'We are concerned': Scott Bessent says Treasury is keeping a close eye on the private credit market

Pressure connected Blue Owl Capital (OWL) isn't letting up aft an plus merchantability meant to calm capitalist worries past week sparked caller interest from apical authorities officials astir the $1.8 trillion backstage recognition industry.

"We are concerned," Treasury Secretary Scott Bessent said Friday erstwhile asked astir the maturation of Blue Owl and different backstage lenders implicit caller years. "If determination is thing rotten, it is not going to beryllium handed to the idiosyncratic investors," Bessent said.

Last Wednesday, Blue Owl said it sold $1.4 cardinal successful loans and lending commitments from 3 of its funds, with immoderate proceeds utilized to repay investors 30% of their superior from the oldest backstage recognition fund, known arsenic Blue Owl Development Corporation II (OBDC II), which is winding down aft scrapping a planned merger precocious past year.

But what drew outsized attraction was Blue Owl's determination to destruct the accidental for investors to currency retired of OBDC II connected a quarterly basis.

The determination drew caller scrutiny to the opaque satellite of backstage debt, which has boomed successful caller years but has ne'er genuinely faced a situation — and is present garnering mounting scrutiny arsenic it is gradually making its mode into millions of US brokerage and status accounts pursuing an enforcement bid President Trump signed past summer.

Wall Street analysts, who mostly approved of Blue Owl's indebtedness sale, inactive aren't disquieted astir the steadfast oregon the wider backstage recognition manufacture having important recognition problems

"We don't judge determination is simply a superior interest astir a deterioration successful backstage recognition quality," Oppenheimer expert Chris Kotowski wrote successful a enactment to clients connected Monday. Kotowski said past week Blue Owl's merchantability "should person been greeted favorably," adding that the marginal haircut of 99.7% connected the dollar for the sold loans served arsenic impervious that backstage indebtedness valuations "reflect marketplace realities."

Blue Owl co-CEO Marc Lipschultz said earlier this period the institution sees nary "red flags" successful the recognition prime of its software-tied loans. "We don't person yellowish flags. We really person mostly greenish flags," helium told analysts.

One facet of Blue Owl's merchantability did rise immoderate eyebrows, arsenic Bloomberg reported 1 of the buyers for its assets included Kuvare, a Chicago-based insurer Blue Owl acquired successful 2024. Like Blue Owl, Apollo (APO), Ares (ARES), Blackstone (BX), KKR & Co. (KKR), and different large backstage recognition lenders ain security companies. (Disclosure: Yahoo is simply a portfolio institution of funds managed by affiliates of Apollo Global Management.)