With over 30 years of experience in the financial services and global development sectors, I am passionate about driving financial inclusion and innovation with AI and analytics.  I have been frequently quoted in the media, including Time Magazine, Forbes, NY Times, WSJ, FT, and Bloomberg.

As the founder and consultant of The People's Economist (www.tpehub.com), a fin-tech startup, I am developing a suite of personal finance tools, news, and information content that will democratize access to financial data and insights for a broad audience. The web app is currently launched in trial.

As the Executive Director of Financial Inclusion Forum UK, a network raising awareness of financial services for the poor, I reported directly to the board and played a lead role in organizing events, content, strategy, and board member recruitment. I have also authored a chapter on digital ID and financial inclusion in a book on regulatory technology, and contributed to the Democrats Abroad 2020 platform as a volunteer policy analyst. 

Throughout my career, I have worked for leading organizations such as Credit Suisse, PIMCO, BRAC USA, and a top-tier hedge fund, developing award-winning research and analytical platforms, advising on large-scale post-crisis bailout engagements, and supporting social enterprises in various program areas.

Blue Owl’s Hall of Mirrors

Asset side a concern, but debt side can kill

Blue Owl announced that they will be permanently freezing redemptions on their non-traded BDC (OBDC II), as well as selling $1.4B loans across several funds at the seemingly self-validating price of 99.8%.
 
Is Blue Owl’s loan sale an arm’s length sale to independent buyers who did their OWN due diligence and just happened to land on the same exact fair value as Blue Owl?

My sense is that this was either an example of cherry picking (e.g. selecting stronger loans) or that the sale was not an according to Hoyle arm’s length sale. I suspect the latter.

While Apollo’s ARI sale to Athene had non-arm’s length written all over it, you have to read between the lines in Blue Owl’s SEC filing to find a patina of not exactly armslengthness (if that’s a word).

Blue Owl identified 6 buyers, all offshore financing vehicles. At least some with a Blue Owl affiliation. See below from their release.

“Some of the Institutional Investors are investors in funds managed by affiliates of the Company’s investment adviser; however, each Institutional Investor made its own independent investment decision in connection with its purchase of a Subject Portfolio. [ed note: I bet].

And conveniently some used the same investment advisor as Blue Owl:

“Additionally, certain affiliates of the Company’s investment adviser have agreed to provide the Purchasers ... with ... advisory services in connection with the Subject Portfolios.”

Further, the fact the buyers landed on the same exact fair value as Blue Owl, should cause one to pause and say “hmmm, isn’t that special?” Very serendipitous for a highly illiquid portfolio of junk rated loans.

“The fair value of each portfolio company investment included in the Subject Portfolios was determined on the Subject Portfolio Valuation Date in accordance with the Company’s standard valuation process.” 

I am not saying this wasn’t arm’s length. Be hopeful, if you like. I’m just saying there is enough evidence to treat this sale with caution. 

Dangers lurking on the debt debt side of the balance sheet

Of greater concern than the asset side, is the liability side. What seems to have been missed in the coverage is that the same SEC filing revealed that OBDC II’s loan agreements underwent material amendments. 

For example, one facility was reduced from $750M to $250M with contraction in the revolving period. 

I previously wrote that BDCs may have their hand forced by creditors - loan maturities, margin calls, etc. The amendments may telegraph lender pressure.

As shown in the image publicly traded OBDC I (the far larger sibling to OBDC II) has nearly $4B in unsecured debt with $1.5B due within 1 year. As the table shows, the current rates are very low and unless they hedged, OBDC will face far greater expenses when they rollover the debt. If they can.

Fortunately, Moody’s upgraded OBDC to Baa2 last month. But that may not age well. 

#privatecredit

#leverage

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Founder @ The People’s Economist, Top Ranked Wall Street analyst, journalist, Personal Finance expert, frequently quoted in mainstream media including WSJ and FT.

From the Dirty Dozen CMBS Archives: The Dubious Case of PKHL 2021-MF

Senior bonds likely to suffer near conplete loss

It's been 1.5 years since I published my Dirty Dozen article, highlighting recklessly inflated ratings of 12 AAA rated SASB CMBS, backed by defaulted loans. At the time, the senior bonds from those twelve deals were all rated at or near AAA, despite the underlying loan being in default. 

I followed that article with several updates including my own ratings estimates. My last major update was in January 2025.  

My original article was covered by both the FT and Trepp and therefore there would be no escaping Rating Agency (RA) awareness that they were being called out. Eventually the ratings started to catch up to reality, but not nearly enough.

While preparing an update to my 2025 follow up, I found the troubling case of PKHL 2021-MF, a multifamily SASB CMBS deal. 

Despite the loan having defaulted in 2023, nether rating agency - S&P and KBRA - took action on the seniors until late 2025. 

S&P downgraded from AAA to Default (but seem to have skipped a step in between) and KBRA downgraded in one action from AAA to BB (and they absolutely should have downgraded to Default as I explain in the Substack post).

In this article, posted on my Subst@ck channel (link in comments) I reveal questionable practices of both S&P and KBRA that go beyond mere very late rating actions. 

My review suggests that rating actions may have been staged to mitigate the reputational risk inherent in a 'straight-to-default' ratings for AAA-rated debt. 

Subscribe to my Substack to be among the first to receive my in-depth SASB CMBS analysis—and other detailed market insights—in the coming weeks.

#cmbs
#sasb
#ratings
#commercialmortgages

Blue Owl - Additional Details Emerge, Questions Remain

CalPERS and Blue Owl's own insurance company emerge as buyers. 

Bloomberg reported today that 4 of the Blue Owl buyers were identified, including Blue Owl's own insurance company - Kuvare, US pension company CalPERs. and two Canadian pension funds. 

As I argued, and still believe, this was not an arm's length sale. Clearly the sale to Kuvare isn't arm's length. 

Turning to CalPERS I downloaded their Private Credit holdings and as I suspected they are already in large to Blue Owl with total commitments of over $2B.  As the table in the image shows, CalPERS has only received 10% cashout compared to their total commitment of $2.1B. The table also reveals that they still have over $800M in undrawn committed capital.
 
CalPERS can hardly be considered an arm's length buyer. Were they protecting their positions? Were they granted other concessions? Was Blue Owl able to leverage the capital already committed by CalPERS or was this a brand new purchase independent from CalPERS existing exposure. 
 
Given that the loans were sold to offshore LLC intermediaries it's not at all clear what the form was for the final purchase. EG were these entities pure pass through entities? Or were they structured. The Bloomberg article suggested the collateral could be destined for CLOs, but not sure how that would work given the intermediary LLC and ultimate end buyers. 

Questions remain:

1. Was this a shot gun wedding for CalPERS and the other pension funds? Or did they buy at arm's length with full due diligence and independent valuation? Did Blue Owl grant any other concessions or credit protection?

2. Why did Blue Owl not mention that the "insurance" company buyer was their very own Kuvare (Apollo was very up front and clear about their recent transaction with Athene)?

3. Did the Canadian insurers already have large exposure to Blue Owl?

4. Did the Pension buyers, commit with new capital or simply use their existing capital calls (and if so they may not have had much of a choice). See first question about Shot Gun wedding.

5. Was the sale at all motivated by Blue Owl's secured lenders? Given Blackrock's massive quarter to quarter write-down, I have to imagine every credit lender is getting tapped on their shoulders by risk management not to rely on valuations provided by the private credit company themselves.

6. Were the LLC intermediate buyers structured or purely passthrough vehicles? 

7. Were any additional credit commitments to the private credit companies included in the $1.4B sale? Who is on the hook for any additional revolving credit commitments to the portfolio companies?

#privatecredit
#privateequity
#pensions
#bdcs

taplio

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