Och-Ziff moves to shore up balance sheet and share price
Hedge fund’s executives forgo dividends and transfer equity to help pay down debt
Och-Ziff, the hedge fund business hit by redemptions after a corruption scandal, is shoring up its balance sheet by having executives forgo dividends and transferring equity from its founder Daniel Och and other former managing directors to its current leadership.
The move, announced on Thursday, helped buoy the firm’s bombed-out share price, pushing it back above the $1 mark below which it risks being delisted by the New York Stock Exchange.
Mr Och and other holders of the group’s class A shares in its operating partnerships will reallocate 35 per cent of the units to current executive managing directors, the company said, in return for some of the current team taking a cut in their annual pay.
Current and former MDs have also agreed to forgo dividends on their shares to allow Och-Ziff to pay down its debt while continuing to make distributions to outside shareholders.
Mr Och said the plan “underscores our collective focus on aligning incentives across the organisation in order to achieve outstanding results for our shareholders and global clients”.
In other initiatives announced on Thursday, the firm is converting from a partnership to a corporation so that more investors can buy its stock, potentially pushing up its share price, and conducting a one-for-10 “reverse stock split” to multiply the share price and keep it away from the NYSE’s delisting danger zone.
After falling to 96 cents on Tuesday, Och-Ziff’s shares were up by more than 25 per cent on Thursday to $1.18.
Och-Ziff, one of the early alternative asset managers to float on the stock market, battled a wave of redemptions after it settled foreign bribery charges with US authorities in 2016 for $413m.
The firm was accused of paying bribes in at least five African countries to win business. One of the fund’s former executives, Michael Cohen, has pleaded not guilty to charges in the case in New York federal court. A subsidiary of the fund also pleaded guilty to criminal violations as part of the agreement, while Mr Och paid $2.2m.
Assets under management dropped 17 per cent in 2016, to $37.9bn. The amount the firm manages has now mostly stabilised at around $32.3bn.
Robert Shafir, the group’s chief executive, said the changes announced on Thursday “solidify Oz’s future, providing long-term stability and setting the firm on a path for continued success”.
“We appreciate the willingness of Dan and the former executive managing directors to transfer a substantial portion of their equity to further incentivise the firm’s next generation over the long term,” Mr Shafir added.
In January the firm appointed Mr Shafir, formerly at Credit Suisse, as chief executive in place of Mr Och, who will also step down as chairman at the end of March.
Mr Shafir joined amid turmoil over the succession to Mr Och. Jimmy Levin, the fund’s co-chief investment officer, had been rumoured to be the heir apparent. In a letter to investors over Christmas weekend last year, Mr Och said he had changed his mind and that it was “not the right time to transition to Jimmy”, who was 34 at the time. Mr Levin was given a $280m pay package at the time he was promoted to co-CIO.
Och-Ziff is one of the largest hedge fund businesses in the world, with trading strategies across real estate, structured credit, long-short equity, special situations, convertible and derivative arbitrage, corporate credit, merger arbitrage and private investments.
Och-Ziff’s investment performance has been stronger this year than many other hedge funds. Its flagship Oz Master Fund was up 0.14 per cent in November, putting it up 0.94 per cent for the year, according to regulatory filings. The latest industry-wide data from HFR put the average fund down 1.66 per cent in the year to the end of October.
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