Saba Capital Reports Low Demand for Discounted Private Credit Tender Offers

Saba Capital Management has revealed that its recent tender offers to purchase shares in non-traded business development companies (BDCs) managed by Blue Owl Capital and Starwood Capital fell significantly short of initial expectations. The initiative aimed to provide an exit for retail investors trapped in illiquid vehicles by offering liquidity at a steep discount. Saba offered a 35% discount for Blue Owl Capital Corporation II (OBDC II) and discounts ranging from 24% to 29% for the Starwood Real Estate Income Trust (SREIT). Despite these offers, the hedge fund acquired only approximately $10 million in aggregate face value across 190 separate trades. The vast majority of this volume came from SREIT, while the tender for Blue Owl shares reportedly failed to attract more than 1% of the offered amount. This lack of appetite occurs against a backdrop of rising redemption pressure across the private-credit sector. Blue Owl has been a primary example of this trend, halting quarterly redemptions for OBDC II in mid-February and opting to return capital via portfolio asset sales. Furthermore, investors sought to redeem $5.4 billion from two of Blue Owl's other private-credit funds during the first quarter, leading the manager to cap requests at 5%. Saba views these developments as a precursor to broader systemic stress, predicting that credit risk will accumulate through 2027 and 2028. The firm stated that it intends to remain a consistent and credible source of liquidity for retail investors as the need for secondary market exits intensifies. Following Saba's activity, Starwood Chairman and CEO Barry Sternlicht announced a commitment to inject equity capital to fund investor redemptions.