Blue Owl Capital Inc is continuing its push into asset-based finance with the purchase up to $2bn worth of consumer instalment loans from fintech lender Upstart Holdings Inc, according to a report by Bloomberg News citing a recent company statement.
The deal will unfold over the next 18 months through a forward-flow agreement, where the buyer commits to acquiring loans before they are even originated. In addition to future loans, the agreement also includes $290m in personal loans that have already been issued.
Apollo Global Management Inc’s structured credit division, Atlas SP Partners, will provide debt financing for these loan purchases.
This acquisition marks a strategic move for Blue Owl, which aims to expand its offerings and become a comprehensive financial solutions provider. Last month, Blue Owl completed its acquisition of Atalaya Capital Management, a firm specialising in asset-based finance. The Upstart deal was structured and finalized by Atalaya, which was founded by Ivan Zinn.
Founded in 2012, Upstart gained prominence during the pandemic, attracting borrowers with its use of artificial intelligence for rapid personal loan approvals. However, like many fintech lenders, the company’s stock has dropped since its 2021 highs, amid challenges including higher interest rates and traditional banks pulling back from offloading loans.
Over the past 18 months, Upstart has shifted its focus toward private credit. In addition to Blue Owl, the fintech company has entered into deals with firms such as Castlelake LP, Eltura Capital Management, Centerbridge Partners, and Ares Management.
Consumer loans purchased by private credit lenders are frequently repackaged into bonds and sold as asset-backed securities (ABS). Upstart has previously tapped the ABS market, most recently in October 2023, according to Bloomberg News.