Blue Owl keeps 5% tender and hardens the funding behind it

AltsWire reports that Blue Owl Credit Income Corp. opened a tender offer Aug. 26 to repurchase up to 101,609,217 shares, or 5% of the shares outstanding at June 30, a cap the nontraded BDC has applied for several quarters; the sharper disclosure that week came in the credit facility behind its buybacks, which tightened concentration limits on riskier collateral and activated a new category of eligible loans, re-plumbing the liquidity engine rather than widening the tender valve.

The offer covers Class S, Class D and Class I common stock; as of Aug. 25, OCIC carried approximately 2.05 billion shares outstanding across all classes, and no officers or directors intend to tender their shares.

Blue Owl disclosed the credit facility amendment the same week: the senior secured revolving credit line held through Core Income Funding VII LLC, the company's financing subsidiary, now cuts its concentration limit for first-lien last-out and second-lien collateral from 15% and trims its covenant-lite loan limit to 30% from 40%, while an existing sub-limit keeps covenant-lite loans to borrowers with less than $75 million in EBITDA capped at 25%.

The more telling change is the addition: early-stage healthcare loans, activated from a section of the credit agreement previously held in reserve, enter as eligible collateral with a 60% advance-rate cap and a liquidity covenant rather than the leverage-ratio and EBITDA tests that govern standard loans, the borrower must maintain at least 175% of its applicable liquidity-maintenance-covenant threshold, mirroring the treatment already in place for recurring-revenue loans. Base size stays at $500 million with an option to grow by up to $300 million, and pricing remains in a separate, non-public fee letter.

Blue Owl is pulling down the facility's tolerance for the parts of a credit book that freeze up first in stress, second-lien and covenant-lite paper, while widening the collateral net into healthcare assets that carry a hard liquidity cushion, hardening the balance sheet behind the quarterly tender rather than changing the tender itself.

The tender opens into a redemption environment still far above capacity: first-quarter requests hit 21.9% of shares and OCIC absorbed $988 million in repurchases, filling roughly 23% of those requests under the 5% cap; second-quarter demand eased to 18.8%, still nearly four times the cap OCIC applies each quarter.

In February, Saba Capital and Cox Capital announced plans for opportunistic tender offers targeting OCIC and two other Blue Owl funds at a 20% to 35% discount to net asset value; as this publication has reported, Cox Capital has since been preparing formal offers that give interval fund investors a second route to liquidity.

The sector context is familiar: the 5% repurchase caps held through the first half of this year, and the $9.6 billion queue is where the pressure shows; OCIC is a leading case in that queue, with two straight quarters of requests at multiples of the cap and a sponsor that has kept the buyback at 5%.

Blue Owl kept the cap at 5% and hardened the facility behind it. A sponsor that raises its repurchase cap before funding it is borrowing liquidity from the next quarter; the third-quarter redemption figure will show whether the tightening was enough. If requests stay near 18%, the cap is not absorbing demand; if they slide hard, the credit facility amendment will deserve a share of the credit.