Blue Owl Capital has marked one of its loans down to near zero, intensifying scrutiny of valuation practices across the $1.8 trillion private credit market. The write-down arrives alongside separate hedge fund criticism of how Blue Owl prices junior debt, and it lands as software loans across business development company portfolios face widespread markdowns.
Blue Owl Capital, a firm managing roughly $315 billion in assets, has marked a loan down to nearly zero, a move that is putting fresh pressure on valuation practices across the $1.8 trillion private credit industry. The write-down raises the question of whether marks across the sector reflect what the underlying loans are actually worth.
A valuation gap hedge funds flagged first
Earlier in 2026, hedge fund Glendon Capital Management flagged what it called inconsistencies in Blue Owl's valuations. By the end of 2025, Blue Owl's OBDC fund was carrying roughly $235 million in junior preferred stock and second-lien debt at around 90 cents on the dollar, while senior debt from the same borrowers traded at approximately 78 cents. Junior debt is paid after senior debt in any restructuring or default, so pricing the riskier claim higher than the safer one is hard to square.
Still, in February 2026, Blue Owl sold $1.4 billion in loans from its BDC funds at an average of 99.7 cents on the dollar, suggesting a significant chunk of the portfolio is worth what the firm says it's worth. But OBDC's net asset value per share still declined 2.7% to $14.41 in the first quarter of 2026, driven by spread widening and what the firm described as credit-specific factors. Meanwhile, Blue Owl's BDC shares have been trading at discounts of roughly 22-25% to reported NAV throughout 2026, despite non-accrual rates of only about 1%.
Software loans face an industry-wide repricing
As of mid-2026, 81% of software loans across BDC portfolios had been marked down. Blue Owl has been cutting its own exposure, with software falling from 19% to 16% of the OBDC fund. Across the broader BDC landscape, portfolios are showing fair values below cost for software holdings, confirming the repricing extends beyond one firm.
Redemption pressure builds
Non-traded funds across private credit are adjusting their practices in response to increased investor demands for liquidity, a dynamic that can force sales at inopportune times and turn paper losses into realized ones. When Blue Owl's shares trade at a 22-25% discount to NAV, raising new equity capital becomes harder, which in turn constrains the firm's ability to make new loans and grow out of troubled positions.
Non-accrual rates near 1% suggest most borrowers are still servicing their debt. But as AI reshapes software economics, the open question is whether these businesses remain viable in three to five years, and whether current marks account for that uncertainty.
Source: Crypto Briefing
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