Investors in a Blue Owl Capital Inc. fund tendered less than 1% of shares to Boaz Weinstein’s Saba Capital Management and Cox Capital Partners, which had offered to buy them out at a steep discount, according to people familiar with the matter.
The tender offer for shares in Blue Owl Capital Corp. II, one of the firm’s non-traded business development companies, expired at the end of last week with limited take up and wasn’t extended, said the people, who asked not to be named because the information isn’t yet public.
The scant sales to Saba and Cox suggest that the malaise in the $1.8 trillion private credit has its limits, with investors preferring to hold onto their shares rather than cash out now at far less than full value. The industry has been shaken by concerns about loan quality and the risk that artificial intelligence poses to the software industry.
A representative for Blue Owl declined to comment. Saba, in a statement, said the Blue Owl fund’s size meant “the pool of illiquid capital available to tender was naturally limited.”
“To Blue Owl’s credit, they went around to calm nerves,” Weinstein said in an interview. “We would have had more success if we offered for their larger BDC, but we had the offer ready before they offered to pay back investors and we still wanted to go through with it. Obviously, we hoped to buy more shares from them than we did.”
Saba is considering new bids for a range of private credit funds, including Cliffwater LLC’s interval fund and Blue Owl Credit Income Corp. The firm has already added a $40 million position in the publicly traded FS KKR Capital Corp., it said.
Weinstein, a seasoned activist investor, had previously said he was “buying pessimism” as he looked to snap up shares at what was expected to be a greater than 20% discount to the most recent estimated net asset value and dividend reinvestment price. Blue Owl urged its shareholders not to sell.
Many non-traded BDCs have capped quarterly redemptions at 5% of shares in recent months, including those managed by Blue Owl, as retail investors raced to the exits. Those kind of regular withdrawals come at full net asset value.
The firm’s Blue Owl Capital Corp. II vehicle came under scrutiny at the end of last year, when it attempted to merge with the publicly traded Blue Owl Capital Corp. That plan was ultimately scuttled on concerns that those in the non-traded fund would see paper losses from the deal.
Blue Owl then told investors in February that they would no longer be able to redeem shares from OBDC II on a quarterly basis. It is instead returning capital through periodic distributions, with 2026 payouts totaling about 35% of NAV as of mid-April, according to the firm. It expects that figure to reach 50% or more by year-end.
Written by: Olivia Fishlow and Ryan Gould @Bloomberg
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