Blue Owl BDC’s CEO Craig Packer speaks throughout an interview with CNBC on the ground on the New York Inventory Change (NYSE) in New York Metropolis, U.S., Nov. 19, 2025.
Brendan McDermid | Reuters
The newest tremor within the non-public credit score world concerned a deal that ought to’ve been reassuring to markets.
Blue Owl, a direct lender specializing in loans to the software program business, mentioned Wednesday it had offered $1.4 billion of its loans to institutional buyers at 99.7% of par worth.
Which means subtle gamers scrutinized the loans and the businesses concerned and felt snug paying almost full worth for the debt, a message that Blue Owl co-President Craig Packer sought to convey in interviews a number of occasions this week.
However as an alternative of calming markets, it despatched shares of Blue Owl and different different asset managers diving on fears of what may observe. That is as a result of as a part of the asset sale, Blue Owl introduced it was changing voluntary quarterly redemptions with mandated “capital distributions” funded by future asset gross sales, earnings or different transactions.
“The optics are unhealthy, even when the mortgage ebook is okay,” Brian Finneran of Truist Securities wrote in commentary circulated Thursday. “Most buyers are decoding the gross sales to imply that redemptions accelerated and led to compelled gross sales of upper high quality belongings to satisfy requests.”
Blue Owl’s transfer was extensively interpreted because the agency halting redemptions from a fund underneath strain, whilst Packer identified buyers would get about 30% of their a reimbursement by March 31, excess of the 5% allowed underneath its earlier quarterly schedule.
“We’re not halting redemptions, we’re simply altering the shape,” Packer informed CNBC on Friday. “If something, we’re accelerating redemptions.”
Coming amid a broad tech and software program selloff fueled by fears of AI disruption, the episode exhibits that even apparently robust mortgage books aren’t proof against market jitters. This in flip forces different lenders to scramble to fulfill shareholders’ sudden calls for for the return of their cash.
It additionally uncovered a central stress in non-public credit score: What occurs when illiquid belongings collide with calls for for liquidity?
Towards a backdrop that was already fragile for personal credit score because the collapse of auto companies Tricolor and First Manufacturers, the concern that this might be an early signal of credit score markets cracking took off. Shares of Blue Owl fell Thursday and Friday. They’re down greater than 50% up to now yr.
Early Thursday, the economist and former Pimco CEO Mohamed El-Erian puzzled in social media posts whether or not Blue Owl was a “canary within the coal mine” for a future disaster, just like the failure of a pair of Bear Stearns credit score funds in 2007.
On Friday, Treasury Secretary Scott Bessent mentioned that he was “involved” in regards to the chance that dangers from Blue Owl had migrated to the regulated monetary system as a result of one of many institutional patrons was an insurance coverage firm.
Principally software program
With skepticism over loans to software program companies working excessive, one query from buyers was whether or not the loans they offered had been a consultant slice of the full funds, or whether or not Blue Owl cherry-picked one of the best loans to promote.
The underlying loans had been to 128 corporations throughout 27 industries, the most important being software program, the agency mentioned.
Blue Owl indicated it was a broad swath of general loans within the funds: “Every funding to be offered represents a partial quantity of every Blue Owl BDC’s publicity to the respective portfolio firm.”
Regardless of its efforts to calm markets, Blue Owl finds itself on the nexus of issues round non-public credit score loans made to software program companies.
Many of the 200-plus corporations Blue Owl lends to are in software program; greater than 70% of its loans are to that class, executives mentioned Wednesday in a fourth-quarter earnings name.
“We stay enthusiastic proponents of software program,” Packer mentioned on that decision. “Software program is an enabling know-how that may serve each sector and market and firm on the earth. It is not a monolith.”
The corporate makes loans to companies “with sturdy moats” and is protected by the seniority of its loans, that means that non-public fairness homeowners would must be worn out earlier than Blue Owl noticed losses.
However, for now at the least, the issue Blue Owl faces is one in every of notion bleeding into actuality.
“The market is reacting, and it turns into this self-fulfilling concept, the place they get extra redemptions, so that they must promote extra loans, and that drives the inventory down additional,” mentioned Ben Emmons, founding father of FedWatch Advisors.