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KBRA Assigns Rating to Blue Owl Capital Corporation's $400 Million Senior Unsecured Notes

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KBRA has assigned a BBB+ rating with a Stable outlook to Blue Owl Capital 's (NYSE: OBDC) $400 million, 5.95% senior unsecured notes due 2029. The rating reflects OBDC's connection to the $128.4 billion Blue Owl Credit platform and its strong position in the private credit market. The company maintains a $13.4 billion investment portfolio across 219 companies, focusing on senior secured first lien loans. Key strengths include solid liquidity with $1.3 billion in available credit lines, $427 million in unrestricted cash, and a diverse funding profile. OBDC plans to merge with Blue Owl Capital III (OBDE) in Q1 2025, potentially becoming the second-largest publicly traded BDC with approximately $17.7 billion in investments.

KBRA ha assegnato un rating BBB+ con un outlook stabile a Blue Owl Capital (NYSE: OBDC) per le note senior non garantite da 400 milioni di dollari, con un tasso del 5,95% e scadenza nel 2029. Il rating riflette il legame di OBDC con la piattaforma Blue Owl Credit da 128,4 miliardi di dollari e la sua forte posizione nel mercato del credito privato. L'azienda gestisce un portafoglio di investimenti di 13,4 miliardi di dollari, suddiviso in 219 aziende, concentrandosi su prestiti senior garantiti di primo grado. I punti di forza chiave includono una solida liquidità con 1,3 miliardi di dollari in linee di credito disponibili, 427 milioni di dollari in contante non vincolato e un profilo di finanziamento diversificato. OBDC prevede di fondersi con Blue Owl Capital III (OBDE) nel primo trimestre del 2025, diventando potenzialmente il secondo BDC quotato in pubblico più grande, con circa 17,7 miliardi di dollari in investimenti.

KBRA ha asignado una calificación BBB+ con una perspectiva estable a Blue Owl Capital (NYSE: OBDC) para sus notas senior no garantizadas de 400 millones de dólares, con un interés del 5.95% y vencimiento en 2029. La calificación refleja la conexión de OBDC con la plataforma de crédito Blue Owl, que asciende a 128.4 mil millones de dólares, y su sólida posición en el mercado de crédito privado. La compañía mantiene un portafolio de inversión de 13.4 mil millones de dólares en 219 empresas, con un enfoque en préstamos senior garantizados de primer nivel. Las fortalezas clave incluyen una sólida liquidez con 1.3 mil millones de dólares en líneas de crédito disponibles, 427 millones de dólares en efectivo sin restricciones y un perfil de financiación diversificado. OBDC planea fusionarse con Blue Owl Capital III (OBDE) en el primer trimestre de 2025, convirtiéndose potencialmente en el segundo BDC cotizado en bolsa más grande, con aproximadamente 17.7 mil millones de dólares en inversiones.

KBRABlue Owl Capital (NYSE: OBDC)의 4억 달러 규모, 5.95%의 만기 없는 선순위 채권에 대해 BBB+ 등급과 안정적인 전망을 부여했습니다. 이 등급은 OBDC가 1284억 달러 규모의 Blue Owl Credit 플랫폼과 연결되어 있으며, 민간 신용 시장에서의 강한 입지를 반영합니다. 회사는 219개 기업에 걸쳐 134억 달러의 투자 포트폴리오를 유지하며, 선순위 보장 첫 번째 담보 대출에 집중하고 있습니다. 주요 강점으로는 13억 달러의 사용 가능한 신용 한도, 4억 2700만 달러의 제한 없는 현금, 그리고 다양한 자금 조달 프로필이 있습니다. OBDC는 2025년 1분기에 Blue Owl Capital III (OBDE)와 합병할 계획이며, 이는 약 177억 달러의 투자를 통해 두 번째로 큰 상장 BDC가 될 가능성이 있습니다.

KBRA a attribué une note BBB+ avec une perspective stable à Blue Owl Capital (NYSE: OBDC) pour ses obligations senior non garanties de 400 millions de dollars, avec un taux de 5,95 % et une maturité en 2029. Cette note reflète le lien d'OBDC avec la plateforme de crédit Blue Owl de 128,4 milliards de dollars et sa forte position sur le marché du crédit privé. L'entreprise maintient un portefeuille d'investissement de 13,4 milliards de dollars réparti sur 219 entreprises, en se concentrant sur les prêts senior garantis de premier rang. Les forces clés incluent une liquidité solide avec 1,3 milliard de dollars de lignes de crédit disponibles, 427 millions de dollars en liquidités non restreintes et un profil de financement diversifié. OBDC prévoit de fusionner avec Blue Owl Capital III (OBDE) au premier trimestre de 2025, devenant potentiellement le deuxième BDC cotée en bourse le plus important, avec environ 17,7 milliards de dollars d'investissements.

KBRA hat Blue Owl Capital (NYSE: OBDC) eine BBB+-Bewertung mit stabiler Aussicht für die 400 Millionen US-Dollar, 5,95 % Senior-ungesicherte Anleihen mit Fälligkeit im Jahr 2029 zugeordnet. Die Bewertung spiegelt die Verbindung von OBDC zur 128,4 Milliarden US-Dollar schweren Blue Owl Credit-Plattform und seine starke Position im privaten Kreditmarkt wider. Das Unternehmen verwaltet ein Anlageportfolio von 13,4 Milliarden US-Dollar über 219 Unternehmen und konzentriert sich auf senior gesicherte Ersthypothekendarlehen. Zu den wichtigsten Stärken gehören eine solide Liquidität mit 1,3 Milliarden US-Dollar an verfügbaren Kreditlinien, 427 Millionen US-Dollar an unbeschränktem Bargeld und ein diversifiziertes Finanzierungsprofil. OBDC plant, im ersten Quartal 2025 mit Blue Owl Capital III (OBDE) zu fusionieren und könnte damit der zweitgrößte börsennotierte BDC mit etwa 17,7 Milliarden US-Dollar an Anlagen werden.

Positive
  • Strong liquidity position with $1.3B in available credit lines and $427M in unrestricted cash
  • Diverse portfolio of $13.4B across 219 companies with 75.9% in senior secured first lien loans
  • Low non-accrual rate of 1.8% at cost and 0.6% at fair value
  • Solid asset coverage ratio of 176%, well above the 150% regulatory minimum
  • Upcoming merger with OBDE will create second-largest publicly traded BDC with $17.7B in investments
Negative
  • Leverage ratios at upper range of target (1.23x net leverage vs 0.9x-1.25x target)
  • Expected pressure on net investment income due to anticipated interest rate cuts
  • High portfolio growth with unseasoned investments poses potential risks
  • Significant unfunded commitments of $1.6B

Insights

The BBB+ rating for OBDC's $400 million senior unsecured notes reflects significant positive developments. The company's integration with Blue Owl Credit's $128.4 billion platform and strong market position in private credit demonstrate robust institutional backing. Key strengths include a diversified $13.4 billion portfolio across 219 companies, with 75.9% in senior secured first lien loans, focusing on less cyclical industries.

The financial metrics are solid with gross leverage at 1.31x and net leverage at 1.23x. The upcoming merger with OBDE will create the second-largest publicly traded BDC, adding $4.4 billion in investments. The low non-accrual rate of 1.8% at cost and 0.6% at fair value indicates strong asset quality. The company's funding profile is particularly strong with 55.8% unsecured debt ratio and $1.3 billion in available credit lines.

NEW YORK--(BUSINESS WIRE)-- KBRA assigns a rating of BBB+ to Blue Owl Capital Corporation's (NYSE: OBDC or "the company") $400 million, 5.95% senior unsecured notes due 2029. The Outlook for the rating is Stable. The company intends to use proceeds to pay down secured debt.

Key Credit Considerations

The rating is supported by OBDC's ties to the $128.4 billion Blue Owl Credit platform that maintains a strong reputation and leadership position in the $1.7 trillion private credit market. OBDC's experienced management team that has decades of experience working in the private markets has built a high credit quality direct lending platform to finance mainly sponsor-backed portfolio companies in the upper middle market. Management has implemented a comparatively favorable and comprehensive set of risk management tools to ensure solid liquidity, funding, and asset quality in less favorable markets. The company benefits from SEC exemptive relief to co-invest with other funds managed by Blue Owl Credit Advisors LLC (the "Adviser") and its affiliates, as well as the company's diversified $13.4 billion investment to 219 portfolio companies with a focus on senior secured first lien loans (75.9%) to mostly upper middle market companies in mainly less cyclical industries as of September 30, 2024. For traditional financing (90.1%), excluding the company's joint ventures and certain investments that fall outside the typical borrower profile, the weighted average annual EBITDA and revenue were $197 million and $875 million, respectively.

The rating also reflects the company's solid access to debt capital markets along with its comparatively stronger funding profile among KBRA rated BDCs. The already diverse funding profiles of OBDC and other Blue Owl BDCs have been further enhanced in recent periods. Funding sources include significant committed bank lines of credit, CLOs, and cost effective access to the senior unsecured note market. The funding structure provides significant financial flexibility and lower asset encumbrance with an unsecured debt to total debt ratio of 55.8%. The company has comfortable liquidity with $1.3 billion of available credit lines and ~$427 million of unrestricted cash set against $1.525 billion of debt maturing within the next two years. The company's unfunded commitments were $1.6 billion, of which a portion is tied to covenants and transactions and are not expected to be drawn. The company's gross and net leverage were 1.31x and 1.23x, respectively, at 3Q24 and at the upper range of the company's net leverage target of 0.9x to 1.25x. KBRA views the company's asset coverage of 176% as adequate, allowing OBDC to absorb increased market volatility and a solid cushion to regulatory minimum of 150% as of September 30, 2024. Credit quality remains relatively solid with non-accruals as a percentage of total investments at cost and fair value of 1.8% and 0.6%. respectively, as of September 30, 2024. KBRA believes that OBDC benefits from the company’s solid underwriting and focus on portfolio companies in the upper middle market with EBITDA in excess of $100 million.

In August, the company announced that it has entered into a definitive merger agreement with Blue Owl Capital Corporation III (NYSE: OBDE) with OBDC as the surviving entity. Pending shareholder approval, the merger is expected to close in 1Q25 and will add ~$4.4 billion to investments for a total of approximately $17.7 billion, making it the 2nd largest publicly traded BDC. With ~93% of OBDE's assets overlapping with OBDC and with low non-accruals and appropriate leverage, KBRA does not expect any significant change in credit metrics of the merged companies.

OBDC’s profitability has benefited from the rising interest rate environment with an asset sensitive balance sheet with the majority of its investments variable rate loans. Going forward, net investment income (NII) will likely be pressured from the Federal Reserve's path to cut interest rates along with competitive pressures. We expect NII and margins to decline from currently high levels but remain within our rating expectations.

The strengths are counterbalanced by the potential industrywide risks related to the company's illiquid investments, an unseasoned investment portfolio with high portfolio growth, retained earnings constraints as a Regulated Investment Company (RIC), and the potential for increased non-accruals with a more uncertain economic environment with high base rates, inflation, and geopolitical risk. KBRA believes that OBDC and other Blue Owl BDCs will remain comparatively resilient.

Blue Owl Capital Corporation is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a Business Development Company under the 1940 Act and has elected to be treated as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s taxable income. The company commenced operations in March 2016 and was publicly listed on the NYSE in July 2019. The company is managed by Blue Owl Credit Advisors LLC, an indirect subsidiary of Blue Owl Capital, Inc. (NYSE: OWL), which had approximately $235 billion of assets under management as of September 30, 2024.

Rating Sensitivities

Ratings are unlikely to be upgraded in the medium term. A rating downgrade and/or Outlook change to Negative could be considered if there is a significant downturn in the U.S. economy with a greater-than-expected negative impact to OBDC's earnings performance, asset quality, and leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.

To access ratings and relevant documents, click here.

Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1006737

Analytical Contacts

Teri Seelig, Managing Director (Lead Analyst)

+1 646-731-2386

teri.seelig@kbra.com

Kevin Kent, Director (Rating Committee Chair)

+1 301-960-7045

kevin.kent@kbra.com

Business Development Contact

Constantine Schidlovsky, Senior Director

+1 646-731-1338

constantine.schidlovsky@kbra.com

Source: Kroll Bond Rating Agency, LLC

FAQ

What rating did KBRA assign to OBDC's $400M senior unsecured notes?

KBRA assigned a BBB+ rating with a Stable outlook to OBDC's $400 million, 5.95% senior unsecured notes due 2029.

When is OBDC expected to complete its merger with Blue Owl Capital III?

The merger is expected to close in the first quarter of 2025, pending shareholder approval.

What is OBDC's current portfolio size and composition as of September 2024?

OBDC has a $13.4 billion investment portfolio across 219 companies, with 75.9% in senior secured first lien loans.

What is OBDC's current asset coverage ratio?

OBDC's asset coverage ratio is 176% as of September 30, 2024, well above the regulatory minimum of 150%.

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