Saba Capital, led by renowned hedge fund manager Boaz Weinstein, announced on Friday that it will acquire shares of three funds under Blue Owl at a discount of 20% to 35% below net asset value. This offer directly challenges the credibility of the asset valuations by the private credit giant, which manages $307 billion, and intensifies market skepticism regarding the accuracy of asset marking in the $2 trillion private credit industry.
This move comes as Blue Owl faces severe challenges. Earlier this week, the company's retail debt instrument, Blue Owl Capital Corporation II (OBDC II), permanently suspended redemptions and instead opted to periodically return capital to investors through asset sales. To alleviate liquidity pressure, Blue Owl announced this week the sale of $1.4 billion in loan assets from the three funds at a price of 99.7% of face value, attempting to demonstrate the robustness of its portfolio quality.
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However, Saba's discounted acquisition offer reveals a harsher reality: the market's true valuation of these assets is far lower than the net asset value reported by Blue Owl. This not only questions the authenticity of the company's claims regarding near-par asset sales but also exposes the widespread issue of inflated valuations in the private credit industry. Since announcing the suspension of redemptions on Wednesday, Blue Owl's stock price has dropped over 10%, with a cumulative decline of 28% this year.
<h2>Discounted Offer Reveals Valuation Controversy</h2>
The acquisition offer initiated by Saba Capital in conjunction with Cox Capital Management, which focuses on secondary market transactions for high-net-worth clients, targets three business development companies (BDCs) under Blue Owl: the suspended OBDC II, Blue Owl Technology Income Corp (OTIC), and Blue Owl Credit Income Corp (OCIC).
Weinstein stated on social media platform X that this move aims to &#34;help retail investors navigate this challenging period.&#34; He pointed out that with rising redemption requests and limited liquidity, private BDCs and interval funds are facing one of their toughest times, with many investors opting for limited choices.
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The key to the acquisition offer lies in its pricing: a discount of 20% to 35% compared to the recently reported net asset value and dividend reinvestment price. This discount far exceeds the asset quality levels claimed by Blue Owl, directly challenging the company's assertion this week of selling loans at 99.7% of face value. Market participants noted that if the assets were indeed as close to par as Blue Owl claims, Weinstein would not propose an acquisition at such a large discount
This discount also exceeds the transaction that Blue Owl attempted to promote last November. At that time, the company planned to merge OBDC II with a larger publicly traded credit fund, but the deal was ultimately canceled after the Financial Times reported that it would result in a 20% loss for OBDC II investors.
As expected, after the news of Saba's acquisition offer broke, Blue Owl's stock price soared, but then it fell sharply as the market carefully read the terms and discovered the proposed acquisition offer discount.
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<h2>Blue Owl's Liquidity Dilemma</h2>
A series of actions by Blue Owl this week highlights the multiple pressures it faces. The company announced the sale of $1.4 billion in loan assets, with OBDC II selling $600 million (34% of its total investment commitment), OTIC selling $400 million (6%), and another publicly traded Blue Owl Capital Corp (OBDC) selling $400 million (2%).
These assets were sold to four North American public pension and insurance investors at a price of 99.7% of face value. Blue Owl's co-president Craig Packer defended this decision in an interview with CNBC, stating that investors &#34;find our approach quite attractive.&#34; He indicated that the company aims to accelerate the return of capital to investors, thus choosing to sell a substantial portion of assets amounting to about 35% of the OBDC II fund.
The proceeds from the sale will be used to reduce the fund's leverage and provide funding for redemptions. OBDC II plans to distribute a special cash dividend to shareholders equivalent to about 30% of its net asset value as of December 31, 2025, and has terminated its dividend reinvestment plan. The fund stated that it would replace the tender offer with quarterly capital return distributions, which may be funded through earnings, asset repayments, other asset sales, or strategic transactions.
However, this arrangement has raised new concerns. OTIC faces redemption requests equivalent to 15% of its net asset value in the fourth quarter of 2025, far exceeding the threshold that allows asset management companies to restrict capital outflows. Nevertheless, Blue Owl continues to allow the fund to redeem, indicating that the pressure may be more severe than publicly disclosed.
<h2>Related Party Transactions Raise Questions</h2>
A key detail of Blue Owl's asset sale transaction further undermines its efforts to boost confidence: one of the buyers is Kuvare, a life insurance company owned by Blue Owl itself. This effectively makes the transaction a related party transaction, severely weakening the credibility of the claim that &#34;near-par sales prove asset quality.&#34;
Blue Owl disclosed that &#34;some institutional investors are investors in funds managed by the company's investment advisory affiliates.&#34; This means that the sold assets will enter the collateralized loan obligations (CLOs) managed by Blue Owl, and the rated liabilities of these CLOs may be purchased by Kuvare. In the words of market participants, this is &#34;taking from one pocket of Blue Owl to put into another pocket.&#34;
Barclays analysts attempted to defend this by stating that &#34;having related parties as part of the buyer group aligns with fair trading principles (Blue Owl owns Kuvare but does not own these BDCs).&#34; However, the analysts also acknowledged that the optics of this arrangement are poor and could serve as a template for other private credit management companies, as many private credit management firms own or are affiliated with insurance companies.
This arrangement deepens the ties between the insurance industry and the private capital sector, making risk tracking more difficult. It also adds additional leverage to private credit assets, as the equity leverage ratio of BDCs is about 1x, while the leverage ratio of CLOs is 9 to 10 times.
<h2>Software Loan Exposure Becomes a Focus</h2>
Another key detail of this asset sale is its industry composition. The largest industry in the sold asset portfolio is internet software and services, accounting for 13% of the total. This aligns with the industry allocation of the overall BDC portfolio, where software accounts for 11.1% of OBDC investments and 12% of OBDC II investments.
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Software industry loans have recently become a significant risk point in the private credit industry. As advancements in artificial intelligence threaten the business models of traditional software companies, investors and analysts are questioning the prospects of large private credit groups lending to these companies. The software industry is the largest exposure area for the BDC sector, with the industry's market value evaporating by $1 trillion in recent months.
Notably, Blue Owl's publicly traded BDC focused on the technology sector—Blue Owl Technology Finance Corp (OTF)—did not participate in this asset sale. As of the third quarter of 2025, 55% of the fund's portfolio is concentrated in the software sector. Market participants believe this may indicate that OTF's software loans cannot find buyers at current price levels.
All assets sold were rated as the highest quality, level 1 or 2, in Blue Owl's internal 5-level rating system, with 97% being senior secured debt. However, this raises another concern: if the sold assets are the highest quality, what is the quality of the assets remaining on the books?
<h2>Systemic Risks in the Industry Emerge</h2>
Saba's acquisition offer and Blue Owl's predicament are not isolated events but symptoms of broader pressures facing the $2 trillion private credit industry. Saba partner Kieran Goodwin warned earlier this month that an increase in BDC redemption requests would force investment firms to either limit withdrawals or sell loan portfolios.
&#34;Selling assets to meet redemptions will only lead to further increases in redemptions,&#34; he wrote on social media, &#34;these loans are marked at 100, but a reasonable bid for private loans should be in the low 90s.&#34; This prediction is becoming a reality.
Weinstein, known for betting on mispricings in the credit market, has also launched high-profile activist campaigns against closed-end funds. He rose to fame on Wall Street in 2012 by betting against JPMorgan's credit derivatives trader &#34;London Whale,&#34; earning substantial profits
He has long criticized closed-end mutual fund management companies, including BlackRock, arguing that such funds deteriorate over time, trapping shareholders in illiquid assets.
Industry data shows that pressure is intensifying. According to a Morningstar DBRS report, the rolling default rate for private credit has risen from 2.8% a year ago to 4%, with downgrades outnumbering upgrades. UBS warned that if artificial intelligence disrupts software companies that account for 17% of BDC loan portfolios, the default rate could reach 13%. Physical payment loans (where borrowers cannot pay cash interest and can only accrue it as debt) have surged to over 11% of BDC revenues.
Market participants point out that if this Blue Owl deal exhausts the secondary market demand for scarce private credit assets, other BDCs seeking to exit their portfolios may face difficulties. For example, New Mountain Finance (NMFC) has indicated that it is seeking to sell a $500 million portfolio, equivalent to 17% of its total investments as of the third quarter of 2025.
Blue Owl has not responded to inquiries regarding the acquisition, and Saba has declined to comment further on its strategy to the media beyond a statement and social media posts on Friday. However, the market has already voted with its feet: the confidence crisis in the private credit industry has only just begun

OBDC

Saba Capital initiated a discounted acquisition of shares in three BDC funds of Blue Owl, with the offer priced at a discount of 20%–35% to net asset value, directly addressing the valuation and liquidity disputes in private credit. Previously, Blue Owl's OBDC II had suspended redemptions and sold $1.4 billion in loans at 99.7% of face value, but related party transactions and high exposure to the software industry raised concerns. The incident amplified industry worries about asset marking, redemption pressure, and potential default risks

- Saba Capital's acquisition bid for three Blue Owl funds at a 20% to 35% discount challenges the valuation credibility of the $307 billion private credit firm.  
- Blue Owl faces liquidity pressures, including suspending redemptions for one fund and selling $1.4 billion in loans to raise capital, yet concerns about asset valuations remain high.  
- This situation reflects broader stress in the $2 trillion private credit industry, where rising redemption requests could force firms to sell assets, exacerbating valuation discrepancies.

20-35% lower than net asset value! Hedge funds quote to acquire shares of Blue Owl's funds, intensifying market skepticism towards PE