Blue Owl In The Crosshairs As Weinstein, Rubric Flag Private Credit Risks

Rubric isn’t the only firm flagging private credit in the headlines lately. Saba Capital Management Boaz Weinstein told CNBC’s “Inside Alts” newsletter that the issues in private credit are “multiplying by the quarter,” partially due to the “financial alchemy of promising liquidity that isn’t there.” Weinstein said he sees cracks, frauds, and companies “that are going bad without being a fraud.” As a result, dividends are being cut, and investors want their money back out.

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“[On] Wall Street the number one story right now is where the redemption is going to be for all these managers,” Weinstein said.

Discounted Blue Owl fund

Saba Capital and Cox Capital Management recently launched a tender offer to buy 6.9% of the shares in one of Blue Owl’s non-traded private credit funds at a 34.9% discount. Weinstein said investors were seeking someone to take their place in such funds to get their money back out, so “that happened in an organic way.”

Also see: Rubric Capital Warns Of $2 Trillion Private Credit Bubble

The fund, Blue Owl Capital Corp. II, put a stop to quarterly redemptions and sold $1.4 billion in direct lending investments so that it could offer liquidity to its investors. That ended up being just the beginning of a flood of non-traded, private credit funds that were struck with redemption requests that exceeded the usual 5% quarterly cap. Jefferies analysts predict redemption rates across retail credit products will continue rising.