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DATE

Thursday, August 7, 2025, at 10 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Craig Packer
  • President — Logan Nicholson
  • Chief Financial Officer — Jonathan Lamm

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TAKEAWAYS

  • Return on Equity (ROE)-- 10.6% ROE from adjusted net investment income for Q2 2025, marking twelve consecutive quarters of double-digit ROE on adjusted net investment income per share with adjusted net investment income (NII) per share of $0.40 for Q2 2025.
  • Net Asset Value (NAV) Per Share-- Net asset value per share was $15.03 as of Q2 2025, down $0.11 from the prior quarter, reflecting portfolio markdowns limited to a few existing watch list names in Q2 2025.
  • Adjusted Net Investment Income-- Adjusted net investment income was $0.40 per share, up $0.01 per share compared to the prior quarter, primarily due to elevated one-time repayment income of $0.05 per share.
  • Dividend Coverage-- Dividend coverage was 109% for Q2 2025, supporting both base and supplemental dividends; a $0.02 supplemental dividend for Q2 2025 results will be paid on Sept. 15, and a $0.37 base dividend declared for Q3 2025, payable Oct. 15, 2025.
  • Portfolio Investments-- Investments totaled nearly $17 billion as of Q2 2025 and with close to $8 billion in net assets at quarter end.
  • Outstanding Debt-- Total outstanding debt was about $9 billion as of Q2 2025, resulting in net leverage of 1.17 times, down from 1.26 times in the prior quarter and within the target range of 0.9 to 1.25 times.
  • Liquidity-- Total cash and facility capacity was $4 billion as of Q2 2025, representing more than two times unfunded commitments, and $500 million in new five-year notes were issued during Q2 2025.
  • Non‑Accrual Rate-- Non-accrual rate was 0.7% at fair value as of Q2 2025 and 1.6% at cost, with a sequential increase in the cost-based metric due to one additional small position moving to non-accrual status.
  • Median and Weighted Average EBITDA-- Portfolio companies’ median EBITDA was $133 million and weighted average EBITDA was $222 million, both higher than in the prior quarter.
  • Interest Coverage-- Borrower interest coverage ratio rose to 1.9 times, indicating increased cash flow protection.
  • PIK Income-- PIK income represented 9.1% of total investment income for the quarter, down from 10.7% in the prior quarter, primarily due to refinancing activity, including Trucordia.
  • Equipment Leasing JV-- A cross-platform joint venture launched to invest in equipment leases, expected to deliver low double-digit yields and accretive impact to fund-level ROE once fully ramped.
  • M&A and Deal Environment-- Deal activity described as “muted,” yet management noted stabilized credit spreads and a “noticeable pickup in engagement with sponsors” in the last 60 days.
  • Spillover Income-- Spillover income was $0.33 per share as of Q2 2025, nearly equivalent to one full quarter’s base dividend ($0.37 per share), providing cushion for future payouts.
  • Portfolio Diversification-- Average position size represented less than 45 basis points of the portfolio as of Q2 2025; and the debt portfolio had a 42% average loan-to-value (LTV).
  • Strategic Expansion-- Expansion into alternative credit, investment-grade credit, and digital infrastructure, including several joint ventures, is adding to origination opportunities, as discussed by management over the past year.
  • Merger Synergies-- The “vast majority” of operating expense synergies have been realized; remaining financing-related benefits are expected “piecemeal” over the next year and could contribute 50-75 basis points to ROE over time as capital is deployed and rebalanced.
  • Tariff Exposure-- Tariff exposure was in the mid-single digit percentage range as of Q2 2025, reduced from prior estimates, with management stating, “our exposure is narrower than we had previously estimated.”
  • Origination Mix-- 10% of Q1 originations involved equity and joint venture investments.
  • Supplemental Dividend Policy-- Continued over-earning of the base dividend is supporting ongoing supplemental dividends as declared by the board for Q2 2025.

SUMMARY

Blue Owl Capital (OBDC 0.99%) management confirmed all major operating expense synergies from the OBDE merger have been realized, with incremental upside from financing synergies and portfolio rotation to come over the next year. Management said, “another 50 to 75 basis points of ROE” may accrue from financing and portfolio rebalancing over time, and indicated an additional “25-plus basis points of ROE” from portfolio realignment into joint ventures, potentially increasing ROE by 50 to 75 basis points over time as these actions take effect. The company reported that median and weighted average EBITDA for portfolio companies rose to $133 million and $222 million, respectively, exceeding the prior quarter’s levels. Borrower fundamentals improved, as reflected by higher interest coverage ratios, stable internal portfolio ratings, and steady credit performance evidenced by below-industry-average non-accrual and loss rates. Management characterized current deal sourcing as driven largely by existing clients but highlighted the equipment leasing joint venture and cross-platform origination funnel as increasing sources of novel investment opportunities. The firm decreased net leverage to 1.17 times, fully absorbing the impact of the OBDE merger and reaffirming “ample capacity to navigate going forward.”

  • Management stated, "the market is expecting modest additional rate cuts later this year." but emphasized, "we are confident that we will maintain our dividend level throughout the rest of the year."
  • Management said, “about 20, 25% [of financing synergies] have not occurred,” and identified the benefit as “another 50 to 75 basis points of ROE improvement over time as financing and portfolio rebalancing synergies take effect” while portfolio realignment may add “another 25-plus basis points” of ROE on a pro forma basis
  • Discussion revealed that Joint-venture and equity investments in new business lines are expected to be “directionally meaningful” without changing the overall risk profile or return goals, and could potentially comprise “10% to 15% of the portfolio in the next couple of years,” according to management commentary.
  • Management reduced estimates of tariff exposure within the portfolio, noting borrower resilience and sponsor support for diversification in affected names.
  • Direct lending continues to command a “150 to 200 basis point premium” over the broadly syndicated loan market, maintaining healthy relative returns even in tight spread environments.

INDUSTRY GLOSSARY

  • PIK (Payment-in-Kind): A debt instrument feature where interest payments are made in the form of additional debt or equity, rather than cash, enhancing yield and potential returns.
  • Supplemental Dividend: An additional dividend distributed to shareholders above the regular base dividend, typically funded by earnings in excess of the base distribution.
  • Non‑Accrual Rate: The proportion of investment assets that are not currently generating scheduled interest or dividend income, often due to borrower financial distress.
  • Spillover Income: Undistributed, accumulated net investment income retained for potential future dividend payouts, strengthening dividend stability across market cycles.
  • LTV (Loan-to-Value): A risk metric calculated as loan amount divided by the value of the underlying collateral, expressing credit protection in the lending portfolio.

Full Conference Call Transcript

Craig Packer: Thanks, Mike. Good morning, everyone, and thank you all for joining us today. We delivered solid second quarter results driven by the continued strong performance of our portfolio. As a reminder, our second quarter results reflect the first full quarter of combined company results following the merger with OBDE that closed in January. In the second quarter, we achieved an ROE of 10.6%, our twelfth consecutive quarter of double-digit ROE based on adjusted NII per share of $0.40, reflecting the ongoing strength of our earnings power. As of quarter end, our net asset value per share was $15.03, down $0.11 from the prior quarter.

Our portfolio continues to perform well, which we believe is a reflection of our investment approach that emphasizes downside protection by focusing on large, highly diversified, recession-resistant businesses. The modest write-downs in Q2 occurred on a few companies that have been on our watch list for several quarters, including some that have been impacted by tariffs. None of these are new underperforming names. In fact, given the uncertainty around tariffs, we're quite pleased with how our portfolio is performing, which is in line with our expectations given our business mix. Overall, the fundamental performance across our portfolio remains strong. We are not seeing any broader signs of stress.

As Logan will dive into later, our borrowers continue to experience healthy fundamental trends, including solid revenue and EBITDA growth. OBDC's great credit performance, as evidenced by our below-industry-average non-accrual and loss rates, is a result of our defensive strategy focusing on high-quality, upper-middle-market businesses. Next, I want to talk about the current market environment and how we are approaching it. 2025 has been a more challenging deal environment as muted M&A has weighed on overall deal activity. Despite limited new supply and a strong broadly syndicated loan market, the spread pressure we experienced last year has troughed and generally stabilized.

That said, our sourcing capabilities, which are enhanced by our scale across both Blue Owl Capital and our credit platform, allow us to continue to generate attractive deal flow. As you've heard me talk about over the past year, we have expanded our broader business into other complementary strategies, including alternative credit, investment-grade credit, as well as data centers and digital infrastructures. With our expanded suite of products across the platform, we're able to access new attractive investment opportunities while also adding financing tools that are valuable to our borrowers and sponsors.

Given our deep expertise in these areas, we're able to better meet the diverse and ever-evolving needs of our partners, which is especially important considering the more muted deal environment we have experienced this year. Our growing solution set has generated novel origination opportunities for our BDC. While we aren't changing our fundamental strategy at OBDC, we're currently evaluating cross-strategy opportunities. At quarter end, we formed a cross-platform equipment leasing joint venture. This is an example of how Blue Owl's in-house expertise enables us to explore strategic equity that has the cash flow and credit profiles to provide consistent income, which is one of the hallmarks of our investment strategy.

Following the OBD merger closed earlier this year, we have incremental capacity to execute on these opportunities. Select strategic equity and joint venture investments enhance our diversification and expand our reach in new investment areas that are unique to the Blue Owl platform and complement our core sponsor deal flow. To close, we believe our experienced team, defensively constructed portfolio, disciplined underwriting, and highly durable funding model have positioned us to deliver strong risk-adjusted returns regardless of what lies ahead. Now I'll turn it over to Logan for additional color on portfolio performance.

Logan Nicholson: Thanks, Craig. Despite deal activity being relatively subdued in April after the initial tariff announcement, we continue to find attractive opportunities to commit capital in the second quarter. We deployed approximately $1.1 billion of new investment commitments with $906 million of fundings in the second quarter. We also saw a steady flow of repayments with $1.9 billion of paydowns this quarter, which resulted in net leverage landing at 1.17 times. You recall, producing leverage back down to our target range was a priority following the one-time leveraging event from the merger with OBDE earlier this year, we now have ample capacity to navigate going forward.

As Craig mentioned earlier, our scale and incumbency create a unique advantage, and in the uncertain market environment that persisted throughout the second quarter, the majority of our originations came from existing borrowers. A recent example of this was Trucordia, an insurance brokerage firm that has been part of the Blue Owl portfolio since 2020. At inception, we provided a creative financing solution that included a cash-paid debt component plus an intentionally structured PIK component and a common equity co-investment. In the second quarter, the company completely recapitalized, resulting in the payoff of our term loan, the collection of all accrued PIK interest on that loan, and the realized gain on our common equity position.

Additionally, the existing preferred equity investment was refinanced. Overall, the transaction resulted in an IRR in the low double digits and a MOEK of approximately 1.4 times across our entire investment. This is yet another example of how structuring deals with PIK at inception can lead to more attractive returns. Additionally, given our deep and long-standing relationship with the borrower, Blue Owl was able to provide a new second lien term loan behind a broad syndicated first lien as the sole lender in that tranche. The transaction highlights the strength of our incumbencies and our ability to provide customized flexible solutions to deliver attractive risk-adjusted returns for our shareholders.

Before we turn to the portfolio, as Craig noted earlier, we formed an equipment leasing joint venture at quarter end. It will allow us to efficiently invest in a diverse pool of high-quality equipment leases with a dedicated leverage facility. We expect it to generate attractive low double-digit yields once fully ramped, which should be accretive to fund-level ROEs over time. This is yet another example of how we leverage the breadth of the Blue Owl platform to create value for shareholders. Now I'd like to touch on some portfolio metrics. We believe our longstanding and disciplined approach of investing in a diverse pool of upper-middle-market businesses and non-cyclical sectors continues to drive strong portfolio results in all market environments.

OBDC's average investment represents less than 45 basis points of the portfolio, minimizing our exposure to any single company. The median EBITDA of our portfolio borrowers is $133 million, and the weighted average EBITDA is $222 million, up from $120 million and $215 million in the prior quarter, respectively. Our debt portfolio sits at a conservative LTV of 42% on average, which we believe is key to protecting our downside and supporting robust recoveries during challenging times. As Craig highlighted, the fundamental performance of our portfolio company borrowers remains strong. Revenue and EBITDA increased by mid to high single digits on a year-over-year basis, accelerated slightly compared to prior quarter results.

Interest coverage increased to 1.9 times based on current spot rates, providing our borrowers with incremental cash flow cushion. And PIK income decreased again quarter over quarter, down to 9.1% of total investment income from 10.7% last quarter, primarily driven by refinancings of several PIK investments, including Trucordia, as I mentioned earlier. As we've highlighted in the past, the vast majority of our remaining PIK names were underwritten at inception rather than resulting from credit issues, and these investments continue to perform as expected. Our internal ratings, which range from one to five as an indicator of portfolio health, remain steady, and our watch list was down modestly at cost from the prior quarter.

Further, we do not see any material pickup in amendment activity or other signs of material stress. Outside of our watch list, our portfolio is performing well. Our marks remain stable quarter over quarter. If you were to exclude the handful of names on our watch list where we saw markdowns, the rest of our portfolio marks were flat quarter over quarter at $0.96 a par. Our non-accrual rate as of quarter end was 0.7% at fair value and 1.6% at cost, compared to 0.8% and 1.4% in the prior quarter, reflecting the addition of one small position that has been on the watch list for several quarters.

And finally, at the time of our first quarter call, we estimated that our tariff exposure was roughly mid-single digits of the portfolio. We're pleased to report that today, with the benefit of more time engaging our portfolio companies, we believe our exposure is narrower than we had previously estimated. Our borrowers continue to manage these headwinds well, and for the small substantive names impacted by anticipated tariffs, our sponsors continue to provide support and resources to diversify supply chains. In closing, I want to echo the sentiment Craig shared. Our second quarter results demonstrate the continued strength of our portfolio, which is bolstered by our differentiated origination funnel and conservative approach to underwriting.

And now I'll turn over the call to Jonathan to provide more detail on our second quarter financial results.

Jonathan Lamm: Thank you, Logan. OBDC delivered another quarter of solid financial performance. We ended the quarter with total portfolio investments of nearly $17 billion, total net assets of nearly $8 billion, and total outstanding debt of approximately $9 billion. Our second quarter NAV per share was $15.03, down from $15.14 last quarter. Turning to the income statement, we earned adjusted net investment income of $0.40 per share, up $0.01 as compared to the prior quarter, driven primarily by an elevated level of one-time repayment income in the second quarter totaling $0.05 per share, which was about $0.03 per share higher as compared to our three-year average. This was partially offset by lower leverage.

Similar to prior quarters, we over-earned our base dividend, resulting in the Board declaring a $0.02 supplemental dividend based on our second quarter results, which will be paid on September 15 to shareholders of record as of August 29. The Board also declared a third quarter base dividend of $0.37, which will be paid on October 15 to shareholders of record as of September 30. We continue to believe OBDC is well-positioned for the evolving rate environment. Our adjusted earnings covered our base dividend, with 109% dividend coverage. Further, our spillover income remains healthy at approximately $0.33 per share and equates to nearly a full quarter's worth of base dividends.

We believe having a meaningful undistributed spillover supports our goal of maintaining a steady dividend through volatile and varying market conditions. Moving to the balance sheet, we finished the quarter with net leverage of 1.17 times, down from 1.26x, and within our target range of 0.9 to 1.25 times. As we made a concerted effort to lower leverage following our merger with OBDE, as Logan mentioned. Turning to liquidity, we ended the quarter with over $4 billion in total cash and capacity on our facilities, which was over two times in excess of our unfunded commitments. We believe we have positioned our balance sheet with significant capacity to invest as new opportunities come in.

During the quarter, we further bolstered our liquidity by raising $500 million in new five-year notes, and we continue to optimize our capital structure post-merger with several refinancings and amendments of our secured facilities. As a result, 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. I'll now hand it back to Craig to provide final thoughts for today's call.

Craig Packer: Thanks, Jonathan. To close, I want to reflect on where OBDC and the broader BDC market are today. Over the past year, we saw two trends that have impacted both OBDC and the broader leveraged finance markets. First, interest rates declined 100 basis points from their peak as market expectations evolved. As a predominantly floating rate asset class, this has had a direct impact on our portfolio's earning power. Second, while direct lending spreads have been tighter, spreads have narrowed in all markets. Direct lending still commands a healthy premium to the broadly syndicated loan market, yielding a 150 to 200 basis point premium, which is generally in line with historical averages.

Despite these two headwinds, we believe our portfolio is positioned for strong consistent performance. Absolute returns for the indirect lending continue to be compelling, and OBDC continues to deliver attractive relative returns. We were once again able to demonstrate in the second quarter, generating a 10.6% ROE and a 10.4% dividend yield on net asset value. Looking ahead, spreads have generally stabilized, while the rate outlook remains uncertain, the market is expecting modest additional rate cuts later this year. However, even with that assumption, we are confident that we will maintain our dividend level throughout the rest of the year.

On the deal environment, we are cautiously optimistic about a potential rebound in activity in the second half of this year. Recent conversations with private equity sponsors have been encouraging, and if these discussions translate into new transactions, they could significantly boost deal flow. Regardless of whether these deals materialize, we are confident that our sourcing capabilities, enhanced by the scale of our platform, continue to drive attractive deal flow going forward. In closing, we feel very comfortable with our ability to deploy capital opportunistically and manage leverage appropriately. Our strong track record combined with the scale of our platform and consistent investment philosophy positions OBDC to deliver attractive risk-adjusted returns to our shareholders across any economic environment.

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

Operator: Thank you. The floor is now open for questions. Our first question today is coming from Brian McKenna of Citizens. Please go ahead.

Brian McKenna: Thanks. Good morning, everyone. We're a couple of quarters removed now from the merger with OBDE. Where are we in terms of realizing the vast majority of those synergies? On the expense side, you know, those are pretty straightforward. But just in terms of remaking some of the assets and also optimizing the funding side, I'm just trying to think through if there's any more upside to the 10.5% ROE from here, assuming all else equal?

Craig Packer: Sure. Good morning, Brian. Jonathan, why don't you handle the expense and financing side?

Jonathan Lamm: Sure. So Brian, on the OpEx side, as we mentioned last quarter, the vast majority, really all of that has come through, you know, came through immediately, and we've seen those synergies, you know, take effect. On the financing side, it's a little bit of a slower burn just because we have certain financings, in particular, on the secured side that have, you know, call dates or reinvestment periods that still need to come. And so that will occur really over the course of the next year or so. It's happening piecemeal. So I would say that the vast majority there has not occurred, and then I'll hand it back. About 20, 25%.

Craig Packer: How much ROE from benefit from additional financing synergies?

Jonathan Lamm: Another 50 basis points.

Craig Packer: On the portfolio rotation, it's going to take a little bit of time as well. You know, part of what we have been planning for is OBD was not invested to the same extent as OBDC in some of the joint ventures that we have that generate nice returns. So as we deploy capital into those strategies, you know, we would be able to essentially true up OBDC on a pro forma basis, which probably is another 25 plus basis points of ROE. So between the financing and the portfolio rebalancing, I think there's a potential for another 50, 75 basis points of ROE improvement over time as those things take effect.

Brian McKenna: Okay. That's really helpful. Thank you both. And then I appreciate all the detail. I'm just kind of the broader capabilities across your credit platform. And you called these out, but in areas like alternative credit, digital infrastructure, etcetera. And it's great to hear the positive impact those businesses are having on just creating differentiated deal flow and really additional origination opportunities for OBDC. I mean, is there any way to quantify how much of year-to-date originations or commitments have come from these types of opportunities? And then is there a way to think about this mix longer term?

Craig Packer: Sure. So okay. I think that there's a couple of pieces to this, and I want to sort of separate them out. The first is you know, Blue Owl as a platform has gotten into new lines of business that just we weren't in previously. As folks, I think, know, but just to highlight, we acquired Adelaide Capital last year, which is in the business of what we call alternative credit, but some will call it asset-based lending. We also got into the business of managing data centers with our acquisition of IPI. Our real estate business has seen tremendous activity in the data center space. So the firm as a whole has a much broader opportunity set than ever before.

And we are going to be selective, but many of those opportunities offer similar cash flow characteristics and return characteristics to what we've been doing in our direct lending business. And so we're going to be deliberate about what we would put in OBDC, but we have just a broader deal funnel, and we think that's valuable in and of itself, but especially in an environment where there's just less new sponsor deals. So that's very attractive to us. It's early, and so I wouldn't, looking backwards for this quarter and the previous quarters, I would say it's very modest.

Because we're just getting that deal flow in place and just now in a position where we can commit to new deals and put them in the portfolios. We've talked a couple of times in the script. We set up an equipment finance JV across our BDCs. So historically, it's had limited impact, but I will tell you the reason why we've mentioned it a couple of times today is we're seeing very consequential inbounds in this area. And so I do think going forward, it's something that we will really benefit from.

I kind of hesitate to quantify it on the fly, you know, but if I would just sort of cuff it, in the next couple of years, could you see 10% of the portfolio, 15% of the portfolio in some of these new strategies? And don't hold me to that. But I want folks to know it can be meaningful, but I also want them to know it's not going to dominate our investing. But these are really, I think, attractive investments that will fit really well in our BDC and offer attractive risk-adjusted returns. So just directionally meaningful, but not change the overall complexion of the portfolio.

Obviously, keep everyone updated quarter by quarter as we start to make these types of investments.

Logan Nicholson: Brian, to that end, 10% of Q1 originations were into these types of equity and JV investments.

Brian McKenna: Okay. That's great. Thank you, guys. Appreciate all the color.

Operator: Thank you. Our next question is coming from Aaron Cyganovich of Truist Securities. Please go ahead.

Aaron Cyganovich: Thanks. You mentioned you're kind of cautiously optimistic about a rebound in activity in the second half. Maybe you could talk a little bit about what types of deals you're seeing or are they predominantly M&A? Are they refinancing? And how open are sponsors to getting deals done rather quickly?

Craig Packer: Sure. I'll start, Logan. You can chime in. Look, I always debate how much to lean in on this comment because we've been hopeful before and been disappointed before. But there's been a noticeable pickup in engagement with sponsors in the last sixty days or so. That feels a little bit different. And, you know, if it were to really result in transactions, I think, can move the needle. In terms of the flavors, it's a mix. We've seen inbounds on potential public to private activities, so public companies getting taken private. So that would be brand new names to the market. Those are really exciting.

There is still activity where we're refinancing loans in the public market into the private markets. There's an ebb and flow there. There are certainly names going the other direction. From private to public, but there are syndicated loans that are getting refinanced in our market. And then there's just, you know, good old-fashioned sponsors looking to potentially sell companies to other sponsors. Continue to see a steady drumbeat of add-on acquisition financing for our portfolio, that's been carrying us throughout. But I would say those first three buckets or so, there's been enough in each area that gives us some hope that this will translate into increased deal activity in the second half of the year.

I'm always a believer, you know, like, to see it actually happen versus predicting it'll happen. But these deals are moving along at a nice clip, and hopefully, will unstick here a bit.

Aaron Cyganovich: Got it. Thanks. And then leverage came back down within your target. Can you talk a little bit about where do you see leverage heading? Are you going to keep it around this level? Or might you lever it up, particularly if deal activities start to pick up?

Logan Nicholson: Yeah. Sure. That was intentional as we noted. We were comfortable at the higher end of our range last quarter, but we've delevered to just under 1.2 times. I think in this range, which is near the top end of our range, is where you'll see us hover in terms of leverage. So very comfortable at this level. And the one-time OBDE merger impact is now fully worked through. So, you know, high one fifteen to one twenty, the high end of our range. Think, a good place to estimate.

Aaron Cyganovich: Thank you.

Operator: Thank you. The next question is coming from Robert Dodd of Raymond James. Please go ahead.

Robert Dodd: Hi, guys. And if I can go back to your comment about these other strategies, Craig. I mean, I'll ask you a hypothetical. You can dodge it if you want. If the platform were to make a new acquisition of a new strategy, you know, tomorrow, what kind of time frame, you know, to onboard it, review it, maybe let it mature a little bit, then, you know, look, is it BDC appropriate and then build a structure? I mean, is it if you made an acquisition tomorrow, it's like, might be onboarding those assets two years from now if they're BDC appropriate or what's the timeframe for review of whether something review and structuring, etcetera, etcetera.

Whether something's appropriate to add in terms of a new type of strategy to the BDC portfolio.

Craig Packer: Well, the acquisitions we've made are completely integrated and fully ramped. Deal flow is active. And our teams are integrated with those opportunities. We've already done all the work necessary to make sure investments can be appropriate, structured properly, you know, past muster in terms of allocation policies. Set up appropriate coordination. So all the opportunities I mentioned earlier, that's all live now. And the delay is not from work internally, but just finding deals that work and takes time for deals to come in. And we commit and they close. So it's just the life cycle of the deals at this point, not any holdups.

We are live on this now, and we look weekly at opportunities that can fit across the platform. And, again, that's why we're saying we're talking about this because you're gonna see because third-quarter investments show up that are a benefit of what we're talking about here. You know, in terms of your hypothetical, you know, if you see us announce we're announcing an acquisition at the Blue level, you know, the deal closes, we're able to integrate and get things up and running really quickly. You know, measured in, you know, a month or two. It doesn't, you know, we're a nimble organization. We're ultimately a fairly focused and focused organization.

You know, we're in three major credit lines, credit, real assets, and GP stakes. You know, by the time we announce a deal, you should assume we've diligence it well and understand exactly how it's gonna fit and whether it's appropriate. And we can be investing in those strategies, you know, measured in months. But deals just have a cycle for themselves. But I would just focus on the deals we've already announced rather than some hypothetical and just say, you know, we're again, I think it's a huge positive for OBDC shareholders. That's why I'm highlighting it. These are really attractive risk-adjusted returns.

Originated and structured by teams with deep, deep, deep domain expertise and offer, you know, low double-digit plus ROEs. You know, Robert, you know well. Like, we've done this before. Out of the acquisition level, but we've built joint ventures in aircraft and rail car finance and drug royalties asset-based lending. I mean, these have been very creative strategies were very deliberate about how we do them. But they offer additional diversification, additional consistent income. The benefits of scale. And, I think it's a nice way to allow us to continue to be very disciplined in our core sponsor lending business.

Robert Dodd: Got it. Got it. Thank you for that color. If I got one more on kind of related to the when we talk about your public-private markets, I mean, there's always swings that mad about. I mean, there's a big sponsor who's talking publicly or at least talking to Bloomberg about shifting a fair number of their deals in private credit to the syndicated loan market, which happens to be open right now with pretty tight spreads.

You know, are you seeing anything in terms of, like, overall shifts in terms of share or anything like that, or is that just used to know the artifact of the noise of that we currently see of, you know, it's swinging backwards and forwards between the two depending on points in the cycle.

Craig Packer: I think it's a very healthy traditional market environment. I would say sponsors continue to shift more of their decisions and financing decisions to the private markets, especially for new deals. In terms of the, you know, trade balance, in one direction or the other, it's pretty balanced. You know, deals coming from public to private, or from private to public. It's a healthy market where sponsors have two good choices, and they're picking. I mean, we've talked about this, you know, many times on these calls. They're gonna be periods of times, you know, the typical order of affairs is both markets are open and sponsors pick. You know, and that's what that's the environment we're in now.

There are gonna be other periods of time where the public markets, you know, are challenged, and deal flow will swing to the private markets. But this is the way it should be. Both markets, there's plenty of deal flow to feed both markets. And we continue to find that the secular shift is towards direct lending. And then importantly, continue to get a significant premium, better documentation, better diligence. And we continue to cherry-pick, we think, the best assets for the private markets. So I think it's a healthy functioning environment that suits us just fine.

Robert Dodd: Got it. Thank you.

Craig Packer: Thanks, Robert.

Operator: Thank you. The next question is coming from Mickey Schleien of Clear Street. Please go ahead.

Mickey Schleien: Yes. Good morning, everyone. Craig, this question may sound a little basic, but we're getting such mixed signals on the economy. Whether we're looking at labor numbers or inflation. Or GDP growth, I just want to ask at a high level, where do you think we are in the credit cycle?

Craig Packer: So our companies continue to perform well. We talked about in the script. You know, they continue to grow modestly quarter over quarter, low single digits, you know, more like double digits year over year. I would say, generally, we continue to see a modestly, you know, sort of expanding economy. But I look. I know at one level, we have 300 plus portfolio companies at OBDC. And so investors will look to us as a barometer, but I just quickly rushed to remind everyone, we are not a microcosm of the US economy. We are heavily concentrated in companies that we think are resistant to a recession.

Particularly, you know, things like software and insurance brokerage, and parts of health care, food and beverage. And so we are not expecting to be an early warning sign of the US economy and weakness. We have very few cyclicals when you're reading about tariffs affecting auto, it's just not something that impacts our portfolio. We have, like, no auto exposure. So I read and consume economic information the same way sure most investors do, and there's, you know, there's concern about the way the labor numbers and just general, you know, impact of tariffs and potential economic weakness.

So I think the consensus is that, you know, growth is slowing in the US, but I'd say that's not what we're seeing. And I hope that if we got in a modest recession that would have, you know, even less impact on OBDC.

Mickey Schleien: And if we do get into a recession or things slow down meaningfully and, normally, we would see spreads widen in that sort of environment. And you mentioned, I think, in your prepared remarks that, you know, they may have troughed. Do you think that trough is sustainable given the amount of capital flowing into private credit? And are you seeing any signs of more pricing discipline in the market?

Craig Packer: My sense is spreads have troughed. You know, we know, I think that they've troughed and I'm hopeful at some point they'll move they'll widen off the trough. I just, I think the reason spreads have gotten as tight as they are is only partly related to capital inflows into the private markets. It's also a white-hot syndicated loan market. And that market is at all-time tights. And, you know, that, you know, we just talked about a minute ago. We compete with that market. So that market, if that market widens, that will benefit private markets. And that market tends to be a period of time where the syndicated market is fickle and cyclical.

And so if you go through has some volatility, spreads will widen there, spreads will widen in the private markets, and then the deal flow environment continues to be modest. So I would say I'm not predicting it in the micro short term, but I would be hopeful that the next move and spreads is wider, not tighter, as, you know, any one of those factors, comes into play more deal flow. Cooling public market, or just some capital consumption in the private markets where there's not quite as much capital out there for new deals.

Mickey Schleien: That's very helpful. Thank you for that, Craig. Those are all my questions this morning. Thank you for taking the time.

Craig Packer: Thanks, Mickey.

Operator: Thank you. Our next question is coming from Casey Alexander of Compass Point. Please go ahead.

Casey Alexander: Hi, good morning. Craig, I'm just a little curious on the equipment leasing side. That market is often characterized by lower balance fixed rate short duration type loans. Some of which could be difficult to scale, particularly to the scale that OBDC is gonna need for it to make a meaningful contribution to NII. So I'm curious, you know, how you guys plan to scale that business something that's meaningful for OBDC.

Craig Packer: Well, the reason we highlighted the equipment finance JV is not we think it's gonna be a massive investment, but to highlight the type of opportunities that we now have, particularly by our acquisition alternative credit space, for equipment financing, joint ventures, or other types of more asset-oriented joint ventures that can benefit OBDC. I think you're right. It'll take time. It'll take time for it to be meaningful. But as you know, we've done this, you know, before. Wingspire, which is one of the largest investments at OBDC, has a very successful equipment financing business. Has a team, and it's, you know, a meaningful contributor, an important contributor to Wingspire's results, which OBDC benefits from every quarter.

I would say in the equipment finance business, one thing, and I, you know, I will share more detail on this when it's really impactful, so I don't want to spend too much time speculating. But particularly, what's going on in data centers is creating the need for massive amounts of capital where you're building out, scale data centers and have lots of financing needs. For the data center itself and GPUs and the like.

And you have some of the, you know, literally the most valuable companies in the world that are building these facilities and don't want to have assets on their books, and it's creating very chunky opportunities for attractive relatively short duration, returns from potentially investment-grade counterparties. So these are the kinds of things that can be a bit chunkier than the really micro ticket, equipment leasing that you're referring to. So it'll be a mix.

But I want to overemphasize the equipment leasing as being a needle mover for OBDC, but I do want shareholders to understand is that we're taking active steps to leverage our broader capability to come up with ever more ways to diversify our portfolio and create consistent returns. This will just be one of many tools.

Casey Alexander: Alright. Thank you.

Craig Packer: Thanks, Casey.

Operator: Thank you. The next question is coming from Finian O'Shea of Wells Fargo Securities. Please go ahead.

Finian O'Shea: Hey, everyone. Good morning. Just a sort of market-level question on the non-traded we wanted to ask given your, you know, position in that domain. And, of course, it's important to direct lending. Seeing if you had thoughts on just this sort of tail off of gross inflows. And to be clear, industry-wide, post-April Liberation Day, they've continued to sort of tail in May and June. And then as it relates to direct lending and BSL, if this continues, do you think things can really cool down and spreads can widen not only BSL, but the direct lending premium to BSL even in a stable market, could we be hopeful for that?

Say, in the event that you know, non-tradeds have kind of, you know, somewhat run their course or?

Craig Packer: I mean, we're continuing to have significant inflows that are really meaningful at Blue Owl in particular. Right? We're a major player in this space but other platforms as well. You're right. They're not as strong as they were pre-tariffs. They're off maybe 20%, but I think they're on the direction of recovering that. I think most people at the time of tariffs would have predicted a much more significant drop in the inflows of in the non-tradeds. So it's been quite resilient. It's all new capital. And so it's not be, you know, may not the capital base may not be coming in as fast a clip, but it's net meaningful inflows daily. And we get to numbers daily.

They're, you know, we report them monthly. So I think it's proving to be a very durable market that's, you know, frankly, still underpenetrated. And I think there's a lot of room to run in terms of additional penetration in the high net worth space in the non-traded funds. I think for OBDC and OCIC, which is our large non-traded fund or OTIC, they have a really good balance between our non-traded funds, which are a meaningful part but only it's only a meaningful part. It doesn't dominate our platform. So we've got a good balance. It's valuable to have that capital come in. You know, OBDC right now is towards the higher end of its target leverage range.

So it's, you know, we like having this additional capital in the non-traded funds. It's what allows us to continue to sign up on large transactions. So I think that picture is a very good one. And, look, I think it really is showing the resilience of that channel despite what some might have predicted would be more negative. In terms of your question on spreads and the like, I covered this a minute ago. I think that there's three factors that are driving spreads to where they are now. Really strong public market, capital formation on the private side, modest M&A. I think if any one of those three were to reverse course, spreads will widen.

If two of the three reverse course, spreads widen meaningfully. I'd say of the three, I'd bet on M&A and the public markets being towards the higher end of the list, not the lack of capital in the private space because we've continued to see a lot of interest from clients. And, you know, spreads I'd like spreads to be tighter, I mean, wider. Excuse me. But I just always remind investors earning 10% on new investments. On first primarily first lien, 40 plus percent 200 plus million EBITDA, recession-resistant businesses. I continue to think that's one of the most attractive risk-adjusted returns in the market, especially if you think that there's gonna be a recession.

So I'd like spreads to be wider, but the absolute returns in the asset class continue to be strong. OBDC just put up a 10 plus percent ROE. I think that offers really good value to investors.

Finian O'Shea: Awesome. Thank you so much.

Craig Packer: Thanks, Finn.

Operator: Thank you. The next question is coming from Christopher Nolan of Ladenburg Thalmann. Please go ahead.

Christopher Nolan: Hi. Following up on Casey's questions on the equipment finance, is this really gonna focus on technology, data centers, and so forth? Will the industry mix for this SLF be different than for the BDC?

Logan Nicholson: Sure. So it'll be a diversified pool of leases. I think Craig just highlighted one potential channel where the opportunity set is growing and could be chunky relative to very singular, micro equipment leases. We also see the continued trend of bank balance sheet pullback in the space in our existing team came along with our alternative credit team has been in the leasing business for years and has been active in the space. And, if you look at, regional bank pullback, things like health care equipment would be another great example. It's firms that have large capital spend equipment don't have the benefit of regional bank balance sheets anymore.

And so we think some of these environments for equipment leasing on the higher-end capital equipment side, are in a similar place that maybe direct lending was ten, fifteen years ago as banks pull back institutional capital has to step in. So I would anticipate it to be a diversified pool and there are some areas like data centers or health care equipment that we see that could be chunkier, but it should be a diversified pool similar to how OBDC's portfolio is diversified.

Christopher Nolan: And then as a follow-up question, the recent big beautiful bill I believe, have accelerated depreciation. You can depreciate 100% in year one. Was that a factor in deciding to go down the equipment financing route?

Logan Nicholson: No, it was not. It was something that we were thinking about well in advance of that.

Christopher Nolan: Great. That's it for me. Thank you.

Logan Nicholson: Thank you.

Operator: Thank you. Our next question is coming from Paul Johnson of KBW. Please go ahead.

Paul Johnson: Hey, good morning. Thanks for taking my questions. I guess I'd ask, you guys have had pretty, you know, meaningful turnover over the last, you know, eighteen months or so, like, potentially a little bit higher than some of your peers. But as you're kinda looking at your back book of loans in the portfolio and then kind of spreads where they're at today. Think your average portfolio spreads about 5.2% to 5.8%. I mean, how do you kind of think about the spread differential, you know, of today's spreads, which seems like they've kind of troughed at this level. And you know, what's left in the back book.

I mean, should we expect to kind of continue to see a little bit of incremental pressure on just general spread compression as things rotate out of the book? Or do you think at this point they're close enough that the spread compression's sort of behind us?

Craig Packer: Look. I think the vast majority of it's has worked its way through. The sponsors are very efficient at identifying opportunities to refinance and reduce spread. Look. Just to remind everyone, our loans, when we put a new loan in the book, typically, it'll have one, maybe two years of call protection where we get a premium. After that, our loans are typically repayable at par. So one of the value propositions of direct lending is it's efficient for a sponsor in a loan that we're providing that is performing well and through its call protection for us to be able to have a conversation about, you know, a cost-effective refinancing. And so that happens.

It's a lot easier, frankly, than the public markets. It's one of the reasons why the sponsors like working with us. I think the vast majority of that has worked its way through. There's probably some modest amount that sponsors are holding off either for call protection or they think they're gonna exit a company. But I think a lot of it's worked its way through at this point, and you know, you've seen that reflected, as you said, the last eighteen months. There's probably a few names, but most of them, I think, are pretty stable at this point.

Paul Johnson: Got it. Appreciate that. Thank you. And then on that, as loans potentially refi into the BSL market as that happens? last few years. I mean, is there an opportunity there kind of with the Trucordia deal to participate similar to the Trucordia deal to participate, you know, in a junior capital position as these investments move into the BSL market? I mean, that a real investment opportunity that you see in the market? Or is that more kind of a one-off situation that presented itself?

Logan Nicholson: Look, I think it is an opportunity. I would characterize the opportunity though as closer to the one-off end of the spectrum given where junior capital is pricing in the public markets as well? If you look at high yield spreads and the second lien spread environment for syndicated deals, they're at very tight levels. And so when a field goes BSL more often than not, it fully transitions that way. And so I think our relationship and incumbency and long-standing history Trucordia was a differentiator for us. And so I think that mattered quite a bit in this instance.

If you look at the amount of discussion around names going and forth, as Craig mentioned, it's actually pretty balanced, though. And so I don't want to overplay names going to BSL, not leaving us with a substantial junior capital opportunity. We're seeing an equal number of names come out of the BSL market and choose the direct markets. And we saw substantial volume in the last quarter from names transitioning out of the BSL market. So there is a balance between the two. And then new names, whether it be a new LBO, a take private, new names continue to have that secular shift to choosing direct, which we continue to see, and there hasn't been any shift there.

So I think the opportunity set remains a very good one. And I think the junior capital side if the public markets stay where they are, I think it'll be more sporadic.

Paul Johnson: Appreciate it. That's all for me. Thank you very much.

Operator: Thank you. We're showing no additional questions in queue at this time. I'd like to turn the floor over to Mr. Packer for closing comments.

Craig Packer: Right. Well, we appreciate everyone's interest. We were really pleased with our quarter. I think it was one of the strongest in the industry and continued particularly terrific performance, on the NII front, the dividend coverage front. And, and the ROE front. So appreciate everyone's interest, and I look forward to speaking with you again soon.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.