Saba raising $1B for distressed assets

Boaz Weinstein’s Saba Capital is raising a new vehicle aimed at buying souring private-credit funds as redemption pressure spreads through retail alternatives. (reuters.com) Reuters reported on April 27 that Saba hopes to raise roughly $1 billion over the coming weeks for the strategy. The fund is meant to buy stakes in stressed private-credit funds and other discounted credit assets from investors seeking cash. (reuters.com) Saba also announced April 27 that it is expanding into public and private business development companies and interval funds, which are retail products that hold illiquid assets but usually offer only limited exits. The firm said those markets now show the same kind of gap between stated net asset value and real exit prices that it has traded in closed-end funds for years. (businesswire.com) That gap has become more visible as investors ask for money back faster than some private-credit funds can sell loans. Blue Owl Capital Corporation II halted quarterly redemptions in mid-February and shifted to returning capital through asset sales after requests outran its limits. (cnbc.com 1) (cnbc.com 2) In early April, investors sought to redeem $5.4 billion from two other Blue Owl private-credit funds in the first quarter, and the manager capped those requests at 5%, CNBC reported. Jefferies analysts said private-wealth flows across tracked products fell 19% in the first quarter from the prior quarter. (cnbc.com 1) (cnbc.com 2) Saba tested that market in March by offering liquidity to holders of Blue Owl Capital Corporation II at a roughly 35% discount and to Starwood Real Estate Income Trust holders at a 24% or 29% discount, depending on share class. Those tenders produced about $10 million in aggregate face value across 190 trades, with substantially all of it coming from Starwood investors. (cnbc.com) (businesswire.com) The Blue Owl response was especially thin. Bloomberg and CNBC reported that investors tendered less than 1% of the Blue Owl shares Saba and Cox Capital Partners had sought to buy. (bloomberg.com) (cnbc.com) Saba says the small volume still proved there is demand for liquidity in products that are sold as long-term holdings but can be hard to exit quickly. After Saba’s public activity in Starwood Real Estate Income Trust, Starwood chairman Barry Sternlicht said the firm would inject more equity to speed investor redemptions. (businesswire.com) Weinstein has argued for months that private credit’s problems are “multiplying by the quarter” as managers promise more liquidity than underlying loans can support. His new fund turns that warning into a trade: buy from investors who want out before managers can fully meet withdrawals. (cnbc.com) (reuters.com)