Owl Rock(US:OBDC)2025-11-06 16:00Financial Data and Key Metrics Changes - Blue Owl Capital Corporation reported adjusted net investment income (NII) per share of $0.36, down from $0.40 in the previous quarter, reflecting lower non-recurring income [5][19] - The net asset value (NAV) per share was $14.89, a decline of $0.14 from the prior quarter, but has increased over 4% since inception [6][19] - Total portfolio investments exceeded $17 billion, with total net assets nearing $8 billion and outstanding debt approximately $9.5 billion [19] Business Line Data and Key Metrics Changes - The company saw originations of $1.3 billion and fundings of $1.1 billion during the quarter, with repayments at $797 million, resulting in a net leverage of 1.22 times [11][19] - Approximately 40% of the originations were add-ons, indicating strong support for existing borrowers [11] - The average hold size for new direct lending deals increased from $200 million in 2021 to roughly $350 million in 2025 [12] Market Data and Key Metrics Changes - The average revenue and EBITDA of portfolio companies grew to over $1 billion and $229 million, respectively, nearly double the levels from four years ago [14] - The non-accrual rate remained low at 1.3%, consistent with historical averages, despite a slight increase due to the addition of a watchlist position [13] Company Strategy and Development Direction - The merger with OBDC II is expected to create significant value for shareholders, adding nearly $1 billion in net assets and enhancing the portfolio's scale and diversity [10][17] - The company focuses on direct lending, primarily making senior-secured loans, which allows for better control and transparency in credit assessments [9] - The strategy emphasizes larger, recession-resistant businesses, avoiding more cyclical sectors like energy and retail [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's strength, citing solid fundamentals and disciplined underwriting practices [25] - The company anticipates that earnings and dividends will adjust in response to declining base rates, but remains focused on maintaining a sustainable dividend policy [24][39] - There are expectations for a potential normalization of spreads in the direct lending market, which could enhance returns [72] Other Important Information - The board declared a fourth-quarter base dividend of $0.37, to be paid on January 15, 2026 [19] - The company has a robust liquidity position with over $3 billion in cash and capacity on facilities, exceeding unfunded commitments [20] Q&A Session Summary Question: What is driving the higher non-accruals in OBDC II? - Management explained that the higher non-accrual rates are due to larger names in OBDC II, which operates under lower leverage constraints, but the impact on overall credit statistics is minimal [27][28] Question: What steps are being taken to improve stock valuation? - Management highlighted ongoing efforts to simplify the BDC portfolio and noted that the stock is yielding over 11%, which is not aligned with performance [31][33] Question: What are the expectations for rate cuts and their impact on dividends? - Management indicated that they do not predict rates but will adjust dividends based on the portfolio's earnings power in a lower rate environment [38][39] Question: How will the merger affect ROE accretion? - Management expects to achieve most operational synergies quickly post-merger, with capital structure-related synergies anticipated in 2026 [86] Question: What is the outlook for originations and M&A activity? - Management noted a significant pickup in activity levels, particularly in sell-side M&A opportunities, which typically yield greater upfront fees [47]