Owl Rock(US:OBDC)2025-05-07 20:15Investment Overview - As of March 31, 2025, Blue Owl Capital Corporation's Adviser and its affiliates have originated an aggregate principal amount of investments totaling $154.20 billion, with $150.22 billion retained by the company or its advised funds [524]. - The company targets middle-market companies with EBITDA between $10 million and $250 million annually and/or annual revenue of $50 million to $2.5 billion at the time of investment [525]. - The company focuses on investing in non-cyclical industries, particularly in healthcare, business services, financial services, and software [557]. - The portfolio consists of 77.5% first lien senior secured debt investments, with 52% classified as unitranche debt investments [552]. - The company aims to participate in transactions sponsored by high-quality private equity and venture capital firms capable of providing operational and financial resources [524]. Financial Performance - The total investment income was $464.6 million, an increase of 16.3% from $399.6 million in the same period of 2024 [588]. - The net investment income after taxes for the three months ended March 31, 2025, was $201.3 million, compared to $182.8 million in 2024, reflecting a growth of 10.3% [588]. - Investment income increased to $464.6 million for the three months ended March 31, 2025, up from $399.6 million in the same period of 2024, primarily due to increased interest income from debt investments [593]. - Total operating expenses rose to $259.6 million in Q1 2025 from $211.6 million in Q1 2024, driven by higher interest expense, management fees, and incentive fees [595]. - Interest expense increased to $148.5 million in Q1 2025 from $119.1 million in Q1 2024, attributed to an increase in average borrowings from $7.5 billion to $10.2 billion [597]. Investment Strategy - The company expects to generate current income primarily through direct originations of senior secured loans and other debt investments in U.S. middle-market companies [524]. - The average debt investment size in each portfolio company was approximately $70.0 million based on fair value, with portfolio companies representing 93.7% of the total debt portfolio having a weighted average annual revenue of $938 million and a weighted average annual EBITDA of $215 million [529]. - The company focuses on originating loans to middle-market companies and may reduce investment levels through partial sales or syndication to additional lenders [532]. - The average hold size of new investments in Blue Owl's direct lending strategy increased to approximately $350 million in 2025, up from $200 million in 2021 [559]. Debt and Leverage - The current target leverage ratio is 0.90x-1.25x, with net leverage reported at 1.26x debt-to-equity [555]. - The total debt as of March 31, 2025, was $13,014.6 million, with an outstanding principal of $10,285.5 million [637]. - The average interest rate for the three months ended March 31, 2025, was 5.6%, with total interest expense amounting to $148.5 million [640]. - The company has a requirement to invest at least 70% of its assets in "qualifying assets" as defined in the Investment Company Act of 1940 [523]. Market Conditions - The lending environment is challenging, with merger and acquisition activity below historical levels and refinance activity slowed [556]. - The middle-market lending environment is viewed as providing opportunities for attractive risk-adjusted returns [543]. - The company expects earnings to benefit from a prolonged higher interest rate environment due to its floating rate loan portfolio [535]. Investment Commitments - Total new investment commitments for the three months ended March 31, 2025, were $1,158,874,000, compared to $1,202,698,000 in 2024 [563]. - The principal amount of new investments funded in the first quarter of 2025 was $912,859,000, slightly down from $920,370,000 in the same period of 2024 [563]. - The weighted average interest rate of new debt investment commitments was 9.5% for the three months ended March 31, 2025, down from 11.1% in 2024 [563]. Shareholder Returns - For the three months ended March 31, 2025, the company declared a distribution of $0.37 per share and a supplemental dividend of $0.05 per share [628]. - The company generated undistributed taxable earnings "spillover" of approximately $0.34 per share as of March 31, 2025 [598]. - Dividend income increased to $56.5 million in Q1 2025 from $50.1 million in Q1 2024, mainly due to higher dividends from equity investments acquired from OBDE [593]. Asset Management - The company has been granted an order for exemptive relief by the SEC to co-invest with other funds managed by its Adviser or certain affiliates, subject to various approvals [519]. - The company is regulated as a Business Development Company (BDC) under the Investment Company Act of 1940 and as a regulated investment company (RIC) for tax purposes [522]. - The weighted average total yield of the portfolio was 10.2% at fair value and 10.3% at amortized cost [554]. - The weighted average spread of total debt investments was 6.1% as of March 31, 2025 [554]. Portfolio Quality - The portfolio composition as of March 31, 2025, included 85.2% rated 2, 7.7% rated 3, and 0.1% rated 5, indicating a stable risk profile [579]. - The amortized cost of performing debt investments was $14,821.5 million, representing 98.4% of total debt investments as of March 31, 2025 [579]. - The company had only four portfolio companies on non-accrual status as of March 31, 2025, with a non-accrual ratio of 1.6% [578]. - The net change in unrealized gain for the three months ended March 31, 2025, was $194.9 million, a significant increase from $6.6 million in 2024 [588]. Mergers and Acquisitions - The company completed a merger on January 13, 2025, resulting in a purchase discount that will amortize over the life of the acquired loans [589]. - The company acquired investments totaling $4.15 billion from OBDE on January 13, 2025, which included 189 portfolio companies [565].