Oaktree Beats First-Quarter Estimates on Sales of Holdings

May 01, 2014 4:07 pm ET

(Updates with closing share price in fifth paragraph.)

May 1 (Bloomberg) -- Oaktree Capital Group LLC, the world’s largest distressed-debt investor, posted first-quarter profit that beat analyst estimates after it earned more than expected from selling holdings.

Adjusted net income, a measure of profit excluding costs such as noncash equity compensation and income taxes, decreased to $246.9 million, or $1.46 a share, from a record $335.8 million, or $1.95 a share, in the first quarter last year. The results exceeded the $1.09-a-share average per-share estimate by nine analysts in a Bloomberg survey.

Oaktree Chairman Howard Marks has urged caution in credit investing since last year, saying loan funds are flush with unprecedented amounts of cash, allowing the lowest-rated companies to borrow at cheap rates. John Frank, the firm’s managing principal, said that while finding bargain investments in credit has been challenging and Oaktree is being more selective in choosing deals, it’s also benefiting from selling holdings at profitable prices.

“We need to look harder and to be more creative, but there are always pockets of distress and other opportunities even in the most bullish times,” Frank said on a conference call today with analysts and investors. “Realization activity in the first quarter was strong.”

Shares Rise

Oaktree was little changed at $53.03 at the close of trading in New York and has lost 10 percent this year. The company has climbed 23 percent from the $43 at which it sold shares to the public in 2012.

The firm’s measure of adjusted net income differs from U.S. generally accepted accounting principles. Under those rules, known as GAAP, Oaktree’s net income decreased to $51.8 million, or $1.30 a share, from $57.6 million, or $1.91 a share, a year earlier.

Assets under management rose to $86.2 billion from $83.6 billion at the end of the fourth quarter as the firm gathered $3 billion in new commitments and distributed money to fund investors. Oaktree plans to pay stockholders a dividend of 98 cents a share on May 15.