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Alternatives

Och-Ziff founder, former execs to sell shares as manager looks to reboot

Daniel S. Och

Och-Ziff Capital Management Group announced Thursday that Daniel S. Och, the firm's billionaire founder and chairman, and former executive managing directors of the alternative investment firm will reallocate 35% of their Class A shares (about 17.1% of outstanding shares) to current executive managing directors and other employees.

The reallocated shares will be transferred to a new share class of interests that entitles employees who hold them to future profits, a news release said.

The new ownership breakdown after the share transfer will be retired EMDs, 30.6% (current, 47.7%); current EMDs/employees, 35% (current, 17.9%); and public shareholders, 34.4% (current, 34.4%).

"By materially increasing equity ownership by the current partners and taking steps to enhance our capital structure, we expect to be better positioned to serve our clients," Och-Ziff CEO Robert Shafir said in the release.

Separately, Mr. Och, who has about $960 million (about 3% of total fund assets) invested in the firm's funds, will redeem the liquid 66% portion of his total investment on Dec. 31.

Among efforts to pay down the firm's debt, current and former executive managing directors will temporarily forgo distributions on the common shares they hold, Och-Ziff said in the release. The distribution holiday for employees will continue until $600 million of cash has been accumulated. Public shareholders will continue to receive distributions.

Following the close of trading on Jan. 3, Och-Ziff also will put into effect a 1-for-10 reverse-stock split of Class A shares. The stock split will reduce the number of Class A shares on Dec. 4 — 192 million — to about 19.2 million shares on Jan. 4.

Finally, Och-Ziff intends to change its tax classification and organizational structure to a corporation from a partnership in 2019.

Mr. Och said in the release that the new plan "is a positive outcome for the firm that underscores our collective focus on aligning incentives across the organization to achieve outstanding results for our shareholders and global clients."

The firm was hit with investor redemptions after a high-profile case centered on charges of bribery of African officials was settled in 2016 with the firm agreeing to pay more than $400 million in penalties.

The firm's assets under management have fallen 33.7% to $32 billion as of Dec. 1 from its most recent peak of $48.3 billion in 2015.

Och-Ziff's share price is down 91.4% over the past five years and 52% year-to-date Dec. 6, but Och-Ziff's restructuring plan met with initial approval from investors: Its shares, traded under the ticker symbol OZM, closed at 96 cents a share on Dec. 4 and climbed to $1.20 on Dec. 6 and to $1.55 Friday.