Blue Owl to buy $2bn of Upstart loans

Blue Owl Capital has agreed to buy up to $2bn (£1.5bn) of consumer loans from fintech lender Upstart over the next 18 months, as it expands in the asset-based finance space.

The deal includes an initial acquisition of a $290m personal loan portfolio, which closed in September.

The transaction was structured and closed by Atalaya Capital Management, an alternative credit manager primarily focused on asset-based finance that Blue Owl acquired earlier this year.

Atlas SP Partners, the warehouse finance and securitised products business majority owned by Apollo funds, will provide the debt financing for the loan purchases.

Read more: Private debt investors eye asset-backed lending over the next year

“We’re thrilled to partner with the Blue Owl team in one of our largest purchase commitments ever,” said Sanjay Datta, chief financial officer of Upstart. “Blue Owl’s ambitious vision and long-term focus will accelerate our efforts to expand access to affordable credit.”

The asset-backed finance (ABF) market is attracting attention from alternative asset managers after commercial banks scaled back their activities in the space.

Earlier this year, Oaktree noted that “ABF has been transformed from a low-return, bank-dominated asset class into a highly attractive area of opportunity for alternative lenders”.

BlackRock has also seen opportunities in this area. ABF is estimated to be a $5.5tn market in the US. Around a third of this market is financed by non-bank lenders, according to Oliver Wyman data cited by BlackRock, with the private credit industry’s current market share estimated to be $200-$300bn.

“While the concept of diversification away from the bank lending channel is not new, over the past several months, market participants have focused on the potential for private credit lenders to play an increased role in ABF, potentially filling ‘financing gaps’ from some banks’ more selective appetite to lend (as they may look to optimize the capital efficiency of their balance sheets),” BlackRock’s analysis said.