Blue Owl Says $10 Billion Private Credit Loan Within Reach

A top executive at Blue Owl Capital Inc. is looking to the next big milestone in a fast-growing corner of finance: a $10 billion private credit loan.

(Bloomberg) — A top executive at Blue Owl Capital Inc. is looking to the next big milestone in a fast-growing corner of finance: a $10 billion private credit loan. 

While reaching that target could still take a few years, big-ticket direct lending is headed in that direction, the firm’s co-chief executive officer, Marc Lipschultz, said in an interview on Thursday. His remarks come after Blue Owl helped lead a recent record-setting loan package of more than $5 billion for a single deal, a sum that was hard to imagine just a few years ago.

“We’ve definitely moved closer to that horizon,” Lipschultz said of the deal sizes growing. “It would be the next step. As much as $5 billion seemed like a very big step three years ago, you can do the math to make it work, capital exists. It would require an awful lot of parties to come together.”

Read More: Private Credit Loans Are Growing Bigger and Breaking Records

The $5.3 billion private credit package put together to refinance Finastra Group Holdings Ltd.’s debt earlier this year is the largest seen in the market so far. While many firms — both new and long-standing — have raised billions of dollars for direct-lending funds in recent years, Lipschultz sees a handful of companies still dominating the market.

“There’s a finite number, but each of us are sizable, so together you can formulate some reasonably large sizable solutions,” he said. “It’s not an irrelevant ambition.”

Private credit firms have stepped up in 2023 to fund leveraged buyouts as debt markets dried up in the midst of historically volatile interest rates and a wave of regional bank failures. Now credit markets are beginning to normalize and banks have once again committed to a handful of large leveraged buyouts, with at least $15 billion set to sweep through markets in the coming months. 

Still, leveraged-buyout volume has been relatively light this year, pushing private lenders to look for other ways to deploy about $443 billion of their dry powder. So they’re expanding past their roots of funding leveraged buyouts and recently refinanced about $10 billion of leveraged loans across three transactions — competing against the syndicated market and the depth of financing from hundreds of institutional asset managers.

“From day one, our stated strategy was to focus on the largest financings and to get ourselves in a distinctive position to do so,” Lipschultz said. “I really firmly and in my heart of hearts believe, by doing more of these bigger companies, that we will be better as we move ahead. Bigger companies have more ability to deal with adversity than small ones.”

Lending to high-quality large software companies can generate unlevered returns in the 12% to 13% range, Lipschultz said on a separate Bloomberg TV interview on Friday. 

The growth of the asset class is closely tied to serving the needs of private equity firms, he added. “That arc of growth of private equity does give you some sense of the future potential for private credit,” he said. 

–With assistance from Paula Seligson and Allan Lopez.

(Updates last paragraph with Friday interview on Bloomberg TV.)

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