Blue Owl Capital and Starwood Capital recently faced disappointing responses to their tender offers aimed at providing liquidity to investors in their non-traded business development companies. Saba Capital Management revealed that the offers for Blue Owl Capital Corporation II (OBDC II) and Starwood Real Estate Income Trust (SREIT) fell short of initial expectations, with only $10 million acquired across 190 trades from SREIT. The tender for Blue Owl shares attracted minimal interest, securing less than 1% of the targeted amount.
This lack of enthusiasm from investors comes against a backdrop of heightened redemptions within the private-credit sector. Blue Owl, in particular, halted quarterly redemptions for OBDC II in February, opting to return capital through periodic asset sales instead. In the first quarter, investors sought to redeem $5.4 billion from two of Blue Owl’s other private-credit funds, leading the company to limit redemption requests to 5%.
Saba Capital’s Boaz Weinstein noted an increasing demand from investors for their capital back. To address this, Saba is exploring bids for additional products, aiming to ensure retail investors have better access to liquidity. The firm’s commitment to provide consistent bids was recognized by Starwood’s Chairman Barry Sternlicht, who announced his commitment to inject equity capital to assist with investor redemptions.
Saba believes that the environment for private credit might face significant stress in the near future, forecasting a growing need for liquidity solutions as risks accumulate. The firm aims to position itself as a reliable source of liquidity for investors in an evolving market landscape.
Why this story matters
- Highlights liquidity challenges in private credit markets impacting retail investors.
Key takeaway
- Saba Capital aims to provide liquidity solutions amid growing investor demand and market stress.
Opposing viewpoint
- Some may argue that tender offers at substantial discounts reflect broader disinterest in private credit investments, signaling potential long-term concerns for these vehicles.
