The private capital markets are a canary in the coal mine. Though the percentage of total assets is minuscule, the credit freeze from Blue Owl Capital (OWL) mattered.
OWL stock fell from $20 last year to close below $10. On Feb. 19, the firm halted redemptions for its private credit fund, ODBC II. ODBC holders may not make their regular withdrawals. That effectively removed the structured redemption feature.
To take advantage of the market fears, Cox Capital Partners and Saba Capital offered to buy shares at a 20% - 35% discount. ODBC holders do not have good options. They may either take the cash or risk further losses amid the illiquidity of funds.
Blackstone (BX) and Brookfield (BAM) are lower on BlackRock’s (BLK) cutting withdrawal limits. The firm, which has an $82 billion private credit fund, will allow no more than a 5% redemption. BlackRock’s HPS Corporate Lending Fund faced a 9.3% investor redemption request. It will allow investors to get back 5%, or around $1.2 billion, out of the $26 billion managed.
The withdrawal request is a sign that investors are worried about the risks. Lending standards are lower in the private credit markets.
Bank stocks are not immune to the fears, either. Bank of America (BAC), Wells Fargo (WFC), and JPMorgan Chase (JPM) shares peaked at the end of last year. They continued their downtrend for the last month.
