Nontraded NAV BDCs paid $5.6B to exiting investors in Q3, leaving $8.2B unmet

Sponsors of nontraded net asset value business development companies delivered nearly $5.6 billion of liquidity to exiting investors through third-quarter tender offers, according to Robert A. Stanger & Co., leaving an estimated $8.2 billion of requests unmet across the 19 funds that have reported.

The tally now covers about 98% of the market, up from 77% when Stanger published its late-September analysis, and six funds have filed since; Blue Owl Credit Income Corp. and Blue Owl Technology Income Corp. together account for roughly 17% of the market, which is enough for their numbers to move the aggregate.

Across the 19 reporting funds, redemption requests totaled $13.8 billion, or 11.5% of estimated tender offer NAV, down from 12.7% in the second quarter on a same-store basis—a comparison run like for like, so the wider reporting set does not produce the decline. Sponsors fulfilled about 40% of what investors asked to sell, against 37% a quarter earlier, and the unmet balance fell to $8.2 billion from $9.8 billion.

That 40% of $13.8 billion is $5.5 billion, within rounding of the $5.6 billion Stanger counts as delivered.

“With nearly the full market now reporting, the results indicate that NAV BDC redemption demand may have peaked in the second quarter,” said Kevin T. Gannon, Stanger's chairman and chief executive. “Requests remain backlogged and persisting at several of the largest funds, but the decline in overall demand is encouraging.” He added his own caveat: “One quarter does not establish a trend.”

The funds that prorated this quarter did it by arithmetic. Ares Strategic Income Fund drew requests for 13.1% of outstanding shares against a 5% quarterly cap and repurchased 38.2% of the shares investors asked to redeem; five divided by 13.1 gives 38.2. The fund's own summary, read in September, put requests equal to 11.6% of the fund, a denominator Stanger's update does not use and the coverage does not reconcile. HPS Corporate Lending Fund, known as HLEND, took requests for about 11.5% of its shares and repurchased roughly $600 million, about 43% of what was tendered, which is what a 5% cap produces at that level of demand; in the second quarter, with requests at about 13.3%, it accepted 25.1 million of the 66.7 million shares tendered.

Blackstone Private Credit Fund, as AltsWire has reported, collected about $4.3 billion of requests in the quarter, roughly 10% of shares outstanding and the largest single-fund request figure the report names. The fund held repurchases to its 5% cap, which on the same arithmetic pays out about half of what was asked; requests had run near 10% in the second quarter too, when the fund also held the cap, following the board's decision to raise the limit to 7% in the first quarter to meet a record 7.9% in requests.

Each fund's apparent judgment call is mostly settled before the quarter opens. Once demand exceeds the cap, the payout percentage is the cap divided by the request rate, and the lever a board actually holds is the cap itself. A board that widens it clears more of the queue in one window; a board that holds it lets the remainder age into the next. That is the discretion this publication has argued the SEC's proposed loosening of interval-fund repurchase rules would formalize rather than remove.

Blue Owl Technology Income is the exception: its requests rose to 39% of shares outstanding from 38.1%, the highest rate named for any fund in the report and more than double the 16.8% at Blue Owl Credit Income, whose own rate eased from 18.8%. HLEND's requests fell to about 11.5% from 13.3% and Blackstone's held near 10%, leaving Blue Owl Technology Income the only fund in the quarter-over-quarter comparison whose request rate moved higher.

Stanger's $8.2 billion is measured against $9.8 billion three months earlier and described as a backlog, language that implies requests turned away in one window wait for a later one; on this quarter's aggregate fulfillment rate, a shareholder tendering an entire position would wait roughly two to three windows if the rate held.

Year to date, NAV BDCs have met more than $18.2 billion of redemption requests; the pattern through the fall holds here—the queue and the cap decide the payout, fund by fund, and at these fulfillment rates the exit queue, not the credit book, sets the pace at which an investor gets out.

Demand on a same-store basis fell 1.2 points of NAV while the fulfillment rate rose three points. If both keep moving at roughly that pace, the $8.2 billion backlog works down over several quarters, and the funds Gannon describes as still backlogged keep paying a fraction of what investors ask. The fourth-quarter filing from Blue Owl Technology Income will show whether the 39% request rate persists.