Omni Bridge (ASX:OBL) signed a master agreement with Ares Management (NYSE:ARES) to establish a “continuation fund” (essentially a repackaging of old funds), called “Fund 9.” This new fund is valued at around $600 million. As part of the deal, Ares will acquire a 70% stake in Fund 9 for an upfront cash payment of approximately $310 million, with Omni retaining a 30% stake.
The deal will see Fund 9 acquire Omni’s co-investment in over 150 investments from its Funds 2/3, Funds 4/5 Series I and one remaining balance sheet investment.
Omni Bridgeway will remain the investment advisor to Fund 9, while Ares will enjoy a preferred return on its 70% share of the fund’s returns.
The transaction is expected to generate a cash multiple on invested capital (MOIC) for Omni of approximately 3.2x on its deployed capital. The agreement also allows Omni to reduce its co-investment obligations from 20% to 6% on these funds and is expected to significantly improve Omni’s liquidity position.
Of the initial $310 million proceeds, $250 million will be used to fully repay Omni’s outstanding debt, with the balance providing approximately $60 million in additional liquidity to the company. Fully settling Omni’s debt is expected to reduce annual interest costs by $30 million.
Omni will also receive a 2% management fee on outstanding gross investment commitments in Fund 9, adding approximately 7% to the company’s cost coverage.
Ares has the option to acquire up to $35 million of equity interest in Omni through the issuance of warrants, which are exercisable at a strike price calculated based on the weighted average price of Omni’s volume at the time of the transaction.
Omni Managing Director and CEO Raymond van Hulst said the deal achieves all of Omni’s strategic objectives, including validating the fair value of its asset portfolio, reducing debt and acceleration of its transition to a “capital-light” fund management model.
The transaction will also simplify Omni’s financial reporting as it will no longer need to consolidate funds 2/3 and 4 into its statutory accounts.
Financial close is expected in December 2024 or January 2025.
Shares of Omni Bridgeway jumped following the news. They are currently trading up 39.38% at $1.35.
