Australia's Blue Sky agrees $36m debt deal with Oaktree

Blue Sky shares fell 6% after announcement of the deal and were trading at A$1.67 apiece as of mid-morning October 2. The stock was worth A$14.70 as recently as December 2017 but declined dramatically after US-based Glaucus Research first published allegations of mismanaged finances in March.

Details of the Oaktree investment coincided with confirmation from Blue Sky that it had committed three regulatory breaches related to incorrectly charged fees to wholesale private real estate and private equity funds. According to a release, the aggregate value of incorrectly charged fees came to at least A$4.1 million. Institutional funds and mandates were not impacted.

The Oaktree deal includes a seven-year senior secured loan note facility and that could see the US-based investor take up to a 30% stake in the Australian firm. “Today’s announcement is testament to Oaktree’s confidence in the strength of Blue Sky’s private markets investment platform and our 12-year track record,” Kim Morison, Blue Sky’s interim managing director, said in a statement.

Blue Sky engaged KPMG earlier this year for an independent valuation review of its 89 managed assets. The review revealed that Blue Sky’s cash position stood at A$40 million in June, down from A$62.2 million the previous year. The decline has been attributed primarily to write-downs in retirement living and student accommodation investments.

The firm has also hired a new chief risk officer as part of a plan to improve investment discipline and procedures, while tightening its focus on core business areas including PE, real estate, and real assets. Operating revenue fell 56% during the 2018 financial year to A$30.1 million. Blue Sky recorded a loss of A$67.6 million in financial 2018 versus a profit of A$20.7 million last year.

Oaktree opened its first office in Australia in 2016. The firm typically targets distressed and corporate debt, control investing, convertible securities, real estate, and listed equities. Its investment activity in the country includes the restructuring and listing of Nine Entertainment and a restructuring package for surfwear brand Quiksilver.

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• Topics
• Australasia
• Credit
• GPs
• Restructuring
• Australia
• Blue Sky Private Equity
• Oaktree Capital
• Distress
• Special Situations