Oaktree in talks with Apollo over Countrywide debt

US distressed investor Oaktree Capital Management is reportedly interested in rescuing the UK’s largest estate agency from the brink of collapse. Apollo acquired the firm at the height of the UK housing bubble for £1bn.

Oaktree Capital is reportedly in talks to take control of Britain’s largest estate agent Countrywide from Apollo Alternative Assets.

The US firm is speaking with bondholders who invested in the debt Apollo raised to acquire Countrywide in 2007 for £1 billion (€1.1 billion; $1.4 billion), according to the Financial Times.

If a deal is concluded, Oaktree’s investment would significantly reduce the debt levels within the group and potentially hand it £75 million of extra equity, the report said. The deal is being on behalf of Oaktree's new European distressed fund.

Countrywide confirmed it had received proposals from creditors for a debt restructuring which would allow it to “expand its operations by opportunistically acquiring attractive estate agency businesses that may become available given depressed industry conditions”.

Any such deal would require approval from the majority of the company’s creditors and the support of management, the Financial Times added. Countrywide also said it intended to approve the deal subject to further analysis.

A serious decline in house sales and restricted mortgage lending has served up a lethal cocktail to Countrywide, which operates a number of estate agency brands in the UK, including names such as Bairstow Eves. 

The deal would be the first investment for Oaktree's €1.8 billion OCM European Principal Opportunities Fund II launched last December to take advantage of distressed situations in Europe.

Caleb Kramer, a portfolio manager at Oaktree, told the FT the fund was a “long-term investor”.
Under the proposals, Oaktree and Apollo would provide the company with a £75 million cash injection in exchange for a 60 percent equity stake. Oaktree would be the single largest shareholder.

Alchemy Special Opportunities, managed by UK firm Alchemy, and hedge fund Polygon, is also contributing some equity. Polygon was one of Countrywide’s biggest shareholders before it was taken private by Apollo. The report also said Apollo’s original equity would be wiped out but that it would retain a stake.

Marc Rowan, a founding partner of Apollo, said: “The proposed transaction would ensure that the company is well placed to maintain its position and to become a consolidator in the industry.”

Countrywide has around £740 million of debt.