Blue Owl Capital Corporation

Good morning, everyone, and welcome to Blue Owl Capital Corporation's third quarter 2024 earnings call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Mike Masticcio, head of BDC Investor Relations. Please go ahead.

Thank you, Operator, and welcome to Blue Owl Capital Corporation's third quarter earnings conference call. Yesterday, Blue Owl Capital Corporation issued its earnings release and posted an earnings presentation for the third quarter ended September 30th, 2024. These should be reviewed in conjunction with the company's 10Q filed yesterday with the SEC. All materials referenced on today's call, including the earnings press release, earnings presentation, and 10Q are available on the investor section of the company's website at blueowlcapitalcorporation.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 and are not guarantees of future performance or results and involve a number of risks 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. 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 Packer, Chief Executive Officer of OBDC.

Thanks, Mike. Good morning, everyone, and thank you all for joining us today. We delivered strong third quarter results driven by continued portfolio performance and robust investment activity. We achieved ROE for the quarter of 12.4%, our seventh consecutive quarter of double-digit ROE and dividend yield. reflecting our attractive asset base and the resilient credit quality of our portfolio. As of quarter end, our net asset value per share was $15.28, just off from historical highs. The fundamental performance of the portfolio remains strong, and our non-accrual rate remains well below the industry average. OBDC continues to over-earn the base dividend, enabling us to pay $0.05 per share supplemental dividend and Jonathan will share more on our financial performance in a moment. We're very pleased with our results this quarter and we think it's important to put them into context of what we're seeing in the broader markets. Since we spoke to you last quarter, the interest rate outlook has shifted considerably. The market is now recalibrating based on an expectation of additional rate cuts over the remainder of the year as inflation has eased. When rates increased over two years ago, we took decisive action to ensure our shareholders would benefit from expected earnings momentum while maintaining ample cushion on our base dividend. We introduced a variable supplemental dividend framework and modestly increased the base dividend. Both of these initiatives were designed to deliver predictable cash flow to our shareholders. As floating rate investors, we recognize that the elevated rate environment would not last forever. And by implementing a programmatic supplemental dividend, it allowed OBDC shareholders to benefit from the higher returns associated with the increased rate environment while providing the predictability of our base dividend. This move has proven beneficial since launching the supplemental dividend structure two years ago. OBDC shareholders have received a total of 47 cents of supplemental dividends per share, reflecting our commitment to ensuring our shareholders benefit from our earnings momentum. In the third quarter, OBDC's base dividend coverage was 127%, one of the highest among BDC peers, providing us with ample confidence in our ability to navigate the rate environment ahead. To put this in context, given current market rate expectations, we believe our base dividend will be covered throughout 2025. Depending upon how fast rates decrease, we may continue to generate excess income and pay modest additional supplemental dividends. Turning to the market environment, while M&A activity remains subdued, we continue to find attractive risk adjusted opportunities to deploy capital and stay at our optimal portfolio leverage for enhanced returns. Even during times of muted industry deal activity, we leverage our differentiated scale and broad origination platform to maintain strong deal flow and selectivity. Our growth as a platform has resulted in a large number of incumbent lending positions. With our $128 billion of assets under management and credit, we have a deep pool of existing borrowers and sponsor relationships we could draw upon for deal flow, even in a period of modest new buyout activity. Across our platform, we are lead or co-lead lender on roughly 90% of deals, administrative agent on approximately 65% of our investments, and have the ability to commit over $1 billion to any single investment. This significant presence typically makes us the first call when a new financing for one of our portfolio companies is in the works, driving significant deal flow. To that end, roughly two-thirds of our originations this quarter were deployed into our 435 existing borrowers and refinancings or add-on acquisitions. We believe this reflects not only the confidence we have in our portfolio companies, but also the trust that private equity sponsors place in us as a preferred financing provider. We also have one of the largest direct lending teams in the industry with over 120 investment professionals coupled with several complimentary credit strategies at Blue Owl. The scale across both Blue Owl Capital and our credit platform is one of our most significant competitive advantages that provides us the ability to generate significant deal flow through our sourcing capabilities. This has allowed us to remain highly selective, even as we deployed over $9.5 billion across the platform this quarter. In addition, our growing footprint has made Blue Owl an attractive home for leading asset managers, which has helped drive the recent acquisitions of Adelaide Capital Management, which closed in September, and the announcement of IPI Partners in October, a global investment manager focused exclusively on data centers. These acquisitions expand our platform into alternative credit, broaden our capabilities, and enhance our overall deal flow across the platform. ultimately strengthening our ability to drive originations at the fund level in the coming quarters. Looking ahead, as we think about our investment approach, we remain focused on direct lending to senior secured investments in the upper middle market. We're seeing strong results from our portfolio companies and the number of challenged positions within the portfolio was small. These achievements reflect the durability of our strategy and our continued focus on credit selection and proactive portfolio management which remains unwavering even as economic conditions shift. Finally, I want to provide an update on our previously announced merger with OBDE. As we discussed on our last earnings call, we expect this merger will streamline our direct lending platform, enhance our scale with a high-quality diversified portfolio that offers significant investment overlap, improve our trading liquidity profile for current and prospective shareholders, increase our access to lower cost sources of debt, and finally drive operational efficiencies and cost savings. We also anticipate that it will drive NII accretion over both the near and long term with an opportunity for NAVPR share accretion. We achieved an important milestone in the merger process in mid-October when the joint proxy statement of OBDC and OBDE was declared effective by the SEC. The proxy solicitation process has begun and will conclude at each of our shareholder meetings scheduled for January 8th. Our current expectation is that the transaction will close in January 2025. We encourage all shareholders to review the proxy materials and vote your shares accordingly. As a reminder, the OBDC Board of Director, myself included, has unanimously recommended shareholders vote in favor of the proposals on the ballot. With that, I'll turn it over to Logan for additional color on portfolio performance.