Private Loan Firm Owl Rock Sells 20% Interest To Dyal Capital
13 Nov 2019
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- Private loans company Owl Rock sells 20% stake to Dyal Capital Partners
- Owl Rock receives $500 million from partnership to use cash to create a new business development company worth between $3 billion and $5 billion
- Private lending market growing fast and could hit $1 trillion in 2020
Owl Rock Capital Group, one of the fast-growing loan firms, is about to be even bigger. The private loan lender that launched three years ago has announced the sale of 20% of its stake to Dyal Capital Partners. It will help the loan investor to launch a new investment that will grow to around $3 billion to $5 billion.
Loan Company Owl Rock receives $500 from Dyal
So far, Dyal has paid close to $500 million for the stake. It implies that the valuation of the company could be around $2.5 billion according to sources familiar with the matter. The private lender announced the partnership deal on Monday, but they did not disclose the terms of the agreement.
Dough Ostrover, Craig Packer, and Marc Lipschultz founded Owl Rock in 2016. They have each invested over $100 million in Owl Rock's first two funds. It will consequently be the first time they are selling a significant stake in the firm. Since then, the company has accumulated over $14 billion in the capital, mainly from investment vehicles called Business Development Companies.
Owl Rock to create new BDC
According to people familiar with the partnership agreement, Owl Rock will use the amount raised to create a new BDC. The latest publicly traded BDC will be worth between $3 billion and $5 billion. At the beginning of this year, Owl Rock's BDC went public, and it is currently valued at $7 billion.
Also Read: What Are Personal Loans?
Commenting on the deal from Dyal, Lipschultz indicated that they are looking at setting the business for the long-term. He added that it is not about value, but the cash generated will provide the company with enough capital. It will be necessary as the company seeks to continue raising funds and investing in them.
The private lending market could hit $1 trillion next year
The valuation of Owl Rock shows how fast the private lending market is growing. Projections indicate that if growth continues at this rate, the market could reach $1 trillion in 2020. The private credit firms have flourished due to the shift by banks from capital intensive lending following the financial crisis. Companies such as Owl Rock have grown following the introduction of low-interest rates. It led to endowments, pension funds, and institutional investors to shift into private investments from low-yielding markets.
Conventionally these private lenders used to lend SMEs, which large financial institutions often overlook. However, as the firms accumulate large capital pools, they are now looking to compete with Wall Street giants. As a result, they are now arranging loans for significantly leveraged businesses. For instance, last month Owl Rock and other lenders agreed to offer an insurance firm a $1.6 billion investment.