Key Takeaways
- • Blue Owl Capital is selling $1.4 billion in loans from three credit funds to return capital to investors and pay down debt, and is permanently halting redemptions at Blue Owl Capital Corp II (OBDC II), according to Reuters.
- • OBDC II investors will receive a payout equal to 30% of the fund's net asset value, or $2.35 per share, totaling up to about $268 million, versus the 5% redemption limit previously applicable.
- • The loans are priced at 99.7% of par, the same level at which Blue Owl carries them on its books, which the firm cites as evidence of valuation strength.
- • Blue Owl shares fell roughly 7% and as much as 9.8% intraday, while Apollo, Ares, Blackstone, KKR and Carlyle also declined, deepening a private equity selloff.
- • The software and services sector accounts for 13% of the sold debt, and software is 8% of Blue Owl's total assets, while 46% of Blue Owl Technology Income Corp's assets are in software.
Summary
Private capital firm Blue Owl Capital is selling $1.4 billion in assets from three of its credit funds, according to Reuters, so it can return capital to investors and pay down debt. The company also said it is permanently halting redemptions at Blue Owl Capital Corp II (OBDC II). The sale comes just over three months after Blue Owl abandoned a plan to merge OBDC II with a publicly traded fund and to temporarily halt redemptions in the smaller fund, which had been scheduled to resume this quarter. That reversal triggered a shareholder revolt and drove Blue Owl down 9.8% in intraday trading on Thursday.
The loans are held across three funds: $600 million in OBDC II, $400 million in Blue Owl Technology Income Corp, and $400 million in Blue Owl Capital Corp (OBDC). The debt spans 128 portfolio companies in 27 industries, with the largest concentration, 13%, in the software and services sector. Blue Owl co-President Craig Packer said the firm is receiving 99.7% of par value on the loans, the same level at which the assets are marked on its books, and called the price "an extremely strong statement." Citizens analyst Brian McKenna wrote that the transaction meant valuations were "marked-to-market and are validated, in our view."
OBDC II's board intends to deliver liquidity through quarterly return-of-capital distributions that will replace future quarterly tender offers. Packer told analysts that "we're not halting redemptions, we are simply changing the method by which we're providing redemptions," and said the payout would equal 30% of the fund's value, compared with the 5% limit that previously applied. Blue Owl declined to name the buyers, describing them as "leading North American public pension and insurance investors" taking equal stakes.
The move came as software stocks and credit quality concerns weighed on private equity and asset managers. Apollo fell almost 6%, Ares and Blackstone each fell more than 6%, KKR dropped almost 4%, and Carlyle declined more than 5%. The S&P 500 Software & Services index has lost about $2 trillion since its October peak, with about half of that loss coming in February. Economist Mohamed El-Erian compared the moment to August 2007, writing on X that it raised questions about broader systemic risk and that "a significant – and necessary – valuation hit is looming for specific assets."
Blue Owl Technology Income Corp saw investors withdraw 15.4% of its assets in January after the firm raised its redemption limit from 5%, and software makes up 46% of that fund's assets, per Packer. Packer said the firm has acknowledged that information technology is mostly software when asked about sector exposure.
The loans are held across three funds: $600 million in OBDC II, $400 million in Blue Owl Technology Income Corp, and $400 million in Blue Owl Capital Corp (OBDC). The debt spans 128 portfolio companies in 27 industries, with the largest concentration, 13%, in the software and services sector. Blue Owl co-President Craig Packer said the firm is receiving 99.7% of par value on the loans, the same level at which the assets are marked on its books, and called the price "an extremely strong statement." Citizens analyst Brian McKenna wrote that the transaction meant valuations were "marked-to-market and are validated, in our view."
OBDC II's board intends to deliver liquidity through quarterly return-of-capital distributions that will replace future quarterly tender offers. Packer told analysts that "we're not halting redemptions, we are simply changing the method by which we're providing redemptions," and said the payout would equal 30% of the fund's value, compared with the 5% limit that previously applied. Blue Owl declined to name the buyers, describing them as "leading North American public pension and insurance investors" taking equal stakes.
The move came as software stocks and credit quality concerns weighed on private equity and asset managers. Apollo fell almost 6%, Ares and Blackstone each fell more than 6%, KKR dropped almost 4%, and Carlyle declined more than 5%. The S&P 500 Software & Services index has lost about $2 trillion since its October peak, with about half of that loss coming in February. Economist Mohamed El-Erian compared the moment to August 2007, writing on X that it raised questions about broader systemic risk and that "a significant – and necessary – valuation hit is looming for specific assets."
Blue Owl Technology Income Corp saw investors withdraw 15.4% of its assets in January after the firm raised its redemption limit from 5%, and software makes up 46% of that fund's assets, per Packer. Packer said the firm has acknowledged that information technology is mostly software when asked about sector exposure.
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