Stress on Blue Owl Capital (OWL) is not letting up after an asset sale meant to calm investor worries final week sparked new concern from high authorities officers in regards to the $1.8 trillion personal credit score trade.
“We’re involved,” Treasury Secretary Scott Bessent stated Friday when requested in regards to the progress of Blue Owl and different personal lenders over latest years. “If there’s something rotten, it isn’t going to be handed to the person buyers,” Bessent stated.
Final Wednesday, Blue Owl stated it bought $1.4 billion in loans and lending commitments from three of its funds, with some proceeds used to repay buyers 30% of their capital from the oldest of these personal credit score funds, often called Blue Owl Improvement Company II (OBDC II), which is winding down after scrapping a deliberate merger late final 12 months.
However what drew outsized consideration was Blue Owl’s determination to get rid of the optionality for buyers to money out of OBDC II on a quarterly foundation and as a substitute institute a program of quarterly capital distributions primarily based on the fund’s future earnings and asset gross sales.
The transfer drew contemporary scrutiny to the opaque world of personal debt, which has boomed lately however has by no means actually confronted a disaster — and is now garnering mounting scrutiny as it’s steadily making its approach into thousands and thousands of US brokerage and retirement accounts following an govt order President Trump signed final summer season.
Blue Owl’s inventory fell 5% Monday morning.
Wall Road analysts, who typically authorised of Blue Owl’s mortgage sale, nonetheless aren’t nervous in regards to the agency or the broader personal credit score trade having important credit score issues.
“We do not imagine there’s a severe concern a couple of deterioration in personal credit score high quality,” Oppenheimer analyst Chris Kotowski wrote in a word to shoppers on Monday. Kotowski stated final week Blue Owl’s sale “ought to have been greeted favorably,” including that the marginal haircut of 99.7% on the greenback for the bought loans served as proof that personal mortgage valuations “replicate market realities.”
Blue Owl co-CEO Marc Lipschultz stated earlier this month the corporate sees no “pink flags” within the credit score high quality of its software-tied loans. “We do not have yellow flags. We even have largely inexperienced flags,” he advised analysts.
One side of Blue Owl’s sale did increase some eyebrows, as Bloomberg reported one of many consumers for its property included Kuvare, a insurance coverage targeted asset supervisor Blue Owl acquired in 2024. Like Blue Owl, Apollo (APO), Ares (ARES), Blackstone (BX), KKR & Co. (KKR), and different main personal credit score lenders personal insurance coverage firms. (Disclosure: Yahoo is a portfolio firm of funds managed by associates of Apollo World Administration.)