DEBT OBLIGATIONS AND CREDIT FACILITIES

9 Months Ended

Sep. 30, 2020

Prior to the Restructuring, the Company’s financial statements reflected debt and debt service of the entire Oaktree Operating Group. OCM, Oaktree Capital I, Oaktree Capital II and Oaktree AIF are co-obligors and jointly and severally liable for all debt obligations listed below, however, debt obligations are reflected in the condensed consolidated financial statements based upon the entity that actually made the borrowing and received the related proceeds. OCM has historically been the only direct borrower or issuer under credit agreements and private placement notes with third parties and made all payments of principal and interest. In connection with the Restructuring, debt obligations with a net carrying amount of $746.3 million related to OCM were transferred as part of the deconsolidation of entities effective October 1, 2019. Accordingly, the Company’s financial statements after the Restructuring generally will not reflect debt obligations, interest expense or related liabilities associated with its operating subsidiaries, until such time as Oaktree Capital I directly borrows or issues notes under such arrangements.

On May 1, 2020, OCM received commitments from certain accredited investors to purchase $250 million of senior unsecured notes that bear a blended 3.68% fixed rate of interest and a weighted average maturity of 2031. The notes are guaranteed by Oaktree Capital I, a consolidated subsidiary of the Company, along with Oaktree Capital II and Oaktree AIF, as co-obligors. As OCM is the issuer of such senior notes, the outstanding principal and interest payments guaranteed by Oaktree Capital I will not be included in the Company’s financial statements unless an event of default occurs. The offering closed on July 22, 2020 and OCM received proceeds of $250 million on the closing date.

Oaktree Capital I, along with certain other Oaktree Operating Group members as co-borrowers, are parties to a credit agreement with a subsidiary of Brookfield that provides for a subordinated credit facility maturing on May 19, 2023. The subordinated credit facility has a revolving loan commitment of $250 million and borrowings generally bear interest at a spread to either LIBOR or an alternative base rate. Borrowings on the subordinated credit facility are subordinate to the outstanding debt obligations and borrowings on the primary credit facility of Oaktree Capital I and its co-borrowers. Oaktree Capital I is jointly and severally liable, along with its co-obligors for outstanding borrowings on the subordinated credit facility. For reasons set forth in the preceding paragraph, the Company’s financial statements generally will not reflect debt obligations, interest expense or related liabilities associated with its operating subsidiaries until such time as Oaktree Capital I directly borrows from the subordinated credit facility. No amounts were outstanding on the subordinated credit facility as of September 30, 2020.

As of September 30, 2020, Oaktree Capital I is jointly and severally liable, along with its co-obligors, for the debt obligations listed below with an aggregate outstanding principal balance of $850 million. The Company’s maximum exposure to these debt obligations is set forth below:


	As of
	September 30, 2020		December 31, 2019

$250,000, 3.78%, issued in December 2017, payable on December 18, 2032	$	250,000	$	250,000
Credit facility, issued in March 2014, variable rate obligations payable on December 13, 2024 (1)	—		150,000
$50,000, 3.91%, issued in September 2014, payable on September 3, 2024	50,000		50,000
$100,000, 4.01%, issued in September 2014, payable on September 3, 2026	100,000		100,000
$100,000, 4.21%, issued in September 2014, payable on September 3, 2029	100,000		100,000
$100,000, 3.69%, issued in July 2016, payable on July 12, 2031	100,000		100,000
$200,000, 3.64%, issued in July 2020, payable on July 22, 2030	200,000		—
$50,000, 3.84%, issued in July 2020, payable on July 22, 2035	50,000		—
Total remaining principal	$	850,000	$	750,000

(1) On December 13, 2019, the credit facility was amended to among other things, increase the revolving loan commitment from $500 million to $650 million, provide for the refinancing of the then-outstanding $150 million term loan with revolving loans, extend the maturity date from March 29, 2023 to December 13, 2024, favorably update the commitment fee and

interest rate in the corporate ratings-based pricing grid and increase the asset under management covenant threshold from $60 billion to $65 billion. Borrowings generally bear interest at a spread to either LIBOR or an alternative base rate. Based on the current credit ratings of OCM, the interest rate on borrowings is LIBOR plus 0.88% per annum and the commitment fee on the unused portions of the revolving credit facility is 0.08% per annum. The credit agreement contains customary financial covenants and restrictions, including ones regarding a maximum leverage ratio and a minimum required level of assets under management (as defined in the credit agreement, as amended above). As of September 30, 2020, OCM had no outstanding borrowings under the revolving credit facility. OCM and the Company were in compliance with all financial maintenance covenants associated with its senior notes and bank credit facility as of September 30, 2020 and December 31, 2019, respectively.

Credit Facilities of the Consolidated Funds

Certain consolidated funds may maintain revolving credit facilities that are secured by the assets of the fund or may issue senior variable rate notes to fund investments on a longer term basis, generally up to ten years. The obligations of the consolidated funds are nonrecourse to the Company.

The consolidated funds had the following debt obligations outstanding:


	Outstanding Amount as of				Senior variable rate notes key terms as of December 31, 2019
Credit Agreement	September 30, 2020		December 31, 2019		Facility Capacity		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)	Commitment Fee Rate	L/C Fee

Senior variable rate notes	$	—	$	159,411	$	159,411	3.42%	4.4	N/A	N/A
Less: Debt issuance costs	—		(934)
Total debt obligations, net	$	—	$	158,477

As of September 30, 2020 and December 31, 2019, the consolidated funds had debt obligations with an aggregate outstanding principal balance of $0 and $159.4 million, respectively. The fair value of the senior variable rate notes is a Level III valuation and aggregated $0 and $159.1 million as of September 30, 2020 and December 31, 2019, respectively, using prices obtained from pricing vendors. Financial instruments that are valued using quoted prices for the security or similar securities are generally classified as Level III because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities, or may require adjustment for investment-specific factors or restrictions.

As a result of the Restructuring, senior variable rate notes and debt issuance costs of $870.7 million and $4.6 million, respectively, were transferred as part of the deconsolidation of entities effective October 1, 2019.

Debt Obligations of CLOs

Debt obligations of CLOs represent amounts due to holders of debt securities issued by the CLOs, as well as term loans of CLOs that had not priced as of period end. Outstanding debt obligations of CLOs were as follows:


	As of September 30, 2020				As of December 31, 2019
	Fair Value (1)		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)	Fair Value (1)		Weighted Average Interest Rate	Weighted Average Remaining Maturity (years)
Senior secured notes	$	6,066,574	2.02%	10.4	$	5,613,846	2.85%	8.6
Subordinated notes (2)	175,307		N/A	10.2	154,153		N/A	10.4
Total CLO debt obligations	$	6,241,881			$	5,767,999

(1) The fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (a) the fair value of any beneficial interests held by the Company and (b) the carrying value of any beneficial interests that represent compensation for services. Please see notes 2 and 6 for more information.

(2) The subordinated notes do not have a contractual interest rate; instead, they receive distributions from the excess cash flows generated by the CLO.

The debt obligations of CLOs are nonrecourse to the Company and are backed by the investments held by the respective CLO. Assets of one CLO may not be used to satisfy the liabilities of another. As of September 30, 2020 and December 31, 2019, the fair value of CLO assets was $6.8 billion and $6.4 billion, respectively, and consisted of cash, corporate loans, corporate bonds and other securities.

The fair value of the Company’s CLO beneficial interests held at September 30, 2020 was calculated using a discounted cash flow model specific to each investment structure. The significant valuation inputs, including the input range and weighted average rate, are as follows:


Valuation Input	Low	High	Weighted Average Rate

Discount rates	9.0%	40.0%	18.4%
Constant default rates	2.0%	4.0%	2.3%
Recovery rates	60.0%	80.0%	64.9%

As of September 30, 2020, future scheduled principal or par value payments with respect to the debt obligations of CLOs were as follows:


Remainder of 2020	$	—
2021	—
2022	—
2023	—
2024	—
Thereafter	6,478,508
Total	$	6,478,508