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 prime authorities officers concerning the $1.8 trillion personal credit score trade.
“We’re involved,” Treasury Secretary Scott Bessent stated Friday when requested concerning the development 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 offered $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 personal credit score fund, generally known as Blue Owl Improvement Company II (OBDC II), which is winding down after scrapping a deliberate merger late final yr.
Treasury Secretary Scott Bessent speaks on the Financial Membership of Dallas on Feb. 20. (Richard Rodriguez/Getty Photographs) · Richard Rodriguez by way of Getty Photographs
However what drew outsized consideration was Blue Owl’s determination to get rid of the chance for buyers to money out of OBDC II on a quarterly foundation.
The transfer drew recent 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 regularly making its approach into thousands and thousands of US brokerage and retirement accounts following an govt order President Trump signed final summer season.
Wall Road analysts, who typically authorized of Blue Owl’s mortgage sale, nonetheless aren’t nervous concerning the agency or the broader personal credit score trade having vital credit score issues
“We do not imagine there’s a critical concern a couple of deterioration in personal credit score high quality,” Oppenheimer analyst Chris Kotowski wrote in a observe to purchasers 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 offered 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 “purple 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 facet of Blue Owl’s sale did elevate some eyebrows, as Bloomberg reported one of many patrons for its belongings included Kuvare, a Chicago-based insurer 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 corporations. (Disclosure: Yahoo is a portfolio firm of funds managed by associates of Apollo International Administration.)
Barclays analyst Ben Troisi known as Blue Owl’s sale “appreciably extra constructive than it’s destructive,” whereas elevating the broader situation of the importance of a personal lender promoting belongings to an insurance coverage subsidiary.
The deal “may set up a template that different personal credit score managers may comply with given how interconnected the insurance coverage and personal capital industries have grow to be,” Troisi wrote. “If related transactions are repeated regularly, it could deepen the ties between these two elements of the non-bank sector,” probably making it harder to trace danger.
“We wish to gauge, ‘May [private credit] have any results on the general financial system?’ To date, it has been very additive,” Bessent stated throughout his Friday speak.
“However once more, how does it have an effect on the regulated system, and we wish to stop contagion.”
Extra reporting from Jennifer Schonberger.
David Hollerith covers the monetary sector, starting from the nation’s greatest banks to regional lenders, personal fairness corporations, and the cryptocurrency house.
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