Private credit roundup: Blue Owl redemptions ease, tech and refinancing risks persist

Oct 5 — Withdrawal requests at Blue Owl Capital's flagship non-traded private credit fund dropped again in the third quarter, signalling ​redemption pressure is easing across parts of the US market even as stress remains in some vehicles and refinancing risks loom.

Investors sought to withdraw $4.2 billion from Blue Owl's two ‌non-traded private credit funds in the quarter, down from $4.7 billion in the second quarter and a record $5.4 billion in the first.

Requests ⁠at the $35.1 billion Blue Owl Credit Income Corp., ​or OCIC, fell to 16.8% of shares ⁠from 18.8%. Blue Owl said most requests reflected investors resubmitting previously unfulfilled tenders rather than new withdrawal ‌demand.

The picture was weaker ‌at technology-focused Blue Owl Technology Income Corp., or OTIC, where investors sought to withdraw $1.1 ⁠billion, equal to 39% of shares, up from 38.1% ⁠in the prior quarter.

The broader direction in the United States nonetheless appears more encouraging. Goldman Sachs' $18.2 billion GS Credit fund reported redemption requests equal to 2% of shares, down from 3.2% in the second quarter, while generating about $400 million of gross inflows.

Evercore analyst Glenn Schorr said the more persistent challenge for non-traded business development companies (BDCs) may now be weak new subscriptions, as ‌direct lending could take time to regain favour among wealth-management clients ​and advisers.

Outside the US, however, liquidity stress has intensified.

Australia's Metrics Credit Partners, which manages about A$40 billion ($28 billion), froze redemptions in some unlisted funds after auditor KPMG declined to sign off on annual accounts for three listed vehicles.

Metrics said KPMG disagreed with assumptions in preliminary financial statements, including the valuation of unlisted commercial real-estate equity investments.

Australia's corporate regulator said it was closely monitoring the sector after previously warning about valuation, liquidity, governance and transparency practices.

Even as redemption ​pressure cools in parts of the US market, lenders are looking ahead to another potential test: refinancing.

Blue Owl executives ‌told sell-side analysts ‌that software portfolio ⁠performance had remained broadly stable but refinancing risk could become more important as loans mature, particularly around 2028.

At Blue Owl Technology Finance Corp., software non-accruals stood at 0.1% of fair value and 0.6% of cost, while median revenue growth and free-cash-flow margins had been stable for four quarters, according to ‌Truist Securities.

Blue Owl management said stronger ​borrowers should be able to extend loans on tighter ‌terms, while weaker credits may ⁠need to reduce ​leverage materially or could ultimately be sold or handed over to lenders.

(Reporting By Patturaja Murugaboopathy; Editing by Vidya Ranganathan ​and Hugh Lawson)

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