Shares in Blue Owl Capital tumbled virtually 6% on Thursday after the non-public market and various belongings supervisor bought $1.4 billion of mortgage belongings held in three of its non-public debt funds.
Blue Owl mentioned Wednesday it had agreed the sale with 4 North American pension and insurance coverage traders, with the loans altering palms at 99.7% of par worth.
The biggest sale comes out of the Blue Owl Capital Company II fund, often known as OBDC II, a semi-liquid non-public credit score technique geared toward U.S. retail traders.
OBDC II offloaded $600 million in loans, amounting to about 34% of its $1.7 billion portfolio.
In a significant swap, Blue Owl mentioned that following the deal, OBDC II would finish common quarterly liquidity funds to the fund’s traders.
Blue Owl.
As an alternative, the enterprise growth firm — which focuses on non-public credit score lending to U.S. middle-market corporations — will pivot to periodic payouts that will probably be funded by asset gross sales, earnings, repayments and different strategic offers.
That shift extra tightly restricts investor liquidity and their potential to withdraw their cash. The transfer underlines the challenges surrounding liquidity and transparency in non-public markets, amid the continued push by non-public asset managers and various funding funds into the extra liquid retail wealth house.
It follows a latest rise in redemption requests in a few of Blue Owl’s enterprise growth corporations, in line with a Bloomberg report.
Final November, Blue Owl Capital tried to merge OBDC II with the bigger, publicly-traded Blue Owl Capital Company (OBDC) fund. Earlier than abandoning its plans, Blue Owl halted redemptions in OBDC II till the deal — which might have introduced losses of some 20% to traders — was accomplished.
The episode rattled traders, sending Blue Owl Capital’s shares decrease.
Now, Blue Owl will use the proceeds from this sale to pay down debt and return capital to OBDC II shareholders, at as much as $2.35 per share or roughly 30% of OBDC II’s internet asset worth.
Blue Owl Capital Company (OBDC).
Elsewhere, the opposite funds — the OBDC and Blue Owl Know-how Revenue Corp (OTIC) — every bought $400 million in belongings, representing 2% and 6% of their respective portfolios.
“These gross sales encompass 97% senior secured debt investments with a median dimension of $5 million and embody investments in 128 distinct portfolio corporations throughout 27 industries,” Blue Owl mentioned in an announcement.
“The biggest business represented is web software program and companies at 13%, typically in line with the business composition of Blue Owl’s total direct lending technique and reflecting continued confidence within the high quality and valuations of those software program investments.”
Logan Nicholson, president of OBDC II and OBDC, mentioned the deal “opportunistically” delivers worth to shareholders and, in OBDC II, gives a “important liquidity occasion” whereas sustaining a diversified portfolio with sturdy earnings potential.
