Q3 2025 Blue Owl Capital Corp Earnings Call

Operator: Good morning everyone, welcome to Blue Owl Capital Corporation's Q3 2025 Earnings Call. As a reminder, this call is being recorded. At this time, I'd like to turn the call over to Michael Maschio, Head of BDC Investor Relations.

Morning, everyone, and welcome to Blue Owl Capital Corporation's third quarter 2025 earnings call. As a reminder, this call is being recorded.

At this time, I'd like to turn the call over to Mike makio head of the BDC investor relations.

Michael Maschio: Thank you operator, welcome to Blue Owl Capital Corporation's Q3 2025 earnings conference call. Yesterday, Blue Owl Capital Corporation issued its earnings release and posted an earnings presentation for the Q3 ended 30 September 2025. These should be reviewed in connection with the company's 10-Q filed yesterday with the SEC. OBDC and Blue Owl Capital Corporation II or OBDC II issued a joint press release announcing that the companies have entered into a merger agreement pursuant to which OBDC will acquire OBDC II. The merger is subject to the satisfaction of customary closing additions including OBDC II shareholder approval. All materials referenced during today's call, including the earnings and merger press releases, earnings and merger presentations, and 10-Q, are available on the news and events section of the company's website at blueowlcapitalcorporation.com.

Thank you, operator and welcome to Blue. Owl, Capital Corporation, third quarter, 2025 earnings conference call. Yesterday, blew all Capital Corporation issued, its earnings release and posted an earnings presentation for the third quarter. Ended September 30th 2025,

These should be reviewed in connection with the company's 10q filed yesterday with the SEC.

Additionally, obdc and Blue Owl. Capital Corporation 2 or obdc 2 issued. A joint press release announcing that. The companies have entered into a merger agreement pursuant to which obdc will acquire obdc 2.

The merger is subject to the satisfaction of customary closing conditions, including obdc 2, shareholder approval.

Michael Maschio: Joining us on the call today are Craig Packer, Chief Executive Officer, Logan Nicholson, President, and Jonathan Lamm, Chief Financial Officer. I'd like to remind listeners that remarks made during today's call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks or, and uncertainties that are outside of the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in OBDC's filings with the SEC. The company assumes no obligation to update any forward-looking statements. We would also like to remind everyone that we refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation available on the events and presentations section of our website.

All materials referenced during today's call including the earnings and merger, press, releases earnings and merger presentations, and 10. Q are available on the news and events section of the company's website at Blue Owl, capital corporation.com,

joining us on the call today are Craig Packer chief executive officer Logan Nicholson president and Jonathan Lamb Chief Financial Officer

I'd like to remind listeners that remarks made. During today's call may contain forward-looking statements, which are not guarantees, a future performance or results and involve a number of risks or and uncertainties that are outside of the company's control.

Actual results May differ materially from those in forward-looking statements as a result of a number of factors including those described in obdc filing with the SEC.

The company assumes. No obligation to update any forward-looking statements.

Michael Maschio: Certain information discussed on this call and in the company's earnings materials, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information. With that, I'll turn the call over to Craig.

We would also like to remind everyone that we're referred to non-gaap measures on the call, which are reconciled to Gap figures in our earnings presentation available on the events and presentations section of our website.

Certain information discussed on this call and then the company's earnings materials, including information related to portfolio. Companies was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information.

With that, I'll turn the call over to Craig.

Craig Packer: Thanks, Mike. Good morning, everyone, and thank you all for joining us today. In addition to reporting another quarter of solid results for OBDC, we are also pleased to be announcing a merger between OBDC and OBDC II, a transaction which we believe can create meaningful value for shareholders of both funds. First, I would like to review OBDC's results for the quarter. Then I will spend a moment discussing the transaction. Our objective has always been to deliver consistent returns to shareholders. We are pleased to have done that since our founding nearly 10 years ago. This long-term focus continues to guide our strategy and how we manage OBDC. In Q3, we delivered solid results that reflect the ongoing strength and resilience of our portfolio. We generated adjusted NII per share of $0.36, which represents an ROE of 9.5%.

Thanks, Mike. Good morning everyone. And thank you all for joining us today.

in addition to reporting and the other quarter of solid results for obdc

We are also pleased to be announcing a merger between obdc and obdc 2.

A transaction which we believe can create meaningful value for shareholders of both funds.

First, I would like to review obdc results for the quarter and then I will spend a moment discussing the transaction.

Our objective has always been to deliver consistent returns to shareholders and we are pleased to have done that since our founding nearly 10 years ago.

This long-term Focus continues to guide our strategy and how we manage obdc and in the third quarter, we delivered solid results that reflect the ongoing strength and resilience of our portfolio.

Craig Packer: These results were roughly in line with our long-term average, though they have come down from peak levels due to the declining base rate and spread environment. While Jonathan will go into more detail shortly, our results in Q3 reflected a lower level of non-recurring income as compared to our historical average. As of quarter-end, our net asset value per share was $14.89, a modest decline of $0.14 from the prior quarter. We note that our NAV remains consistent with levels from a few years ago and has increased over 4% since inception, underscoring the durability of our strategy and portfolio. Our portfolio continues to benefit from our disciplined investment approach, which emphasizes larger recession-resistant businesses.

We generated adjusted knee per share of 36 Cents, which represents an Roe of 9.5%.

These results were roughly in line with our long-term average, though they have come down from Peak levels due to the declining base rate and spread environment.

While Jonathan will go into more detail. Shortly. Our results in the third quarter, reflected a lower level of non-recurring income as compared to our historical average.

As of quarter end our net asset value per share was $14.89.

A modest decline of 14 cents from the prior quarter.

We note that our nav remains consistent from with levels from a few years ago and has increased over 4% since its Inception underscoring, the durability of our strategy and portfolio.

Our portfolio continues to benefit from our discipline investment approach.

Craig Packer: During the quarter, we marked down a few watchlist positions, but we want to emphasize that these positions have been on our watchlist for several quarters and don't reflect new credit issues in the portfolio. Overall, the portfolio's fundamentals remain strong, and as Logan Nicholson will detail later on, we are not observing any broad signs of stress or a material increase in amendment activity. With that, I want to take a moment to address the recent headlines surrounding private credit, which have generated a lot of attention and a confusion for investors. It's important to clarify where we participate within the broader landscape. Our primary focus is on direct lending, which we believe is one of the most attractive areas of the market.

Which emphasizes larger recession, resistant businesses.

During the quarter, we marked down a few watch list positions, but we want to emphasize that these positions have been on our watch list for several quarters.

And don't reflect new credit issues in the portfolio.

Overall, the portfolio's, fundamentals remain strong. And as Logan will detail later on. We are not observing any broad signs of stress, or a material increase in Amendment activity.

With that, I want to take a moment to address the recent headlines surrounding private credit, which have generated a lot of intention and a confusion for investors.

It's important to clarify where we participate within the broader landscape.

Craig Packer: Direct lending, we make primarily senior secured loans directly to companies, typically as the lead lender, which affords us the ability to be in direct dialogue with our borrowers and sponsors to shape transaction terms and credit documentation. This direct engagement also gives us access to comprehensive financial reporting and an ongoing dialogue with our portfolio companies. The transparency and control this provides allows us to build a complete picture of each credit during underwriting, gives us greater confidence compared to deals in the public fixed income markets. Our portfolio is continuing to perform well, and as Logan will describe later, our borrowers are demonstrating solid revenue and EBITDA growth. OBDC's healthy credit performance, as evidence by our below industry average non-accrual and loss rates, is a direct result of our disciplined approach and focus on high quality upper middle market businesses.

Our primary focus is on direct lending, which we believe is 1 of the most attractive areas of the market.

Which are Fords us the ability to be a direct dialogue with our borrowers and sponsors to shape transaction terms and credit documentation.

This direct engagement also gives us access to comprehensive financial reporting and an ongoing dialogue with our portfolio companies.

The transparency and control of this provides allows us to build a complete picture of each credit during underwriting, gives us greater confidence compared to deals in the public fixed income markets.

our portfolio is continuing to perform well and as Logan will describe later our borrowers are demonstrating solid revenue and ebit dog growth

Obdc is healthy credit performance as Evan evidenced by our below industry. Average, not a cruel and loss rates.

Craig Packer: Public market sentiment with respect to BDCs seems to be disconnected from the realities on the ground, and we encourage investors to look beyond the headlines and focus on the fundamentals that drive our strong risk-adjusted results over time. Next, I'd like to briefly highlight the transaction we announced yesterday to merge OBDC and OBDC II with OBDC as the surviving entity. The merger strengthens OBDC's position as the second-largest publicly traded BDC, adds nearly $1 billion in net assets, and creates a larger, predominantly senior secured portfolio with potential for earnings accretion over time. This merger marks an important step in streamlining our BDC platform while enhancing long-term value for shareholders. Now, I will turn it over to Logan to provide more detail on OBDC's portfolio and the proposed merger.

Is a direct result of our discipline approach and focus on high-quality Upper Middle Market businesses.

Public Market sentiment, with respect to bdcs. Seems to be disconnected from the realities on the ground and we encourage investors to look beyond the headlines and focus on the fundamentals that drive our strong risk adjusted results over time.

Next, I'd like to briefly highlight the transaction, we announced yesterday to merge obdc and obdc 2 with obdc as the surviving entity.

The merger strengthens obdc position as the second largest publicly traded BDC.

Adds nearly 1 billion dollars in net assets and creates a larger predominantly senior secured portfolio with potential for earnings accretion over time.

This merger marks an important step in streamlining, our BDC platform. All enhancing long-term value for shareholders.

Now, I will turn it over to Logan to provide more details, on obdc portfolio and the proposed merger.

Logan Nicholson: Thanks, Craig. We saw a pickup in deal activity during Q3 with originations of $1.3 billion and fundings of $1.1 billion. That outpaced $797 million of repayments and resulted in net leverage of 1.22x at the end of the quarter. In addition to a higher number of new deal originations this quarter, approximately 40% of the originations were add-ons, consistent with the past 3 quarters. This sustained level of add-on activity underscores the benefits of being an incumbent lender as it allows us to support the continued growth of our borrowers. As we've increased in scale, we've been able to commit capital in greater size to larger borrowers while maintaining a highly diversified portfolio.

Thanks Craig. We saw a pickup in Deal activity during the third quarter with originations of 1.3 billion and fundings of 1.1 billion.

that had that outpaced 797 million of repayments and resulted in net, leverage of 1.22 times at the end of the quarter,

In addition to a higher number of New Deal, originations this quarter approximately, 40% of the originations were add-ons consistent with the past 3 quarters, this sustained level of add-on activity, underscores, the benefits of being an incumbent lender as it allows us to support the continued growth of our Borrowers.

Logan Nicholson: For example, our average hold size across our platform on new direct lending deals has grown from $200 million in 2021 to roughly $350 million this year, while the total deal size doubled to nearly $1.5 billion over the same period. This enhanced capacity allows us to participate in some of the largest and most attractive transactions in the market and shows the secular trend of larger borrowers preferring direct solutions. Next, I'd like to reiterate that the fundamental performance of our portfolio remains strong. We believe our borrowers are among the highest quality we've seen since inception.

As we've increased in scale, we've been able to commit capital in Greater size to larger borrowers while maintaining a highly Diversified portfolio.

For example, our average hold size across our platform on new direct. Lending deals has grown from $200 million in 2021, to roughly 350 million this year. While the total deal size doubled to nearly 1.5 billion dollars over the same period.

This enhanced capacity allows us to participate in some of the largest and most attractive transactions in the market and shows the secular trend of larger borrowers, preferring Direct Solutions.

next, I'd like to reiterate that the fundamental performance of our portfolio remains strong

Logan Nicholson: This is supported by the scale and diversity of our $17 billion portfolio, the increasing size of the companies we lend to, and our continued focus on senior secured investments, which represent 89% of the portfolio near record levels, excluding our specialty finance and JV investments. Our credit metrics continue to reflect strength. The cumulative fair value of our 3s to 5s rated names is approximately 8%, which declined nearly 2% since year-end 2024. Our non-accrual rate remains at the low end of the range across the BDC sector and in line with our historical average at 1.3% at fair value this quarter, which is modestly up primarily due to the addition of Beauty Industry Group, which had been on our watch list for over 2 years.

We believe our borrowers are among the highest quality we've seen since Inception.

This is supported by the scale and diversity of our 17 billion dollar portfolio. The increasing size of the companies we lend to and our continued focus on senior, security Investments, which represent 89% of the portfolio near record levels. Excluding our specialty finance and JV Investments

our credit metrics continue to reflect strength.

The cumulative fair value of our threes to fives. Rated names is approximately 8% which declined nearly 2% since year end 2024

Logan Nicholson: Credit-related amendment activity is stable, with no signs of increased pace or intensity of amendments over the last 2 years. We also monitor portfolio company revolver drawing activity closely as it's an indicator of stress, and our average revolver draws are below 20%, a conservative level that has actually been decreasing throughout the year. Further, on the theme of larger, more resilient borrowers in the market, the average revenue and EBITDA of portfolio companies has grown to over $1 billion and $229 million respectively, nearly double the level of 4 years ago. We continue to focus on upper middle-market borrowers that are scaled players with access to more resources to manage various headwinds.

Our non-accrual rate remains at the low end of the range across the BDC sector and in line with our historical average at 1.3%, at fair value, this quarter, which is modestly up. Primarily due to the addition of beauty industry Group, which had been on our watch list for over 2 years.

Credit related Amendment activity is stable with no signs of increased Pace or intensity of amendments over the last 2 years.

We also monitor portfolio, company, revolver drawing activity closely as it's an indicator of stress and our average. Revolver drawers are below. 20%.

A conservative level that has actually been decreasing throughout the year.

Further on the theme of larger more resilient borrowers, in the market, the average revenue in Evita of portfolio companies has grown to over 1 billion and 229 million respectively, nearly double the level of 4 years ago.

Logan Nicholson: These companies have market-leading positions with diversified revenue streams, strong recurring cash flow profiles, healthy liquidity, and generally operate in non-cyclical defensive sectors of the economy that are expanding, including healthcare, technology, business services, and insurance brokerage. As a reminder, we intentionally avoid more cyclical sectors such as energy, chemicals, and retail, which are featured more prominently in the public markets and tend to be more volatile. These larger businesses have continued to perform well with year-over-year revenue and EBITDA growth again in the mid to high single digits and average LTVs of 42%. Our interest coverage ratio increased to approximately 2 times based on current spot rates, up from 1.7 times 1 year ago, reflecting ongoing portfolio company EBITDA growth as well as base rate reductions. We expect that will continue to improve as base rates decline further.

we continue to focus on Upper Middle Market, borrowers that are scaled players with access to more resources to manage various headwinds

Technology, business services and insurance. Brokerage as a reminder, we intentionally avoid more cyclical, sectors such as energy, chemicals and Retail, which are featured more prominently in the public markets and tend to be more volatile.

These larger businesses have continued to perform well with year-over-year revenue and ibid, dog growth again in the mid to high single digits and average ltvs of 42%.

our interest coverage ratio increased to approximately 2 times based on current spot rates

Logan Nicholson: I wanted to highlight that PIK income at 9.5% of total investment income is down from 13.5% a year ago, primarily driven by refinancings of several PIK investments. As we've highlighted in previous earnings calls, the vast majority of our PIK names were underwritten at inception, and we have not had any non-accrual, bankruptcy or principal loss on any of these structured PIK loans since inception. In summary, Q3 credit performance metrics, including below-market loss rates, steady amendment activity, and strong borrower fundamentals underscore the quality of our portfolio, and we believe our credit business remains well positioned. Turning back to the proposed merger between OBDC and OBDC II. OBDC II was launched in 2017 to give individual investors access to the same strategy and platform we originally offered institutions through OBDC.

Up from 1.7 times one year ago, reflecting ongoing portfolio company EBITDA growth as well as base rate reductions. We expect that this will continue to improve as base rates decline further.

I also wanted to highlight that pick income stands at 9.5% of total investment. Income is down from 13.5% a year ago, primarily driven by the refinancing of several pick investments.

As we've highlighted in previous earnings calls, the vast majority of our pick names were underwritten at Inception. And we have not had any non acral bankruptcy or principal loss on any of these structured pick loans since Inception

in summary Q3 credit performance metrics including below Market loss rates, steady Amendment activity and strong borrower fundamentals, underscore the quality of our portfolio and we believe our credit business remains well positioned

Turning back to the proposed merger between obdc and obdc 2.

Logan Nicholson: Both portfolios are highly aligned and comparable exposures to senior secured loans, and nearly all of OBDC II's investments, about 98%, overlap with OBDC. These portfolios are managed by the same investment team and reflect a consistent investment composition and credit quality. As Craig mentioned, this transaction adds scale to OBDC's portfolio, bringing in $1.7 billion of investments which will increase the portfolio to $18.9 billion across 239 companies. With the addition of complementary portfolios from OBDE last year and now OBDC II, the overall portfolio will have grown by 40%, affording us more scale and diversity. The merger strengthens our balance sheet given OBDC II's lower leverage at 0.78 times, and we expect the transaction to be accretive to NII over time.

Obdc 2 was launched in 2017 to give individual investors access to the same strategy and platform. We originally offered institutions through obdc

both portfolios are highly aligned and comparable exposures to senior secured loans, and nearly all of obdc 2's Investments about 98% overlap with obdc

These portfolios are managed by the same investment team and reflect a consistent investment composition and credit quality.

As Craig mentioned, this transaction adds scale to obdc portfolio bringing in 1.7 billion dollars of Investments, which increase, which will increase the portfolio to 18.9 billion dollars across 239 companies.

With the addition of complimentary portfolios from obde last year and now obdc 2. The overall portfolio will have grown by 40%, affording us more scale and diversity.

Logan Nicholson: We anticipate approximately $5 million of cost savings in the first year, largely from eliminating duplicative expenses. Over time, there is potential for lower cost sources of capital and greater flexibility to pursue new investment opportunities. Finally, while this merger would provide liquidity for OBDC II shareholders, it is worth noting that these shareholders have had access to liquidity through a quarterly repurchase program which met 100% of shares tendered for nearly 7 years. We believe this transaction positions the combined company well to continue to deliver attractive risk-adjusted returns as a market leader in the space. Now I'll turn over the call to Jonathan to provide more detail on our Q3 financial results and the mechanics of the proposed merger.

The merger, strengthens our balance sheet, given obdc 2's lower leverage at 78 times and we expect the transaction to be a creative to knee over time.

We anticipate approximately 5 million dollars of cost Savings. In the first year largely from eliminating duplicative expenses over time there is potential for lower cost sources of capital and greater flexibility to pursue new investment opportunities.

Finally, while this merger would provide liquidity for obdc 2 shareholders, it is worth noting that these shareholders have had access to liquidity through a quarterly repurchase program, which met 100% of shares tendered for nearly 7 years.

Jonathan Lamm: Thank you, Logan. To summarize OBDC's quarterly performance, we ended the quarter with total portfolio investments of over $17 billion, total net assets of nearly $8 billion, and total outstanding debt of approximately $9.5 billion. Our Q2 NAV per share was $14.89, down from $15.03 last quarter, following write-downs of existing watchlist positions. Starting with the income statement. As Craig mentioned, we earned adjusted net investment income of $0.36 per share, down from $0.40 as compared to the prior quarter, driven primarily by lower non-recurring income, which was $0.02, well below the $0.05 we generated in Q2, and our historical run rate average of approximately $0.03.

We believe this transaction positions, the combined company, well to continue to deliver attractive, risk-adjusted returns, as a market leader, in the space. And now I'll turn over the call to Jonathan to provide more detail on our third quarter Financial results and the mechanics of the proposed merger.

Thank you Logan. This is quarterly performance. We ended the quarter with total portfolio Investments of over 17 billion dollars. Total net assets of nearly 8 billion dollars and total outstanding debt of approximately 9 and a half billion dollars.

Our second quarter in math per share was $14.89 down from 15.3 cents. Last quarter, following write Downs of existing watch list positions.

Jonathan Lamm: The board also declared a Q4 base dividend of $0.37, which will be paid on 15 January 2026 to shareholders of record as of 31 December 2025. In prior quarters, we over-earned our base dividend, allowing the board to declare supplemental distributions. This quarter, given the lower rate environment over the past year, we did not generate excess earnings to distribute under our dividend policy. Craig will provide additional color on our dividend outlook later in the call. As we have previously reported, our spill over income remains healthy at approximately $0.31 per share and supported our base dividend this quarter. Moving to the balance sheet.

Starting with the income statement. As Craig mentioned, we earned adjusted net investment income of 36 cents per share down from 40 cents as compared to the prior quarter driven primarily by lower non-recurring income which was 2 cents. Well below the 5 cents, we generated in the second quarter and our historical run rate average of approximately 3 cents.

the board also declared a fourth quarter based dividend of 37 cents, which will be paid on January 15th, 2026 to shareholders of record as of December, 31st 2025

In Prior quarters, we over earned our base dividend, allowing the board to declare supplemental distributions.

This quarter given the lower rate environment, over the past year, we did not generate excess earnings to distribute under our dividend policy.

Craig will provide additional color on our dividend Outlook later in the call.

As we have previously reported,

Our still over income remains healthy at approximately 31 cents per share and supported our base dividend. This quarter.

Jonathan Lamm: We finished the quarter with net leverage of 1.22 times, up modestly from 1.17 times, and within our target range of 0.9 to 1.25 times as we had net fundings of $273 million. In terms of liquidity, we remain well capitalized with significant capacity to invest as new opportunities come in. We ended the quarter with over $3 billion in total cash and capacity on our facilities, which was well in excess of our unfunded commitments. We have no material short-term maturities, and our robust liquidity position provides us with more than ample unfunded capacity to meet any near-term funding needs. Overall, we remain very pleased with our results and believe that our balance sheet is well positioned for the environment ahead. Lastly, I'd like to spend a minute describing the proposed merger consideration.

Moving to the balance sheet.

7 times and within our target range.

of 0.9 to 1 and a quarter times as we had net fundings of 273 million

In terms of liquidity we remain. Well capitalized with significant capacity to invest as new opportunities come in.

We ended the quarter with over 3 billion dollars in total cash and capacity on our facilities which was well in excess of our unfunded commitments.

We have no material short-term maturities and our robust liquidity position provides us with more than ample unfunded capacity to meet any near-term funding needs.

Overall, we remain very pleased with our results. And believe that our balance sheet is well positioned for the environment ahead.

Lastly, I'd like to spend a minute. Describing the proposed merger consideration.

Jonathan Lamm: The transaction is structured as a stock-for-stock merger, with each OBDC II shareholder receiving a certain number of OBDC shares to be determined just prior to closing. The exchange ratio will be determined by a formula which will be struck on a NAV for NAV basis if OBDC is trading at or below NAV per share, or a premium that will benefit OBDC shareholders if OBDC is trading above NAV per share. As a sign of support from Blue Owl, OBDC and OBDC II will be reimbursed for 50% of the fees and expenses associated with the proposed merger, up to $3 million in total, which will be paid for by OBDC's advisor if the proposed merger is consummated.

The transaction is structured as a stock for stock merger. With each obdc to shareholder receiving a certain number of obdc shares to be determined, just prior to closing.

The exchange ratio will be determined by a formula, which will be struck on a n. For now basis, if obdc is trading at or below nav per share.

Or a premium that will benefit obdc shareholders. If obdc is trading above nav per share,

as a sign of support from Blue Owl, obdc and obdc 2 will be reimbursed for 50% of the fees and expenses associated with the proposed merger up to $3 million in total.

Jonathan Lamm: OBDC's board of directors has also authorized a new share repurchase program of up to $200 million in open market purchases from time to time to account for the increased size of the combined company. This will replace our current $150 million share repurchase plan. Finally, we are expecting to close the transaction in Q1 2026, subject to customary closing conditions. Now I will turn it over to Craig for some closing remarks.

Which will be paid for by ovc's advisor. If the proposed merger is consummated.

Obdc is board of directors has also, authorized a new share repurchase program of up to $100 million in open, market purchases from time to time to account for the increased size of the combined company.

This will replace our current 150 million. Share, repurchase plan.

Finally, we are expecting to close the transaction in the first quarter of 2026 subject to customary closing conditions.

Craig Packer: Thanks, Jonathan. To close, I want to talk about our earnings outlook in the current environment and the quality of our portfolio. As expected, rising rates over the past few years increased our earnings, given the floating rate nature of our portfolio. We have passed those gains through to our shareholders via regular and supplemental dividends. As a reminder, we implemented the supplemental dividend policy in part because we expected that elevated base rates would likely eventually subside, and this mechanism would provide for a naturally adjusting tool to allow for these rate movements to flow through to dividends. Naturally, if base rates decline further, as the market currently expects, our earnings and dividends will adjust as well. That said, we think it's important for investors to separate out the impact of potentially lower rates on the portfolio from the risk of significant credit concerns.

Now, I will turn it over to Craig. For some closing remarks

Thanks Jonathan to close. I want to talk about our earnings Outlook in the current environment and the quality of our portfolio.

As expected Rising rates over the past few years increased, our earnings given the floating rate of our portfolio. We have passed those gains through to our shareholders via regular and supplemental dividends.

As a reminder, we implemented the supplemental dividend policy in part because we expected that elevated base rates would likely eventually subside. And this mechanism would provide for a natural adjusting tool to allow for these rate movements to flow through to dividends

Naturally, if base rates decline further, as the market currently expects, our earnings and dividends will adjust as well.

Craig Packer: While rates may decline, we continue to feel confident in the strength of our portfolio, supported by solid fundamentals, disciplined underwriting, and a defensively constructed asset mix. Our loss rates remain well below market averages, a reflection of our consistent focus on downside protection and credit selectivity. Even in a lower rate environment, we believe OBDC will continue to have strong credit performance that will provide investors with a steady stream of dividends that will be attractive relative to other investment opportunities. Thank you for your time today, and we'll now open the line for questions.

That said, we think it's important for investors to separate out the impact of potentially lower rates on the portfolio, from the risk of significant credit concerns.

While rates may decline, we continue to feel confident in the strength of our portfolio supported by solid fundamentals. Disciplined underwriting and a defensively constructed asset mix.

Our loss rates remain well below Market averages, a reflection of our consistent focus on downside protection and credit selectivity

Even in a lower rate environment, We Believe obdc will continue to have strong credit performance. That will provide investors with a steady stream of dividends. That will be attractive relative to other investment opportunities.

Thank you for, for your time today and we will now open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first questions come from the line of Brian McKenna with Citizens. Please proceed with your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad,

The confirmation tone will indicate your line is in the question queue.

You may press star 2 to remove your question from the queue. For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

1 moment, please while we pull for your questions.

Our first question is come from the line of Brian McKenna with citizens. Please proceed with your question.

Brian McKenna: Thanks. Good morning, everyone. Starting on the OBDC II merger, nonaccruals in this portfolio are 60 basis points above OBDC. What's driving this? What part of that portfolio has underperformed relative to OBDC? Leverage is clearly lower, but what kind of ROEs has OBDC II generated since inception? Is there a way just to think about the incremental ROE, you know, post the merger?

Thank you. Good morning everyone. So starting on the obdc 2 merger non across in in this portfolio are 60 basis points above obdc. So what's driving this? And then what part of that portfolio has underperformed relative to obdc and then Leverage is clearly lower butt. What kind of Roi has obdc 2? Generate since Inception? And then is there a way just to think about the incremental Roe, you know, post the merger.

Craig Packer: I'll start. Hey, hey, Brian McKenna. It's Craig Packer. I'll start and then Jonathan Lamm can chime in. Well, for those that aren't familiar, OBDC II was raised about a year after we initiated OBDC. The portfolios have almost complete overlap, almost 100%. It's the same names invested in the same period of time with the same economics, with the same strategy and the same team. The OBDC II will comprise about 10% of OBDC. The impact of merging it in is really quite modest, given the overlap in names. The higher nonaccrual rates are a function of the names on nonaccrual being a little bit bigger at OBDC II because OBDC II is still operating under a lower leverage constraint than OBDC.

um well for for those that um aren't familiar, obdc 2 um was raised um about a year after we we initiated obdc

The portfolios have almost complete overlap. Almost 100%. It's the same names invested in the same period of time at the same economics, with the same strategy and the same team.

Um,

The, uh, obdc 2 will comprise about 10% of obdc.

So, the impact of of merging it in is really quite modest. Um, given the overlap in names, um, the higher non acral rates.

Are a function of um the names on non-accrual being a little bit, bigger at obdc 2, because obdc 2 is uh still operating under a lower leverage constraint.

Craig Packer: It has the old leverage rules, so it's capped at 1 turn of leverage. We've been running at 0.75 times of leverage. We've had the non-accruals are just a little bit bigger part of that portfolio. It's the same names that OBDC already has exposure to. When you add them in, it has an immaterial impact on overall credit statistics at OBDC. Their names were already in slightly higher immaterial impact.

Um, than obdc, it has the old leverage rules so it's um, it's capped at 1. Turn of Leverage would be running at 0.75 times of Leverage, um, and so we've had the non across for just a little bit bigger part of that portfolio, but it's the same names that obdc already has exposure to

Jonathan Lamm: You wanna hit the ROE question. Yeah. On the ROEs, obviously just given we've been running OBDC leverage toward the middle, toward the middle over time, middle to the upper end of our target leverage ratio, whereas OBDC II has been running, as Craig Packer alluded to, at 0.6, call it, to 0.75. Historically, the ROEs just based on the returns associated with that leverage have been lower. As the companies come together, Brian McKenna, we think that there's about 15 to 20 basis points of ROE accretion that we can create across the portfolio, and that's really driven by OpEx synergies that we can see. Some liability management associated with some of the financings, in particular in OBDC II that we can refinance into, you know, single facilities.

When you add them in it it has a an immaterial impact on overall credit statistics at obdc. So their names were already in slightly higher in material impact. Um you know Jonathan maybe you want to you want to hit the Roe question? Yes. So on on the on the Roes obviously just given we've been running. Uh obdc leverage toward the middle, toward the middle over over time, middle to the upper end of our Target leverage ratio, whereas obdc 2 has been running as Craig alluded to at at at 6 call it to 75. Historically the Roes just based on the uh just based on the returns associated with that leverage have been lower but as the companies come together, Brian, uh, we think that there's about 15 to 20 basis points of of Roe accretion that we can create across the portfolio and that's really driven by Opex synergies.

Jonathan Lamm: OBDC II just you know, has a little bit of a higher weighted average asset yield.

That we can that we can see some liability management associated with some of the financing in particular and obdc 2 that we can we can refinance in into you know, single facilities. And uh and and obdc 2 just you know, has a little bit of a higher um weighted average asset yield

Brian McKenna: Okay, great. That's helpful. You know, just as it relates to the stock, you know, it's now trading at 82%, give or take a book value. You know, a few years ago, you did an investor day, you laid out some steps you were going to take to improve the valuation. You know, as we sit here today, we're clearly in a different part of the cycle. I mean, what are you doing as a management team to improve the valuation? You refresh and upsize the buyback to $200 million. You know, should we expect you to be a little bit more active there? You know, should we expect to see maybe some insider buying and even some repurchases from OWL?

Okay great, that's helpful. Um and then you know just as it relates to the stock you know it's not trading at 82% give or take a book value. You know, a few years ago you did an investor day you laid out some steps. Um, you were going to take to improve the valuation. You you know, as we sit here today, we're clearly in a different part of the cycle, but I mean, what are you doing? As a management team, to improve the valuation, you were fresh and upsized to buy back to 200 million dollars, you know, should we expect you to be a little bit more active there and then, um, you know, should we expect to see, maybe some some Insider buying and, and even some some purchases from owl?

Craig Packer: We laid out some goals on investor day that I think were very effective. In fact, the stock, within a year or so, actually got to book value. We were very pleased with that at the time. You know, one of the goals, you know, just to say it, at the time, was also to simplify our BDC portfolio, which at the time was, 7 names, and we had a stated goal of getting it down to 4 names. With the merger we're announcing today, if that's approved and closes, you know, we'll have accomplished that goal. You know, we're quite mindful where the stock is.

um, so uh, we, um,

Craig Packer: It's something we take quite seriously and discuss as a management team and with our board. I think, you know, I just, you know, running some math, you know, the stock is yielding, you know, more than 11%. It's, you know, it's hard for us to reconcile that with the performance, which has been very consistent. We think that what's happening with the company and high quality BDCs is simply a rate cycle that we're going through. As you acknowledge, we're in a different part of the rate cycle now. Credit performance in the portfolio remains, you know, very strong, even with the impact of the 1 non-accrual.

We laid out some goals with investor day. That I think we're very effective and in fact, the stock, um, within a year or so actually got to book value. So, um, we were, um, very pleased with that at the time, um, you know, 1 of the goals. You know, just to say it at the time was also to simplify or BDC portfolio which at the time was uh, 7 names. And we had a stated goal of getting it down, the 4 names and with the merger, we're announcing today, what if that if that's approved and closes, you know, we'll have accomplished that goal. Um, you know, we um, we're quite mindful where the stock is, um, and um, it's something we we, you know, we take quite seriously and and discuss, um, as a management team and with our board, um, I think, you know, I just just, you know, running some some math, um, you know,

You know, the stock is, is yielding. Um,

Craig Packer: I won't try to go point by point through all the tools, but I just would say all the tools are on the table. You know, buyback. I think part of what we did in the earnings day was just provide a lot of transparency around the quality of the portfolio. I think with a lot of the headlines now, investors are oftentimes taking a just a knee-jerk reaction to a headline. I think part of our job is to make sure that people hear our confidence in the portfolio, and that remains the case today. Whether it be buybacks, I think certainly with the merger, you know, that's something that we'll be attuned to. We have the buyback that's out there.

Craig Packer: Insiders, we don't direct insiders to buy the stock, but obviously a lot of employees find it attractive from time to time. We did do a special program around at the time you mentioned for employees. You know, we'll certainly look at that tool as well. It's, you know, it's all available. We've been very focused and have been very focused on creating value for shareholders and getting the stock back to where we think it should be. Candidly, where the analyst community, you know, has it projected out as well.

Brian McKenna: Great. I'll leave it there. Thanks so much, Craig.

And so, I think part of our job, um, is to make sure that people hear our confidence in the portfolio. Um, and then, and, and that remains the case today. But whether it be BuyBacks, um, I think certainly with the merger, you know, that's something that we're, we'll be attuned to we have the buyback that's out there. Um, insiders, we don't, we don't direct insiders, um, to buy the stock but, but obviously, a lot of employees, um, find it attractive from time, to time, we did do a special program around, um, at the time you mentioned for employees, you know, we'll certainly look at that tool as well. Um, so it's, you know, it's all available and, um, we we've been very focused and have been very focused on, on creating value for shareholders, and getting the stock back to where, where we, we think it should be and, and kindly where the where the analyst Community, you know, has it projected out as well?

Craig Packer: Thanks, Brian.

Great. I'll leave it there. Thanks so much. Greg.

Thanks Brian.

Operator: Thank you. Our next question has come from the line of Arren Cyganovich with Truist. Please proceed with your questions.

Thank you. Our next question is coming from the line of Aaron. Ciganovich with truist, please proceed with your questions.

Arren Cyganovich: Thanks. With respect to what you were discussing in your prepared remarks about base rates declining further as the market expects and earnings and, you know, dividends having to be adjusted. I guess, is there a certain level that you would have to be below the current NII or is it just, you know, once you kind of see the future there, you'll make that adjustment? I guess lastly, you know, what are your expectations for rate cuts over the next, you know, 4 or 5 quarters?

thanks, uh, with with respect to what you were discussing in your prepared remarks about base rates, declining further as the market expects in earnings and you know, dividends having to be adjusted, you know, I guess is there a certain level uh that you would have to be below the, the current knee or or is it just, you know, once you kind of see the the the future there, um, you'll

You'll make that adjustment. Uh and then I guess, lastly, you know what are your expectations for, um, rate Cuts over the next, um, you know, 4 or 5 quarters.

Craig Packer: On our expectation, look, we don't consider ourselves, you know, macro economists for the macro view. We tend to look at the forward curve as the best sense of market sentiment, the market sentiment, and we focus on SOFR. That by the end of next year, that's expected to get to be about 3%. I think that's our expectation, but that we're really just mimicking the market and, you know, we'll have to see there. You know, in terms of Look, dividend policy is robust. We look at it every quarter. We discuss it with the board every quarter. That's not new to this environment.

So um on the, on the, on our expectation look, we don't consider ourselves, you know, macro, you know, macroeconomics for the macro view. We we we tend to look at the forward curve as the best sense of Market sentiment the market sentiment and, and we focus on. So for, um, and and that by the end of next year, that's expected to get to be about 3%. So I think that's that's our expectation. But that we're really just mimicking the market and and you know, we'll have to see there. Um, the um, you know, in terms of deal, look dividend policy is robust.

Craig Packer: We had those same discussions as rates were going up, you know, throughout this period of time. We're in a different rate environment. We wanna have a base dividend that is sustainable with a rate environment that we expect the rate environment to stay in a stable place, but rates could move up and down. You know, you're constantly evaluating this. We put the supplemental dividend in place when rates went up because we thought that might not be sustainable. The supplemental, I think, worked extremely well. We're gonna strive to find the right balance between being very thoughtful on rate moves, excuse me, dividend moves. The portfolio is performing well.

We look at it every quarter, we discuss it with the board every quarter. Um, that's not new to this environment, we had those same discussions as rates were going up, um you know, and throughout all every, you know, throughout this period of time, and obviously we're we're in a different rate environment. Um, we

We want to have a a base dividend that that is sustainable in with a rate environment that we if we expect a rate environment to stay in a stable place but rates could move up and down and so you know you're you're constantly evaluating this. We put the supplemental dividend in place, when rates went up because we thought that might not be sustainable. And the supplemental I think worked extremely well. Um we we're going to we're going to strive to find the right balance.

Craig Packer: you know, this quarter, our NII was $0.01, our dividend was $0.01 above at our NII. We have significant spillover. We've said we're comfortable through the end of the year. We remain comfortable through the end of the year. As we look to 2026, given how much rates have come down or are expected to come down, you know, it's logical for investors to think that we'll evaluate reducing the dividend appropriate with the earnings power in a lower rate environment. We'll look at it. We have, you know, a strong performing portfolio. you know, our dividend levels for investors who are newer to the stock were lower in a lower rate environment. If you went back to when rates were at 3%, our dividend was about $0.33.

Between being very thoughtful on rape moves. Uh, excuse me dividend moves. Um, we the portfolio is performing well. Um, you know this quarter our knee was a was a penny. Uh, our dividend was a, a penny above, at our knee, we have significant spillover. We've said we're comfortable through the end of the year. We remain comfortable through the end of the year, but as we look to 2026 given how much rates have come down, are expected to come down,

Craig Packer: There are good, you know, data points that investors can look to to try to calibrate where dividends will go. We enjoy the benefit of higher rates, we think this company is designed to generate a premium return in all rate environments. It's not designed to generate a high level of return when rates are low. You know, because of the quality of what we're investing in and the market we invest in, the investment opportunities, you know, fluctuate. The absolute return fluctuates, based on where rates are. I think you can look at where rates were at a 3% environment at $0.33 and get a sense of the order of magnitude of what we might consider. We're not doing that now.

You know, it's logical for investors to think that we'll evaluate reducing the dividend appropriate with the earnings power in a, in a lower rate environment. Um, so we'll look at it. We have, you know, a strong performing portfolio and you know, our dividend levels for investors who are newer to the stock were lower and a lower rate environment. If you went back to when rates were at 3% our dividend was about 33 cents. So it's there are there are good, you know, data points that investors can look to to try to calibrate where dividends will go. Um,

We we enjoy the benefit of higher rates, um, but this, we think this, this company is designed to generate a premium return in all rate environments. Um, it's not designed to generate a highly, a high level of return. When rates are low, you know? Because of the quality of our investing, and then the market we invest in, um, the rate, the investment opportunities, you know, fluctuate, the absolute return fluctuates, um, based on where rates are. So I think you can look at where

Craig Packer: We're not gonna do that, you know, for Q4. We'll have discussions with our board, as, you know, 2026 gets underway based on rate expectations at the time, you know, to consider what we do with the dividend. We have a quarter, you know, a quarter, a quarter's worth of spillover income. That gives us a little bit of cushion. We're not stubborn about it either. You know, we think that the base dividend level should reflect the earnings power of the portfolio in the expected rate environment for a reasonable period of time. Hopefully that gives you a little bit of a context of how we think about it.

Arren Cyganovich: Yeah, that's helpful. Thank you.

We're not stubborn about it either, you know, we think that that the base dividend levels should reflect the earnings power of the portfolio in the, in the expected rate environment for for a reasonable period of time. So hopefully that gives you a little bit of a context with how we think about it.

Yeah, that's helpful. Thank you.

Operator: Thank you. Our next question has come from the line of Robert Dodd with Raymond James. Please proceed with your questions.

Thank you. Our next question, has come from the line of Robert Dodd with the Raymond James, please proceed with your questions.

Robert Dodd: Hi, guys. Moving on to, like, the outlook for originations activity, et cetera. I mean, I think you've well covered the dividend discussion at this point. I mean, you are at basically towards the high end of your target leverage. Obviously when OBDC comes in, then that would adjust. I mean, is there any opportunity or do you expect there to be an opportunity to rotate any assets or anything like that in terms of if M&A activity does continue to ramp that we're hearing about? You're a little not tapped out, but I mean, you might not be able to participate in that as fully given where the leverage is. Obviously, repayments happen too.

Uh, hi guys. Moving on to like the Outlook core of originations activity, Etc. Um, I mean I think you've well covered the dividend discussion at this point. I mean, you

You you all that?

basically, towards

The higher end of your target leverage. Um, obviously when obdc comes in then that would that would adjust. But I mean,

is there any opportunity to to or do you expect there to be an opportunity to rotate any assets or anything like that in terms of to be? If if m&a activity does continue to ramp that? We're hearing about you're you're a you're a little

Robert Dodd: I mean, what are your thoughts on what the opportunities are if there is a real M&A cycle, given where your leverage is to start with?

Not, not tapped out. But I mean you towards the the you might not be able to participate that in that as fully given, where the Leverage is, unless you can obviously repayments happen, too. I mean, what what are your thoughts on on?

what the opportunities are if, if there is a real m&a cycle given where you're leveraging to start with,

Craig Packer: I'll make a couple comments, and Logan, maybe you can comment on what activity level we're seeing right now. You're right. We are at sort of the higher end of the range that we've had. Look, we have a very prolific ability to originate assets at Blue Owl. It's one of our great strengths as a platform. Even in moderate M&A environments, we, you know, this past quarter as a platform originated $10 billion worth of deals. You know, what we've been doing at OBDC is really trying to match originations to repayments to stay at sort of the mid to higher end of our range to generate good returns.

Craig Packer: It's not easy to do that perfectly because deal closings and repayments aren't perfectly precise. We're at the higher end. The merger will take leverage down a little bit by itself, that will create some cushion. Guys, what is it? 1.15 or something pro forma? 1.15 pro forma. That alone will get us down a little bit. We can modulate this, you know, pretty easily in any given quarter because we're constantly getting repayments.

All right, so um I I'll make a couple comments and Logan. Maybe you can comment on what activity level? We're we're seeing right now. Um, you're right. We are we are at at at sort of the higher end of the range that we we've had look we have a very prolific ability to originate um assets that blow out its 1 of our great strengths as as a platform um even in moderate m&a environments. Um we you know this past quarter as a platform originated, 10 billion dollars worth worth of worth of, um, worth of um deals. You know what we've been doing at obdc is really trying to match originations to repayments um, to stay at sort of the the mid to to higher end of our range to generate good returns. It's it's not easy to do that perfectly because because deal closings and repayments are in aren't um, perfectly precise. So, um, we're at the higher end, the merger will take, uh, leverage down a little bit by itself and so that will create some cushion. And uh, and um, guys, what is it? 1. 1

Craig Packer: I think that we can participate in an attractive deal flow cycle, if we see an unusually attractive cycle, just by allowing some repayments to come in and deploying to get back to a 1.2, 1.25. Logan, maybe just comment on what the deal environment's been.

5 or something proforma, so 1.15, proforma. So that alone will get us, um, down a little bit and we can modulate this, you know, pretty easily in any given quarter because we're constantly getting repayments. Um, and so I think that we can um participate in an attractive deal flow cycle. Um,

Logan Nicholson: Yeah. Sure. In the fall, we've seen a meaningful pickup in our activity levels. We've seen in the last couple of months. Particularly in September, a pickup of our activity in pipeline by about 1/3 from prior quarter levels. The mix is significantly weighted now towards sell-side M&A opportunities, which usually and typically result in greater upfront fees when doing a brand-new deal. There's more new capital, obviously, in those new deals as well in the supply. Versus what you've seen over the last two years is, you know, dollar for dollar refinancings of deals that come with very little upfront fees. The mix is better and the pipeline is higher. You know, we're trying to be cautiously optimistic given we need to get to signings of those deals.

If if we see an unusually attractive cycle, um, just by, um, you know, allowing some repayments to come in and and deploying to get back to a 1.2 1.25. Um, you know, we Logan, maybe just comment on what the deal environment's been. Yeah, sure. Um, in the fall, we've seen a, a, a meaningful pickup in our activity levels. We've seen in the last couple of months,

particularly in September, a pickup of our activity and pipeline by about a third from prior quarterly levels.

And the mix is significantly weighted. Now towards sell Side m&a Opportunities, which usually and typically result in Greater upfront fees.

Logan Nicholson: We would note that the teams are very busy and the outlook we're quite optimistic. I'd also point out something that we pointed out last quarter and after the OBDE merger that also rings true after OBDC II. We continue to have less pro forma JV and strategic equity investments as we would've had prior to the merger. It gives us an opportunity to deploy into those accretive and non-correlated opportunities. If you look at this quarter as an example, the differences are modest, but that dividend income offset some of the base rate decline, and was stable and non-correlated to the rest of the portfolio. It was really more one-time income related items that had the impact this quarter versus last quarter.

When doing a brand new deal and there's more new capital obviously in those new deals as well. In the in the supply versus what you've seen over the last 2 years is, you know, dollar for dollar refinancing of of deals that come with very little upfront fees. So the mix is better and the pipeline is higher, you know, we're we're trying to be cautiously optimistic. Given we need to get to signings of those deals, but we would note that the teams are are very busy and the Outlook, we're we're quite optimistic.

I'd also point out something that we pointed out, uh, last quarter. And after the obde merger, that also Rings. True after obdc 2, we continue to have less.

Pro forma, joint ventures, and strategic equity investments, as we would have had prior to the merger.

Logan Nicholson: I think those JVs and strategic investments will be a place post the OBDC II merger, where we're able to take advantage of it.

Robert Dodd: Thank you for that. That does The follow-on is exactly that. I mean, you created a new vehicle across strategies, opportunities or whatever it was called, I think this quarter, to take advantage. I mean, it's obviously very, very small right now. I think it's like $5 million position. I mean, how big could that vehicle be as a piece of the portfolio? What kind of return on capital do you expect from those versus from that type of opportunity versus the on-balance sheet direct lending?

And so it gives us an opportunity to deploy into those accretive and non-correlated opportunities. And if you look at this quarter as an example, the the differences are modest. But that dividend income offset some of the base rate Decline and was stable and non-correlated to the rest of the portfolio. It was really more 1 time income related items that that had the impact this quarter versus last quarter. So I think those JVS and strategic investments will be a place post. The obdc 2 merger where we're able to um to take advantage of it.

So 1 of them is called, I think this quarter, um, to take advantage. I mean, it's obviously very very small. Um, right now, I don't think it's like, 5 1.

Logan Nicholson: Sure. I think it's a great example of the benefits of the platform. Last quarter, we talked about the equipment leasing JV we set up with CalSTRS. This quarter we set up another entity really for asset base and alternative credit across the platform. It's meant to be a diversified box of secured investments across a diversified pool of call it conviction calls or best-in-class opportunities from the Blue Owl platform. We're gonna go slowly, and keep it quite diversified, but I would expect that there will be some meaningful opportunities there. Just like every other one of our strategic equity and JV investments, it's gonna be a small individual part of the portfolio.

How how, how big could that vehicle be? Um, as a, as a piece of the portfolio and what kind of return on on Capital? Do you expect from those versus the on from that type of opportunity versus Beyond balance sheet direct lending?

Sure.

So, I think it's a great example, of, of the benefits of the platform last quarter. We talked about the equipment leasing JV, we set up, uh, with calstrs. And, and this quarter we set up another entity really for, for asset based and alternative credit across the platform. It's meant to be a diversified box.

Logan Nicholson: It could be 1% or 2% over a number of years, I wouldn't expect it to move the needle a lot in the next quarter or 2. Over the next few years we would look to grow it. Returns wise, just like all of the other JVs we've set up, we're targeting, you know, a low double-digit type of return profile that should hopefully be with an asset-backed asset base at non-correlated to the corporate credit in the other direct lending names. Similar return profiles, and we're gonna move slowly and deliberately in the deployment of that new entity.

Of uh secured Investments across the Diversified pool of of call it. Conviction calls or best-in-class opportunities from the Blue Owl platform. We're going to go slowly um and and keep it quite Diversified, but I would expect that there will be some meaningful opportunities there. Just like every other 1 of our Strategic Equity and JV Investments, it's going to be a small individual part of the portfolio. It could be a percent or 2 over a number of years, so I wouldn't expect it to move the needle a lot in the next quarter or 2, but over the next few years, we would look to grow it and returns wise, just like all of the other uh, GVS we've set up. We're we're targeting, you know, a low double digit type of of return profile.

Robert Dodd: Got it. Thank you.

That should hopefully be with with an asset backed asset base at non-correlated to the corporate credit uh in the other in the other direct lending names. So Sim similar return profiles and we're going to move slowly and deliberately and in the deployment of that of that new entity

got it. Thank you.

Logan Nicholson: Thanks, Robert.

Operator: Thank you. Our next question has come from the line of Finian O'Shea with Wells Fargo. Please proceed with your questions.

Thanks, Robert.

Thank you. Our next question is coming from the line of finneon Osha with the Wells Fargo. Please proceed with your questions.

Finian O'Shea: Hey, everyone. Good morning. Logan sticking with you. I found one of your opening comments interesting on the average or hold sizes and facility sizes approaching $1.5 billion. Correct me if I'm wrong there. I think you were talking about the tranche size total of an average name. You know, is that indicative of more refi repricing risk as the leverage finance market continues to hold up strong? You know, how much, I suppose, higher do you think that will go over time? Or do you think it's more, do you think you'll be more so, you know, broadening as opposed to growing in size of companies? Thanks.

Hey everyone. Good morning. Um,

Logan sicking, uh, with you, uh, found 1 of your opening comments, interesting on the, um, average your whole sizes in, in facility sizes, um,

Approaching $1.5 billion. Uh, correct me if I'm wrong there. I think you were talking about the...

Trot size, total of a, of an average name. Um, you know, is that,

Indicative of more.

Refi repricing. Risk is the The Leverage from Finance Market. Um continues to hold up. Strong

And you know how much?

I suppose higher. Do you think that will go?

Um, over time or do you think it's more? Um,

Logan Nicholson: Yeah, no, thanks for the question, Finn. It is related to tranche size, not our specific Blue Owl hold size. You know, it's been increasing meaningfully. If you look at Q1, we noted a comment that in one of the quarters this year, the average deal size exceeded $2 billion total tranche size. We're seeing sizeable businesses, some of them even north of $10 billion enterprise value choosing direct. I think if the average deal size were even half of that, we would have the same dynamic of competition with syndicated markets or public markets. I don't think that that's new. I think a point of validation that we continue to monitor are the new M&A and new borrower choices. There are third parties like S&P, for example, that put out market share statistics quarterly.

Do you think you'll be more? So, you know, broadening as opposed to growing in in size of companies, thanks?

Yeah, no thanks for the question. Finn, it is related to tranche size, not our specific blue, AUM (Assets Under Management) size, and you know it's been increasing meaningfully. If you look at the first quarter, we noted a comment that in one of the quarters this year, the average deal size exceeded $2 billion total tranche size. So, we're seeing sizable businesses, some of them even north of $10 billion Enterprise Value, choosing direct. And I think.

If the average deal size were even half of that, we would have the same dynamic of competition with syndicated markets or public markets. So, I don't think that that's new.

And I think a point of validation that we continue to monitor are the new m&a and new borrower choices and there are third parties like S&P for example, that put out market share statistics.

Logan Nicholson: Despite the public markets being wide open, north of three quarters of all of those new M&A deals and LBO deals are still choosing direct. We don't see even in this low spread public market environment, we don't see material share loss. In fact, we see it the other direction. I think the experience our borrowers are having is a good one with direct lending, and I think you're seeing that adoption continuing.

Quarterly and despite the public markets being wide open.

Craig Packer: The number of companies in the private markets, the scale of those companies, how long they can stay private for longer is a secular shift. I think the secular shift to direct is something we're experiencing every single quarter. I think we have a reasonably long runway for that to continue, and we're not concerned that the dynamic right now is any different with the public markets.

North of 3, quarters of all of those new m&a deals in lvo deals are still choosing direct. So we don't see. Even in this low spread Public Market environment, we don't see material share loss. In fact we see it the other direction and I think the experience, our borrowers are having is a good 1 with direct lending and I think you're seeing that adoption continuing. So

the the number of companies in the private markets, the scale of those companies, how long they can stay private for longer is a secular shift. And I think the secular shift to direct is something we're experiencing every single quarter. So I think we have a, a reasonably long runway for that to continue. And we're not concerned that the D Dynamic right now is any different with the public markets.

Finian O'Shea: All for me. Thanks so much.

Well, for me, thanks so much.

Craig Packer: Thanks, Finian O'Shea.

Thanks Ben.

Operator: Thank you. Our next questions come from the line of Casey Alexander with Compass Point. Please proceed with your questions.

Thank you. Our next questions come from the line of Casey Alexander with compass point. Please proceed with your questions.

Casey Alexander: Yeah, good morning, and thank you for taking my questions. I'm kind of curious in relation to the $200 million share repurchase program. I noticed that the merger doesn't have any lockups or gates for the OBDC II shareholders. Is it kind of your plan or your strategy to hold that for after the merger and use that to absorb any potential selling pressure that might come from the merger?

Yeah, good morning. And thank you for taking my questions. I I'm I'm kind of curious. Um, in relation to the million dollar share repurchase program, and I noticed that the merger doesn't have any lock ups or gates for the obdc to shareholders. So is, is kind of your plan or your strategy to hold that for after the merger and use that to absorb any potential selling pressure that might come from the merger.

Craig Packer: I don't think that we've made that determination. I think that we, you know, we think about the buyback, you know, as something that can be used anytime. Obviously, current share price environment is one that you have to be looking hard at it. Just because you're raising it, and again, investors may not be familiar with OBDC II. OBDC II, throughout its entire life for 7 years has had quarterly tender offers. We have fulfilled every penny of every tender offer for every quarter for 7 years.

Um I I don't think that we've um we've made that determination. I I um I think that we, you know, we think about the buyback you know as as something that that can be used anytime and obviously um, current share price environment is 1 that you have to be looking hard at it. Um I just because you're raising it and again investors may not be familiar with obdc 2. Um obdc 2 um

Craig Packer: Unlike other BDC mergers in the space where a merger with a public BDC would be the first opportunity for investors to get liquidity, these investors have not only had access, but anybody who's wanted out has gotten out on schedule. You know, I think there's a lot of fact pattern to suggest that investors in OBDC II wouldn't necessarily be sellers, because if they wanted to sell, they could have just sold in the last tender offer we did. Therefore, we're not thinking about our buyback as necessarily needed for the closing of that merger because that fact pattern wouldn't suggest that the merger would create more sellers.

Throughout its entire life. For SE for, for 7 years, has had quarterly tender offers. Um, and we have fulfilled, every penny of every tender offer for every quarter for 7 years.

So unlike other BDC murders in the space where a murder with a public BDC would be the first opportunity for investors to get liquidity. These investors have not only had access but they've all anybody's wanted out is but has gotten out um, on scheduled. So um, you know so I think there's a, there's a, there's a

Craig Packer: We just view it as a tool to be used in any, in any environment. Certainly, again, the stock price is at a level that we'll look at it.

There's a lot of fact, patterns to, to suggest that investors in obdc 2 wouldn't necessarily be sellers. Because if they wanted to sell, they could have just sold in the last 10 or off. We did. So, um, so I don't so therefore we're not thinking about our buyback as, as, as necessarily needed for the closing of that merger because because that fact pattern wouldn't suggest that the merger would create more sellers. So we just view it as a tool to be used. Um in in any environment and certainly again the stock price um is is is at is at a level that that we that will will look at it.

Casey Alexander: All right. Thank you for taking my question.

All right. Thank you for taking my question.

Craig Packer: Thanks, Casey.

Operator: Thank you. Our next questions come from the line of Mickey Schleem with Clear Street. Please proceed with your questions.

Thanks k.

Mickey Schleien: Yes, good morning, everyone. Craig, thanks, and Logan, thank you for all the discussion of the market backdrop. I wanted to follow up on that issue, you know, by noting that, you know, we've heard generally that activity's picked up in Q3, which is obviously a good thing, and that could help balance the direct lending loan market. With that in mind, I'm curious what your sense is of the market's current balance or disequilibrium and your outlook for spreads, particularly going into next year.

Thank you. Our next question is come from the line of Mickey shine with clear Street. Please proceed with your questions.

Uh, yes. Good morning, everyone. And, uh, Craig, thanks, and Logan, thank you for all the discussion of the market backdrop. But I wanted to follow up on that issue.

Uh, you know by um, noting that, you know, we've heard generally that activities picked up in the third quarter, which is obviously a good thing and that could help balance the direct, uh, lending loan market. And um, with that in mind, I'm curious what your sense is of the Market's current balance, or disequilibrium, and your outlook for spreads particularly going into next year.

Craig Packer: Sure. I'll start, and Logan, you're welcome to chime in. Okay, I'm glad you're asking the question because I think when you look at earnings, certainly our earnings and maybe other BDCs, there are a few different pieces that are at play here, and I think it's worth spending a second on this. We're really confident in the quality of our portfolio. Our portfolio continues to perform well. We did have the one non-accrual. Overall, we expect credit performance to continue to perform well. What's happened is there's been a meaningful move on rates over the last year, 100 basis points move on rate, and that's been the primary driver of earnings. That shouldn't be a surprise given the floating rate nature of the assets.

Sure I'll I'll I'll start with Logan. Welcome to chime in. Uh okay I'm glad you're asking the question because I think when you look at earnings certainly our earnings and maybe other bdcs. Um there are a few different pieces that are at play here and I think it's worth spending a second on this.

We're really confident in the quality of our portfolio. Our portfolio continues to perform well, we did have the 1 non AC cool. Um, but overall, we expect credit performance to continue to perform well.

Craig Packer: It certainly will produce headlines that earnings are down in a given quarter or down over a year. It's just a function of rates. To your point, there's another piece, which is spread. Spreads have tightened in the direct lending market. Directionally, if you look at our OBDC, a year ago, we published this, spreads in the portfolio were 50 basis points wider than they are today. You have two things going on, a 100 basis point drop in rates and a 50 basis point drop in spreads. Two different cycles. The spread cycle, which is what you're asking about, I think is a function of two things. One, we do compete with the syndicated market. Syndicated spreads are at all-time tights.

What's happened is there's been a meaningful move on rates over the last 2 years. 100 basis points move on rate and that's been the primary driver of earnings. Um, that shouldn't be a surprise given the floating rate nature of the assets, um, but it certainly will produce headlines that earnings are down in a given quarter or down over a year. It's just a function of rates. But to your point, there's another piece which is spread spreads have, um, tightened in the direct lending Market directionally. If you look at ours, our our obdc a year ago, we we published this spreads in the portfolio. Um, we're 50 basis points wider than they are today. So, you have 2 things going on a 100 basis point, um, drop in rates, and a 50 basis, point drop in, in, in tight in, uh, in spreads.

2 different Cycles.

Craig Packer: We're seeing single B credits getting priced at 275 to 300 over. Any student of the public loan markets would say that's exceptionally tight. In my experience in the leveraged finance space in all these years, that market tends to be cyclical. At some point, you should expect the public loan market spreads to widen out, and that could be material. The other activity that's going on is the M&A cycle remains modest. We're seeing signs of pickup. The private equity firms are eager to resume M&A activity, and we're starting to see signs that that's happening.

The spread cycle which is what you're asking about. I think is a function of 2 things 1. We do compete with the syndicated Market syndicated spreads are at all-time tights. We're seeing single B credits getting priced at 275 to 300 over and each student of the, of the public loan markets would say that's exceptionally tight in my experience, in the leveraged Finance space. And all these years that market tends to be cyclical at some point, you should expect the public loan Market spreads to widen out and that, and that could be material. Um, the other, uh, the other activity that's going on is the m&a cycle remains modest. We're seeing signs of pickup. The private Equity firms are

Craig Packer: I don't wanna predict this is the beginning of a new cycle, but we're seeing signs in the last month or two that are encouraging, and I know other managers have observed that as well. If you get an environment where M&A continues to pick up and you get some, I wouldn't even say dislocation, just normalization of the public loan market, spreads in the direct lending market will follow suit and spreads will widen out.

Resume m&a activity and we're starting to see signs, that that's happening. I don't want to predict. This is the, this is the, the beginning of a new cycle. But, but we're seeing signs in the last month or 2 that are encouraging, and I know other managers have have observed that as well. So if you get an environment,

Craig Packer: I think there's just gonna, you know, at some point be a normal spread widening cycle in the direct lending market. As to when that happens, I, you know, My prediction skills haven't been good. I would have thought it would happen, you know, this year, and it hasn't. But at some point it will. When it does, that will offset some of the rate tightening that we've experienced and generate better re-returns. Again, I don't wanna say I expect it to happen next year because I think that it would be, just, it's just impossible to predict.

Where m&a continues to pick up and you get some. I won't even say dislocation just normalization of the public loan market. Then spreads in the direct lending Market will follow suit and spreads will widen out. So I think there's just going to, you know, it's at some point being normal, spread widening cycle in in the direct lending Market,

um, as to when that happens, um,

Craig Packer: If folks observing the loan market and observing the M&A cycle, I think it's pretty reasonable to think over the next 12 to 18 months that one or both of those things will happen and we will benefit from it.

Logan Nicholson: Maybe just add on-

I, you know, I my, my prediction skills haven't been good. I would have thought it would have happened, you know, this year, and it, and it hasn't. Um, but it but at some point, it will and when it does, um, that will offset some of the rate tightening that, that, that we've experienced and and generate better returns. So, again, I don't want to, I don't say I expect to happen next year because I think that it would be um, just it's just impossible to predict. But if folks observing the, the loan market and the m&a cycle, um I think it's pretty reasonable to think over the next 12 to 18 months that that 1 or both of those things um will happen and and we will benefit from it.

Mickey Schleien: Appreciate the-

Logan Nicholson: one additional

Mickey Schleien: Yeah, I'm sorry.

Logan Nicholson: One additional-

Mickey Schleien: Go ahead.

Logan Nicholson: One additional point to add on is Craig's mention of where syndicated market spreads are today. You know, we've seen spread deployment stability over the last few quarters in private markets. If you look at the average spread on our new deployments, excluding a couple of one-off second liens or refinancings, we've been deploying right around that 500 over spread level basically for the last year, plus or minus. Our deployments have been consistent while public markets continue to tighten. The relative spread environment still feels, you know, reasonably good.

Maybe just add on additional. Yeah I'm sorry. Go ahead 1 additional point to add on is Craig's mention of where syndicated markets spreads are today. You know, we've seen spread deployment stability over the last few quarters in private markets and if you look at the average spread on our new deployments excluding a couple of 1-off second liens or refinancing

We've been deploying right around that $500 million over spread level basically for the last year plus or minus. And so, our deployments have been consistent. Well, public markets continue to tighten, so their relative spread environments still feel reasonably good.

Mickey Schleien: Appreciate that. That's really helpful and sort of in line with my thesis. Moving on, there were several portfolio companies which contributed to this quarter's unrealized portfolio depreciation, but Conair and Beauty Industry Group were most of it on a net basis. Could you just help us understand what the issues are there? Do you see those sort of factors affecting other portfolio companies?

Logan Nicholson: Sure. Absolutely. Thanks. I think there's two different issues on the two names. On Conair, to address the first one, it's a second lien position predominantly behind a syndicated market first lien. That first lien has been downgraded to CCC ratings, has a technical pressure to it, and the marks reflect a relative value to the trading price of the first lien. There's an element of both technical and fundamental. It also has tariff-related weakness and tariff-related issues affecting the business. They import the vast majority of their goods from China and are working through redeveloping their supply chains to work around or to fix that issue. It's gonna take time with Conair.

Appreciate that, that that's really helpful and sort of in line with my thesis. Um, moving on. Um, there were several portfolio companies, which contributed to this quarter's unrealized portfolio depreciation, but Conair and, uh, beauty industry group were were most of it on a net basis. Could you just help us understand what the issues are there? And do you see those sort of factors affecting other portfolio companies?

Sure, sure. So, um, absolutely thanks, and I think...

There's 2 different issues on the 2, on on Conair to address the first 1.

It's a second lien position, predominantly behind a syndicated market. The first lien has been downgraded to triple C ratings.

And so has a technical pressure to it and the marks reflect a relative value to the trading price of the first Lane. So there's an element of both Technical and fundamental. It also has tariff related, weakness and tariff related issues.

Um, affecting the business. They import the vast majority of their goods from China and are working through redeveloping, their supply chains to work around.

Or or to fix that issue.

Logan Nicholson: It's a name where on the Conair side, they have well over a year's worth of liquidity, there's no imminent event or imminent catalyst that we can see. The company is on solid footing and should have a long period of time to try to work through the tariff-related issues. It's a tariff-related name in our list, but it's one that's depressed in trading price by a public market name and public market rating dynamic. On the Beauty Industry side, there are some similarities in the fact that tariffs have impacted the fundamentals. Beauty Industry is a name that we've had in our portfolio for over five years, through two ownership periods. It's been on our watch list for two years, there have been a number of issues. Tariffs is just the latest.

Um and so it's going to take time with Conair, it's a name where

On the Conair side they have well over a Year's worth of liquidity and so there's no imminent event or imminent Catalyst that we can see the company is on solid footing and and should have a long period of time to try to work through the Tariff related issues. So it's, it's a, it's a terrifying name in our list. But it's 1 that's depressed in trading price.

Logan Nicholson: Importantly, they had some competition-related issues a number of years ago and then an operational issue, and most recently, tariffs, given they import most of their beauty-related products from China as well. The sponsor there over time has put in capital, and at this period of time, we're unsure that they'll put in additional capital to support the business. We had further markdowns that we took. That one doesn't have the same trading dynamics and is a much tighter liquidity situation than Conair. It was marked down accordingly this quarter. Hopefully, that provides some context.

Craig Packer: Yeah. I would just add, we have said in, you know, when tariffs kicked in that, you know, there were a few names that we thought, you know, were names. Although disappointing, it's not surprising to us, but I wanna reassure investors this is not indicative of a long list of other names that, you know, could migrate.

By public market name and public market rating rating Dynamic on the beauty industry side. There are some similarities in the fact that tariffs have impacted the fundamentals. Beauty industry is a name that we've had in our portfolio for over 5 years, uh, through 2 own periods. Uh, it's been on our watch list for 2 years and there have been a number of issues tariffs is just the latest um importantly. Uh, they had some competition related issues a number of years ago and then an operational issue and most recently tariffs given they import most of their uh beauty related products from China as well. Uh, the the sponsor their over time has put in capital and at this period of time where unsure that they'll put in additional Capital to support the business. So we had further markdowns that we took, but that 1 doesn't have the same trading Dynamics and is a much tighter liquidity situation than Conair. And so it's, it's, um, it. It was marked down accordingly this quarter. Hopefully, that provides some. Yeah, I would just add, um,

we we have said in in in, you know, when tariffs kicked in that, you know, there were a few names that we thought, you know, if we're

Names. And um, so although disappointing, it's not surprising to us, but I want to reassure investors. This is not indicative of a long list of other names that that, you know, could migrate

Michael Maschio: Why don't we move to the next question?

Why don't we move to the next question?

Operator: Thank you. Our next question is coming from the line of Kenneth Lee with RBC Capital Markets. Please proceed with your questions.

Thank you. Our next questions come from the line of Kenneth Lee with RBC Capital Markets. Please proceed with your questions.

Kenneth Lee: Hey, good morning. Thanks for taking my question. Just one on the merger here. Wondering if you could talk a little bit more about expected timeframes for achieving the expected ROE accretion that you mentioned. Thanks.

Hey, good morning. Thanks for taking my question. Um, just went on the, the merger here. Um, wonder if you could talk a little bit more about expected time frames for achieving the, uh, the expected Roe accretion that you mentioned. Thanks.

Jonathan Lamm: Sure. I mean, timing-wise, similar timing in terms of our expectation to close the merger, which should be at some point, hopefully in Q1, maybe later in Q1. The OpEx synergies tend to come in relatively quickly, just given they're mostly related to duplicative expenses and things along those lines. The capital structure related synergies

Sure. I mean timing, timing wise similar similar timing, in terms of our expectation, to close to close the merger, uh, which should be at some point, hopefully, in the first quarter, um, maybe later in later in the first quarter, um, the Opex synergies, uh, tend to come in, um, relatively quickly, uh, just given, uh, their

Jonathan Lamm: Do sometimes take a little bit longer, but we expect we can achieve most of those in 2026. The effect of just leveraging out the portfolio, just given the relative small size of OBDC II to OBDC also is a relatively near-term event. We don't think that it's gonna take very long.

Mostly related to duplicative expenses and things along those lines. The capital structure related synergies.

Do sometimes take a little bit longer but we expect most of, we we expect, we can achieve most of those in 2026.

Um, and uh the effect of just leveraging out the portfolio, just giving them the relative small size of obdc 2 to to obdc also is a is a relatively near-term event. So we don't think that it's going to take very long.

Kenneth Lee: Gotcha. Very helpful there. Just a follow-up, if I may, another one on the new share repurchase program. How would you evaluate potential share repurchases in the context of OBDC's leverage? As well, how would you approach balancing between repurchases and a potential pickup in investment opportunities over the near term there? Thanks.

Gotcha very helpful there and then just uh, follow up. Uh, if I met uh, another 1 on the the new share repurchase program. Um, how would you evaluate potential share repurchases? In the context of of obdc is Leverage.

And as well. How would you approach bouncing between repurchases and uh, a potential pickup in in investment opportunities? Over the near time there? Thanks.

Craig Packer: Look, I think that I think you're doing a good job of identifying all the variables. You know, we're gonna balance all of those variables. I think that, look, our capital is permanent and very valuable, and so we are always trying to preserve that capital for new investment opportunities. Certainly in a world where the stock is where it is, and where we've already talked about how spreads are tight and rates are lower, you know, then it's gonna make the attractiveness of buying shares that much better. Leverage obviously plays in. I've already commented on leverage. Leverage can, you know, we can manage leverage just as we get repayments, which we continue to get.

Um, oh okay, I I I think that, um, I think you're doing a good job of identifying all the variables. I, you know, we're going to balance all of those variables I I um, I think that that, um, look, our capital is permanent and very valuable. And so we are, we are always trying to preserve that capital for new investment opportunities. Um, but certainly in a world, where, where the stock is, where it is, um, and where I believe we've already talked about how spreads are tight and right.

Craig Packer: I can't. It's not scientific. You know, I think this is well understood. We also operate with various windows based on our public disclosure periods of time. In any given quarter, you know, our legal judgment is there's periods of time in a quarter where we can buy shares and we can't based on when we're gonna report results and the like, and when we get information from our portfolio companies. We're not open, you know, there's meaningful parts of a quarter where essentially we're not able to buy shares.

Craig Packer: In the periods of time where we can buy, we'll look at where the share price is, we'll look at other investment opportunities are, we'll look at the leverage, and we'll make appropriate judgments as we have in the past. I wish I could give you a more precise analytical answer, but I think it's a function of all those things.

Lower, you know, then it's going to make the the the attractiveness of buying shares that much that much better. So, um, and leverage obviously plays in. I've already comment on Leverage. Leverage can, you know, we can manage leverage just as we get repayments, which we continue to get so, um, I I don't, I can't, um, it's not scientific and and and we I, you know, I think, I think this is well understood, we also, um, operate with various Windows based on our public disclosure periods of time. So in any given quarter, um, you know, our our, um, our legal judgement is there's periods of time in a quarter where we can buy shares and, and we can't based on where we're going to report um, results and the like and and when we get information from our portfolio companies, so we're not open um, you know, there's meaningful ports of a quarter where essentially we're we're not able to buy shares so in the period of time where we can buy, we'll look at where the share price is. We'll look at other where other investment opportunities are. We'll look at the leverage and we'll, and we'll make, um, appropriate judgments as we have.

As we have in the past. I I wish I wish I could give you a more precise sound a little answer, but but I think it's it's a function of all of all those things.

Kenneth Lee: Gotcha. Very helpful there. Thanks again.

Craig Packer: Thank you.

Gotcha very helpful there. Thanks again.

Thank you.

Operator: Thank you. Our next question's come from the line of Sean-Paul Adams with B. Riley Securities. Please proceed with your questions.

Thank you. Our next questions, come from the line. I'm Sean Paul Adams, with B Riley Securities, please proceed with your questions.

Sean-Paul Adams: Hey, guys. Good morning. Given the impact of the uptick in the scale on earnings, are there any potential evaluations for changes on the management fee cost structure on a go-forward basis?

Hey guys. Good morning. Um, given the impact of the uptick in the scale on earnings, are there any potential evaluations for changes on the management fee cost structure on a go-forward basis?

Craig Packer: I'm not sure I totally understand the question, but no, we're not looking at the management fee structure, if that's your question. We've had the same structure.

Uh I'm not sure. I totally understand the question, but no, we're not looking at at the management fee structure. If that's your question,

Sean-Paul Adams: Got it.

Craig Packer: for almost 10 years, and OBDC II had the same fee structure. You know, and our tech fund has the same. You know, this is the fee structure.

It's, you know, this is the fee structure.

Sean-Paul Adams: Good. Appreciate it.

I appreciate it.

Craig Packer: Thank you.

Thank you.

Operator: Thank you. Our next question has come from the line of Christopher Nolan with Ladenburg Thalmann. Please proceed with your questions.

Christopher Nolan: Hi. Just to follow up on that previous question on the management fee structure. Given your comments in terms of, narrower spreads, lower rates, you're in a different environment, and any consideration to improving expenses relative to revenues to improve the total return of OBDC?

Thank you. Our next questions come from the line of Christopher Nolan with Vladimir Thalman. Please proceed with your questions.

Hi. Just follow up on that. Previous question on the management fee structure, uh, given your comments in terms of uh narrow spreads lower rates, you're in a different environment and any consideration to improving. Um,

Expenses, relative to revenue, should improve the total return of Blue Owl Capital Corp.

Craig Packer: I appreciate why you're asking the question. I just would urge you to look over the life of the fund. It's had the same fee structure. It had that same fee structure when rates were at zero. For multiple years, we had the same fee structure. You know, the fee structure has been set. It's very visible. We're consistent with it. It's not something that we're evaluating. It's, you know, I think it's designed, in, you know, a thoughtful way, consistent with other industry peers and can measure it with the quality and the resources that we apply to it.

Craig Packer: You know, I don't think the intention of the fee structure is to move around based on where rates are in any three, six-month, nine-month period in, you know, in either direction. I don't think that's an expectation that people should have.

Um, I I I appreciate why you're asking the question. I, I just would urge you to look over the over the life of the fund. Its had the same fee structure has that same fee structure. When rates were at zero for multiple years, we had the same fee structure. Um, you know, the fee structure has been set. It's very visible. Um, we're consistent with it. It's not something that we're evaluating. Um, it's, you know, I think it's designed, um, in, you know, a thoughtful way consistent with other industry peers and and can measure it with the uh, the quality and and, and the resources that that we apply to it. Um, you know, I I don't think the intention of the fee structure is

Christopher Nolan: Okay. The only reason I ask is your investment yields on debt is roughly 10.5%, and your stock is yielding dividend yield roughly 12% or so, a little less. The total returns, you know, part of the reason, possibly, why the stock is trading below book is, you know, total returns. I'm just trying to look at the You mentioned earlier that all levers are available. I'm just following up on that.

To move around based on on where, where rates are on any 3, 6-month 9-month period and, you know, in either direction. So, so I, I I don't think that's an that's an expectation that people should have.

Okay, the only reason I ask is your investment yields on debt is roughly 10 and a half percent.

And your stock is yielding dividend yield roughly 12.

Percent or so, a little less.

and I'm just the total returns, you know, part of the reason possibly

The stock is trading below book. You know, total returns.

Craig Packer: Yeah. I have lots of opinions about why our stock's trading where it's trading, but I'd say there are peer stocks that are comparable quality that have much lower yields. I don't think it's. I hear your question. We're hoping that this is a short-term technical situation. Investors have been very jumpy, you know, about some of the headlines in private credit generally. In the short term, investors seem to be reacting to a headline or two that's happening in the marketplace. I think You know, I appreciate your pointing out that our stock is yielding 12% for a really high-quality performing portfolio.

And I'm just trying to look at the you mentioned earlier that all levers are available and just following up on that. Yeah. Um, I I, um, have lots of opinions about why our stocks trading where I was trading, but I'd say there are peer stocks that that are are comparable quality that that have have much lower yields. And so, I, I don't think it's, it's, um, I I, I

Craig Packer: Our hope is that investors will find that attractive, and we'll certainly, buyback is a factor. Look, there've been periods of time, you know, where the stock has been dislocated. Again, over the last 10 years, we haven't changed the fee structure. I don't think that's something that is really of meaningful consideration. I want to keep saying it. I think everything else is, and I'm hoping that investors will see the quality of the portfolio and the opportunity to earn that type of yields.

I I don't I I hear your question. Um, we're hoping that this is a short term. Um, technical situation investors. Have been very jumpy, you know, about some of the headlines in private credit generally and so in the short term investors seem to be reacting to a headline or 2 that's happening in the marketplace. Um, I think you're, you know, I appreciate your pointing out that our stock is yielding 12% um for a really high quality uh, performing portfolio. And so, um, our hope is that investors will find that, uh, attractive. And we'll certainly um, by

Craig Packer: By the way, even if dividends go down a little bit, you're still gonna talk about a 10%, 11% yield that hopefully folks will find that attractive and the stock will get moving in a more constructive direction.

Christopher Nolan: Great. Thank you. I appreciate the considered answer.

Buy back is, is is is a factor. Look, they've been periods of time, you know where the stock has been dislocated. Again, over the last 10 years. We haven't changed the fee structure. Um, I just I don't I don't think that's something that that um is is towards the is really of of meaningful consideration. I want to keep saying it, um but I think everyone everything else is and I I'm hoping that investors will see the quality of the portfolio and the opportunity to earn earn earn that type of yield. And by the way, even if dividends go down a little bit, you're still going to talk about a, a 10 11% yield. Um, that's hopefully folks, will find that attractive and the stock will will get moving in a in a more constructive, um, Direction.

Craig Packer: Thank you.

Great, thank you. I appreciate the, uh, considered answer.

Thank you.

Operator: Thank you. Our next question has come from the line of Brian McKenna with Citizens. Please proceed with your questions.

Brian McKenna: Great. Thanks. Just a quick follow-up on repayment activity. You know, clearly a little bit lighter in the quarter, and they can bounce around from quarter to quarter. Any visibility into 4Q repayments? I'm just trying to think through, is that $0.02 per share of non-recurring income a good starting point for Q4?

Thank you. Our next question, has come from the line of Brian McKenna with citizens. Please proceed with your questions.

Uh, great thanks. So just a quick follow up on repayment activity. You'll clearly a little bit later in the quarter, uh, and they can bounce around from quarter to quarter, but any visibility into 4 key repayments. I'm just trying to think through is that 2 cents per share of non-recurring income. A good starting point for the fourth quarter.

Craig Packer: I think so far it's consistent with the prior quarter. No change.

Yeah, I think so far. It's consistent with the prior quarter. No, no change.

Brian McKenna: Got it. Thank you.

Craig Packer: $0.02 seem about right. Seems about right.

Got it. Thank you.

2 cents even about, right?

Operator: Correct. Thank you. Our next question has come from the line of Mickey Schleien with Clear Street. Please proceed with your questions.

Correct, thank you. Our next question, has come from the line of Mickey slinn with clear Street. Please proceed with your questions.

Mickey Schleien: Apologies. The phone cut out. A couple of questions. In terms of the merger closing, are you assuming the government is going to reopen quickly and get the SEC fully up and running in your assessment?

Uh apologies uh the phone cut out um couple of questions. Um in terms of the merger closing, are you assuming the government is going to reopen quickly and get the SEC fully up and running uh in your assessment?

Craig Packer: That would be part of the assessment that they would be able to review that. You know, ultimately, we think the projection that we've got in place, you know, accounts for that.

That would be part of the assessment that they would be able to.

Mickey Schleien: Okay. And I don't want to beat a dead horse here, I just want to confirm. There were no repurchases made under the 2024 stock repurchase program. Is that correct?

Review review that and uh you know but ultimately we think the the projection that we've got in place, you know, accounts for that.

Craig Packer: That's correct.

Okay? I don't want to beat a dead horse here, but I just want to confirm: there were no repurchases made under the 2024 stock repurchase program. Is that correct?

That's correct.

Mickey Schleien: Okay. That's it. Thank you.

Operator: Thank you. We have reached the end of our question and answer session. I would now like to hand the call back over to management for closing remarks.

Craig Packer: Okay. Look, we appreciate the engagement. We're available. If folks have questions, please reach out. Thanks for your time, and we will speak with everyone soon.

Thank you. We have reached the end of our question and answer session. I would now like to hand the call back over to management for closing remarks.

Okay well we appreciate the engagement. Um we're available folks, have questions, please reach out. Um thanks for your time and uh we will speak with everyone soon.

Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Thank you. This does include today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.