OMERS among pension funds buying Blue Owl private loans

The Bay Street Financial District is shown with the Canadian flag in Toronto on Aug. 5, 2022. Photo by THE CANADIAN PRESS/Nathan DenetteArticle contentBlue Owl Capital Inc., facing a looming deadline to return cash in one of its private credit funds, found four buyers for a US$1.4 billion portfolio of loans to help pay out investors: Three of North America’s biggest pension funds and its own insurance firm.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentChicago-based insurer Kuvare — along with the California Public Employees’ Retirement System, Ontario Municipal Employees Retirement System and British Columbia Investment Management Corp. — bought the debt, according to people with knowledge of the matter. Blue Owl said late Wednesday that it sold the loans at 99.7 per cent of par value.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Play VideoArticle contentArticle contentThe sale of the loans was evenly spread across three funds and was part of a plan to return cash to investors in the firm’s Blue Owl Capital Corp II, which was hit with a wave of redemptions last year. The initial plan to return capital, by merging the fund with one of the firm’s publicly traded vehicles, was scrapped amid scrutiny around losses that some investors would take.Article contentPosthasteBreaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentBlue Owl didn’t identify the buyers of the loans, saying only that they included North American public pension funds and insurance firms.Article contentA representative for Blue Owl, which acquired Kuvare in a US$750 million deal in 2024, declined to comment, as did representatives for Calpers and OMERS. Representatives for BCI and Kuvare didn’t immediately respond to requests for comment.Article contentBidder interest in the deal was so strong that Blue Owl co-founder Craig Packer on Thursday said that “they would have bought multiple amounts more.”Article contentSpeaking on an earnings call, Packer also described the size and price of the sale as “an extremely strong statement,” even as investors dumped the firm’s stock on concerns about rising risks in private credit assets.Article contentArticle contentThe transaction highlights the rising entanglement between private credit and the insurance industry.Article contentRead More Top bosses depart Canadian pension fund Canadian pension funds to exit U.K.'s biggest port operator Article contentAnalysts at Barclays warned on Thursday that the deal could provide a template for future transactions where debt held in some of the only publicly visible funds — so-called business development companies — could be shifted into more opaque and more highly leveraged vehicles.Article content“If similar transactions are repeated frequently, it would deepen the ties between these two parts of the non-bank sector, which could make it more difficult to track the risk,” the analysts wrote.Article contentCiting public disclosures, the analysts also said that some of the assets being sold are likely to make their way into Blue Owl-managed collateralized loan obligations, a popular investment vehicle for insurance companies because of their high ratings and beneficial capital treatment. Those would likely be purchased by Kuvare.Article contentUnlike BDCs, which typically carry leverage of just 1x their equity, CLOs are usually leveraged 9 to 10 times, the Barclays analysts noted.Article content“It would add additional leverage to private credit assets,” they said.Article contentPacker said on the earnings call that the buyers had “made an arm’s length economic decision and there’s nothing behind the scenes that would in any way undermine that conclusion.”Article contentWith assistance from Layan OdehArticle contentBloomberg.comArticle contentTrending Posthaste: U.S. tariffs against Canada keep falling, but is that just the quiet before the CUSMA storm? 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