Redemption requests surge! Moody's downgrades Blue Owl(OWL.US)'s outlook on its $36 billion fund to "Negative"

Zhitong Finance APP learned that on Tuesday, Moody’s downgraded the outlook for “Private Credit Storm’s Eye” Blue Owl (OWL.US), a $36 billion fund, from “Stable” to “Negative,” because its first-quarter redemption requests were “significantly higher than” those of its peers. Moody’s said the outlook adjustment for one of Blue Owl’s larger funds, Blue Owl Credit Income Corp (OCIC), was also due to the fact that most redemption requests came from a very small number of investors, which reveals that its shareholder base has a certain degree of concentration.

This is the latest response by a ratings agency to private credit market funds affected by the redemption wave. In recent months, turmoil in the private credit industry has continued to intensify, as market concerns have grown that the industry has excessive exposure to the software sector, which is currently facing disruption from artificial intelligence. Market anxiety has spread to Wall Street, as multiple funds have limited withdrawals, and some major U.S. banks have also tightened lending to this $2 trillion industry.

Last week, Blue Owl said that after receiving historic redemption requests in the first quarter, it would restrict withdrawals from two of its funds. Investors requested redemptions of 21.9% of OCIC shares that were not specified, but the company said it plans to satisfy only 5% of the requests.

Moody’s said that the company’s decision to satisfy only 5% of the redemption requests would keep first-quarter net outflows under control, but it expects redemption requests to remain at high levels in the coming quarters, which would further slow inflows and cause OCIC’s currently strong capital and liquidity position to gradually dissipate.

Earlier on Tuesday, Moody’s also downgraded the outlook for U.S. business development companies (BDCs) from “Stable” to “Negative,” citing rising redemption pressure, higher leverage, and weakened access to funding-market channels. In March, S&P Global downgraded the outlook for Cliffwater LLC’s $33 billion flagship private credit fund from “Stable” to “Negative” because investor redemption requests increased.