Ostrover, Lipschultz to Get $600 Million Backing From New Jersey

  • State’s investment adds to about $1 billion raised by Owl Rock
  • Duo started firm to lend to companies, stepping into bank void

Owl Rock Capital Partners, the firm started by former Blackstone Group LP credit executive Doug Ostrover and ex-KKR & Co. energy head Marc Lipschultz, won a $600 million commitment from the New Jersey State Investment Council.

New Jersey on Wednesday approved a proposal to put as much as $400 million in Owl Rock Capital Corp., a lending vehicle known as a business development company or BDC, and as much as $200 million in separate accounts managed by Owl Rock Capital Partners. The state’s investment division cited investment opportunities, the experience of Owl Rock’s dealmakers and discounted fee terms as reasons for proposing the commitment.

Owl Rock previously raised $968 million for the BDC from investors such as George Soros, Michael Dell, Alibaba Group Holding Ltd. co-founder Joseph Tsai and Brown University, according to regulatory filings. The firm plans to make loans to small and mid-sized companies as traditional lenders such as banks retrench, hampered by regulations imposed since the financial crisis.

The BDC plans to raise $3 billion to $5 billion including leverage, according a report prepared for the council by the state’s investment division. Margaret Popper, a spokeswoman for Owl Rock at Sard Verbinnen & Co., declined to comment.

New Jersey said it will get a “significant” fee discount on its investment in the BDC, though the levies will increase if the vehicle becomes publicly traded, according to the report. The state also negotiated down to paying no management or performance fees on its co-investments alongside Owl Rock.

The investment division specifically cited its “longstanding” relationship with Ostrover, who co-founded credit investor GSO Capital Partners and left last year, as a reason to pursue the commitment.

New Jersey has committed $1.6 billion to five GSO funds since 2008, according to a May 31 report, with two mezzanine funds generating 18 percent and 19 percent annualized returns as of Sept. 30, an energy fund returning 7.7 percent as of that time, and two credit funds producing returns of 14 percent and 3.8 percent as of March 31.

Craig Packer, a former senior leveraged-finance banker at Goldman Sachs Group Inc., joined Owl Rock as a co-founder in February and became chief executive officer of the BDC. Ostrover is CEO of Owl Rock Capital Partners and Lipschultz, KKR’s former head of energy and infrastructure, is the firm’s president.

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