Blue Owl Private Credit Fund Raises $400 Million in Bond Market
(Bloomberg) — A Blue Owl Capital Inc. private credit fund raised $400 million from bond investors Monday, marking the first deal of its kind in over a month, as worries about AI-disrupted software bets and looser lending standards have roiled the once red-hot industry.
The bonds were issued by Blue Owl Capital Corp. — known as OBDC — a publicly-traded business development company that provides direct loans to mostly small and mid-size companies. The investment-grade rated notes, which mature in 2028, were priced to yield 6.5%, according to a regulatory filing.
Private credit managers broadly are grappling with rising concerns about their exposure to companies threatened by artificial intelligence, spurring record redemptions requests from non-traded funds and causing publicly listed vehicles to trade well below their net asset value. Blue Owl has borne the brunt of market fears in recent months, with its share price down 43% this year and OBDC currently trading at a roughly 25% discount to NAV. Still, the bond sale could indicate a nascent rebound in investor confidence in the private credit market.
A representative for Blue Owl declined to comment.
The OBDC bond sale priced at a roughly 2.7 percentage point spread to similar-maturity Treasuries, according to the filing. US BDC spreads have widened in recent weeks, climbing to about 2.25 percentage points above their benchmark, from 1.7 in January, according to data compiled by Bloomberg. That compares with an average yield gap of about 0.8 percentage point for US high-grade bonds.
Morgan Stanley helped arrange the bond sale, with proceeds to be used to repay existing debt, according to the filing.
OBDC, with a market capitalization of $5.4 billion and net assets of roughly $7.4 billion, had over $9 billion in outstanding debt as of the end of last year, according to bond documents. The fund last tapped the bond market in May, raising $500 million at a 6.2% coupon.
Monday’s bond sale was the first deal of its kind since a publicly-traded fund managed by Blackstone Inc. sold $400 million of debt in late February. Other private credit funds are expected to tap the bond market in the coming weeks, according to bankers.
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