By Pritam Biswas and Arasu Kannagi Basil
Feb 20 (Reuters) – Blue Owl Capital shares fell more than 5% in early trading on Friday, extending a sharp selloff after the alternative asset manager’s plan to return capital from a debt fund rattled investors and pressured private credit peers.
The stock had fallen 6% on Thursday, and has now shed more than half its value over the last 12 months.
New York-based Blue Owl said on Wednesday it would sell $1.4 billion of assets across three funds and return the proceeds to investors in a nine-year-old vehicle.
The investment manager sold the portfolio of loans to three of North America’s biggest pension funds and its own insurance firm – Chicago-based Kuvare – Bloomberg News reported on Friday, citing people with knowledge of the matter.
“A lot of pushback this morning focusing on the fact that one of the four buyers of the loans was Kuvare, Blue Owl’s own insurance asset manager,” said Brian Finneran, managing director at Truist Financial.
Blue Owl said the debt it is selling spans 128 portfolio companies across 27 industries, with the largest concentration, 13%, in software and services.
It sold the loans at 99.7% of par value, matching its own book marks, which the firm cited as validation of its valuations.
NOT HALTING INVESTOR LIQUIDITY
Blue Owl permanently removed an option for investors in that vehicle, mainly wealthy individuals, to withdraw some funds every quarter, stoking concerns about private-lending standards and the sector’s exposure to the struggling software industry.
“We are not halting investor liquidity in non-traded debt fund Blue Owl Capital Corp II,” Blue Owl said in a statement on Thursday, a day after saying it would return 30% of the net asset value of the fund to investors, and stop quarterly redemptions.
Instead of resuming a tender-offer process that would have allowed investors to redeem 5% of their capital, Blue Owl said its new plan “returns six times as much capital and returns it to all shareholders over the next 45 days.”
“In the coming quarters, we will continue to pursue this plan to return capital to OBDC II investors,” it added.
The selloff reflects weeks of rising unease over software valuations as rapid advances in artificial intelligence threaten to upend established business models.
The volatility has spilled into private-credit firms that have become major lenders to the tech sector, an industry that has leaned heavily on private credit since post-crisis banking regulations tightened traditional lending channels.
The turmoil also hit larger peers Apollo Global and KKR, with sector returns broadly pressured by valuation uncertainty.
The private credit industry has already been under sharp scrutiny following the twin bankruptcies of auto-parts maker First Brands and subprime lender Tricolor last year. Investors have been highly skeptical about the quality of private credit portfolio and valuations.
“We’re not to the point that we say what’s going on with Blue Owl is necessarily systemic any more than when we see a particular bank have some credit risk,” said Steve Wyett, Chief Investment Strategist at BOK Financial.
“This is indicative of a bigger issue in the private alternative world, whether it’s private credit, private equity, or venture capital, this is about this mismatch between the need for liquidity from underlying investors and what the managers can deliver based upon the assets that they’re invested in.”
FINANCING FAILURE HIT SHARES
Separately, Blue Owl was unable to secure financing for a $4 billion data-center project it is co-developing in Pennsylvania with CoreWeave, Business Insider reported Friday.
Blue Owl did not immediately respond to a Reuters request for comment on the report.
The report comes months after Blue Owl struck a $27 billion deal to finance Meta’s biggest data-center project.
“And then the hits keep coming, Blue Owl down again this morning on headline that it couldn’t secure financing for a $4 billion CoreWeave data center,” Finneran said.
(Reporting by Pritam Biswas and Arasu Kannagi Basil in Bengaluru; Additional reporting by Shashwat Chauhan; Editing by Tasim Zahid and Leroy Leo)
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