Owl Rock(US:OBDC)2025-11-05 21:36Investment Strategy and Portfolio - As of September 30, 2025, Blue Owl Capital Corporation has originated $174.72 billion in aggregate principal amount of investments, with $170.63 billion retained by the company or its affiliates [531]. - The average debt investment size in portfolio companies was approximately $66.5 million based on fair value, with 94.4% of the total debt portfolio having a weighted average annual revenue of $1.02 billion and a weighted average annual EBITDA of $229 million [536]. - The company focuses on investing in upper middle market businesses, defined as those generating over $50 million in EBITDA annually [532]. - The investment strategy includes direct origination of loans to institutionally-backed companies, with a target loan-to-value ratio of 50% or below [532]. - Blue Owl Capital Corporation's portfolio companies had an average interest coverage of 1.9x and an average net loan-to-value of 42% as of September 30, 2025 [536]. - The company has a diversified investment strategy that includes senior secured loans, subordinated loans, and equity-related securities [531]. - The investment portfolio is expected to be predominantly composed of directly originated debt and income-producing securities [533]. - The company focuses on investing in upper middle-market businesses in non-cyclical industries, including healthcare, business services, technology, and insurance brokerage [562]. - The average investment size in the portfolio is less than 0.5%, with the top ten investments representing less than 25% of the total portfolio [563]. - Approximately 97.4% of debt investments bear interest at a floating rate, which is expected to benefit earnings in a prolonged higher rate environment [541]. Financial Performance - The net investment income after taxes for the three months ended September 30, 2025, was $190.1 million, compared to $184.9 million for the same period in 2024 [592]. - The total investment income for the nine months ended September 30, 2025, was $1,403.5 million, up from $1,202.4 million in 2024 [592]. - Total investment income increased to $453.1 million for the three months ended September 30, 2025, compared to $406.0 million for the same period in 2024, primarily due to higher interest income [597]. - Interest income from investments rose to $359.9 million for the three months ended September 30, 2025, up from $307.7 million in the prior year [596]. - The net change in unrealized gains (losses) for the three months ended September 30, 2025, was a loss of $65.6 million, compared to a gain of $5.8 million in the prior year [608]. - Adjusted, non-GAAP net increase in net assets from operations was $128.2 million for the three months ended September 30, 2025 [595]. Debt and Leverage - The current target leverage ratio is set at 0.90x-1.25x, with net leverage reported at 1.22x debt-to-equity [561]. - The weighted average total cost of debt as of September 30, 2025, was 6.2% [630]. - The total debt of the company amounted to $12,864.6 million, with outstanding principal of $9,627.3 million and net carrying value of $9,528.5 million [648]. - The company’s revolving credit facility has an aggregate principal of $3,900 million, with $1,222 million outstanding as of September 30, 2025 [648]. - The average daily borrowings for the nine months ended September 30, 2025, were $9,920.2 million, compared to $7,509.1 million in 2024, indicating a 32.2% increase [649]. - The company may seek to retire, repurchase, or exchange debt securities depending on market conditions and liquidity [630]. Investment Commitments and Returns - Total new investment commitments for the three months ended September 30, 2025, reached $1,338,001 thousand, compared to $1,151,667 thousand in 2024 [568]. - The principal amount of new investments funded totaled $963,441 thousand in 2025, down from $1,080,803 thousand in 2024 [568]. - The realized gross internal rate of return (IRR) on exited investments since 2016 is approximately 10%, based on total capital invested of $20.27 billion and total proceeds of $24.84 billion [621]. - The company generated undistributed taxable earnings "spillover" of approximately $0.31 per share as of September 30, 2025 [603]. Shareholder Distributions and Stock Activity - For the nine months ended September 30, 2025, the company declared a total distribution of $0.37 per share for three separate dividends, with supplemental dividends of $0.02, $0.01, and $0.05 [639]. - The company repurchased 4,090,138 shares of common stock for approximately $50.0 million under the 2022 Stock Repurchase Program, which ended on May 2, 2024 [645]. - The company distributed a total of 998,642 shares as part of the dividend reinvestment plan for the dividend declared on February 18, 2025 [644]. - The supplemental dividend declared on August 5, 2025, resulted in the issuance of 51,572 shares [644]. - The company’s distributions may exceed earnings, indicating a potential return of capital to shareholders [639]. Regulatory and Management Structure - The company is managed by Blue Owl Credit Advisors LLC, which oversees day-to-day operations and investment management [520]. - Blue Owl Capital Corporation is regulated as a Business Development Company (BDC) and is required to invest at least 70% of its assets in qualifying assets [529]. - The company has received exemptive relief from the SEC to co-invest with affiliates under certain conditions, enhancing its investment flexibility [526]. Market Environment and Opportunities - The middle market lending environment is seen as providing opportunities for attractive risk-adjusted returns, with approximately 200,000 U.S. middle market companies identified [551]. - The weighted average spread of total floating rate debt investments was reported at 5.7% [560]. - The weighted average EBITDA of borrowers increased to approximately $229 million in 2025, up from $115 million in 2021 [564]. - Average revenue of borrowers rose to approximately $1 billion in 2025, compared to $500 million in 2021 [564]. - The average hold size of new investments in Blue Owl's direct lending strategy is approximately $350 million, up from $200 million in 2021 [564].