Shares in Blue Owl Capital tumbled 8.7% on Thursday after the non-public market and different belongings supervisor offered $1.4 billion of mortgage belongings held throughout 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 fingers at 99.7% of par worth.
The most important sale comes out of the Blue Owl Capital Company II fund, also called 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 a substitute, the enterprise growth firm — which focuses on non-public credit score lending to U.S. middle-market firms — 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 capacity 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 different funding funds into the extra liquid retail wealth area.
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 web asset worth.
Blue Owl Capital Company (OBDC).
Elsewhere, the opposite funds — the OBDC and Blue Owl Know-how Earnings Corp (OTIC) — every offered $400 million in belongings, representing 2% and 6% of their respective portfolios.
“These gross sales include 97% senior secured debt investments with a mean dimension of $5 million and embody investments in 128 distinct portfolio firms throughout 27 industries,” Blue Owl mentioned in a press release.
“The most important business represented is web software program and providers at 13%, typically in step with the business composition of Blue Owl’s general 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 robust earnings potential.
