OBDC - Earnings call transcript Q2 2024 | Blue Owl Capital Corporation

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Operator

Good morning, everyone, and welcome to Blue Owl Capital Corporation's Second Quarter 2024 Earnings Call.

As a reminder, this call is being recorded.

At this time, I'd like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations for OBDC. Thank you.

Michael Mosticchio

Thanks, operator, and good morning to everyone joining. involve listeners statements, made guarantee outside which performance results remind may today's of the to risks or forward-looking of contain are and company's like control. that that during remarks call future and I'd uncertainties number are a not a Actual differ OBDC's in filings those the SEC. materially in a statements as described results of including a those may result number from forward-looking of factors, with in discussed no was assumes any to company's on information this including obligation and sources derived and companies, information company The has independently forward-looking related call not update the third-party portfolio materials, earnings been statements. Certain to verified. from The company respect with warranties representations makes no or to this information. such

quarter Capital Yesterday, with These and its XXXX. an conjunction ended should Corporation be release reviewed second the SEC. earnings yesterday June issued filed Blue company's XX-Q in XX, earnings Owl posted with the the presentation for

Owl entered is OBDE, including OBDC merger the addition, satisfaction agreement release approval. announcing traded merger also Stock In that New customary closing Blue of Corporation to shareholder a press on York company Exchange. into a the affiliate BDC Capital The has subject III, issued with conditions, our or

posted about additional presentation investor transaction. this also with have We an details

earnings today's the call, materials available All on referenced and earnings presentation, press merger the section including at of website blueowlcapitalcorporation.com. release, Investors XX-Q on are presentation the company's

over Packer, Executive Chief call Craig Officer to turn the OBDC. With that, I'll of

Craig Packer

also of joining will agreement strategic all strong OBDE we Mike. of not believe to today. provide Thanks, OBDC, another are sharing and merger be between that for both behalf value for us to just of results milestone and everyone, you thank sets long-term full we but pleased shareholders. Good On OBDC our team, morning, a quarter

as Mosticchio, years nearly I in, serve Investor heard you of just our of Relations Mike experience. He joined month, has who we new brings BDC XX Before last call. us team Relations. want recently to to joined Head Investor on from, some this voices highlight jump BDC

very the We have him are on to happy team.

is Logan and OBDE finance from and Additionally, of both you'll the and who hear portfolio year later leveraged OBDC. for Logan manager in a of experience call X decades Nicholson, the named brings the space. was President recently joined us ago in OBDC

Lamm, I'm also for and Financial joined Officer always, As by OBDC. Jonathan Operating Chief Officer Chief

For on the today's quarterly call, close some a concluding then overview share market we results of our OBDC's will then thoughts portfolio the discusses in merger provide believe current environment. I logistics brief the on performance, Logan walk opportunity earnings. will I why OBDC's After OBDE more with start commentary of with merger an and Jonathan through proposal will attractive remarks. and detail and the some is quarterly with

from very dividend ended strong XX.X%. Further, of our as Board. shareholders the of dividend a quarter, dividends So our share, $X.XX declared income $X.XX at again total and we $X.XX regular value to delivered once OBDC $X.XX the strong quarter our quarter for net will investment receive annualized supplemental reflecting up start, quarter. by with at ROE asset per per $XX.XX the Net of delivered $X.XX another last and share

quality yield, base to pleased rate double-digit continue interest credit environment, quarter and are current is of consecutive quarter the sixth This the an which attractive yield, attractive our resilient and of over of was We this XX%. to portfolio. ROE deliver our dividend our benefit reflects asset dividend a the which

of year, to demonstrated the and right make long and quality moment public now they the to believed that The the do our right We platform OBDC streamline have it returns and the have OBDE over Both generated portfolios. has is that. BDC sense and right have under with these on BDC near-record conditions been their would has as create all exceptionally vision. performed to the over averages, combine valuation well that to a elements our We few believe private historical of trading credit years. at solid premium alignment past to deliver the class, equities BDC environment an market last asset

increased remain the volatility value markets confident shareholders. over past short-term portfolios have this offer week, and our we the in While proposition will merger seen the to that

structured As elaborate will has the also been on this transaction Jonathan later, best whatever market allow environment. mutual for the thoughtfully to outcome

and employ the not spent a been portfolio billion the comprised XXX extremely $X.X both since portfolio. if was shareholders, to inception. our in OBDC's today co-investing into and similar see To investment strategy, you OBDE's portfolio, you investments it same portfolio launched have of we OBDE and have time across companies. OBDE is OBDC evaluating XXXX OBDE will has Both funds

a XX% believe are this approximately logical overlap sets low-risk OBDC. also the of result, We in transaction a this OBDE for in of shareholders. makes both As and investments

liquidity increase cost publicly shareholders; we combining By improve BDCs, with to scale and lower-cost finally, profile and high-quality, current our a direct efficiencies sources that and two to: our offers Streamline our enhance our trading lending of traded operational significant savings. plan prospective investment for overlap; portfolio platform; debt; access our drive diversified

with accretion BDC NII expect to total approximately $XX.X to bringing $X.X also while will proposed as our investments position It time. establish billion. merger approximately second-largest publicly over by portfolio, that OBDE add OBDC's achieving We the total the would traded investments billion assets of

in benefit the will combined the increased of company ways. We believe multiple from scale shareholders

and the our one further points. be average mitigation, basis for strengthens provide been will always would effort. than risk less portfolio portfolio. this critical in the combined merger, Upon completion of in the merger of has on Diversification size XX diversification reducing reliance First, our that any merger position investment, the success

this excellent incremental maintain increased quality much combined comes credit with risk. adding in the Often, portfolio. scale will we Second,

portfolio since potential believe has merger to with high-quality risk. managed Blue that mitigate combine we allows us this a diversified However, which Owl will meaningfully been by inception,

and enhanced new flexibility investors. larger Third, both trading we the OBDC's BDCs and volumes. will increased base higher existing larger the should trading of liquidity. and capitalization shareholder Larger provide had expect historically company daily for improve trading combined market volumes have average A liquidity

Fourth, at Both terms. expected is OBDC have in of ratings company OBDC including access the are efficient upgrade of received quarter and and the first two to OBDE access and favorable more capital, diverse to a more as the debt investment-grade XXXX. maturer the rated, potential to combined BDCs, financings

combined increased expect company enable access better potentially of scale the lower wide funding We at the to solutions debt to of borrowing a costs. array

elimination X. over we we expenses driven investment As expect excess before, I estimate duplicative through time, which year million mentioned could of net of be transaction accretive operational to be the to by the in savings in income $X

benefit structure improvements. yield from mix cost capital savings NII incremental generate Over should as the portfolio term, the further from long we and optimize

over I'll detail offer proposed that, merger call Jonathan, second will results. to the mechanics the With of who quarter our more turn on the and

Jonathan Lamm

to OBDC determined like describing Transaction structured to shares minute merger as Thank be spend a a is closing. you, certain the stock-for-stock to merger a number receiving consideration. shareholder Craig. proposed just OBDE of with I'd each prior

shareholders share high per It for accretion premium a to NAV at for be OBDC level, At share is above close. potential at at trading structured a NAV sets of OBDC valued merger to the should both and benefit. to for allows per shares of allow OBDE be

share potential shareholders how of various three NAV scenarios potentially our the of per for at have levels sides. discussing impact as per share NAV On the using trading will a included investor show Page both scenarios XX, June proxy deck close. we merger, X XXXX These

prior which per of a both immediately premium be on OBDC NAV struck The share shareholders at if NAV its per trading or that will determined shared exchange NAV-for-NAV by is the a ratio be If OBDC basis will premium formula to to be is will between trading an sides. below share. at closing,

will to to Owl and to continue deliver OBDC The the of consistent close, pay Board approximately course Stock spillover approval, regular to Post given ticker prior to yield and Capital closing, and regular XX% pay earned supplemental today's a company to variable intends of quarter. to combined the with dividend income combined in as to Subject X.X%, equal intends operate continue York the continue declare dividend a supplemental OBDC Blue New trade OBDC. the to dividends. under levels, to Exchange a and Corporation ordinary on continue

As to adviser proposed fees place. share with reimbursed total, existing Blue May for sign $X.XX $XXX in paid million from be announced OBDE associated for consummated. will merger proposed million up of in expenses repurchase if be the and the by OBDC's remain in support cap a will Owl, of a OBDC's which merger program OBDC also and is will

including Finally, approval. shareholder quarter subject we conditions, in are the transaction the customary expecting to to closing of first close XXXX,

billion. ended now of debt outstanding billion investments of OBDC's We with and net assets of $XX.X performance. portfolio total total quarterly the second Turning to billion, $X.X $X quarter

the for over-earned NAV. meaningfully Our share quarter prior resulting benefit was in $X.XX a up to a we per supplemental Similar $X.XX $X.XX dividend NAV year-over-year. our dividend, and to $XX.XX, quarters,

the on offset was However, two a decline investments, resulting $X.XX markdowns this than in benefit for NAV quarter. more credit-related by of

billion of deployment. repayments. $X.X We originations, billion of by terms In $X.X had offset of

As decline timing we last quarter which X.XXx. saw had leverage you'll to our mismatch recall, some

However, X.XXx. end we high of X.X our now X.Xx, of the fully impact target reversed leverage that near is at and to range

the Turning statement. income to

per leverage OBDC mentioned, repayment-related Craig of the and flexible financing balance $X.XX solid higher As and NII first we up earned share, driven also sheet to income. net continues by well-diversified quarter a prioritize $X.XX structure. from

and the quarter, $XXX liability one pleased financing new our lender. OBDC's million, strength We by adding we with increased corporate revolver partnerships remain structure. This of

additional for on I'll the that, color With Logan portfolio to performance. it turn over

Logan Nicholson

Thanks, consistent and a want transaction. across with our all OBDC about the to you looking Jonathan. will combined It's upon investment forward, to close think a portfolio today. To remain reminder of of I we the as great be which start, OBDE philosophy provide

We solutions in conditions. the more different significant noncyclical that companies while better and We borrower middle with we believe emphasizing middle sector. primarily because histories market equipped to to prefer to and market economic adapt by larger are upper diversification provide U.S. companies durable direct upper sectors operating lending sponsor-backed

industry-leading the Our nearly are average will million, points. and scale loss benefits XX we of believe substantiated $XXX borrowers our this which have be basis EBITDA forma by pro weighted ratio, of

same shepherd and exit. OBDC note team by I'd from constructed centralized OBDE were investments that to origination that the

of overlap of portfolio those As Craig approach and portfolios consolidating construction OBDE's mentioned, with simple. these overlap over centralized investment XX% to make This OBDC. should investments

that, commentary steady on average, With minute we quarters, portfolio the our in line companies. I'll across today. growth on to OBDC recent spend our EBITDA with In portfolio revenue and continue a see

a coverage and in over line environment navigated trough in models quarter higher remains successfully the portfolio, the have expected coverage thoughtfully higher and been our average level rate around have as environment. the interest response. have rate business Across of year with the adapted today's with highlighting last borrowers in their X.Xx, we consistent Our interest

watch our our fair finally, quarter-over-quarter, rate reflecting any debt small which names was quarter, this X.X% material list Pluralsight stress. not signs XX we the amendment steady portfolio, nonaccrual of position. remains of Our subset pickup or do see value of addition is on of And a point of the activity in basis and

our Our giving portfolio resilient, us strong stable returns and continues shareholders going be performance in to forward. deliver credit ability to for confidence our and

Craig today's And to now it final I'll to thoughts hand call. back for provide

Craig Packer

call, know are today's more direct competitive a environment the spend lending in on Thanks, market M&A on covered already as pressure light. quarter. strong and experienced second so lot we've the remains market I financing we Logan. public feeling Certainly, will market I volumes a the just the loan minute is

We quarter, which activity and the saw repricing elevated spreads. of in levels refinancing reduced

in see of stabilization spreads we levels. do signs at current However,

loans. earning We approximately large, high-quality Even with and into capital XX% opportunities continue investment attractive new are spreads, to tighter find companies. on deploy we to

We also the target continued to leverage successfully higher investment range. toward offset originate of to end our new opportunities repayments

structures. face protection some on we where of area will in our is sacrifice levels deals structural One new documentation economic maintaining appropriate capital and pressure, While not

platform normalized to confident eventually positioned we our we in a is level, today, expect which allow activity at ease. market are Overall, more M&A will how will and resume conditions

financings some largest proven ability environment. be in differentiator real this a will capital provide for to Our significant of the

performance BDC reflected helpful past we well over Having traded quality. recently, credit offer in said equities have strong until perspective. few very it all steady earnings might and markets what and BDCs' that, some the and to thought be have up days, has happened observed that the I

outlook, we're of traded more term volatile any that our economic off investing a investors price seeing in recently, believe opportunity diversified justify to can a of are loans we offer extent not in in Although the portfolio markets. strategy defensive portfolio concerned this movement. To first-lien our BDCs the have signs about

recession-resistant concerned consistently for businesses the we those potential sectors buffer economic from the our an economic downturn, to investing about inevitable in have For investors been cycles. and

of to execution In to We market the that also addition, to the certainty I of public helpful positioned volatile. long-term but want they as be volatility our we of too well investing how this with that for and capital, highlight increases markets arise. can value become certainty last, advantage borrowers direct provide us lenders. It's as will time are more horizon to say the early as resources, long opportunities take

like would this that quarter, our also announced spaces. alternative manager, Blue acquisitions I credit the insurance in highlight to Owl, and

our to our expand related will broaden our as and of directly not could BDCs. we BDCs, a these While expect coverage platform capabilities the sourcing incrementally efforts acquisitions

growing to Since allowed inception, allowed team and in shareholders. robust we us systems. that was high-quality has management platform a us invest has competitive great bring portfolio our believed This a this scale to a to to to our returns origination have build expertise underwriting together advantage. broad with deep deliver scale All

help to allowing efficiencies to operating proposed that navigate and a deliver the will cost environment increased of from and dynamic financing also while over lower the believe a We benefit more time. portfolio shareholders scaled ahead diversified merger

public BDC, continue be to OBDC leader. second-largest a the will market As

wanted close, of highlight since pleased then. what IPO, we to year we accomplished marked fifth I since this To July are with that anniversary OBDC's have and the very

successfully interest grown has it Our twofold portfolio economic environments, nearly weathered and size. dramatically rate has and in different

public. annual today results of when from XX.X%, basis went XXX approximately Our an increase points ROE of an we reflect

shareholders. merger time sets Looking forward, now to two and we for to enhance meaningful our and our of through are grow excited merge with scale is about proposed BDCs prospects the right returns the believe create benefits We OBDE. continuing these of both our

support your joining on for us you On team, behalf thank for Blue Owl advance today's call. and of in the entire

Operator

first Instructions] from with Brian JMP comes Securities. today of Mckenna [Operator Our line question the

Brian Mckenna

Congrats OBDE. the on with merger

commitments at and at some new the a given basis, new looking activity. a of a amount actually existing which stands So OBDC bit year-to-date of been relative on out refi healthy there's companies, others, little mix to

companies new expect existing to M&A up? to split Or continue see companies? we and this more new should as pretty forward, between even activity a skew continues for could even Moving to deals toward pick

Craig Packer

it. Appreciate effort. of real Brian. origination a our Look, strength we platform think Thanks, is our

inception. an I when Obviously, try since doing or of We there an see underwriting. terms to think in we've of the a shown opportunities. an that really -- spades we're refinancing add-on that's existing that's out easier in either new everything company,

So and will economic there's very existing a new names mix. we to from an compare want see new names, for basis. We names constantly much and opportunities

you'll mix. So I a think see

refis And remains a months been pretty more The has environment easy in the new up, in last add-ons the the see the X think M&A M&A moderate. market picks bit to more If done. have because weighted will refinancings names. gotten you'll probably -- and I skew refis us towards

new time, imagine, bit it over up, little would as skew M&A will I So towards names. picks a

names we organically preordain next it I'm don't we look new in. months. But as opportunities at that hopeful this. come And see more over We'll the X

Brian Mckenna

number delivered credit a a create OBDC different a from of Okay. GAAP Great. OBDE's has I even will better clear question perspective that XX% here. OBDE. And argue that the then merger think Helpful. portfolio since can then And with a ROE is you than OBDC. inception. It's the combination on synergies

ROE. ROEs seat, comes drive over potential So Craig, my XX% how a to be about how But thinking that the through just that would from to above it get and in it synergies ultimately seem the your there's you're would here, that thoughts time figure. great, GAAP

Craig Packer

little we and platform ability of try XX.X%. to accomplished those Thank our and to point to you. and OBDC's at to optimize. the X going I'd our question. we're you Day like strong ROE gracious at steps It's ago, really out, and Very of returns higher. power outlined to Sure. our over demonstrates And we've take drive Look, were Investor some were a many we year that

portfolio As you of pristine. it highlighted, E, is the

less, more proud much liabilities. -- of even little skews performance, partly return of side a As because as better. bit lien, I'm little vintage a liability the profile C's E's bit the E's less is credit E is it given more little bit a first expensive is partly

quickly to side be liability improve the to think we'll get that on match benefit asset scale continue return on side. and to the essentially the of We as C's E's E able optimize we fairly

And a that. can rates pro XX%. combined any we to driver bigger the I think take a a basis, we're mix. Obviously, we're basis, to do hope We'll on do a in on job of going so forma optimize north of XX%. I that than the are Today, -- like I'd OBDC think to great

And low the in generate expected. think the participants, still where way land plays down. we way double-digit the like looking most rates expect can rates drive rate return the it -- a rates we to obviously, ultimately. at But going rate out will able curve what's be XX% should a to it's of we We market then come rate on picture stays rates, even order. we with we're If now, short if of generate return rate are and

guess, we'll scale, very the benefit in think whatever and more So is for the two of we to better that But expenses. the live the We more we optimize we'll with. side, combining be have fund this optimization best on liability positioned of power environment funds one we rate of the performers more optimize space. I diversification, think even

Operator

questions James. from with Dodd the Raymond line Robert Next are of

Robert Dodd

structure. of the calculation incentive? of income all obviously fee? that in fine. the potentially in The so some says entities premium the of trading depending incentive require accretion will Or the discount merger, that or the are fee fee far, nuances discount XXX, no at Because amortization is, exclude would any change filing level the amortization, intent question it the the of the in the structure. On from in close calculation included change the where is the That's be to

Jonathan Lamm

we merger filed you that. we've to [ of take So -- deal what make we with filed an structure, terms the ] at in the Robert, amendment to a also if to IMA look

approvals it for us come to our the adjust is that for incentive the forward, on So intention, will based fee.

Robert Dodd

Got it. almost your the XXX. version, tech. Craig, a Obviously, like you would talk X X then I lending is the public I ultimately, the That and different reading at ago, diversified Analyst the about Day you did tech one, the XX to point, was summary And topic. second BDCs, months this think. X

-- that. But publicly lending, any about lending vehicle? diversified much that the say there's you about but how current private don't X you just vehicle. diversified the the traded also you both I if to add C&E means you can and like what's And still other But know feel could color do what that version. there's

Craig Packer

Sure.

So as, X have Robert, sometimes create Investor little our pointed know year we when out confusion. managed X we Day BDCs, did ago, can that and we a

nontradeds, And of sense lot bit to it and traded a so publicly that, X and would a make diversified time, ultimately over tech. tech out a have traded laid diversified we of -- publicly vision a

So is asking, we OBDC as BDC, that still Robert a is II, have there. private

I'm spent time we on a really up merger amount that and a with said fund look our and I think just this going our the the Board. OBDE say independent want at of behalf thinking with we the the to Board, time, each each same this for to each summer The Board continually of with which advisers closely working structure fund, fund at I optimize OBDC for ideally. thing is fit tremendous situation through to over acknowledge came

obviously, if for will it be opportunities OBDC going It our But careful strategic both options we to on execute of that still one we to optimize funds, each shareholders. with of all no makes sense to diversified make publicly there make fund, there. see to And there's logic for have for II, fund to sure are this individually. and how so evaluate to we're would traded industrial sets continue super transaction, about as change including

ourselves. II ago whatever is, merger. an we the way. and there's it that merger, evaluate the said here pursue ahead of we're that makes delivering But funds, are announced we'll we now, to So for Right to closed, we'll then. line that if we -- that that continue X sense, with on opportunity this and merger want don't for getting get year focused the down along on I the And

Operator

is the Securities. with The from next question of Truist line Mark Hughes

Mark Hughes

access impact I about the the what Have gotten any think to to you early Congratulations. you be? care thoughts share? cost that, the scale, get better borrowing might point capital. that with indications Any you

Jonathan Lamm

effectively mean, unsecured -- entered so said when into Mark, structure issued investors complexity there's IG BDCs. have you've your because you many come our bonds, generally think, I or observed, have to probably back I as bond and we've in that we've us

and the for of one is that been things they so asking have that looking merger. for And

is coming I'd companies IG points range? So there there's low-hanging together to our space. basis to. That's our in we it in XX, peers XX it somewhere tighten think context that the where relative spreads these -- fruit to point Is of in X, that the

Craig Packer

but secured not $XX bond I And certainly we've space. going not obviously is in the it's significant mean, side. like, increase delivered We've we finance the excellent true There's side, the be sources billion our which but vehicle. the and for shareholders, also our fund. only diversification only to in managed on lenders, It's the this -- really on an and secured are always second-largest unsecured. for carefully financing performance

for that BDC credit trade in they they've particular the for way, by and delivered BDC So should and have I say, the lighter bonds -- on. space, broadly quality would the that they than

quality I we provide will tighter, should tighter, think trade space collectively, essentially So able also should credit with trade the upside. refinance and OBDC's to being

So seems to Jonathan's me. basis very XX, XX, points XX reasonable

time, I liability think of should time, -- opinion. my quality tighter in costs it over come space, should the over the

Mark Hughes

of Kind new market? then out commitments are the relative the And the leverage there the quarter, EBITDA or in existing in to trajectory seeing what you in any Understood. portfolio? loan-to-value

Craig Packer

rate XX%. been very leverage, deals to really modest XX%, lower higher value has The depending on leverage is maybe generally the deal, remains Xx. Loan good. given quality The upon so environment, new Xx,

we've but fingertips be in it the That's very will quarter, be always with much will preference. what average think companies. don't have EBITDA been to I in We at line, bigger my line continue our done it finance historically. for I

equity like were working half Our firms the the of refinancings the ability do whole also or to a really deal a Private most with be quarter's -- meaningful continues differentiator. had do can size deal. to or than firms add-ons. more But that we of activity

statistics. And exact so obviously, those are the same

new continue size credit a But find investments even of credit the quality, new consistent like. company, moderate to to stats, deals, for find opportunities we in environment, that really M&A

Mark Hughes

And common exposure change then to merger? the Any there your equity. post strategy in

Craig Packer

No change in strategy.

for reminder of familiar. folks a equity common credit portfolios as are our in Common underlying that that less of really Just essentially. for portfolios equity diversified us, majority assets the vast equity is are exposure

asset-based an have We lending business.

We life insurance have business. a settlements

We business. have an aircraft and railcar finance

really these portfolio investments is standpoint, underlying from an the but equity accounting loans, essentially. risk So are of all a

And over so ROE a for time. for been potential strategy -- accretion really some and generate to also we terrific nice that's NAV us

we strategy. like So the

I shareholders. think beneficial been to it's

to strategies will those We allow us so to continue and has not the continue OBDE much percentage. to of OBDE will increase grow addition of but it, pursue their it. less necessarily

to these will. protected from will different invest of also individual bit they're And we face. the a cycle more bit you if a So some refi specialty -- continue loans in they're that lending verticals,

find those as at on we continue the would we new opportunities, strategy. look So well. If

Operator

Johnson are the Our next KBW. Paul of with questions from line

Paul Johnson

Did in what quarter. then [indiscernible]. [indiscernible] And is question you XX% the this quarter, now ] interestingly [indiscernible]? your have increased on idea portfolio just [ an any slightly it's additional

Craig Packer

think ask to you. heard to try I I question, some really -- of you to but was Can I shift hear was position it hard Paul, and the it repeat?

okay? us hear you can Paul,

Michael Mosticchio

don't next to we in the queue. Why the question jump

Craig Packer

dial Paul, if you can question. happy us, try maybe and in to back to hear take we're your

Operator

is next Kenneth from the of Markets. RBC Capital line with The Lee question

Kenneth Lee

briefly Should we across expect or the portfolio mix. alluded going kind about merger? the accretion, merger. optimizing Under post Just the portfolio rotation you one any streamlining NII portfolio of to the forward

Craig Packer

No we've High-quality strategy mean, companies, really recessing-resistant sectors, mostly we're same since the had bigger, sponsor-backed. rotation. -- I inception.

Folks remember we'll that. second We E continue first in a second will our is first significant OBDC's with the lien we exposure repayments got I little XX% repaid. quarter. in liens got lien. more got think that of

brings We us there. bigger, opportunities our are us, is going mix advantage highest-quality really would I bit out to best to bigger of fund to show its it win as a say, combined to up the as power, core to on and and of continue investments. And ability market stick take But of some size, purchasing second the strategy. gives optimize allows the the that continue little a take down these a lien ROE mostly strategic of try we'll first basis investments to investments to equity through lien, but

I to keep repeating think really diversification, the I going that.

that's valuable portfolio. in lending think I the really

outlined will what a keep strategy it similar executing so it. well. to be just And on we're strategy going we've to because that worked has And

Kenneth Lee

what's currently? terms potentially types follow-up, mentioned forward of in the may, briefly again there. could And from assets or of remind upon acquisitions Great. The you you Very and helpful acquisition? terms this the of sourced Could what of us if insurance some there. And touched change prepared being in just X platform, the potential remarks. either in I Owl you sourcing advantages going the Blue loans

Craig Packer

for So strategy direct -- as beverage, loans flow-oriented primarily stick companies. lending like food going continue sectors OBDC Cash in to to equity-backed have. software private of to brokerage, a we and for is insurance,

Blue announced Owl, insurance the money manager two the companies. managing for has of One OBDC, insurance acquisitions. in space is

to which is phrase financing. second an is The that asset-based an generally industry alternative applies catch credit,

market it of be that's space. terrific a pioneer that commercial in lending Atalaya loans, strategies. could really business loans, asset-based pools other So and called We a acquired leader loans, consumer

they we'll investment pursue to separate strategies, credit separate teams and as with alternative and strategies. them insurance continue The have

options. market. force going OBDC And specifically. so over our it's it more not more in opportunities a going to accrue lending the and will to change offer companies, be them will We're OBDC's more to going I strategy. that the think talk of benefit business But time to bigger we're create diversified to And

these time, will to just and that, from there the wider. be much selected basis. time co-investing that I to other But sourcing strategies OBDC on a from effort So be broader may think in addition

from come expect in complexion, to a but wider time, that expect don't opportunities this do So time from change effort. some

Operator

Compass Our of next the Casey with questions from Alexander line are Point.

Casey Alexander

listing would congratulations is been Congrats BDC the successful OBDE space, that. on merger. of direct on direct in observe And the the I so done certainly that the anything that's most Yes. of listing

gets question, My capital the and OBDC OBDC, OBDC? down better cost a OBDE's that How think has liability much difference transition liabilities than how then by of return of equity for cost to of because that do the trying duplicative think takes on of the you expenses? elimination what's capital hard. of made maybe And it's it But structure too OBDE long appropriate just I advantageous and up does. of more to

Jonathan Lamm

the market. great -- a to million will that also we've hit synergies expect talked market, view issuances specifically operational our the we the company that on have unsecured debt outlined the in And company inure about we in the tightening presentation combined We've $X investor the combined benefits about in the to synergies, will that question. just immediately. of It's of

It's relative of In the accretion to size you it dilutive. or to dilution, it's like going given we think think to don't that OBDC. terms of not, if about that, OBDE want you're -- if

'XX, into we that accretion, late by NII in we'll closed and 'XX expect 'XX. We that start if the early to see merger

given but quarter dilution, slight the we're minimal X So there's you about have then just may there and accretion where from talking synergies. a

then refinancings. respect and with with those the of majority are XXXX And refinancings XXXX vast

quickly. those see really facilities you'll coming out So debt relatively

Casey Alexander

BDCs. And this January merger I lockup for but consummated maybe -- do is, both will if of would 'XX, And I shareholder saw and that other you time line is it, deck question is, require you when have a on that, in that to votes assume, the the question my OBDE. this, close? waive missed before expect I My Great. the

Jonathan Lamm

Yes.

So expect early to final the E XXXX, for approval. correct, you're for what the We're merger around time January, to lockup that going so commented and both we shareholders. alluding right close that out to in for of in shareholder we're shareholder release sides C And going on need approval OBDE. we the is

Craig Packer

it. it, though add to even just Casey, So didn't ask you

really excited thank to you acknowledging to the thought at appreciate First, the and really this it, so A hard words it. into But thank precisely of how worked kind We for far. execution take we're step. listing. on next for do it. the went We lot you

coming Jonathan's get place distributions to now this the if and to add and those X close paid prior to to are get shareholders the the off, want $X.XX between special deal announced comment, We've to closing. will at all going each, dividends beyond closes. OBDE just I lockups take merger already significant

addition, to for essentially in distribution for will well. be distribution -- at And close get there onetime will normalize essentially NAV NAV -- that for the close prior to a paid as a

distribution $X.XX as paid get that shareholders That's and of -- use XX per a another numbers, $X.XX prior specials, distribution. share OBDE quite will about of $X.XX talking another close. June to So of

like you So a call. I the to lot there's bit know merger in for But complicated. shareholders, both have little If this, a book questions should about [ and on this folks ]. is OBDC OBDE our

Operator

Wells [Operator Instructions] is Finian next with question Our the O'Shea from line of Fargo.

Finian O'Shea

like, for I out? portfolio. in I a the wanted of little that earnestly play a It would congrats. more specialty right? that Is into believe, answer your how can that and sounded mean to Mark, unpack Everyone, the idea And push indicated finance. more what to bit optimization

Craig Packer

glad you to strategy. that our give I'm we're didn't asked impression definitely Well, question we changing the because want the

comment operational the on assets, on the Jonathan the liability. should and On

on we since There's sponsor-backed, change side, to upper no OBDC Primarily be strategy. lending. in we're to operate going continue asset But the the to inception. have middle-market way going

you're been that investments alluding already are to. very of these what building in we which have out some call our We verticals specialty of strategic some active finance

But them. to how doing not new We much. a complexion may a a continue of been in it's additional We're going not opportunities we've change strategy, and not ones. in change So grow have and thing, there's do them. that's to to

doesn't to tried a clear maybe say, is do of it, OBDE job today any I its didn't that vintage. have What of given

And down percentage OBDE so OBDC come equity because the on combined any. a forward, doesn't going at day one, basis will have

so time, get at can that we the and And back least normalize to over current it mix.

higher. a to higher, not that continue grind we'll And bit wholesale but

about the we go verticals and selective really multiple funds. are verticals into, we across those in we think I co-invest

mix. So to change it's dramatically not not -- we're the going

strategy. same So

we We in and to funds that are try investments really disciplined think as deploying as have but I improve we have the fully now on can efficiently, been and returns. past levered, fully we add OBDE be new spread both overall deployed,

past. of E in little as the in a bit to as optimizing overall, OBDC So no it fold change operate has just we continue and

Operator

Our Paul final comes the with from question line of Johnson today KBW.

Paul Johnson

may okay. you potentially or me just about any if underlying there happened with not level day-to-day company just share you I'm there. But kind just the portfolio. question PIK statistics have what terms of much [ And of as ] you I'm the hear of is the could can hope in my sure quite well payouts of but in the performance I not sure how on got through, even portfolio. asking was

Craig Packer

Paul hard But so question was little your that -- what a bit to was. So you. I it's hear think little bit,

Paul Johnson

Yes. Correct.

Craig Packer

Okay.

So of look, were at take of last as has exposure paid our flexibility been loan at defined consistent or of PIK for underwriting pretty PIK quarters we were investments be XX%. vast period give to structured asked our performing allow of handful majority over credits PIK or that the to the a to all time PIK. of a portion in The a provide for

we're PIK -- select circumstances. and be to something ultimately collect in do way. not if we're able And premium have that is will we, a asked our all but return PIK go hasn't when approach flexibility XX% portfolio to that generally we for, is of it interest, consistent, that changed. on And we getting willing it. offer it to and to paid think It's And looking offer we the

the PIK. for so of period names we last a quarter We've credits, context have that negotiating in trickier had a or more we, allowed couple in of of the

say of really I it has portion small but so happened very exposure. it's our And -- hasn't PIK at that a won't all,

that on should almost percent putting providing are And are in that always, getting they in more situations are underwrite, we're -- always as well. those They're performing those think XX-plus getting flexibility, not economics. investments our high given cases, are real be. in are We're not are or we structured benefit more into to PIK way a of Sponsors all Almost that we of that these the our from. -- companies. the for our watch XXs capital additional They list.

generates this. go because for And refinanced. continue are are our it something loans systematically cash pay repaid that do do typically great or to to X these returns X It's investors. Obviously, do or they so we that required and years, after when we or contractually they get

and We've for something we to it do reasons it's some. generates credits. some returns, couple sense those had for so that of PIK make do And have we've a good agreed names that had because

Paul Johnson

the here that. for issues I Appreciate color again, it. on apologize side. And Got the on my tech

concentration, risk At kind in getting might the going in concentration? of credit speaking of in their higher an that sort like but As portfolio platform, terms do environment the you either of how building think challenged little more think do just sponsor about into the starts you a sponsor investments underperforming. and some about level, I be How kind funnel, level pipeline, bit little with where on pipeline? desperate sponsors sort business building getting management a to the the you're of temporarily of the bit more or bit little the potentially here, at of space a going potentially mean, investments, more a better but buy hypothetical time

Craig Packer

on of The diversified terrific had relationships fund think do. portfolio a having do, at very team concentration big I day-to-day cover having private a with XXX-plus way over really ours. firms you time. of a a strength we significant a which So a is level do, we and equity very our private have sponsors huge that's like in We avoid list sponsor firms leading many equity we senior and level, like

with X, any undue we on not Obviously, we names. relationships value much have private X, there's XX So our X, concentration very equity firms.

but relationships. cavalier or dependent on want it, don't sound any I And of those X X about not we're so to

lived just say partnership-oriented and really future to that They're throughout in we those though, I higher don't any feel firms. I lived of through a been them. history, up with companies long that come if as through the to will that. regularly -- COVID, challenges their those through rate change I believe work experience and comfortable expect with I'd we've we've our equity environment. the -- allow investments, private keep in they That's we've companies solutions to support our all want expect as continue them they

owning but And we've done We're on if to. are it, we our preference, up struggling, support, companies company for don't whatever to ability that's to they a it. need not that including set basis, preference. and reason, have the as that's well, to Not select continue take that they do a if action protect our our investment,

it's private on where well. the are exposure. equity be are that might worried like feel see I a about Private headlines economy, pain. I private while you'll this -- doing particular cyclical feel a week's equity the the is firms like feel don't generally many this firms, don't companies, -- portfolios the So is And I firms companies strength. which think doing well. I equity equity of much focus Private too some

loosening in more that, I of bit I am that And pressure result a If forward the are of M&A down. looking private think will environment. a robust as come hopeful to anything, firms on equity probably debt rates service

to been why wanting private is longer, with our firms their frankly, as more about their seen which and be growing equity I'm generally keep the not feeling certainly, we there'll deal has not any positive activity companies M&A. And and good dialogue -- that So portfolios, hopeful about much portfolios. detecting haven't anxiety I'm their

Paul Johnson

rates logically the activity. of Appreciate given fairly with that long recession declining U.S. have would sat so would happen hands with on me would a one, in obviously Got from activity? were And the from what if of your just activity M&A to sponsors lead much on far. stimulate anything, significantly peak, how Obviously, with wondering lower recession, that. if of But their enter of terms what it. one like point last going M&A. the are to Kind thoughts kind into

Craig Packer

Okay.

the private you as the all to equity think I time. them firms, speak said, we

distributions. the funds. those the the the to get to speak they're, real have of also LPs pretty sponsors both I think, and from are, We equity to private eager the There's do LPs thirst to and pretty eager that. some think, And And I LPs more realizations. a

will I expect -- If the that recession, change don't think will at sponsors. in willing up mild I there's point for pick spades. would a be I'd that behavior some So day-to-day that U.S.

are we're holding better well. they're they to even Sponsors paid doing doing companies. in of on They're and again, for as Companies get our well. so performance. And experiencing portfolio growth because are well want

are recession, to so U.S. really recession economy. as private of be continuing they firms could if don't -- equity that much. growthier focus a the And think Even there grow, quite I a lots mild parts of the be -- companies and again, were might have the mild on growing they

So some back. I M&A of it's expertise, think to recession mild in in sponsor result say see. area not would think this is activities But delay want don't -- but a don't my the don't I I coming we'll

Operator

Thank you. At this time, we've question-and-answer session. our reached

back management closing hand for the to I'll remarks. floor Now

Craig Packer

please there's Great. a us that. earnings Well, today. lot a obviously, access with -- you website, thank put lot all joining the of there, on We've our put out merger. plus for the We material

do We much please to Have you're If great on you well informed, sure have make want a merger, questions, And particularly day. support. the out. very appreciate the just obviously. reach

Operator

conference. today's conclude will This

for participation. you disconnect this may time. at your lines your You Thank

Blue Owl Capital (OBDC) 8 Aug 242024 Q2 Earnings call transcript