Blue Owl Capital’s OBDC II is winding down its tender offer model — and replacing it with something different
Non-traded BDCs have always had a liquidity problem. They offer higher yields and reduced daily volatility compared to exchange-listed funds, but investors who need to access their capital cannot simply sell shares on an exchange. Since the earliest versions of these vehicles, the standard solution has been the periodic tender offer — a structured window during which the fund buys back a limited percentage of shares from investors seeking an exit.
Quarterly tender offers worked reasonably well when non-traded BDCs were smaller and less institutionally distributed. As the asset class scaled, their limits became more apparent. Blue Owl Capital is now replacing that structure for OBDC II with a mechanism designed to return more capital, more efficiently, over time.
How OBDC II worked before Feb. 18
OBDC II was formed in 2016, before perpetually offered non-traded BDCs became the dominant vehicle format for private wealth investors. At that time, the quarterly tender offer was the primary liquidity mechanism. Shareholders could submit shares for repurchase each quarter, subject to the fund’s 5% cap and its available cash.
That cap meant the fund could return a maximum of roughly 5% of NAV to investors in any given quarter. For a fund with $1.6 billion in assets as of Dec. 31, 2025, a 5% tender amounts to approximately $80 million — useful for ongoing liquidity needs, but not a meaningful event for investors holding substantial positions.
Why quarterly tenders have limits
Beyond the size constraint, quarterly tenders also distribute on a pro-rata or first-come basis, meaning not all investors who submit shares are guaranteed full repurchase at the target percentage. During periods of elevated redemption demand — which can coincide with market stress, when investors most want liquidity — tender mechanics can leave shareholders with less exit capacity than expected.
Perpetually offered non-traded BDCs, which became standard after OBDC II’s formation, built liquidity into the product design from the start. OBDC II’s older format did not have that advantage, and adapting it required a different approach.
The new return-of-capital distribution model
Following the $600 million asset sale, OBDC II plans to pay a return-of-capital distribution of up to $2.35 per share on or before March 31, 2026 — approximately 30% of net asset value as of Dec. 31, 2025. That payment equals roughly six times the size of the 5% quarterly tender previously scheduled for the first quarter.
Going forward, OBDC II’s board intends to deliver liquidity through quarterly return-of-capital distributions rather than tender offers, funded by earnings, loan repayments, asset sales, or other transactions. That mechanism gives the board flexibility to match capital returns to actual cash availability rather than a fixed percentage window.
Cumulative distributions since inception, before the anticipated return-of-capital payment, total $6.14 per share. Logan Nicholson, president of OBDC II and OBDC, framed the February transaction as both a validation of the portfolio’s credit quality and a substantial step toward delivering on the fund’s original liquidity commitments to investors.
