Blue Owl Capital effectively froze redemptions in its $1.4 billion retail-focused fund, Blue Owl Capital Corp. II (OBDC II), on February 18, 2026, triggering a selloff across the private credit sector and prompting a $1.4 billion asset sale, according to announcements from the firm and reports from multiple financial news outlets.
The restructuring of OBDC II shifts from a quarterly redemption model to a “return of capital” framework, meaning investors will receive distributions only as the fund collects loan repayments or sells portfolio assets. This move, widely interpreted as a “soft freeze” on withdrawals, immediately impacted market confidence. Shares of Blackstone Inc. And Apollo Global Management both fell by more than 5% in the wake of the announcement, reflecting investor anxieties about liquidity in retail-oriented private credit vehicles.
Blue Owl’s decision to halt redemptions came after the firm scrapped its traditional quarterly tender offer, which had previously allowed investors to exit up to 5% of their holdings. The move was accompanied by the sale of loan assets, intended to bolster the firm’s balance sheet and address shareholder concerns. The $1.7 trillion private credit market is now grappling with its most significant crisis of confidence since the 2008 financial crisis, with calls for increased regulatory oversight emerging.
The situation at Blue Owl highlights a growing liquidity risk inherent in the structure of many private credit funds. Blue Owl, which manages over $300 billion in assets, has been a key player in expanding access to private credit investments beyond traditional institutional investors. However, the halting of redemptions in OBDC II has drawn attention to the difficulties investors may face when attempting to access their capital in these funds.
The fund’s restructuring follows the cancellation of a merger last year between Blue Owl Capital Corp II and a larger, publicly traded credit fund managed by Blue Owl. The recent events at Blue Owl have also attracted the attention of activist hedge fund Saba Capital, which is reportedly seeking to acquire stakes in three Blue Owl funds, signaling a perception of vulnerability within the firm.
The broader market reaction indicates a souring sentiment towards private credit, particularly concerning loans to software companies, which had previously been a popular investment destination. The events at Blue Owl represent the firm’s first major investor challenge since its initial public offering in 2021. As of February 20, 2026, Blue Owl’s stock had experienced a significant decline, at one point falling nearly 30% for the year.
Regulators are now considering urgent oversight of the private credit market, which some are characterizing as a “shadow banking” threat. The firm has not yet announced a timeline for resuming redemptions in OBDC II.
