Key Takeaways
- • Blue Owl Capital sold $1.4 billion of loan assets across three private debt funds at 99.7% of par value to four North American pension and insurance investors, according to the company, and its shares fell almost 6% on Thursday.
- • Blue Owl Capital Corporation II (OBDC II), a semi-liquid private credit vehicle aimed at U.S. retail investors, sold $600 million in loans, about 34% of its $1.7 billion portfolio, and will end regular quarterly liquidity payments.
- • OBDC II will shift to periodic payouts funded by asset sales, earnings, repayments and other strategic deals, which materially tightens investor withdrawal rights.
- • The move follows a recent rise in redemption requests across some Blue Owl business development companies, per a Bloomberg report, and comes after the abandoned November merger of OBDC II into the publicly traded OBDC.
- • OBDC II will return capital to shareholders at up to $2.35 per share, roughly 30% of its net asset value, using sale proceeds to pay down debt.
Summary
Shares of Blue Owl Capital tumbled almost 6% on Thursday after the private markets and alternative assets manager sold $1.4 billion of loan assets held in three of its private debt funds. Blue Owl said on Wednesday that it had agreed the sale with four North American pension and insurance investors, with the loans changing hands at 99.7% of par value.
The largest portion came from Blue Owl Capital Corporation II (OBDC II), a semi-liquid private credit strategy aimed at U.S. retail investors. OBDC II offloaded $600 million in loans, about 34% of its $1.7 billion portfolio. The company said that after the transaction, OBDC II will end its regular quarterly liquidity payments to investors and instead move to periodic payouts funded by asset sales, earnings, loan repayments and other strategic deals. The change tightens investors' ability to withdraw capital. The business development company specializes in private credit lending to U.S. middle-market companies.
The other two funds, Blue Owl Capital Corporation (OBDC) and Blue Owl Technology Income Corp (OTIC), each sold $400 million in assets, representing 2% and 6% of their respective portfolios. According to Blue Owl, the sales consist of 97% senior secured debt investments with an average size of $5 million, spanning 128 distinct portfolio companies across 27 industries. The largest industry exposure is internet software and services at 13%, which the firm said is generally consistent with its overall direct lending strategy.
The transaction follows a recent rise in redemption requests at some of Blue Owl's business development companies, according to a Bloomberg report. It also comes after Blue Owl attempted last November to merge OBDC II with the larger, publicly traded OBDC. Before abandoning that plan, the firm had halted redemptions in OBDC II until the merger was completed, a step that could have produced losses of roughly 20% for investors. That episode weighed on Blue Owl's shares.
Blue Owl will use the proceeds to pay down debt and return capital to OBDC II shareholders at up to $2.35 per share, or approximately 30% of the fund's net asset value. Logan Nicholson, president of OBDC II and OBDC, said the deal opportunistically delivers value to shareholders and provides a "significant liquidity event" for OBDC II while maintaining a diversified portfolio with strong earnings potential.
The largest portion came from Blue Owl Capital Corporation II (OBDC II), a semi-liquid private credit strategy aimed at U.S. retail investors. OBDC II offloaded $600 million in loans, about 34% of its $1.7 billion portfolio. The company said that after the transaction, OBDC II will end its regular quarterly liquidity payments to investors and instead move to periodic payouts funded by asset sales, earnings, loan repayments and other strategic deals. The change tightens investors' ability to withdraw capital. The business development company specializes in private credit lending to U.S. middle-market companies.
The other two funds, Blue Owl Capital Corporation (OBDC) and Blue Owl Technology Income Corp (OTIC), each sold $400 million in assets, representing 2% and 6% of their respective portfolios. According to Blue Owl, the sales consist of 97% senior secured debt investments with an average size of $5 million, spanning 128 distinct portfolio companies across 27 industries. The largest industry exposure is internet software and services at 13%, which the firm said is generally consistent with its overall direct lending strategy.
The transaction follows a recent rise in redemption requests at some of Blue Owl's business development companies, according to a Bloomberg report. It also comes after Blue Owl attempted last November to merge OBDC II with the larger, publicly traded OBDC. Before abandoning that plan, the firm had halted redemptions in OBDC II until the merger was completed, a step that could have produced losses of roughly 20% for investors. That episode weighed on Blue Owl's shares.
Blue Owl will use the proceeds to pay down debt and return capital to OBDC II shareholders at up to $2.35 per share, or approximately 30% of the fund's net asset value. Logan Nicholson, president of OBDC II and OBDC, said the deal opportunistically delivers value to shareholders and provides a "significant liquidity event" for OBDC II while maintaining a diversified portfolio with strong earnings potential.
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