Bombs Away

Blue Owl Capital is restricting redemptions on 2 of its private credit funds.

They are seeing increased requests for investors to get their money back.

Blue Owl has the money to accommodate these requests, but it would require them to sell off some of their loan portfolio at under 100¢ on the dollar, both because of increasing concerns about the business future (or lack thereof) of AI companies to whom they have lent money and because the loans carry interest rates far lower than what is available now, because of the Fed rate hikes.

The anodyne term for this is, "Price discovery," and that is antithetical to the, "Extend and pretend," game that they are currently playing.

It's beginning to look a lot like 2008.

Redemption requests for two of Blue Owl Capital’s private-credit funds remained well above the typical 5% cap, even as requests on one of the funds fell for the second quarter in a row.

Blue Owl Credit Income Corp. said it saw estimated third-quarter redemption requests representing 16.8% of shares, or $3.1 billion. That compares with 18.8% in the second quarter and 21.9% in the first quarter.

The tech-focused fund, Blue Owl Technology Income Corp., saw estimated redemption requests represent 39% of shares, or $1.1 billion, up from 38.1% in the second quarter but down from 40.4% in the first quarter.

………

Private-credit funds like Blue Owl’s have seen a rise in redemption requests over the past year, as investors grew concerned about credit health and the funds’ exposure to software.

Both the Blue Owl funds said they would redeem only 5% of the redemption requests, the standard across the industry.

Yeah, right, "Standard across the industry."