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Blue Owl Capital has scrapped their plan to merge Blue Owl Capital Corp. II (OBDC II) with NYSE: OBDC and announced that they intend to reopen their share repurchase program next quarter. Shareholders will continue to have the right to redeem their shares at NAV, but the actual liquidity available each quarter may be lower than many had expected. In the most recent repurchase offer, OBDC II increased its repurchase capacity by 0.95 percent. That represents roughly 47 percent of the maximum increase that is permitted under the tender offer rules. Prorated investors will likely look to #secondarymarkets for liquidity.

A discount to NAV means very little without a view on how (and when) you can realize that value. John Cox spoke with JunkBondInvestor about how we approach secondaries at Cox Capital. A central theme: the fund’s structure and potential exit can matter as much as the underlying portfolio. If we expect to exit through a repurchase program, we need to underwrite its capacity, proration, future NAV and the time required to return capital. If a listing is a plausible alternative, we also need to consider what public investors might pay for the shares—and when we would be able to sell them. We can be right about the underlying loans and still earn a disappointing return if our assumptions about the exit are wrong. That’s why comparing a secondary offer with reported NAV is only the beginning. The relevant comparison includes the shareholder’s available alternatives: waiting through repurchases, selling today, or, where available and appropriate, borrowing against the position. Each involves a different combination of price, timing and risk. We also discussed redemption queues, the operational challenges of serving thousands of smaller accounts, and how secondary markets are developing across the wealth-management channel. https://lnkd.in/gE2FkSdi

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