Lipschultz, Ostrover Raise $1 Billion With Soros, Dell Backing

  • Duo set up lending vehicle as banks retrench under regulations
  • Owl Rock has hired dealmakers from Goldman Sachs, TPG, Carlyle

Owl Rock Capital Partners, the firm started by former KKR & Co. energy head Marc Lipschultz and ex-Blackstone Group LP credit executive Doug Ostrover, raised almost $1 billion to provide direct loans to companies.

Owl Rock’s lending vehicle, a business development company or BDC called Owl Rock Capital Corp., sold $375 million in stock in June, according to filings, as part of $968 million in commitments. Investors include funds tied to George Soros, the family office of Dell Inc.’s founder Michael Dell, funds affiliated with Alibaba Group Holding Ltd.’s co-founder Joseph Tsai and Brown University, a separate filing shows.

Owl Rock plans to make loans to small and mid-sized companies, Lipschultz and Ostrover said in an interview in February. Direct lenders are playing a bigger role, stepping into a void left by banks hampered by stricter regulations and higher capital requirements imposed since the financial crisis.

TPG, Carlyle

Craig Packer, a former senior leveraged-finance banker at Goldman Sachs Group Inc., also joined Owl Rock as a co-founder in February. He became chief executive officer of the BDC, while Ostrover is CEO of Owl Rock Capital Partners and Lipschultz is the firm’s president. Owl Rock has also hired about 10 additional dealmakers from Wall Street banks and investment firms such as TPG and Carlyle Group LP, according to its website.

“Regulatory and structural changes in the market have reduced the amount of capital available to middle-market companies,” the BDC said in an April filing with the U.S. Securities and Exchange Commission. “Nearly 200,000 middle-market companies will continue to require access to debt capital to refinance existing debt, support growth and finance acquisitions.”

The firm also said it expects private equity groups to seek out debt financing from non-bank sources such as Owl Rock to fund acquisitions. Private equity firms are sitting on more than $850 billion in uninvested money, according to research firm Preqin.

BDCs, which can be publicly traded or closely held, have gained share in the lending market as banks retrench. Like real estate investment trusts, or REITS, they can avoid paying corporate income tax by distributing at least 90 percent of taxable income to shareholders. Among the largest BDCs are Ares Capital Corp., Prospect Capital Corp., Apollo Investment Corp. and TPG Specialty Lending Inc.

Owl Rock plans to lend to companies with revenue of $50 million to $2.5 billion or earnings before interest, taxes, depreciation and amortization -- a measure of cash flow -- of $10 million to $250 million, according to the April filing. Its investments will typically range in size from $20 million to $250 million and mature in three years to 10 years, the filing shows.

Margaret Popper, a spokeswoman for the firm at Sard Verbinnen & Co., declined to comment on Owl Rock’s plans or progress.

Ostrover, 54, was a co-founder of credit investor GSO Capital Partners, which Blackstone acquired in 2008. GSO managed $75 billion when he left last year, up from about $10 billion when Blackstone acquired it. Lipschultz, 47, spent 21 years at KKR, most recently as the private equity firm’s head of energy and infrastructure.

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