Blue Owl Capital Inc. is taking decisive steps to manage investor cash as it faces a deadline for returning funds from one of its private credit vehicles. The firm has successfully arranged the sale of a substantial $1.4 billion portfolio of loans, which will help fulfill these obligations. This notable transaction included participation from three of North America’s largest pension funds and Blue Owl’s own insurance subsidiary.
The buyers of the loan portfolio are identified as Chicago-based Kuvare, the California Public Employees’ Retirement System (Calpers), Ontario Municipal Employees Retirement System (OMERS), and British Columbia Investment Management Corporation (BCI). Blue Owl reported that the loans were sold at an impressive 99.7% of their par value.
This sale was executed across three different funds and was part of an initiative to return cash to investors in the firm’s Blue Owl Capital Corp II fund, which had experienced significant redemptions last year. Initially, Blue Owl considered merging this fund with a publicly traded vehicle to facilitate capital return, but this plan was abandoned due to regulatory concerns related to potential losses for some investors.
Although Blue Owl did not disclose the specific identities of its loan buyers beyond the general categorization of “North American public pension funds and insurance firms,” the firm maintained that the interest in the deal was robust. Blue Owl co-founder Craig Packer noted that bidder demand was so strong that buyers expressed a willingness to purchase additional amounts.
During an earnings call, Packer characterized the transaction’s size and price as an “extremely strong statement” about the value placed on such assets, even as some investors reacted with caution, leading to a decline in the firm’s stock price over rising concerns related to risks in private credit markets.
This transaction draws attention to the increasing connections between private credit and the insurance industry, prompting analysts at Barclays to caution that such deals may pave the way for future transactions. They warned that if similar dealings become commonplace, it could deepen the links between these two critical sectors, potentially complicating the ability to track associated risks.
As Blue Owl navigates these complex financial waters, the firm’s proactive approach in securing liquidity and managing investor relations could foster a more positive outlook, reflecting its resilience in the face of industry challenges.