for future funds.
Motley Fool contributor Kiarra Jackson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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