Omni Bridgeway's Strategic Deal with Ares Management Enhances Liquidity

3 min read | December 18, 2024 12:41 PM AEDT | By Team Kalkine Media

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Highlights

Omni Bridgeway (OBL) collaborates with Ares Management (NYSE:ARES) for a $310m agreement.

The deal simplifies Omni's financial structure and enhances liquidity.

Fund 9 establishes a capital-light model for Omni's funds management strategy.

Omni Bridgeway (ASX:OBL) has entered a significant partnership with Ares Management (NYSE:ARES) through a framework agreement to create Fund 9, valued at approximately $600m. This agreement enables Omni to simplify its financial model, strengthen its liquidity, and transition towards a capital-light funds management structure.

Ares Management will acquire a 70% stake in Fund 9 for $310m in cash, while Omni will retain a 30% interest. Fund 9 will consolidate Omni’s co-investments from its Funds 2/3, Funds 4/5 Series I, and a balance sheet investment, covering over 150 assets. Omni Bridgeway will continue its role as the investment adviser for the new fund, while Ares is set to receive a preferred return on its 70% share of Fund 9's profits.

This transaction is expected to yield a cash multiple on invested capital (MOIC) of 3.2x for Omni on its deployed capital. The deal also reduces Omni’s co-investment obligations from 20% to 6% across these funds.

Omni Bridgeway plans to allocate $250m of the $310m proceeds to fully repay its outstanding debt, while the remaining $60m will enhance the company’s liquidity. The debt repayment is anticipated to save the company $30m annually in interest expenses. Additionally, Omni will receive a 2% management fee on the gross investment commitments of Fund 9, estimated to contribute 7% to the company’s cost coverage.

Ares Management has also secured an option to acquire up to $35m in Omni equity through warrants exercisable at a strike price linked to Omni’s volume-weighted average price at the time of the transaction.

Omni's Managing Director and CEO, Raymond van Hulst, highlighted that the deal aligns with the company’s strategic objectives. The agreement validates the fair value of Omni's asset portfolio, reduces its debt, and positions the company for a capital-light management approach. Additionally, the transaction simplifies financial reporting by eliminating the need to consolidate Funds 2/3 and 4 into Omni's statutory accounts.

Financial closure for this transaction is expected to occur between December 2024 and January 2025. Omni’s collaboration with Ares underscores a transformative step for its operations and financial framework, paving the way for future growth.

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