OBDC | Q3 2025

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Overview

• Adjusted NII per share of $0.36.

• Total investment income of $453.07M.

KEY Takeaways

• Adjusted net investment income came in at $0.36 per share, a little lower than last quarter, mainly because of falling base rates and less one-time income.

• NAV slipped slightly to $14.89 per share due to markdowns on a few long-monitored loans, not new problems.

• Credit quality remains strong — only 1.3% of loans are on non-accrual, well below the industry average.

• Leverage sits at 1.22x, near the top of the range but still within target, and the company has over $3B in liquidity between cash and credit lines.

• The quarterly dividend stays at $0.37, but management signaled it may fall to around $0.33 per share next year if rates keep dropping.

• OBDC originated $1.3B of new loans and funded $1.1B, with about 40% being add-on loans to existing relationships.

• The merger with OBDC II will add about $1.7B in new investments, reduce leverage, and create cost savings — expected to close in early 2026.

• A new $200 million share buyback was authorized, signaling management sees the shares as undervalued.

NOTES

Blue Owl Capital Corporation (OBDC) had another steady quarter. Overall, the portfolio is holding up well, and the company is about to get even bigger thanks to its planned merger with OBDC II.

For the quarter, OBDC earned $0.36 per share in adjusted net investment income. That’s basically the money left over after expenses that can be used to pay dividends.

It’s down a few cents from the last couple of quarters, but management made it clear that this isn’t because of credit problems—it’s mostly because interest rates have started coming down and there was less one-time income from fees and repayments. When base rates fall, the floating-rate loans OBDC holds simply don’t earn quite as much, so the decline makes sense.

Net asset value, or NAV, ended the quarter at $14.89 per share, down slightly from $15.03 last quarter. The small drop came from markdowns on a few loans that were already on the company’s watchlist, not from any new issues.

Management emphasized that overall credit quality is still very healthy. In fact, only about 1.3% of the portfolio is on non-accrual (meaning those borrowers aren’t paying interest right now), which is well below average for the industry.

Most of the companies OBDC lends to are large, steady businesses—think health care, tech, business services, and insurance—not highly cyclical industries like retail or energy. The average company in their portfolio does over $1 billion in annual revenue and about $229 million in EBITDA, which means these are more established businesses with the ability to weather economic ups and downs.

The company’s leverage (how much it borrows relative to equity) is at 1.22x, near the high end of its target range, but still comfortable. They also have over $3 billion in liquidity between cash and credit facilities, so they’re well-positioned to fund new deals or handle anything unexpected.

On the dividend front, OBDC declared a $0.37 base dividend for the fourth quarter, payable in January. There’s no supplemental dividend this time because earnings came in just below the level needed to “over-earn” the base payout.

Management said they’re fine holding the current dividend through the rest of the year, but if interest rates continue to fall, investors should expect a lower base dividend in 2026. They even pointed out that when rates were around 3% a few years ago, the dividend was closer to $0.33 per share—so that might be a rough guide if rates end up back there again.

Credit performance remains the real story. OBDC’s portfolio continues to perform well, with most borrowers growing revenue and profits in the mid-to-high single digits.

Two companies—Conair and Beauty Industry Group—were the main sources of markdowns this quarter, and both issues were tied to tariffs and supply chain costs from importing products from China.

Conair still has plenty of liquidity to work through its challenges, while Beauty Industry Group is in a tougher spot. Even so, management said these situations were already on their radar and don’t point to broader trouble in the portfolio.

On the investing side, activity was a bit heavier during the quarter. OBDC originated $1.3 billion of new loans and funded $1.1 billion, while getting about $800 million back from repayments. Roughly 40% of those new loans were add-ons to existing relationships—something management highlighted as an advantage of being an “incumbent lender.”

They’re also participating in larger deals than before. The average deal size across the platform has roughly doubled since 2021, showing that even big, billion-dollar companies increasingly prefer borrowing directly from lenders like OBDC instead of going through the public loan market.

That trend—large private companies choosing direct lenders—is part of a bigger shift in finance. Even though public credit markets have reopened and spreads are tight, most new private-equity-backed deals are still being funded through direct lending. Management thinks this trend has a long runway ahead.

The merger with OBDC II was another big piece of news to come out of the quarter. OBDC II is basically a mirror of OBDC—same strategy, same team, and almost identical portfolio.

The merger will add about $1.7 billion in new investments and make OBDC the second-largest publicly traded BDC. It also brings down leverage a bit since OBDC II carries less debt, and it should slightly boost earnings over time by reducing duplicate costs and giving the combined company more scale. The merger is expected to close in early 2026, and the adviser is covering part of the costs.

As for the stock, management knows investors are frustrated. OBDC trades around 80% of book value and yields over 11%, which they called “hard to reconcile” with how well the business is performing.

To help close that gap, they announced a new $200 million share buyback program (up from $150 million). They haven’t been buying back shares recently, but hinted that with the stock this cheap, it’s something they’ll look at more seriously.

All in all, this was an interesting quarter for OBDC. The main things to look out for going forward are the dividend adjustment if rates keep falling, how spreads in the lending market evolve, and the integration of OBDC II.

Still, the overall message from management was clear: the business is solid, credit quality is in a good spot, and the stock looks undervalued relative to what’s actually happening under the hood. The fact that they’re considering buying back shares here is a telling sign, and maybe we shareholders should follow their lead.

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