Looming DoJ Investigations Dampen Och-Ziff Outlook

Och-Ziff Capital's troubles appear to be getting worse as an ongoing investigation further clouds its already murky investment performance this year, analysts are saying.

Jefferies analyst Daniel Fannon cut Och-Ziff's 12-month price target Tuesday to $4 from $5.50, noting that Och-Ziff's "weak investment performance" so far in 2016 is being compounded by a Foreign Corrupt Practices Act (FCPA) investigation by the Justice Department, which could amount to both hefty legal costs as well as reduced confidence for Och-Ziff products. Jefferies also cut its rating on Och-Ziff to Hold from Buy,

"The FCPA investigation is having an impact on multiple fronts including the firm's profitability, capital position (i.e., legal costs, potential fine, etc.) and client demand for its products," Fannon said in the Jefferies report, which also lowering Och-Ziff's earnings forecast in fiscal 2017 to $0.62 a share from previous guidance of $0.88.

Jefferies' revised outlook comes on the heels of a Sunday downgrade on Och-Ziff by Keefe, Bruyette & Woods, which dropped its rating to Market Perform from Outperform.

Keefe, Bruyette cited the uncertainties tied to the investigation, which first came to light in March 2014, when Och-Ziff revealed it had received SEC subpoenas and information requests by the Justice Department tied to an ongoing FCPA investigation. 

The investigation centers on potential bribery violations by Och-Ziff, in accepting capital from a Libyan sovereign wealth fund, as well as in Zimbabwe and Congo, which Och-Ziff has loaned roughly $234 million. read more »