Blue Owl Lifts Earnings as Portfolio Contracts
The investment portfolio declined to $14.96 billion as lending activity slowed.
Blue Owl Capital Corporation (OBDC), a business-development company, reported higher quarterly net investment income as lower expenses helped offset a smaller investment portfolio. GAAP net investment income rose to $176.2 million, or $0.36 a share, from $159.2 million, or $0.32 a share, in the prior quarter.
The sequential improvement interrupted a run of weaker operating results, though earnings remained below year-earlier levels. Net assets generated by operations swung to an increase of $65.7 million from a decrease of $24.4 million in the prior quarter as realized and unrealized losses narrowed.
Total investment income increased 1.2% from the prior quarter to $401.3 million, aided by higher dividend income and nonrecurring income from a preferred-equity realization. It declined 17.4% from $485.8 million a year earlier as lower average investments weighed on income.
Adjusted net investment income rose to $170.6 million, or $0.34 a share, from $153.0 million, or $0.31 a share, sequentially. A year earlier, adjusted net investment income was $205.8 million, or $0.40 a share.
Expenses declined to $224 million from $235 million as average borrowings fell to $8.4 billion from $9.3 billion, reducing interest expense. Net realized and unrealized losses narrowed to $110 million from $184 million in the prior quarter, though they exceeded the $79 million recorded a year earlier.
Investment activity slowed further. New commitments fell 53% sequentially to $319 million, while funded investments declined to $219 million; both measures were also sharply below year-earlier levels. Pricing weakened, with the weighted-average interest rate on new commitments declining to 8.7% from 9.7% a year earlier.
Net asset value fell to $14.26 a share from $14.41 in March and $15.03 a year earlier, reflecting markdowns on a small number of investments. Non-accruals rose to 2.8% of the portfolio at cost from 2.0%, while first-lien loans increased to 73.2% of fair value as Blue Owl shifted the portfolio toward senior-secured exposure.
Blue Owl reduced its base dividend to $0.31 a share from $0.37 and declared a $0.02 supplemental dividend after none in the prior quarter. The company also repurchased about $35 million of stock, which added to net asset value per share.