Omni Bridgeway (ASX:OBL) has entered into a framework agreement with Ares Management (NYSE: ARES) to establish a “continuation fund” (essentially a repackage of the old fund) called “Fund 9.” The new fund is valued at approximately $600 million. As part of the transaction, Ares will acquire a 70% stake in Fund 9 for approximately $310 million in upfront cash, with Omni retaining a 30% interest.

The transaction will result in Fund 9 acquiring Omni’s co-investments in more than 150 investments from Fund 2/3, Fund 4/5 Series I, and one remaining balance sheet investment.

Omni Bridgeway will continue to serve as Fund 9’s investment advisor, while Ares will receive a preferred return on a 70% share of the fund’s proceeds.

The transaction is expected to give Omni a cash-to-invested capital (MOIC) multiple of approximately 3.2x. The agreement also allows Omni to reduce its co-investment obligations in these funds from 20% to 6%, which is expected to significantly strengthen Omni’s liquidity position.

Of the initial $310 million in proceeds, $250 million will be used to fully repay Omni’s outstanding debt, and the remainder will provide the company with approximately $60 million in additional liquidity. Full resolution of Omni’s debt is expected to reduce annual interest costs by $30 million.

Omni will also receive a 2% management fee on Fund 9’s total outstanding investment commitments, adding an estimated 7% to the company’s cost coverage.

Ares has the option to acquire up to $35 million in Omni stock through the issuance of stock acquisition rights, with an exercise price calculated based on Omni’s volume-weighted average price at the time of the transaction. Can be exercised.

Raymond Van Hulst, Managing Director and CEO of Omni, said the partnership will enable Omni to verify the fair value of its asset portfolio, reduce debt and move to a “capital-light” cash management model. He said all of Omni’s strategic goals, including acceleration, will be achieved.

The transaction will also simplify financial reporting, as Omni will no longer need to consolidate Funds 2/3 and 4 of its statutory accounts.

Closing is expected to be completed in December 2024 or January 2025.

Omni Bridgeway’s stock price soared on the news. It is currently trading at $1.35, up 39.38%.