Private Markets Alert Newsletter

✍️ Op-Ed: The Liquidity Reckoning

Blue Owl permanently halted redemptions at retail-focused OBDC II after selling $1.4B in assets at 99.7% of par—timing striking as SEC Chair Atkins confirmed regulatory changes expanding 401(k) access to private investments. Mohamed El-Erian questioned whether this marks "canary-in-the-coal-mine" moment similar to August 2007. Blue Owl shares plunged 10%, Apollo fell 6%, Blackstone dropped 5%. Verdad Capital's Dan Rasmussen warns: "This is a canary in the coal mine." Market analysts note 40% of direct lending firms report negative free cash flow, default rates among middle-market borrowers hit 4.55% and rising, 30% of firms with debt due before 2027 show negative EBITDA. The crystallization: semi-liquid structures promising quarterly redemptions cannot function when underlying illiquid assets face sustained redemption pressure and valuation uncertainty. OBDC II offloaded $600M—34% of its $1.7B portfolio—returning 30% NAV to investors while permanently abandoning quarterly tender offers. The contradiction defines late February 2026: regulatory momentum accelerates retail access through 401(k)s precisely as Blue Owl's asset-liability mismatch exposes fundamental structural flaw in retailization strategy.

🤝 Top Deals & Market Activity: Blue Owl Crisis Crystallizes

Blue Owl sold $1.4B in loan assets across three credit funds to four North American pension and insurance investors at 99.7% of par value. Largest portion came from OBDC II—$600M representing 34% of $1.7B portfolio. Buyers include Chicago-based insurer Kuvare, CalPERS, Ontario Municipal Employees Retirement System, British Columbia Investment Management Corp. Blue Owl permanently halted quarterly redemptions at OBDC II, shifting to quarterly capital distributions instead.

Blue Owl shares fell nearly 6% Thursday. Apollo Global Management dropped over 6%, Blackstone fell 5%, TPG slid 8%, KKR declined 4%. Sale follows turbulent three-month period: Q4 2025 scrapped plans to merge two funds, walked back proposal to freeze redemptions originally set to resume this month. Technology Income Corp saw 15.4% surge in redemptions in January.

OBDC II plans returning 30% NAV in Q1—significantly more than typical 5% redemption cap under earlier structure. Firm said proceeds used to return capital to investors and pay down debt. About 13% of loans sold tied to software sector. Blue Owl defended actions: "not halting redemptions" but rather "changing the method" by which investors receive cash. Firm maintains about $4B in total cash and borrowing capacity.

Yet Senator Elizabeth Warren cited Blue Owl's actions as evidence of rising risks: "Trump Administration needs to wake up. Stop pushing these risky investments into Americans' retirement accounts. Increase banks' capital requirements for private credit exposures. Compel transparent data from these firms. And run a stress test on the market now."

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