Blue Owl Capital (OWL.N), a private capital firm, is divesting $1.4 billion in assets from three of its credit funds. This move aims to return capital to investors, pay down debt, and permanently halt redemptions in one of the funds. The decision comes amidst increasing pressure on direct lending and software stocks. Blue Owl Capital focuses on alternative asset management, offering investment solutions across credit, private equity, and real estate. The firm manages investments for institutions and individuals, providing access to diverse, less liquid asset classes.
The sale follows Blue Owl’s abandonment of a previous plan to merge two of the three funds and temporarily halt redemptions in the smallest fund. Concerns about credit quality and exposure to the software sector have plagued the industry, triggering a shareholder revolt. This led to a 9.8% drop in Blue Owl’s share price on Thursday, exacerbating a broader sell-off among private equity firms. Economist Mohamed El-Erian has drawn parallels to the early stages of the 2008 financial crisis, highlighting potential systemic risks across the industry.
Other private equity firms, including Apollo Global Management, Ares, Blackstone, KKR & Co., and Carlyle Group, experienced declines alongside Blue Owl on Thursday. The debt being sold by Blue Owl spans 128 portfolio companies across 27 industries, with a 13% concentration in the software and services sector. The S&P 500 Software & Services index has lost approximately $2 trillion in value since its peak in October.
According to Blue Owl, the proceeds from the asset sale will be used to compensate investors in Blue Owl Capital Corp II and reduce debt. Craig Packer, co-President of Blue Owl, stated that the firm intends to return capital to investors in its OBDC II fund swiftly, changing the method of redemption to a payout equal to 30% of the fund’s value. The buyers of the assets are described as ‘leading North American public pension and insurance investors,’ all acquiring equal stakes.
