Former GSO, KKR execs start credit firm

Doug Ostrover, one of the founders of GSO Capital Partners, and Marc Lipschultz, KKR’s head of energy and infrastructure, are launching Owl Rock Capital to invest in private loans. The duo are raising a private fund and setting up a BDC.  

Doug Ostrover, one of the founders of GSO Capital Partners, and Marc Lipschultz, KKR’s head of energy and infrastructure, are starting a new private debt firm called Owl Rock Capital.

The firm will invest in loans across the credit spectrum and be based in New York. The news was first reported by Bloomberg on Tuesday and confirmed by multiple sources.

Ostrover, one of three founders at Blackstone-owned GSO, left the firm last May, while Lipschultz is departing from KKR this month. They could not be reached for comment by press time.

Although Lipschultz’s specialty is in energy and infrastructure, the new firm will invest in a variety of debt. The duo will first set up a private fund. Sources told Private Equity International's sister title PDI that the vehicle is targeting at least $2 billion. 

The firm is also setting up a business development company (BDC), the Owl Rock Capital Corporation, according to Securities and Exchange Commission (SEC) filings in October. Alan Kirschenbaum, formerly the chief financial officer at TPG Specialty Lending (TSLX), is listed as chief operating officer on the filings. TSLX is the $1.3 billion BDC at TPG.

Kirschenbaum left TSLX in August and was later replaced by Ian Simmonds, who was previously a managing director at Bank of America Merrill Lynch’s Financial Institutions Group.

Ostrover founded GSO with Bennett Goodman and Tripp Smith in 2005. The firm was later acquired by Blackstone in 2008. Its assets have ballooned from $10 billion at the time to $79 billion by the end of 2015, according to Blackstone’s latest earnings report. 

Goodman and Smith still co-lead GSO, with Smith dividing his time between New York and London and overseeing GSO’s European expansion. The firm has a large energy practice and has collected large sums of money for energy credit. Ostrover’s new firm is expected to make deals in that area too.

Some of GSO’s and Blackstone’s recent mark-downs stem from current energy holdings, which are in the low teens as a percentage of both GSO’s and Blackstone’s assets. Though Steve Schwarzman, Blackstone’s chairman, said on a recent earnings call that the firm has collected $8.5 billion towards new energy investments and expects that to be a lucrative area for Blackstone going forward.

Ostrover told Bloomberg that he has already hired 12 people for his new firm. Sources also told PDI that he’s been talking to more industry experts about jobs at Owl Rock. Many of his connections are in the capital markets space and among people who can lead large deals, areas he’s focusing on for Owl Rock.

Lipschultz has worked at KKR since 1995 in a variety of senior roles. He founded the firm’s energy real assets and infrastructure businesses. He’s being replaced on the energy front by Robert Antablin, who will become head of the Americas energy private equity team, and David Rockecharlie, who will become head of energy real assets, according to a KKR memo obtained by PDI. Both are based in Houston and are long-time KKR executives.

Raj Agrawal and Jesus Olmos in Menlo Park and London, respectively, will become global co-heads of infrastructure at KKR, with Agrawal replacing Lipschultz as chairman of the infrastructure investment committee. Agrawal and Olmos have led the OECD-focused infrastructure businesses for the past several years.  

Nat Zilkha, KKR’s co-head of credit, had told PDI in a Q&A last year that the energy opportunity within debt seemed less attractive to him than previously thought, as it’s hard to predict the energy market cycle and make bets on when oil prices will rebound.