Blue Owl terminates merger of private credit funds

Blue Owl Capital has terminated the merger of its two private credit funds, citing current market volatility, with a promise to “reevaluate alternatives in the future”.

The US alternatives manager had previously proposed to merge Blue Owl Capital Corporation II (OBDC II), which manages $1.7bn, into the publicly-listed $17.1bn Blue Owl Capital Corporation, both of which are focused on lending to the US middle market.

Approximately 98 per cent of the investments in OBDC II overlap with those of OBDC.

At the time the merger was announced on 5 November, Blue Owl stated that the deal “enhances liquidity for shareholders of the combined company and may improve the ability to attract a broader, more diverse investor base”.

Earlier this week, shares in Blue Owl slumped around 6 per cent, after the firm prevented investors in OBDC II from redeeming until the deal had closed following an initial rush to withdraw funds, CNBC reported.

Blue Owl said the decision to call off the merger “reflects the boards’ commitment to acting in the best interests of shareholders and is based on management’s recommendation due to current market conditions”.

“While we continue to believe that combining OBDC and OBDC II could create meaningful long-term value for shareholders, we are no longer pursuing the merger at this point given current market conditions,” said Craig W. Packer, chief executive of OBDC and OBDC II.

“Both funds remain strong, with excellent fundamentals, and we are confident in our ability to deliver attractive returns independently as we continue to work with the board to consider the best future opportunities for OBDC II.”

With the merger terminated, OBDC II plans to reinstate its tender program in the first quarter of 2026, subject to board approval.

Blue Owl confirmed that OBDC’s $200m share repurchase program that was announced concurrently with the merger remains in place.