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New words:
Angel, appointed, appointment, BA, belief, Biographical, breadth, Brinley, Bryan, BS, buyout, career, Cole, College, Commerce, compelling, East, Emory, Engineering, escalated, firm, firsthand, found, Gate, Goizueta, Golden, Goldman, Head, Hockey, Humana, incorporated, India, Island, joining, Jonathan, Lamm, leadership, Linnemann, Logan, LSTA, MBA, Meenal, Mehta, Mumbai, Nicholson, Partner, Patrick, Pennsylvania, picked, President, proposition, proven, ratified, School, Secular, shutdown, solution, spent, startup, Sydenham, tender, today, traditionally, Treasury, trend, University, Vice, view, Virginia, weigh
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adding, begin, consumer, decommissioning, decreased, exceeding, indexed, language, meaningfully, pandemic, rapid, receivable, refinancing, regulate, robust, turn
Financial report summary
?Risks
- We are subject to risks related to the economy.
- We are subject to risks related to our business.
- We are subject to risks related to our Adviser and its affiliates.
- We are subject to risks related to business development companies.
- We are subject to risks related to our investments.
- We are subject to risks related to an investment in our common stock.
- We are subject to risks related to U.S. federal income tax.
- We are subject to general risks.
- Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations.
- The COVID-19 pandemic caused severe disruptions in the U.S. economy and disrupted financial activity in the areas in which we or our portfolio companies operate.
- Any public health emergency, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
- The current period of capital markets disruption and economic uncertainty could have a material adverse effect on our business, financial condition or results of operations.
- Price declines in the corporate leveraged loan market may adversely affect the fair value of our portfolio, reducing our net asset value through increased net unrealized depreciation and the incurrence of realized losses.
- Economic recessions or downturns could impair our portfolio companies and harm our operating results.
- Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
- Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition.
- We have a limited operating history.
- We borrow money, which magnifies the potential for gain or loss and may increase the risk of investing in us.
- Defaults under our current borrowings or any future borrowing facility or notes may adversely affect our business, financial condition, results of operations and cash flows.
- Provisions in our current borrowings or any other future borrowings may limit discretion in operating our business.
- If we are unable to obtain additional debt financing, or if our borrowing capacity is materially reduced, our business could be materially adversely affected.
- Our ability to achieve our investment objective depends on our Adviser’s ability to manage and support our investment process. If our Adviser were to lose a significant number of its key professionals, or terminate the Investment Advisory Agreement, our ability to achieve our investment objective could be significantly harmed.
- Because our business model depends to a significant extent upon Blue Owl’s relationships with corporations, financial institutions and investment firms, the inability of Blue Owl to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- We may face increasing competition for investment opportunities, which could delay further deployment of our capital, reduce returns and result in losses.
- Our investment portfolio is recorded at fair value as determined in good faith by our Adviser in accordance with procedures approved by our Board and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
- Our Board may change our operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse to our shareholders.
- Any unrealized depreciation we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
- We are subject to limited restrictions with respect to the proportion of our assets that may be invested in a single issuer.
- We are subject to risks associated with the discontinuation of LIBOR, which will affect our cost of capital and results of operations.
- We are subject to risks related to corporate social responsibility.
- Our Adviser and its affiliates, including our officers and some of our directors, may face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in increased risk-taking or speculative investments, or cause our Adviser to use substantial leverage.
- The time and resources that individuals associated with our Adviser devote to us may be diverted, and we may face additional competition due to, among other things, the fact that neither our Adviser nor its affiliates is prohibited from raising money for or managing another entity that makes the same types of investments that we target.
- Our Adviser and its affiliates may face conflicts of interest with respect to services performed for issuers in which we may invest.
- Our Adviser or its affiliates may have incentives to favor their respective other accounts and clients and/or Blue Owl over us, which may result in conflicts of interest that could be harmful to us.
- The Oak Street division of Blue Owl may enter into sale lease-back transactions with our portfolio companies or with borrowers under our credit facilities.
- Our access to confidential information may restrict our ability to take action with respect to some investments, which, in turn, may negatively affect our results of operations.
- We may be obligated to pay our Adviser incentive fees even if we incur a net loss due to a decline in the value of our portfolio and even if our earned interest income is not payable in cash.
- Our ability to enter into transactions with our affiliates is restricted.
- We may make investments that could give rise to a conflict of interest.
- The recommendations given to us by our Adviser may differ from those rendered to their other clients.
- Our Adviser’s liability is limited under the Investment Advisory Agreement, and we are required to indemnify our Adviser against certain liabilities, which may lead our Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
- There are risks associated with any potential merger with or purchase of assets of another fund.
- Our Adviser’s failure to comply with pay-to-play laws, regulations and policies could have an adverse effect on our Adviser, and thus, us.
- Our Adviser’s inability to attract, retain and develop human capital in a highly competitive talent market could have an adverse effect on our Adviser, and thus us.
- The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
- Failure to maintain our status as a BDC would reduce our operating flexibility.
- Regulations governing our operation as a BDC and RIC affect our ability to raise capital and the way in which we raise additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a BDC, the necessity of raising additional capital may expose us to risks, including risks associated with leverage.
- Our investments in portfolio companies may be risky, and we could lose all or part of our investments.
- We may invest through joint ventures, partnerships or other special purpose vehicles and our investments through these vehicles may entail greater risks, or risks that we otherwise would not incur, if we otherwise made such investments directly.
- Any strategic investments that we pursue are subject to risks and uncertainties.
- To the extent we invest in publicly traded companies, we may be unable to obtain financial covenants and other contractual rights, which subjects us to additional risks.
- Broadly syndicated loans, including “covenant-lite” loans, may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.
- Downgrades by rating agencies of broadly syndicated loans could adversely impact our financial performance.
- If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses.
- We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient.
- We may not realize any income or gains from our equity investments.
- The credit ratings of certain of our investments may not be indicative of the actual credit risk of such rated instruments.
- Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
- A redemption of convertible securities held by us could have an adverse effect on our ability to achieve our investment objective.
- To the extent original issue discount (OID) and payment-in-kind (PIK) interest income constitute a portion of our income, we will be exposed to risks associated with the deferred receipt of cash representing such income.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- If we cannot obtain debt financing or equity capital on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.
- Defaults by our portfolio companies could jeopardize a portfolio company’s ability to meet its obligations under the debt or equity investments that we hold which could harm our operating results.
- Subordinated liens on collateral securing debt investments that we may make to portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
- Certain of our investments may be adversely affected by laws relating to fraudulent conveyance or voidable preferences.
- There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- We generally will not control the business operations of our portfolio companies and, due to the illiquid nature of our holdings in our portfolio companies, we may not be able to dispose of our interests in our portfolio companies.
- We are, and will continue to be, exposed to risks associated with changes in interest rates.
- International investments create additional risks.
- We will expose ourselves to risks if we engage in hedging transactions.
- The market structure applicable to derivatives imposed by the Dodd-Frank Act, the U.S. Commodity Futures Trading Commission (“CFTC”) and the SEC may affect our ability to use over-the-counter (“OTC”) derivatives for hedging purposes.
- Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
- We may enter into total return swaps that would expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
- We cannot guarantee that we will be able to obtain various required licenses in U.S. states or in any other jurisdiction where they may be required in the future.
- An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
- Certain investment analyses and decisions by our Adviser may be required to be undertaken on an expedited basis.
- We may not have the funds or ability to make additional investments in our portfolio companies.
- Our investments in portfolio companies may expose us to environmental risks.
- The effect of global climate change and climate-change related regulation and sustainability concerns could impact the operations of our portfolio companies and adversely affect our business.
- Our shares are not listed on an exchange or quoted through a quotation system and will not be listed for the foreseeable future, if ever. Therefore, our shareholders will have limited liquidity.
- A shareholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
- Certain provisions of our charter and actions of our Board could deter takeover attempts and have an adverse impact on the value of shares of our common stock.
- Investing in our securities involves a high degree of risk.
- The net asset value of our common stock may fluctuate significantly.
- The amount of any distributions we may make on our common stock is uncertain. We may not be able to pay distributions to shareholders, or be able to sustain distributions at any particular level, and our distributions per share, if any, may not grow over time, and our distributions per share may be reduced. We have not established any limits on the extent to which we may use borrowings, if any, and we may use sources other than cash flows from operations to fund distributions (which may reduce the amount of capital we ultimately invest in portfolio companies).
- Distributions on our common stock may exceed our taxable earnings and profits. Therefore, portions of the distributions that we pay may represent a return of capital to you. A return of capital is a return of a portion of your original investment in shares of our common stock. As a result, a return of capital will (i) lower your tax basis in your shares and thereby increase the amount of capital gain (or decrease the amount of capital loss) realized upon a subsequent sale or redemption of such shares, and (ii) reduce the amount of funds we have for investment in portfolio companies. We have not established any limit on the extent to which we may use offering proceeds to fund distributions.
- Shareholders will experience dilution in their ownership percentage if they do not participate in our distribution reinvestment plan
- Preferred stock could be issued with rights and preferences that would adversely affect holders of our common stock.
- If we issue preferred stock or convertible debt securities, the net asset value of our common stock may become more volatile.
- Holders of any preferred stock that we may issue will have the right to elect certain members of the Board and have class voting rights on certain matters.
- A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or our notes, if any, or change in the debt markets, could cause the liquidity or market value of our notes to decline significantly.
- We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.
- We will be subject to U.S. federal income tax at corporate rates if we are unable to maintain our tax treatment as a RIC under Subchapter M of the Code or if we make investments through taxable subsidiaries.
- We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
- If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, certain U.S. shareholders will be treated as having received a dividend from us in the amount of such U.S. shareholders’ allocable share of the base management fee and incentive fees paid to our Adviser and some of our expenses, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. shareholders. we are not treated as a “publicly offered regulated investment company,” as defined in the Code, certain U.S. shareholders will be treated as having received a dividend from us in the amount of such U.S. shareholders’ allocable share of the base management fee and incentive fees paid to our Adviser and some of our expenses, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. shareholders.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- Heightened scrutiny of the financial services industry by regulators may materially and adversely affect our business.
- We are an “emerging growth company” under the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
- Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.
- Our Bylaws include an exclusive forum selection provision, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other agents.
- We expend significant financial and other resources to comply with the requirements of being a public entity.
- We may experience fluctuations in our operating results.
- We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.
- We are subject to risks in using custodians, counterparties, administrators and other agents.
- Internal and external cybersecurity threats and risks, as well as other disasters, may adversely affect our business or the business of our portfolio companies by impairing the ability to conduct business effectively.
- Increased data protection regulation may result in increased complexities and risk in connection with the operation of our business.
Management Discussion
- Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. For the quarter ended September 30, 2023, our net asset value per share increased, primarily driven by an increase in accumulated undistributed earnings from net investment income.
- We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights.
- Investment income increased by $33.2 million million to $107.2 million for the three months ended September 30, 2023 from $74.0 million for the same period in prior year primarily due to an increase in interest income as a result of an increase in our debt investment portfolio which, at par, increased from $3.1 billion as of September 30, 2022, to $3.3 billion as of September 30, 2023, as well as an increase in the base rates charged on our floating rate debt investments. Dividend income increased period-over-period due to an increase in our portfolio of dividend income-producing equity investments which, at cost, increased from $140.5 million as of September 30, 2022 to $167.4 million as of September 30, 2023. Other income remained relatively flat period-over-period. Payment-in-kind interest and dividend income represented approximately 9.7% and 3.7%, respectively, of investment income for the three months ended September 30, 2023 and approximately 13.5% and 4.1%, respectively, of investment income for the three months ended September 30, 2022. We expect that investment income will vary based on a variety of factors including the pace of our originations and repayments.