Owl Rock plans fund targeting stressed companies after Dyal deal

Direct lending firm expected to also launch its next general business development company in 2020.

Direct lending shop Owl Rock Capital, formed by ex-GSO and KKR executives, plans to look further down the quality spectrum for investments in companies under some stress, expanding its strategy from the best-performing businesses, sources told Buyouts.

The new product launch, expected next year, will require the hiring of a specialist to lead the strategy, sources said. It’s being supported by a minority investment in Owl Rock’s management company by Dyal Capital, announced earlier this month, sources said.

Owl Rock primarily targets high-performing companies with its lending products, which include an institutional-level business development company, a high net worth-backed BDC, a tech-focused BDC and a first lien loan-focused fund.

The firm plans to launch its next general BDC next year, along with the new product targeting lending to average-performing companies, which will be a traditional LP/GP fund and not a BDC, sources said.

Owl Rock doesn’t “have a home for companies that just haven’t gone quite right. That doesn’t make them bad businesses, or bad loans, it just means circumstances are a bit more complex,” one of the sources said.

The fund would not be focused on distressed companies, the source said. These sort of companies, which “aren’t pristine, but are perfectly attractive businesses,” represent about 25 percent of the deal flow Owl Rock sees, according to the source.

The debut fund will likely require the firm to hire a person to lead the strategy, supplemented with existing resources, the source said.

Owl Rock was formed by GSO Capital Founder Douglas Ostrover and KKR’s former global head of energy and infrastructure, Marc Lipschultz. The firm raised $5.5 billion for its debut BDC.

More recently, it’s been raising its debut tech-focused BDC targeting $5 billion. Owl Rock Technology Finance will lend to tech companies, including so-called unicorns with $1 billion-plus valuations, Buyouts previously reported.

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