36(b) Lawsuit Alleges Blue Owl BDC Charged Improper Advisory Fees

A recent complaint filed by an investor in the Blue Owl Capital Corporation, a publicly-traded Business Development Company (BDC), alleges Blue Owl Credit Advisors violated section 36(b) of the Investment Company Act of 1940. The complaint alleges Blue Owl Credit Advisor inflated asset values to such a degree that the fees paid were “unreasonable given the services provided.” In addition, the complaint alleges Blue Owl Credit Advisor collected fees on “pay-in-kind” (PIK), payments that involve non-cash income that accrues to the loan balance rather than the debtor using cash to lower the balance. This PIK income may never be realized by the fund. The complaint further alleges the board of Blue Owl Capital Corporation relied on valuation models and independent valuation firms selected and paid for by the BDC and failed to adequately oversee the valuation process. Last, the complaint also alleges the board is not properly independent from Blue Owl Advisors. Historically, the bar for section 36(b) cases is high and no shareholder has prevailed. 

Click here to read the complaint.