According to a letter sent to clients last week, Bill Sacher, the head of Oaktree Capital Group LLC (NYSE:OAK)’s active mezzanine business, has resigned from the due to disagreements over the future of the firm’s lending strategies.
Bill Sacher has run Oaktree’s mezzanine funds for 13 years, and his departure is seen as a major surprise as the group is looking to raise capital for the strategy’s fourth pool.
The letter sent to clients was written by Oaktree Capital Group LLC (NYSE:OAK) Chairman Howard Marks, President Bruce Karsh and John Frank, the managing principal of the group. The letter said that Sacher will be replaced by managing directors Raj Makam and Bill Casperson. Bloomberg News obtained and reviewed a copy of the letter.
When reached by telephone, Sacher declined to comment.
Statement from Oaktree
Bill Sacher’s sudden departure was “the result of our differing views as to how to develop an integrated mezzanine and private debt business that will best position us going forward,” the execs wrote in the letter. “While we have respect for Bill and wish him well, we’re confident that both the mezz effort and our plans to expand in direct lending are on a sound path.”
Explanation of mezzanine financing
Mezzanine financing is a hybrid of debt and equity sometimes used by companies in financial difficulty or rapidly growing companies, is just a small portion of Oaktree’s business, with the division raising $3.6 billion for three funds since 2001, according to the firm’s first-quarter earnings filing. Oaktree typically arranges mezzanine capital deals ranging from $30 million to $150 million in size.
Bill Sacher is “key man”
Of note, Sacher is listed as a “key man” on the third mezzanine fund, and according to knowledgeable sources, Oaktree Capital Group LLC (NYSE:OAK) is asking the pool’s investors to approve an amendment with Makam’s and Casperson’s names to continue investing. Per SEC filings, the fund was about 83% invested as of March 31st.
The other key men on the fund are Marks and Sheldon Stone, who runs Oaktree’s high-yield business. Key men provisions are common in private-equity contracts, and these provisions determine what happens when managers considered essential leave a fund or change roles.