Blue Owl Sells $1.4B in Loans, Halts OBDC II Redemptions, and Shifts to Capital Returns

Blue Owl Capital’s business development companies have agreed to sell $1.4 billion in direct-lending investments across three vehicles, a transaction that will allow one fund to return approximately 30% of its net asset value to shareholders while permanently replacing its quarterly redemption program with structured capital distributions.

The loans are being sold by two of Blue Owl’s non-traded BDCs – Blue Owl Capital Corporation II, or OBDC II, and Blue Owl Technology Income Corp., or OTIC – as well as publicly traded Blue Owl Capital Corporation (NYSE: OBDC). The loans are being sold to four North American public pension and insurance investors. The assets were sold at 99.7% of par value, consistent with where the funds mark the investments on their books. The pricing suggests the transaction aligned closely with the funds’ internal valuation marks.

The transaction comes amid heightened scrutiny of private credit valuations and liquidity structures, particularly in vehicles that offer periodic redemptions to retail investors.

OBDC II to Replace Redemptions With Capital Distributions

OBDC II is selling approximately $600 million of loans, or about 34% of its portfolio. The fund’s board intends to use the proceeds to fund a return-of-capital distribution of up to $2.35 per share, representing roughly 30% of net asset value as of Dec. 31, 2025. The distribution is expected by March 31, 2026, pending board approval.

As part of the shift, OBDC II will permanently halt quarterly share redemptions. Instead, the board said it intends to prioritize delivering liquidity ratably to shareholders through quarterly return-of-capital distributions. Those distributions may be funded by earnings, repayments, additional asset sales or other strategic transactions and are intended to replace future quarterly tender offers.

The move follows elevated redemption requests in recent quarters. Redemption requests at Blue Owl’s non-traded BDCs had exceeded the standard 5% quarterly cap, according to company disclosures. The firm in November terminated a previously proposed merger between OBDC II and OBDC following investor opposition.

Craig W. Packer, chief executive officer of Blue Owl’s BDC platform, said demand from institutional buyers exceeded the amount ultimately sold.

“We saw strong demand to purchase these investments at fair value from highly sophisticated institutional investors, with interest far exceeding the value of the investments we ultimately chose to sell,” Packer said.

Logan Nicholson, president of OBDC II and OBDC, said the transaction provides a significant liquidity event while maintaining portfolio diversification and earnings potential.

Debt Reduction and Portfolio Details

In addition to funding the distribution, OBDC II will use proceeds to repay approximately $11.8 million outstanding under its revolving credit facility and $275 million under a separate credit agreement with Goldman Sachs Bank USA.

The fund also amended its primary credit agreement on Feb. 17, 2026, reducing its maximum revolving credit commitment from $225 million to $75 million and shortening the availability period to October 2027 from January 2028. The unused commitment fee was increased to a range of 0.50% to 0.65%, up from 0.375%.

The remaining $800 million of loans being sold are split evenly between OBDC and OTIC. Both funds said they intend to use the proceeds to pay down debt and increase balance sheet flexibility.

The loans being sold represent partial interests in 128 portfolio companies across 27 industries. Approximately 97% of the investments consist of senior secured debt. The largest industry concentration, about 13%, is in software and services – a sector that has experienced market volatility in recent months.

Industry Implications

The transaction comes as private credit managers face increased investor scrutiny over valuation marks and liquidity practices. Selling directly originated loans near par value may help validate internal marks, particularly in an environment where investors have raised questions about exposure to software companies and broader credit conditions.

Blue Owl said the transaction improved diversification and created additional capacity to deploy capital. OTIC, the firm’s technology-focused BDC, has also experienced elevated redemption activity in recent months.

Separately, OBDC II’s board declared monthly distributions of $0.0533 per share for February and March 2026. After accounting for previously declared distributions, the fund will have paid $6.14 per share in cumulative distributions since inception.

The board also terminated the fund’s dividend reinvestment plan. Future distributions, including the return-of-capital payment, will be made in cash.

As of Dec. 31, 2025:

• OBDC II had investments in 183 portfolio companies with an aggregate fair value of $1.6 billion;
• OBDC had investments in 234 portfolio companies with an aggregate fair value of $16.5 billion; and
• OTIC had investments in 190 portfolio companies with an aggregate fair value of $6.2 billion.

In December 2025, OBDC II updated its DRIP price to $8.31, a 0.48% dip from the previous month’s $8.35. That news came on the heels of November’s decision to terminate the previously proposed merger of OBDC II with OBDC. Leadership cited market conditions as the reason for calling off the activity, though both companies said they planned to reevaluate alternatives in the future.

The loan sales are expected to settle this quarter.

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