OB OBDC Blue Owl Capital Corporation Loading... : Investor Sentiment and Bull/Bear Views

The author believes the stock is significantly undervalued and is an attractive buy at current.

Buying at a down 35, even with these adjustments, it's probably going to be an okay investment... if we're right and if these buys at -27 or -35 are bad buys you know, look out below. Institutional buyers are currently demanding massive discounts (65 to 73 cents on the dollar) to take private credit loans off the hands of distressed sellers. Publicly traded Business Development Companies (BDCs) hold massive portfolios of these exact types of private loans. If the true market-clearing price for these assets is 25% to 35% below par, the stated Net Asset Values (NAVs) of public BDCs are artificially inflated and highly vulnerable to severe downward revisions. Avoid publicly traded BDCs, as their underlying private loan portfolios carry hidden mark-to-market risks that are not currently reflected in their share prices or stated book values. BDCs generally hold their loans to maturity. If the underlying corporate borrowers continue to make their interest payments and do not actually default, the mark-to-market volatility will not impact the BDCs' cash flows or their ability to pay high dividends to shareholders.

Morgan Stanley, Cliffwater, and JP Morgan are restricting redemptions at private credit funds and marking down the value of certain loans. The $2 trillion private credit market is experiencing severe liquidity and valuation stress due to a prolonged high interest rate environment. Publicly traded Business Development Companies (BDCs) that operate in this exact lending space will likely face similar portfolio markdowns, rising defaults, and investor flight. AVOID. The flurry of bad news, redemption gates, and forced markdowns by tier-one banks signals underlying rot and illiquidity in private credit portfolios. The Fed cuts rates sooner than expected, which would bail out over-leveraged corporate borrowers, reduce default risks, and restore liquidity to the private credit market.