Saba Capital tender offers for shares are below initial expectations

Tender offers for shares in unlisted business development companies managed by Saba Capital Management, Blue Owl Capital and Starwood Capital came in “below initial expectations”, he said.

Hedge fund Saba in early March offered Liquidity will be available at a 35% discount to investors locked in Blue Owl Capital Corporation II (OBDC II), a non-traded private credit fund. IT started A similar program at Starwood Real Estate Income Trust (SREIT) with a 24% or 29% discount, depending on share class.

On Monday, Saba said it was able to obtain approximately $10 million in total notional value in 190 separate transactions through auctions, “substantially all” of which was obtained from the SREIT. Tender for Blue Baykuş shares reportedly failed to achieve more than 1% of what was offered.

Investors’ disinterest in obtaining liquidity at a large discount came during a quarter when redemptions rose in non-traded BDCs, many with private loans. Blue Owl was among the poster children for this phenomenon, halting quarterly redemptions on its OBDC II in mid-February, opting instead to return capital periodically through portfolio asset sales. In early April, investors sought repayments of $5.4 billion from two other private loan funds in the first quarter. Like most of its peers, the fund manager chose to limit these demands to 5%.

Following the OBDC II decision, Saba Capital’s Boaz Weinstein told CNBC that they were “hearing from investors in these funds that they want their money back,” so the firm sees a market opportunity. That’s why Saba announced on Monday that it is “considering bidding for a number of additional products, including the Cliffwater interval fund and Blue Owl’s OCIC.”

“Saba’s goal is clear: retail investors in these products deserve access to liquidity, just as investors in publicly traded BDCs have long enjoyed,” Saba said in a statement. he said. “We aim to be a consistent and reliable offering in this market.”

The hedge fund said that following its public listing on the SREIT, Starwood Chairman and CEO Barry Sternlicht announced its commitment to inject equity capital to fund investor repayments. Saba said he “praised” Sternlicht for this decision.

“We believe our entry into this market was a catalyst for this outcome and that all SREIT investors benefited from the outcome,” the firm said.

In terms of OBDC II, “the pool of illiquid capital available for bidding is inherently limited” with only $332 million remaining in the fund, Saba said. But the firm said it sees credit risk accumulating in 2027 and 2028 and believes “the opportunity to provide liquidity at scale will increase significantly.”

“Saba believes that the question is not whether this area will experience significant stress, but when,” the firm said in a statement on Monday. he said. “Hundreds of billions of dollars of private credit are currently held by retail investors in products that offer limited or no secondary liquidity. Saba aims to be a consistent source of this liquidity and ensure that capital is deployed and ready when the need intensifies.”