Blue Owl Capital Corp. II halted redemptions on February 18, 2026, effectively freezing investor withdrawals from its retail-focused private credit fund, a move that triggered a sell-off in the broader private credit market.
The decision to end quarterly redemptions, and instead distribute capital incrementally as loan repayments are collected or assets are sold, came after Blue Owl agreed to sell $1.4 billion in direct lending investments across three funds to North American pension and insurance investors. The largest portion of the sale, $600 million representing roughly 34% of its $1.7 billion portfolio, came from OBDC II, the fund aimed at U.S. Retail investors. The loans were sold at 99.7% of par value, according to the company.
The restructuring of OBDC II’s liquidity profile has been interpreted by many analysts as a “soft freeze” on investor withdrawals, and prompted a sharp decline in Blue Owl’s share price, reaching its lowest level in two and a half years. The fallout extended to other major players in the private credit space, with shares of Blackstone Inc. And Apollo Global Management tumbling more than 5% on February 20, 2026, as investors assessed the potential for wider contagion.
Blue Owl co-President Craig Packer insisted the move was not a halt to redemptions, but rather an acceleration of the process. “We aren’t halting redemptions,” Packer stated on an earnings call. “We’ve been tendering for 5% of the shares of this fund for eight years. Instead of resuming 5% a quarter, we are in fact accelerating redemptions.”
The move follows the collapse of a merger between Blue Owl Capital Corp II and a larger publicly traded credit fund managed by Blue Owl last year. The $1.7 trillion private credit market is now grappling with its most significant crisis of confidence since the 2008 financial crisis, according to some observers, with regulators calling for increased oversight of the sector, which some are now labeling “shadow banking.”
The restructuring at Blue Owl comes as the private credit industry faces increasing scrutiny over its liquidity promises to retail investors. OBDC II’s shift from a quarterly tender offer—allowing investors to exit up to 5% of their holdings—to a mandatory liquidation model underscores the challenges inherent in offering liquidity in an asset class traditionally considered illiquid. The firm’s announcement of the $1.4 billion asset sale signaled a growing liquidity crunch within the alternative asset sector.
The implications of Blue Owl’s actions are still unfolding, but the event has raised concerns about the broader health of the private credit market and the ability of firms to meet redemption requests as economic conditions tighten. One industry voice warned of echoes from the 2008 financial crisis, highlighting the potential systemic risks associated with the rapid growth of private credit.
