How Blue Owl found itself at the middle of Wall Street's latest private credit fears

Public worries implicit the satellite of backstage indebtedness person forced large lender Blue Owl Capital (OWL) to scrap plans to springiness a wide mode retired to shareholders successful 1 of its backstage funds.

The concern draws much scrutiny to the opaque satellite of backstage debt, which has boomed successful caller years — and is present gradually making its mode into the brokerage and status accounts of millions much Americans.

New York-based Blue Owl, 1 of the nation's largest backstage lenders, called disconnected a planned merger connected Thursday that would person combined 2 of its indebtedness funds — a smaller backstage money ($1.7 billion) and a larger nationalist money ($17.1 billion).

The lender cited "current marketplace volatility."

"We are nary longer pursuing the merger astatine this constituent fixed existent marketplace conditions," said Craig Packer, CEO of some these funds, successful a property merchandise statement. "Both portfolios successful some funds are doing highly well," Packer told CNBC the aforesaid day. "There's nary unreserved here, there's nary exigency here, the money continues to execute well."

Originally formed arsenic Owl Rock Capital successful 2016 by Packer and genitor institution co-CEOs Marc Lipschultz and Doug Ostrover, Blue Owl is the fastest-growing backstage credit-focused Wall Street elephantine of the past 10 years. It manages $295 cardinal successful assets, with a small much than fractional of that being credit, according to the firm's astir caller filings.

The institution has gained a foothold successful backstage lending wrong a scope of categories, from user loans via fintech platforms specified arsenic SoFi (SOFI) and PayPal (PYPL) to backstage US companies. This year, it besides notched a drawstring of large information halfway deals with tech giants, including a $27 cardinal associated task financing woody with Meta Platforms (META) past month.

In a caller interrogation with Yahoo Finance, co-CEO Lipschultz described the AI infrastructure improvement arsenic "an accidental for Blue Owl to bash thing truly special."

Packer, on with different money executives, pitched the merger to shareholders conscionable 2 weeks agone arsenic an effort to prevention medication costs for some funds, which clasp astir the aforesaid benignant of assets.

But the merger progressive exchanging stakes successful the backstage money for those successful the larger one, which, based connected existent prices, entailed a crisp unrealized nonaccomplishment of astir 20% for backstage money investors who had the authorization to ballot down the combination.

Earlier this week, Blue Owl's banal slumped 7% pursuing a Financial Times study that archetypal spotted that imaginable haircut. It recovered immoderate of those gains connected Thursday.