Blue Owl Capital (NYSE:OBDC) reported first-quarter 2026 adjusted net investment income of $0.31 per share and net asset value per share of $14.41, as management said lower base rates, tighter spreads and reduced fee income weighed on earnings.
Chief Executive Officer Craig Packer said the quarter was “more challenging” from an earnings perspective, with headwinds that had been building over the past year becoming fully reflected in results. He cited lower rates, tighter market spreads, slower deal activity and lower leverage as key factors.
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At the same time, Packer emphasized that the company’s underlying credit performance remained strong. He said there were no new non-accruals during the quarter, borrower performance was stable and credit quality remained consistent with recent periods.
Dividend Reset to $0.31 Per Share
Blue Owl’s board declared a second-quarter base dividend of $0.31 per share, down from the prior level. Packer said the company believes the new dividend level is appropriate given the portfolio’s forward earnings power, particularly as spreads widen and the rate environment appears more stable.
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The dividend will be paid July 15, 2026, to shareholders of record as of June 30, 2026. Chief Financial Officer Jonathan Lamm said spillover income stood at approximately $0.28 per share, which he described as a “meaningful cushion” supporting the base dividend.
Packer noted that the company is maintaining its supplemental dividend framework, under which it pays out 50% of net investment income above the base dividend. In response to an analyst question, Packer said he hopes and expects the new dividend level to act as a floor, but cautioned that quarterly results can vary.
NAV Declines on Spread Widening
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Net asset value per share declined to $14.41 from $14.81 in the prior quarter. Management attributed the decline primarily to mark-to-market adjustments tied to broader credit spread widening rather than deterioration in underlying asset quality.
Packer said approximately 75% of the write-down was attributable to spread widening across the debt portfolio. Lamm added that realized losses in the quarter were tied to investments already on non-accrual that had been written down over several years and did not contribute to the NAV decline.
During the question-and-answer session, Lamm said the company uses an external valuation agent every quarter for every portfolio company and takes the resulting point valuations. Packer added that, as a lender, the company expects most performing loans to be repaid at par, and said the average loan in the portfolio was marked at 95.4.
Portfolio Activity Slows as Leverage Falls
President Logan Nicholson said Blue Owl took a more conservative approach to deployment during the quarter as market volatility increased and deal activity slowed. The company funded $525 million of investments while repayments and sales totaled nearly $1.5 billion.
Net leverage ended the quarter at 1.13 times, within the company’s target range of 0.9 times to 1.25 times and at its lowest level in two years. Nicholson said the lower leverage and “ample dry powder” position the company to deploy capital as the pipeline improves.
Management said the investment environment has become more attractive as spreads widen. Packer said the deals the company is seeing today generally carry spreads about 50 to 75 basis points wider than a few quarters ago, with more attractive terms. He also said slowing retail inflows into private credit have improved the supply-demand balance for new deals.
Nicholson said the company continued to invest selectively in joint ventures and specialty finance investments. He highlighted an increased allocation to its life sciences specialty finance vehicle, LSI, including support for an investment in TG Therapeutics. Blue Owl served as sole lender in a $1 billion financing for TG Therapeutics, which Nicholson said the firm has backed since 2024.
Credit Metrics Remain Stable
Management described portfolio credit performance as stable. Nicholson said the portfolio is diversified across 30 industries, with an average position size of about 40 basis points, and remains focused on large, non-cyclical defensive businesses.
Borrowers delivered year-over-year revenue and EBITDA growth in the high single digits, consistent with last year. Interest coverage ratios were approximately 2 times, revolver draws remained low and amendment activity was stable.
Non-accruals declined to 1.0% of the portfolio at fair value after two names were removed and no new names were added. Nicholson said non-accruals have averaged roughly 1% at fair value over the past three years.
Payment-in-kind income was stable on a dollar basis but increased to 11.7% of total investment income because cash interest declined with lower rates. Nicholson said PIK income remains below its 2024 peak of more than 13%, and more than 85% of PIK names were structured that way at underwriting.
The company’s average loan-to-value ratio increased to 47%. Packer said the move reflected broader valuation changes, especially in software, rather than weaker borrower fundamentals. During the Q&A, Nicholson said software portfolio LTV was approximately 48%, close to the overall portfolio level.
Software Exposure Declines, Buybacks Continue
Software exposure fell to approximately 16% of the portfolio from roughly 19% last quarter, driven by repayments. Nicholson cited the repayment of Intelerad, a provider of medical imaging software solutions that was sold to GE HealthCare at a $2.3 billion valuation. The investment totaled $169 million for OBDC and more than $400 million across the Blue Owl platform.
Management said it remains cautious about the potential impact of artificial intelligence on some software businesses, but Nicholson said the company has not yet seen a material impact on software borrower performance.
Blue Owl repurchased $35 million of stock during the quarter, adding $0.02 to NAV per share, according to Lamm. Over the past two quarters, the company has repurchased $183 million of stock. The board authorized a new $300 million share repurchase program in February, replacing the prior $200 million plan, with about $265 million remaining after first-quarter activity.
Lamm also highlighted balance sheet actions, including a January upgrade from Moody’s to Baa2 and a post-quarter $400 million unsecured note offering. He said liquidity increased to more than $4 billion in total cash and facility capacity, exceeding unfunded commitments and providing capacity for investments and upcoming maturities.
Packer closed by noting that OBDC has reached its 10-year anniversary. He said the fund has delivered a 9.6% annualized total return over that period while maintaining low loss rates that averaged 31 basis points annually.
About Blue Owl Capital (NYSE:OBDC)
Blue Owl Capital Corporation (NYSE: OBDC) is a publicly traded business development company sponsored by Blue Owl Capital, a global alternative asset manager. Launched in 2020, the firm provides customized financing solutions to middle-market companies across various industries. As an externally managed BDC, Blue Owl Capital Corporation leverages the deep credit‐investment capabilities of its sponsor to deliver flexible capital tailored to the needs of growing businesses.
The company’s investment activities span a range of private credit products, including first‐lien senior secured loans, unitranche facilities, second‐lien financings, mezzanine debt, and minority equity co-investments.
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