OCREDIT leverage hits 0.98x as redemptions persist

OCREDIT's July books put a number on the cost of semi-liquidity: per-share net asset value held at $25.97, up a penny from June, while the August distribution stayed at $0.20 a share, payable on or about Sept. 30. But aggregate NAV fell 2.4% to $1.6 billion, debt outstanding grew to $1.57 billion, and the debt-to-equity ratio reached 0.98x, the highest level of the year so far, as AltsWire reported.

The fund, known by its ticker OCREDIT, is the T. Rowe Price OHA Select Private Credit Fund, a nontraded BDC formed as a joint venture between T. Rowe Price and Oak Hill Advisors, with private credit investments across more than 130 portfolio companies. The structure is built for the wealth channel: a continuous public offering of up to $2.5 billion in shares feeds in new subscriptions, and tender offers that open each quarter let shareholders out at NAV.

The redemption pressure shows up in the share counts: shares outstanding across all classes, net of repurchases, fell to roughly 59.8 million as of the July 1 subscription date from about 61.1 million on May 1, before ticking back up to approximately 60.1 million by early August, with Class D shares swinging the hardest from roughly 7.36 million in May to 6.36 million in July.

That pattern, set against a per-share NAV that barely moved, reads as continued net redemptions rather than asset-value deterioration: the fair value of the portfolio rose slightly to approximately $3.1 billion in the same month aggregate NAV contracted, an asset book holding its marks while the ownership base shrinks.

Debt moved the same direction: the debt-to-equity ratio climbed from 0.93x in June and 0.91x in April to its July level, and in that same month OCREDIT priced $400 million of unsecured notes extending maturities to 2031. The timing suggests the note sale was less about dry powder for new deals than about prefunding the redemption queue.

Every turn of leverage spent on redemptions is a turn that cannot fund the next loan. At that level, the fund's borrowing capacity is effectively spent; future deployment will have to come from retained earnings or new subscriptions, and new subscriptions are exactly the flow that has been thinning. AltsWire reported that industry-wide nontraded BDC sales fell nearly 59% year over year, and the semi-liquid shelf is under stress, as this publication has described it, with BCRED logging a fourth straight NAV decline in August.

In the wealth channel, a steady distribution is a retention tool, and OCREDIT is keeping its $0.20 monthly payment unchanged even as aggregate NAV falls. Shareholders can take the payment in cash or reinvest through the plan—every share reinvested is an inflow that partially offsets the tender outflow—and the August declaration, with a Sept. 30 payment date and Aug. 31 record date, gives advisors a fixed moment to decide which side of that choice they sit on.

The second-quarter tender offer drew no oversubscription, AltsWire reported, so shareholders who asked for cash got it without proration—the easy version of the test. The third-quarter tender, opened alongside nontraded BDCs from Bain Capital and Fidelity, will test whether the clean exit can be repeated under a heavier redemption book. The trust this channel demands from semi-liquid sponsors is built on repurchase mechanics, and OCREDIT is preserving the mechanics—the tender stays open, the distribution stays declared—by spending its balance sheet. The 0.98x ratio is that spending in visible form.

It is a defensible trade as long as marks hold and the note market stays open, but it leaves the fund little headroom for the next cycle. The fund is still taking money in: as of the Aug. 3 subscription date, it had issued approximately 49 million Class I shares for $1.34 billion, 4.6 million Class S shares for $126.1 million, and 6.4 million Class D shares for $173.9 million, net of repurchases. Taking subscriptions while borrowing to pay redemptions is the balancing act, and OCREDIT is doing the borrowing half at close to a full turn of leverage. The Sept. 30 distribution payment and the share counts around the next tender offer will show which side of that balance moves first.