OBDE - Earnings call transcript Q2 2024 | Blue Owl Capital Corp III

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Operator

Good morning, everyone, and welcome to Blue Owl Capital Corporation III'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 OBDE.

Michael Mosticchio

Thank you, operator. Good morning, and welcome to the second 2024 earnings call for Blue Owl Capital Corporation III. I'd like to remind listeners that remarks made during today's call may contain forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. materially number forward-looking described of filings the differ result as in may with a of factors, SEC. results from statements those a OBDE's Actual including those information to company's independently the materials, verified. not from including portfolio any obligation third-party and to earnings no related was assumes this call company forward-looking The been statements. Certain companies, discussed information sources on in has update derived and warranties its with Capital company release respect this The representations makes earnings Owl issued such information. Yesterday, second June an Corporation posted or III the quarter earnings no and Blue for XX, to presentation ended XXXX. be the company's should XX-Q SEC. in the with These conjunction reviewed filed with yesterday

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

posted investor Officer earnings about have OBDE. the presentation, We release, the turn available additional merger today's materials XX-Q press to blueowlcapitalcorporationiii referenced over on Packer, details transaction. All Craig and this at section that, presentation .com. With an including earnings company's of Executive Investors on call I'll are also call, the the Chief presentation website with of

Craig Packer

company. Financial Owl thank surviving as Mike. Nicholson, agreement with Logan OBDE's for and you, after earnings Thank with a has Capital merger Good us close, also morning, Lamm, Corporation, OBDC entered market that joined by OBDE President; Chief you today call. our joining for Officer. Yesterday, everyone, Blue we the our into Jonathan I'm second announced quarter and

shareholders of anticipated a for on hand overview it and investing quarterly to would the then share the Logan, will combined to my will for our call I then with the brief of who overview OBDE's quarter. today, of company. results On will over an I like provide thoughts benefits the start activities

additional and credit maintaining investment delivered details value once ended our our and ROE X.X% of delivered We we reflect results report year range. credit portfolio. of $X.XX the the quarter, and quarter asset increase second higher very income the of $X.XX performance, per annualized $X.XX as was leverage pleased excess benefits a from the our the across to strong in the further will another rate net the for share, strong of per at dividend excellent adjusted growth again regular Jonathan income agreement. We're performance for of consistent quarter ago. environment up a portfolio a share quarter quarter XX.X%. from investment and returns Next, Net $XX.XX towards last up the we merger cover share. Results of per second quarter targeted Net discuss the double-digit higher delivering end

a spend to combination. announced like would on I Next, our moment recently

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

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

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

will it a confident and OBDE successful. are continue in standalone basis, believe we we to on While be

we will benefits of the bring about if to is merger this OBDE approved. We shareholders are it expect excited

If allocating similar XXXX. since funds have OBDE's inception to extremely see it same the OBDC is strategy both not you in and will the evaluating Both OBDE's spent we portfolio. investments employ time been the portfolios to portfolio, you have same investment

in result, also a approximately As in of XX% the OBDE investments are OBDC.

shareholders the with $XX.X XX. of our We OBDC company increased $XX.X approximately will in to traded scale by the expect largest investments add combined position will billion that BDC also total from publicly approximately billion second OBDE's investments assets. We multiple establish the as proposed portfolio, bringing total as the merger of June of to benefit believe We'd ways.

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

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

been has since merger Blue us, this Owl with However, high-quality managed diversified a allows inception. portfolio by that combined

liquidity. terms. of will transaction how of structured, a be OBDE have shares we market further OBDC access result to the the multiple more deeper a Third, including potential receiving traded shareholders of diverse debt financings is combined larger shares company the and access company OBDE, a OBDC's favorable and expected much this more capitalization are which than OBDC, Today's expect liquid of will of offer shares capital, as higher and is at enhance at more combined liquidity. Fourth, to to efficient

was better. XXX XX. OBDC's to of debt, over are profile, average expect OBDC's shareholders We June of credit which as OBDE should from generally benefit also benefit from points cost lower lower basis ratings OBDE which

be We be year investment portfolio generate debt in we to yield expect we of higher and in operational savings accretive elimination shareholders the estimate which duplicative OBDC's $X expect by immediately and of lower OBDE excess could income for driven transaction X. of cost million through expenses, to net of to the

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

OBDC's for associated that, with sign turn expenses Owl, if investment from our Logan a paid call as the OBDC to be Blue reimbursed up the merger the to and to $X.XX proposed million adviser proposed quarter. of discuss which will will a is cap I'd merger consummated. With by of Finally, support like to fees total, activity be and in this OBDE

Logan Nicholson

Craig. Thank you,

the our to demonstrating towards deploying companies We attractive opportunities billion approximately most continue number second quarters, commit continue on portfolio investment to in million growth offset on our steady across in to leverage sales line $X revenue in active during average, focus was by XXX average find increasing were and our in second and $XXX capital, repayments. This In commentary size originations, see recent portfolio our to to new substantial we and XX of quarter. making quarter commitments of the our the the for with brings basis quarter total points. Originations companies. progress approximately our EBITDA and

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

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

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

financial turn merger proposed I'll OBDC. to Now to to our with provide over detail more it materials where Jonathan find on and results on our

Jonathan Lamm

billion. of $X.X portfolio ended investments We total total quarter and billion $X.X billion, of with $X.X the Logan. assets Thanks, of debt outstanding net

net second value in $XX.XX. asset benefit meaningfully to quarter, our over last NAV. $X.XX to Similar dividend, resulting earned share Our quarter we was per regular a

$X.XX, of conjunction declared with X special paid dividend listing special a We our this in dividends year. X of also previously earlier announced

investment. The on this impacted markdowns, Finally, primarily continuing increase one focus was on NAV was leverage. to credit-related key by quarter

to progress target finishing X.XXx. near the quarter end, range of X.X up from of leverage our significant made at have net debt-to-equity, quarter and X.XXx X.XXx high end We last to the this

second income regular share Turning statement. quarter, to dividend. earned $X.XX per our above of $X.XX income the investment in net the We

As earnings, of return earned XX.X%. an equity we result a annualized of our strong on

also earlier fees reflect incentive earnings our full first and of listing management quarter year. normalized Our since this this quarter

a dividend the regular quarters $X.XX level of set X share, per line our Our with at in Board quarter listing we third ago. declared

dividends As special per a which was declared I reminder, in mentioned. the conjunction of first previously of with the X $X.XX listing, Board the June, in also as share, paid

additional in the Next, turning be and publicly on regarding Those coming to statement websites. in well to proposed the prospectus and will OBDE website OBDC's joint the OBDE to as I'd available intend the be accessible proxy will filings SEC's that highlight like merger OBDC file weeks. merger, as that the information

OBDE's OBDE replay merger. At NAV website, the to trading rationale is shareholders to of the the benefit Additionally, OBDC's Events transaction. and additional to presentation the section to direct to includes and both I'd the to this details of you about level, potential price additional high prior a of a about closing. XXXX behind is Investors details investor from section to which OBDC OBDC this OBDE the the merger website, like an includes premium at morning proposed call a allow for structured with earnings depending And which structured of value QX on with

shareholders as to close approximately on time last per per approval, the to June conditions, of $X.XX one we a XXXX including subject approval. dividends holding dividends, additional shareholders first transaction, expecting shareholders closing price. share income previously timing, payment are share, today share. Around can all closing should left the would XX. these quarter dividends to the to Monday's X at to of to per spillover totaling and return close total shareholder least equate per transaction plus special dividends declared $X.XX more of regular of of alone also closing, the on $X.XX the close the $X.XX of terms XX% receive the after special of Between In of receive in expect Altogether, expect dividend stock another Board totaling which plus subject undistributed the of as and the customary X for share the based

for Finally, to hand last the if prior shares now final I'll closes it thoughts lockup of to XX, on be call. today's January will waived. And the to Craig OBDE provide back merger

Craig Packer

competitive experienced the already market public remains know We are have on repricing Jonathan. we a quarter, of which financing in feeling strong pressure and just the on in covered spend the minute market activity the refinancing a light. quarter. I'll the environment direct levels as second call, and we Certainly, elevated loan lot lending market spreads. volumes so M&A more Thanks, saw I is today's reduced

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

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

and repayments offset We to also to successfully leverage target new our towards end range. continue the originate higher are opportunities investment of

in While capital our expect will some we where pressure, economic is appropriate will normalized conditions levels area new our is and documentation face on a protection structures. Overall, market deals today, level, are more ease. of will and confident one at how to maintaining we resume we not in activity eventually structural platform allow M&A which positioned sacrifice

thought to perspective. will capital until past steady strong Our have be BDC's provide and offer credit said all differentiator a of real recently has proven to quality. what traded up well that, reflected few financings and significant largest some the in over environment. Having the and observed ability the it for equities I performance might markets we BDC helpful days, this that earnings be happened have very some in

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

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

more return volatile. helpful this the want to In of take resources long-term addition, as and allowed We with capital will leverage, the value earlier become offering the close, the us focused on and on execution to other can with Stock I us I in has then, we market attractive positioned our have early what for our major our advantage say quality, how high long listing excellent shareholders Exchange markets this increases certainty the that time end target we increased generate of January. are well to year, last, also the this It's highlight milestone certainty of an too time horizon of but we investing New leverage public range, listing, summer. accomplished as our that very on risk-adjusted they to highlight increasing to as we to provide maintaining which opportunities the at Since York volatility to been of want earlier and borrowers to accelerated delivering credit together our lenders. be direct arise. To liquidity communicated

this deliver While operating portfolio OBDE proposed on step diversified your next continue help navigate entire for efficiencies call. company shareholder another of increased expect to a a stand-alone, be and more we in Blue is to Owl believe transaction public year, today's allowing shareholders OBDC that company cost and close a to that value. lower as largest the is the us combine will Upon BDC, from behalf a believe thank merger while team, will advance successful joining market public second for to the We of we the dynamic in you with combined and scaled support environment financing. benefit merger the leader. On also ahead creating

Operator

parties now That concludes disconnect. Have good today's call. All may day. a

Blue Owl Capital Corp III (OBDE) 8 Aug 242024 Q2 Earnings call transcript