Blue Owl has called off its planned merger of two private credit funds following investor concerns over proposed withdrawal restrictions, according to a report by Reuters. The reversal comes as the alternative asset manager faces heightened scrutiny in a volatile credit market.
The merger, which would have combined the publicly traded Blue Owl Capital Corp (OBDC) with its non-public counterpart Blue Owl Capital Corp II, initially involved a plan to freeze redemptions, with investors in the private fund facing a roughly 20% discount relative to underlying net asset value until the merger closed. The move sparked a sell-off in Blue Owl’s shares, which have declined 40% year-to-date.
Executives stressed that the decision to halt the merger was not driven by liquidity concerns. “There’s no emergency here, the fund continues to perform well,” said Co-President Craig Parker, noting that the company intends to explore alternative strategies for the funds.
The episode highlights the liquidity challenges inherent in private credit and other private market investments, particularly when merging public and non-public vehicles. Analysts suggest the timing of the merger announcement, amid a sizeable discount in the public fund, exacerbated investor concerns rather than underlying credit performance.
Blue Owl’s move underscores growing investor appetite for private credit products while also signalling the need for careful liquidity management in the sector, especially as retail participation in private assets expands.
The firm plans to reassess the structure of its private credit funds and explore future consolidation or strategic alternatives once market conditions and public fund pricing align more closely with net asset values.
