Fifth Street Asset Management

Fifth Street Asset Management Inc. was a U.S. alternative asset manager focused on credit investments and lending to small and medium-sized businesses. The businesses targeted by its lending activities generally generated annual revenue of approximately $25 million to $500 million. Rather than operating primarily as a traditional retail investment-management brand, Fifth Street built its business around the management of business development companies, private investment vehicles, senior-loan funds, and related credit strategies. The firm was founded in 1998 by Leonard M. Tannenbaum. Its principal investment platform included Fifth Street Finance Corporation and Fifth Street Senior Floating Rate Corporation, two publicly traded business development companies. Fifth Street Finance was established in 1998 and completed its initial public offering in 2008. Fifth Street Senior Floating Rate was formed in 2013. Through these vehicles and other funds, the manager provided loans and other financing to smaller companies, a segment that is often underserved by large commercial banks but offers specialized credit managers opportunities to earn management and incentive fees. Fifth Street expanded its platform through partnerships and structured financing arrangements. In 2014, Fifth Street Finance partnered with Kemper Corporation on two joint ventures involving stated equity commitments of $200 million and leverage of $400 million. The arrangements were designed to expand lending capacity and distribute additional debt exposure. The firm also managed two senior-loan funds and maintained a broader institutional credit business. By the middle of the 2010s, Fifth Street reported more than $6 billion in assets under management across its two public business development companies and multiple private investment vehicles. Its principal offices were identified in Greenwich, Silicon Valley, Dallas, and Chicago, and the organization had more than 100 professionals. Its business model generated revenue primarily from management fees and related fees associated with the assets and investment portfolios it managed. For the quarter ended March 31, 2015, reported total revenue was $24.9 million, with management fees accounting for most of the total; these figures are historical and should not be treated as current financial information. Fifth Street also became a public company in its own right. After initially withdrawing a proposed offering, it amended and completed an initial public offering in October 2014 under the NASDAQ ticker FSAM. The offering was reduced from the originally proposed size, and the shares experienced a sharp decline during their first trading day. The company and its investment vehicles subsequently faced investor criticism over equity issuances that were viewed as dilutive, including offerings by the business development companies at prices below previously reported net asset value. The Fifth Street platform ultimately underwent a major transition in 2017. On July 14, 2017, Oaktree Capital Management announced that it would assume management of Fifth Street Finance Corporation and Fifth Street Senior Floating Rate Corporation. The transaction closed on October 17, 2017. Following the closing, the two funds were renamed Oaktree Specialty Lending Corporation and Oaktree Strategic Income Corporation, respectively. This change ended Fifth Street's role as manager of its principal publicly traded business development companies and marked the effective end of the Fifth Street asset-management platform as described in the cited historical sources.

Fifth Street Asset Management was founded in 1998 by Leonard M. Tannenbaum as a credit-focused investment manager serving the U.S. middle market. Its strategy centered on lending to smaller companies, generally businesses with annual revenue between $25 million and $500 million. The firm developed a platform combining publicly traded business development companies, private investment funds, senior-loan funds, and joint ventures. The first major public vehicle associated with the platform was Fifth Street Finance Corporation, founded in 1998 and taken public in 2008. A second public business development company, Fifth Street Senior Floating Rate Corporation, was established in 2013. These vehicles invested in loans and other credit instruments issued by middle-market companies, allowing Fifth Street to earn management fees and related compensation while providing capital to borrowers that might not have had the same access to traditional bank financing. In 2014, Fifth Street Finance entered into two joint ventures with Kemper Corporation. The arrangements were described as having $200 million of equity commitments and $400 million of leverage, giving the partners additional capacity for lending activities. Fifth Street also maintained two senior-loan funds and several private investment vehicles. During this period, the firm reported more than $6 billion of assets under management across its two public business development companies and private funds, with principal offices in Greenwich, Silicon Valley, Dallas, and Chicago and a workforce of more than 100 professionals. Fifth Street Asset Management became publicly traded in October 2014. It had initially withdrawn its proposed offering before filing an amended version that reduced the size of the IPO. The shares began trading on NASDAQ under FSAM, but the stock fell materially during its first trading session. The firm and its managed investment companies also attracted negative investor attention in 2014 after issuing new shares. Critics argued that certain offerings were dilutive to existing shareholders, particularly where shares were issued below a previously reported net asset value. Historical company reporting cited in the reference material showed that total revenue for the quarter ended March 31, 2015, was $24.9 million, compared with $23.8 million for the corresponding quarter a year earlier. Management fees represented the large majority of quarterly revenue, and fee-earning assets under management had increased year over year. These results illustrate the fee-based economics of the platform but are not current figures. The decisive change came in 2017. Oaktree Capital Management announced on July 14 that it would assume management of Fifth Street Finance Corporation and Fifth Street Senior Floating Rate Corporation. The transaction closed on October 17. Oaktree renamed the funds Oaktree Specialty Lending Corporation and Oaktree Strategic Income Corporation. Because those two public business development companies were the core of Fifth Street's operating platform, the transaction effectively ended Fifth Street's role as their investment manager and marks the end of the brand's active historical business as documented by the cited sources.

• 2017

  Oaktree assumes management of Fifth Street's public BDCs

  [1]Fifth Street Asset Managementen.wikipedia.org

  Oaktree Capital Management completed its assumption of management of Fifth Street Finance Corporation and Fifth Street Senior Floating Rate Corporation.

• 2014

  Kemper joint ventures formed

  [1]Fifth Street Asset Managementen.wikipedia.org

  Fifth Street Finance partnered with Kemper on two lending joint ventures involving reported equity commitments and leverage.

• 2014

  Fifth Street Asset Management IPO

  [1]Fifth Street Asset Managementen.wikipedia.org

  Fifth Street Asset Management completed its public offering and began trading on NASDAQ under FSAM.

• 2013

  Second public BDC established

  [1]Fifth Street Asset Managementen.wikipedia.org

  Fifth Street Senior Floating Rate Corporation was established as a second publicly traded business development company associated with the manager.

• 2008

  Fifth Street Finance Corporation IPO

  [1]Fifth Street Asset Managementen.wikipedia.org

  Fifth Street Finance Corporation completed its initial public offering and became a publicly traded business development company.

• 1998

  Fifth Street entities founded

  [1]Fifth Street Asset Managementen.wikipedia.org

  Leonard M. Tannenbaum founded the Fifth Street entities, establishing the platform's middle-market credit and lending focus.

A specialized U.S. middle-market credit manager providing financing to small and midsize businesses through public business development companies, private funds, and related lending structures.

• Business development company · 1998

  Fifth Street Finance Corporation

  A publicly traded business development company founded in 1998 and taken public in 2008. It invested in loans and other credit instruments for U.S. middle-market companies and was one of the principal investment vehicles managed by Fifth Street Asset Management. Oaktree assumed management in 2017 and subsequently renamed the company Oaktree Specialty Lending Corporation.

• Business development company · 2013

  Fifth Street Senior Floating Rate Corporation

  A publicly traded business development company established in 2013 with a focus on floating-rate senior loans and related middle-market credit investments. It was managed alongside Fifth Street Finance Corporation until Oaktree assumed management in October 2017, after which it was renamed Oaktree Strategic Income Corporation.

• Private credit funds

  Private investment vehicles

  Fifth Street managed multiple private investment vehicles that complemented its public business development companies. These vehicles formed part of the firm's broader credit platform and provided financing to small and midsize businesses through private-market structures.

• Senior loan funds

  Senior-loan funds

  The firm maintained two senior-loan funds as part of its credit-management activities. The funds focused on senior lending exposure and broadened Fifth Street's product range beyond its publicly traded business development companies.

• 2014

  Investor criticism over dilutive share offerings

  Fifth Street-related business development companies issued new shares during 2014. Investor criticism focused on dilution and the effect of offerings priced below previously reported net asset value, including an offering by Fifth Street Senior Floating Rate Corporation.

  Source

Read more

• Junior Achievement sponsorship

  Connecticut

  Fifth Street Asset Management joined GE, Ernst & Young, KPMG, and UBS in sponsoring Junior Achievement programming for young entrepreneurs in Connecticut.

  Outcome. The cited material identifies the sponsorship but does not provide a quantified outcome.

  Source

• 2017

  Transfer management of the two public BDCs to OaktreeM&A

  Background

  Fifth Street's two public business development companies were the central vehicles in its asset-management platform.

  Action taken

  Oaktree Capital Management assumed management of Fifth Street Finance Corporation and Fifth Street Senior Floating Rate Corporation. The transaction closed on October 17, 2017, and the funds were renamed.

  Aftermath

  The vehicles became Oaktree Specialty Lending Corporation and Oaktree Strategic Income Corporation, ending Fifth Street's management role over its principal public funds.

  Source

• 2014

  Expand lending capacity through Kemper joint venturesStrategy

  Background

  Fifth Street sought to broaden the lending capacity of its middle-market credit platform and use joint-venture structures to support additional leverage and debt distribution.

  Action taken

  Fifth Street Finance partnered with Kemper Corporation on two joint ventures with reported equity commitments of $200 million and leverage of $400 million.

  Aftermath

  The joint ventures became part of Fifth Street's broader 2014 credit-platform expansion. The cited material does not quantify their subsequent performance.

  Reported equity commitments and leverage. $200 million equity commitments and $400 million leverage (2014)

  Source

• 2014

  Issue new shares to support balance-sheet growthOther

  Background

  Fifth Street-related public vehicles sought to grow their balance sheets and raise additional capital.

  Action taken

  New shares were issued, including an August offering by Fifth Street Senior Floating Rate Corporation at a stated price below its previously reported net asset value per share.

  Aftermath

  The offerings drew criticism from shareholders who argued that the pricing diluted existing investors and reduced investment value.

  Fifth Street Senior Floating Rate Corporation offering price versus reported net asset value. $15.13 reported net asset value per share → $12.14 offering price per share (August 2014)

  Source

• 2014

  Complete a reduced public offering for the management companyOther

  Background

  Fifth Street Asset Management had initially withdrawn a proposed IPO before revising the transaction.

  Action taken

  The company amended the offering, reduced its planned size, and completed the IPO in October 2014 under the NASDAQ ticker FSAM.

  Aftermath

  The shares declined sharply during their first trading day. The cited reference does not establish the longer-term market outcome.

  First-day share-price movement. $17 opening price → $13.37 closing price, a 21% decline (First trading day in October 2014)

  Source

1. 1Fifth Street Asset Managementen.wikipedia.org