Request for more color on the framework and approach to marking the portfolio, including historical data on average markup between realized and prior unrealized marks.

Jonathan Lamm explained that an external valuation agent marks every single name quarterly to a point value, not a range. Craig Packer added that as a lender, loans are contractually due at par, and the vast majority exit at fair value, with only 35 basis points of loss in the fund's history. “We go out to an external valuation agent every single quarter for every single name, a large, well-regarded valuation agent. They are not providing a range of values, but rather marking the book to the point value.”

While headline nonaccruals declined, the watchlist (credits below 85% mark) increased. Is this due to mark-to-market or deteriorating credit fundamentals, specifically asking about Cornerstone OnDemand?

Logan Nicholson clarified that the 3-5 rated names (broader watchlist proxy) are stable. The increase in credits below 85% mark is primarily due to public market volatility impacting cross-held names like Cornerstone OnDemand, where public loan marks are heavily factored. Cornerstone's underlying earnings and revenues are stable. “Our 3s to 5s rated names, which we would view as more expansive than just the names below 80 and the names that we spend a lot of time considering all of the factors around credit performance, that is stable, and it has not gone up.”

What are the primary drivers of NII for the remainder of the year (fee income, leverage, etc.), and is fee income likely to increase given the choppy market?

Craig Packer stated that it's a mix of factors. He expects fee income to be higher than the Q1 low, and that refinancings will allow for spread addition. He noted caution on leverage but flexibility to increase it for attractive opportunities. He expressed optimism that spreads are widening and base rates stabilizing, which should support earnings. “I do think that this environment over the next 12 months is going to give us an opportunity when we get repayments to recycle those dollars into higher spread assets.”

OBDC

Blue Owl Capital (OBDC) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· May 7, 2026

Source: earnings call transcript

Executive summary

Blue Owl Capital Corporation Q1 FY26 — Dividend Reset Amidst Market Headwinds and Strategic Positioning

Blue Owl Capital Corporation faced a challenging Q1 FY26, with lower base rates, tighter spreads, and minimal fee income impacting adjusted NII and leading to a dividend reduction. Despite these headwinds, the underlying credit quality of the portfolio remains robust, evidenced by declining nonaccruals and stable borrower performance. The company strategically reduced leverage and enhanced liquidity, positioning itself to capitalize on a more attractive investment environment with widening spreads and improved supply-demand dynamics.

Highlights

Credit performance remains strong with no new nonaccruals and stable borrower performance.
Nonaccrual rate declined to 1.0% at fair value, removing two names with no new additions.
Net leverage reduced to 1.13x, the lowest level in two years, providing ample dry powder.
Moody's upgraded credit rating to Baa2 in January, validating strong balance sheet and performance.
Successful $400 million note offering subsequent to quarter end, increasing liquidity to over $4 billion.

Concerns

Adjusted net investment income was $0.31 per share, reflecting a challenging earnings environment due to lower base rates and tighter market spreads.
Base dividend for Q2 reduced to $0.31 per share from a prior higher level.
Net asset value per share declined to $14.41 from $14.81, primarily due to mark-to-market adjustments from spread widening.
Minimal fee and repayment income, reaching a 3-year low, impacted Q1 results.

Guidance & targets

Category	Target	Timeline	Confidence
Base dividend per share	$0.31 per share high materiality	Q2 · FY26	High
Supplemental dividend framework	Pay out 50% of NII above base dividend medium materiality	Ongoing	High
Spreads on new deals	50 to 75 basis points wider high materiality	Near-term	High

OBDC operating KPIs by quarter

OBDC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Fundings	$525M In the first quarter, OBDC had fundings of $525 million against an almost $1.5 billion of repayments and sales, resulting in an ending net leverage of 1.13x, our lowest level in two years. Source: earnings call transcript	$429M OBDC had fundings of $429 million against $747 million of repayments, resulting in ending net leverage of 1.11x. Source: earnings call transcript	-18.3%
Average loan-to-value	47% Our average LTV across the portfolio sits at 47%, implying that over half of enterprise value would need to be impaired before we incur any losses. Source: earnings call transcript	47% LTVs also remained stable this quarter at 47%, providing ample cushion below our loans in the capital structure. Source: earnings call transcript	0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

TG Therapeutics Increased allocation to support continued growth. Blue Owl served as sole lender in a $1 billion financing. $1 billion

Investment made through Life Sciences Specialty Finance (LSI) vehicle.

GE Healthcare Sale of medical imaging software solutions provider, Intelerad. $2.3 billion

Intelerad was an over $400 million investment across the Blue Owl platform.

Risks & headwinds

Lower base rates and tighter market spreads Last year, Q1 FY26

75 basis points (rate cuts between Sept-Dec), 50 to 75 basis points wider (new deals, implies prior tightness)

Mitigation:Dividend reduction to align with forward earnings power; strategic deleveraging to position for wider spreads.

Slower deal environment and reduction in flows into private credit Q1 FY26

minimal fee and repayment income, which was at a 3-year low

Mitigation:Intentional low leverage and ample dry powder to deploy as pipeline builds and opportunities improve.

NAV decline from spread widening Q1 FY26

NAV per share down from $14.81 to $14.41; approximately 75% of write-down attributable to spread widening.

Mitigation:Management emphasizes this is a market-driven mark-to-market adjustment, not deterioration in underlying asset quality.

Potential impact of AI on some areas of software Ongoing

not yet seeing material impact

Mitigation:Remaining appropriately cautious; sponsors focused on preparing companies for an AI world; high bar for new software names and disposition to reduce software exposure.

Earnings benefit from low-cost unsecured notes rolling off as maturities come due FY25-FY26

$1 billion matured since last July, another $1 billion set to mature this year.

Mitigation:Proactive strengthening of balance sheet, including $400 million note offering to address upcoming maturities and enhance liquidity.

What to watch in Q2 FY26

NII trajectory and base dividend coverage

Next quarter / remainder of the year

Current Adjusted NII $0.31/share (Q1 FY26), base dividend $0.31/share (Q2 FY26)

Target NII above $0.31/share, potential for supplemental dividends

Why it matters

Determines if the dividend reset is sufficient and if the supplemental dividend framework will yield additional shareholder returns.

I hope it's a floor. I expect that we will have a really good environment. I think spreads, as we talked about, will go wider from here. Obviously, it's very base rate driven as well. Right now, base rates are expected to sort of stabilize here. We had very little prepayment income this quarter. That's not an easily predictable variable, but our history shows we typically have it. So I hope and expect it to be a floor.

Find out whether OBDC delivers this. Inve re-checks your case every morning.

Q&A highlights

Is the new $0.31 quarterly dividend a floor for NII, and is there potential for supplemental dividends later this year given improving market conditions?

Craig Packer hopes and expects the $0.31 dividend to be a floor, citing potential for higher fee income and stabilizing base rates. He emphasized the commitment to the supplemental dividend framework (50% of NII above base) and expressed optimism for attractive earnings generation in the next 12 months.

“I hope it's a floor. I expect that we will have a really good environment. I think spreads, as we talked about, will go wider from here.”

asked by Brian Mckenna · answered by Craig Packer

2 min read 6 chapters

Detailed narrative

Credit Performance and Portfolio Health

The company reported strong credit performance with no new nonaccruals and a decline in the nonaccrual rate to 1.0% at fair value. Borrower revenue and EBITDA growth remained healthy in the high single digits, consistent with previous quarters. Interest coverage ratios are stable at approximately 2x, and revolver draws remain low, indicating fundamental health across the diversified portfolio of large, noncyclical defensive businesses.

Dividend Adjustment and Earnings Headwinds

OBDC reduced its base dividend for the second quarter back to $0.31 per share, citing lower base rates, tighter market spreads, and minimal fee and repayment income as earnings headwinds. This decision aims to align the dividend with the portfolio's forward earnings power, while maintaining a supplemental dividend framework to distribute excess income.

Strategic Deleveraging and Liquidity

The company intentionally operated with lower leverage, ending the quarter at 1.13x net leverage, its lowest in two years. This, combined with a successful $400 million note offering post-quarter end, has boosted liquidity to over $4 billion, providing significant dry powder to deploy into a more attractive investment environment.

Valuation and NAV Impact

Net asset value per share declined to $14.41, primarily due to mark-to-market adjustments driven by broader market spread widening, not a deterioration in underlying asset quality. Approximately 75% of the write-down was attributable to spread widening across the debt portfolio, with the average loan marked at 95.4% and an average LTV of 47%.

Software Portfolio Dynamics

Software exposure declined to approximately 16% of the portfolio from 19% last quarter, driven by significant repayments including the sale of Intelerad. While the company remains cautious about AI's potential impact, software borrowers continue to demonstrate stable low double-digit EBITDA growth, and the company maintains a high bar for new software investments.

Market Opportunity and Outlook

Management believes the current environment, characterized by wider spreads (50-75 bps wider on new deals) and a better supply-demand balance in private credit, presents a more attractive investment opportunity than the past two years. The company's strong balance sheet and incumbencies position it well to selectively deploy capital into risk-adjusted opportunities as deal flow resumes.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.