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Onex Corp. ONEX-T has paused fundraising for its largest private equity fund, delayed the timeline for hitting a key financial target and is hunting for places to cut costs as new chief executive officer Bobby Le Blanc crafts a turnaround plan to streamline the Toronto-based private equity investor.

Onex swung to a first-quarter loss as it wrote down the value of its private wealth business, and also paused fundraising for Onex Partners VI, which aims to raise billions of dollars, as limited-partner investors sit on the sidelines.

Mr. Le Blanc was named CEO of Onex on Thursday as founder Gerry Schwartz steps back but stays on as the company’s chair. On Friday, Mr. Le Blanc said his management team is reviewing Onex’s strategic plans after shareholders “sent a clear signal that we must do more, and we must do it at an accelerated pace.”

“We will re-emerge as a stronger and more streamlined organization,” he said on a conference call to report quarterly earnings. “As CEO, this will be my top priority.”

Mr. Le Blanc is resetting expectations for the business as it wrestles with “challenging market conditions.” He said Onex no longer expects to meet a target to generate positive fee-related earnings – a measure of revenue earned from managing third-party capital, less costs – by 2026. That goal was set out at a 2021 presentation to investors, and Onex plans to convene another investor day this fall to outline new targets.

“That number, although achievable, is not a 2026 number anymore,” said Chris Govan, Onex’s chief financial officer, on the conference call.

Onex is still raising money for multiple funds and said it has brought in about US$900-million in fee-generating capital through its credit and private equity platforms so far this year. Fundraising for Onex Partners VI is on pause indefinitely, “until the fundraising environment improves,” the company said.

Last year, Onex raised an initial US$2-billion for the OP VI fund, but US$1.5-billion of that total was Onex’s own money. Since then, it has struggled to land commitments from limited-partner investors, some of whom still have money tied up in its previous flagship funds, including the US$7.15-billion Onex Partners V.

Mr. Le Blanc said existing investors in Onex funds “want to see more return of capital” to prove that Onex can deliver its promised rates of return, and the company is on the lookout for opportunities to sell some assets.

And he said Onex could use some proceeds from any sales to buy back shares in an effort to narrow the steep discount in the company’s share price relative to the underlying value of its assets, “until the share price makes any sense to us.”

At the same time, Onex is aiming to cut costs as it expects more muted revenue in the short term, and plans to take a restructuring charge in the second quarter.

That charge will be smaller than a US$20-million restructuring charge booked in the first quarter, and disclosed on Friday, along with a US$171-million impairment charge stemming from a decision to wind down operations at Gluskin Sheff and Associated Inc., its private wealth unit acquired in 2019.

Onex acquired Gluskin Sheff in 2019 for US$330-million as part of a failed plan to expand sales of its credit and private wealth products. In late March, Onex announced a deal with RBC Wealth Management Canada to distribute its alternative investment products through RBC advisers and take over parts of Gluskin Sheff’s private wealth business. The agreement was reached after four key managing directors from Gluskin’s client wealth management group planned to leave to join RBC.

Onex is still working out details of the arrangement with Royal Bank of Canada, Mr. Le Blanc said.

Impairment and restructuring charges weighed on Onex’s first-quarter earnings. The company lost US$232-million, or US$2.87 per share, in the quarter that ended March 31, compared with a profit of US$164-million, or US$1.89 per share, in the same quarter last year.

Onex had about US$7.8-billion of investing capital as of March 31, or US$96.24 per fully diluted share. That marked a 4-per-cent increase in investing capital per share year over year, but a decrease of 1 per cent from Dec. 31.

The value of Onex’s private equity investments rose 2 per cent year over year, and was effectively unchanged from the previous quarter.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/05/24 4:00pm EDT.

SymbolName% changeLast
ONEX-T
Onex Corp
+1.15%96.35

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