Oaktree Capital Management has bought $1.5 billion of preferred shares in United Wholesale Mortgage, giving the Los Angeles-based firm an equity interest in the mortgage lender along with generous dividend payments and a slew of protections. The transaction marks a return to a familiar counterparty: billionaire Mat Ishbia's mortgage company had previously turned to Oaktree after an unsuccessful hedge in 2020, before UWM went public. The new investment is both a contrarian bet on the struggling US housing market and an example of a debt-like strategy that is becoming more common among private lenders, even those that have historically avoided equity risk.
The preferred shares are designed to throw off at least $150 million in annual dividends, and the package includes warrants with exercise prices ranging from $2 to $6 per share. The structure reflects a broader shift in private credit, where structured equity trades are custom and terms are often private, but packages can include preferred stock, lender protections and contractual dividends. Investors typically add penalties or increase the rate of return as time goes on, signaling that such capital is not expected to be permanent. At $1.5 billion, the UWM investment is an unusually large sum for a single lender.
The evidence comes from a single National Mortgage News report, which cites people familiar with the deal and notes that representatives for UWM and Oaktree declined to comment. The same source describes Oaktree's first deal with UWM in 2020 as a $300 million debt deal with a 15.5% coupon, guaranteed by the mortgage lender and secured by the parent's stake in the firm. That financing was repaid roughly four months later for what appears to be 1.5 times Oaktree's initial investment, according to the people, who asked not to be named discussing confidential information. The report also places the UWM transaction within a wider trend, naming Apollo Global Management Inc., Sixth Street and Bain Capital as firms that have ramped up preferred-equity deals with companies in need of cash.
The sector implications are significant. For distressed debt investors and private credit firms, preferred and structured equity deals increase potential risks and rewards: they can capture equity-like returns pushing into the mid-teens, but if a company fails, investors get in line behind other creditors. The opportunity is growing because elevated interest rates and years of sluggish dealmaking have saddled private equity managers with assets they cannot or will not sell, making it tougher to return cash to investors. A structured-equity investment can create liquidity without forcing a sale or adding debt to the balance sheet. Oaktree's own history illustrates the flexibility of these instruments, including a 2018 structured equity deal with Montrose Environmental Group that began at just under $200 million and grew to nearly $400 million before the firm went public in 2020, and a 2024 majority stake in B. Riley's Great American unit valuing the firm at $386 million.
The report leaves several material details unresolved. The precise dividend rate, maturity, step-up provisions, voting rights and conversion features of the UWM preferred shares are not disclosed. The source does not specify UWM's current financial condition, the size of the soured hedges that prompted the call to Oaktree, or the dilution impact on existing shareholders. Because the analysis rests on a single full-text source with unnamed people as the basis for key historical details, the terms and motivations should be treated with caution until corroborated by filings or official disclosures. What to watch is whether UWM's performance supports the dividend burden, whether the warrants move into the money, and whether Oaktree's structured equity push extends to other mortgage lenders or housing-related borrowers.