Activist investor Boaz Weinstein is offering to buy shares in Blue Owl Capital Inc.’s business development companies after a challenging week for the lender and broader fears about bubbling risks in the $1.8 trillion private credit market.
Saba Capital Management, led by Weinstein, and Cox Capital Partners launched the tender with an offer price that’s expected to be at a 20% to 35% discount to the most recent estimated net asset value and dividend reinvestment price. That will be determined when tender offers start after a 10-business day notice period, Cox and Saba said in a statement Friday.
Existing shareholders in the non-traded BDCs would have the option — but no obligation — to sell to the firms.
The price that any tender clears at will provide a window into where the market gauges the value of these funds and if it reflects Blue Owl’s internal net asset value. Steeply discounted exits could hurt future fundraising efforts.
“The purchasers’ tender offers would provide a liquidity solution to retail investors in the wake of a significant industry-wide increase in BDC redemption requests, multiple quarters of net outflows and a rise in redemption gate provisions,” Saba and Cox said in the statement.
The move comes just days after Blue Owl decided to restrict withdrawals from one of its private credit funds. Facing a looming deadline to return cash to investors in Blue Owl Capital Corp. II, also known as OBDC II, it raised capital by selling a $1.4 billion portfolio of loans to three of North America’s biggest pension funds and its own insurance firm.
Blue Owl shares extended losses on Friday, closing the week at their lowest level since June 2023, while shares in other asset managers also sold off.
“Saba and Cox are looking to capitalize on the headlines in the market,” said Michael Covello, executive managing director at investment bank Robert A. Stanger & Co. Inc.
For an investor who says, “I’ve read all the headlines, I’m scared, I don’t care what it costs, I want to get out today,” the tender offer could be a good opportunity, even with the discount, Covello said. “But there’s a cost to liquidity.”
Saba and Cox sent notice to purchase OBDC II shares on Feb. 17. They plan to make similar offers for Blue Owl Technology Income Corp. and Blue Owl Credit Income Corp., which are also BDCs.
Who’s Buying?
Weinstein is a seasoned activist investor who has waged aggressive proxy battles against Wall Street’s biggest names, including BlackRock Inc. and Nuveen. He launched Saba in 2009 and the hedge fund has focused on building stakes in closed-end funds and special purpose acquisition companies.
A Deutsche Bank AG alum, Weinstein has sometimes positioned himself as a defender of retail investors, taking on fund managers that he sees as more interested in collecting fees than maximizing returns for shareholders.
Cox Capital is an investor in dozens of private funds, from BDCs to real estate investment trusts. The Philadelphia-based firm, founded by John Cox in 2020, provides a source of “secondary liquidity” to investors in alternative assets, according to its website.
The credit secondaries market is a fast-growing area of finance, and has proven useful to private equity firms in need of cash, especially as dealmaking slowed down after the Covid-19 pandemic.
