Less than 24 hours ago, we noted that Goldman’s Delta-One Desk head, Rich Privorotsky, warned, “while we’re all laser-focused on ORCL CDS and NVDA, maybe what we should have been watching was OWL and COF,” following up on our extensive writing on the subject of private, as far back as March 2024 “What’s Behind The Recent Explosion In Private Credit“, and certainly the precipitous plunge in stock prices within the sector… 

Again, as we highlighted, it got far worse in recent days following news that the alternative asset manager restricted investors from redeeming capital from one of its oldest private credit funds, sending the stock to a 2 year low. 

Two days ago,  Bloomberg reported that Blue Owl announced earlier this month that it would merge its $1.8 billion non-traded business development company, Blue Owl Capital Corporation II, with its $17.6 billion publicly listed vehicle, Blue Owl Capital Corp., or OBDC. 

But investors in the non-traded fund won’t be able to redeem their capital until the merger closes, which is expected to happen early next year, according to a statement. 

Investors in the acquired vehicle will swap their holdings for OBDC stock.

That means they could see paper losses of as much as 20% if the deal closes at current share prices, given that OBDC shares are trading at that much of a discount compared to the value of the fund’s assets.

Fears over asset quality, manager selection and lower earning potential following rate cuts have led to shares of publicly traded business development companies taking a hit this year. Shares of the traded Blue Owl vehicle have declined about 22% so far this year.

Worse, as Privo lamented at BIZD’s performance, “those pesky BDC ETFs have failed to have any substantive recovery at all, are now a glaring disconnect to the rest of the credit complex.”

Well things just got a little more stressful in the credit complex as Blue Owl Capital Inc. is calling off the merger of two of its private-credit funds after its shares were hit.

“While we continue to believe that combining OBDC and OBDC II could create meaningful long-term value for shareholders, we are no longer pursuing the merger at this point given current market conditions,” said Craig W. Packer, Chief Executive Officer of OBDC and OBDC II.

“Both funds remain strong, with excellent fundamentals, and we are confident in our ability to deliver attractive returns independently as we continue to work with the Board to consider the best future opportunities for OBDC II.”

OBDC’s $200 million share repurchase program that was announced concurrently with the merger remains in place.

The funds remain gated to redemptions:

Investors in the non-traded fund, which was launched with plans for an eventual liquidity event like a public listing or fund merger, were restricted on redeeming their capital until the deal was closed.

On Wednesday, the company said the tender program would be reinstated in the first quarter of 2026, subject to board approval.

Finally, evaporating liquidity conditions in these BDCs is a major problem for the entire market as MS concluded recently, “the point we want to drive home is that credit markets will play a major role in enabling AI-driven technology diffusion” and of all the available sources of credit, the chart below shows just how big the debt hole is that private credit will have to plug.

Translation: private credit is by far the weakest link in the column that supports the US legs of the AI arms race… which is why not if but when the government comes rushing in to backstop the entire space with trillions in taxpayer funds (as it will have to do to prevent China from victory by filling a $1+ trillion gap), private credit will also be bailed out.

Not tomorrow, of course, but one day, when the pain in the sector hits unbearable levels – and Blue Owl’s merger collapse is just another cockroach croking in the coal-mins (to mix metaphors). 

The Blue Owl CEO told CNBC this morning that “there’s no emergency here.”

With the US badly lagging China in nuclear power plant rollout, and the Trump admin slow-playing its Industrial Policy in this most critical sector, the private sector is taking matters into its own hands, with two notable developments announced this morning by two of the leading companies in the space, as they pursue commercial rollout. 

We start with developer of modular microreactors, Nano Nuclear, which has completed the initial testing of its proprietary Annular Linear Induction Pump (ALIP) technology. Testing was conducted at their Westchester County, New York, facility in collaboration with aRoboticsCompany.

Nano acquired the ALIP technology in 2024 and is working to develop the magnetic pump design for commercialization. Unlike a normal centrifugal pump used to push water through a pipe, the ALIP is a magnetic pump that is intended to move more exotic reactor coolant without the use of an impeller, including molten salt, liquid sodium, and lead-bismuth, similar to the technology being developed by TerraPower, Oklo, and First American Nuclear. Similar technology was used on one of the first nuclear submarines, the USS Seawolf – a sodium cooled reactor using magnetic coolant pumps.

The pump design was recently tested to 350°C (662°F) to “maximize ALIP’s lifespan in environments where maintenance or component replacement is not an option such as in space, undersea, and nuclear applications. The test outcomes have also provided valuable data for optimizing the pump’s magnetic behavior using novel, highly-engineered materials and unique component geometries.”

Nano also commented that their validations this year at their New York demonstration facility include a full stack of precision manufacturing processes, such as orbital laser welding, and electromagnetic quality control systems, such as 3-D high resolution magnetic field mapping.

Elsewhere, another frontrunner in experimental nuclear technology, Oklo, signed a binding contract with Siemens Energy to begin engineering and design work for long-lead components of the power conversion system for their Aurora reactor at Idaho National Laboratory (INL).

“Siemens Energy and Oklo will develop the best solution for power supply,” said Tobias Panse, Senior Vice President, Steam Turbines and Generators, Siemens Energy. “We offer best-in-class solutions for reliable power supply with the highest efficiency. Oklo’s small modular reactor solutions are ideal for companies with large power demand.”

The Aurora sodium faster reactor at INL is designed to be a commercial scale reactor, which will initially be used for testing and demonstration purposes until NRC licensing is completed. In the meantime, the company will continue to pursue the fast-track regulatory process under the DOE’s Reactor Pilot Program.

Former Treasury Secretary Larry Summers has resigned from the board of OpenAI following the release of messages in which Summers was asking Jeffrey Epstein for dating advice to try and bed a female mentee whose father was a former CCP official. 

Then-Harvard President Lawrence H. Summers speaks at the University’s 2004 Commencement ceremony. Summers recently retracted from public engagements after his emails with sex offender Jeffrey Epstein were released. By Crimson Multimedia Staff

On Monday Summers announced that he would be stepping back from all public commitments – and while he said he would continue to teach at Harvard, his office appeared to be gone Monday evening. 

“In line with my announcement to step away from my public commitments, I have also decided to resign from the board of OpenAI,” Summers told Axios. “I am grateful for the opportunity to have served, excited about the potential of the company and look forward to following their progress.”  

Over 20,000 documents were released last week by the House Oversight and Government Reform Committee from Epstein’s estate. 

Summers, a known longtime associate of Epstein, joined the board of OpenAI in 2023 during a brief period in which CEO Sam Altman was ousted from the company – only to return days later. Summers was appointed alongside Bret Taylor, former Salesforce CEO, and Quora CEO Adam D’Angelo – the only member of OpenAI’s initial board who still had a seat. 

In a statement, OpenAI said “Larry has decided to resign from the OpenAI Board of Directors, and we respect his decision. We appreciate his many contributions and the perspective he brought to the Board.”

Meanwhile, the Economic Club of New York postponed a discussion with Summers this week, hours after the Crimson published its article – telling FT that it was “postponed due to an unavoidable change in schedule. 

Harvard Investigates

According to the Harvard Crimson, the University will launch a new investigation into its ties to Epstein following the Summers scandal. The university had already conducted an investigation in 2020, in which they found that Epstein donated $9,179,000 across 22 ‘gifts’, including a $736,000 donation after his 2006 arrest but before his 2008 conviction for sex trafficking a minor. 

Epstein was also a Visiting Fellow in the Psychology Department in the 2005-2006 academic year despite lacking academic qualifications typically possessed by Visiting Fellows. 

The new probe will cover any new information revealed in the new document dump, including hundreds of messages Summers and Epstein exchanged regarding women, politics, and Harvard-related initiatives. 

Several other prominent Harvard faculty also appeared in the documents, including Harvard Law School professor emeritus Alan M. Dershowitz and English professor emerita Elisa F. New, who is married to Summers, the Crimson reports. 

The cache of documents released last week added to a long paper trail detailing ties between Epstein and prominent Harvard affiliates.

In the documents, New discussed her personal projects at length with Epstein, soliciting thousands of dollars in funding from the child sex trafficker several times — years after Harvard said it had stopped taking contributions from Epstein.

In one 2014 exchange, New and Epstein discussed a potential $500,000 gift to Poetry in America, a television show and digital initiative she spearheaded. She also accepted an unspecified amount of money from Leon Black, an executive at private equity giant Apollo, in a gift that she wrote Epstein helped broker.

“It really means a lot to me, all financial help aside, Jeffrey, that you are rooting for me and thinking about me,” she wrote in December 2015.

So Epstein was advising Summers on how to cheat on his wife, while also discussing fundraising with said wife.

We’ve been hammering on the same theme for months: low- and middle-income consumers are getting financially squeezed. 

Goldman has flagged imploding sentiment, UBS has revealed the tale of two consumer worlds, and consumer behavior and spending trends show a pullback in discretionary spending, from restaurants to big-box retailers. 

The strain has become large enough that the Trump administration rolled out “Operation Affordability” last week, an attempt to ease pressure ahead of the midterm election cycle. 

The latest evidence of the ongoing consumer squeeze is one of the largest off-price retail chains in the US, known for selling brand-name and designer merchandise at steep discounts, reported a very solid third quarter. 

TJ Maxx’s earnings report shows sales beat expectations for the third quarter, prompting it to raise its full-year outlook. This is a sign that an increasing number of consumers are trading down for the off-price retailer. 

Third-quarter revenue came in at $15.1 billion, beating the Bloomberg Consensus estimate of $14.9 billion, with comparable sales also outperforming. Management boosted full-year comp-sales guidance to +4% (from +3%) and raised its earnings forecast. 

“The fourth quarter is off to a strong start, the availability of merchandise continues to be outstanding, and we are excited about the deals we are seeing in the marketplace. With our compelling values and ever-changing, fresh assortments of good, better, and best brands, we are convinced that our stores and e-commerce sites are strongly positioned as gifting destinations for value-conscious shoppers this holiday season. Going forward, we see great potential to continue capturing market share,” TJ Maxx CEO Ernie Herrman wrote in a statement. 

Shares of TJX rose nearly 3% in premarket trading in New York. As of Tuesday’s close, the stock was up 20.5% on the year and trading at a record high.

At the start of the week, Goldman analysts led by Brooke Roach commented on off-price retailers, citing HundreX data showing consumer net purchase intent toward retailers such as Ross Dress for Less, T.J. Maxx, and Burlington Stores, which are improving. 

Roach showed that Google Trends data for off-price retailers has improved this fall. 

The takeaway is that rising traffic at off-price chains is a clear “trade-down” signal. Target’s already-reported soft demand reinforces the view that more consumers are shifting toward discounters as financial pressure intensifies.