Blue Owl Capital (NYSE:OBDC) executives used the company’s fourth-quarter and full-year 2025 earnings call to address investor focus on private credit valuations and credit quality, highlighting a newly announced $1.4 billion secondary sale of assets across affiliated vehicles that management said was executed at book value. The company also detailed fourth-quarter results, capital allocation decisions, and expectations for earnings pressure from lower base rates and tighter spreads.
Asset sale tied to OBDC II liquidity plans
CEO Craig Packer said the company terminated a previously proposed merger of OBDC II into OBDC after concluding the deal “no longer made sense” in light of market reaction and board discussions. OBDC II, described as a nine-year-old private fund required to consider a liquidity event, has now agreed to sell a $600 million portfolio of assets at book value, representing about 35% of its total assets, with plans to distribute most proceeds to OBDC II shareholders.
Management repeatedly pushed back on headlines suggesting OBDC II was “halting” redemptions. Packer said the fund had been tendering for 5% of shares quarterly for eight years, and that the new approach accelerates liquidity by returning 30% of investor capital at book value within about 45 days through a pro rata distribution. He added that the firm intends to continue returning capital on an accelerated basis as repayments come in, with quarterly evaluations that could resemble 5% per quarter, subject to debt considerations.
OBDC portfolio impact described as modest, with added validation
Packer characterized OBDC’s participation as a partial “strip sale” across more than 70 individual loans, with an average size of about $5 million per position, or roughly 5% of each position. He said the sale modestly increases portfolio diversity and reduces leverage by approximately 0.05x, adding flexibility for future deployments.
In response to analyst questions, management emphasized the transaction was “plain vanilla,” using standard LSTA loan trade settlement procedures, and said there were no hidden structures such as delayed settlement economics or other buyer compensation. Packer said four institutional investors each bought the same amount at the same price and had indicated interest in purchasing more.
President Logan Nicholson provided additional detail, saying the sold portfolio was largely first-lien and had a weighted average spread “just over 500,” which he said was consistent with the broader portfolio. He added the PIK exposure in the sold assets was about 10% to 11%, in line with the company’s overall PIK exposure, and that key metrics such as first-lien percentage and non-accruals were “the same pre and post” for OBDC.
Fourth-quarter results: stable NII, modest NAV decline
OBDC reported adjusted net investment income (NII) of $0.36 per share in the fourth quarter, in line with the prior quarter, which management said translated to a 9.7% return on equity. CFO Jonathan Lamm said results included several non-recurring items—higher one-time income and lower operating expenses—that contributed approximately $0.02 per share in the quarter, which he said was elevated versus historical levels.
On the one-time items, Lamm said most of the benefit came from a repayment that included call protection, while a smaller portion reflected a non-repeatable operating expense “true-up” tied to synergies from the OBDC and OBDE merger, as invoicing and expenses came through late in the year.
Net asset value (NAV) per share was $14.81 at quarter-end, down from $14.89 in the prior quarter. Management attributed the decline primarily to additional write-downs on a “small handful of watchlist names,” partially offset by accretive share repurchases.
Dividend maintained as rate and spread headwinds build
The board declared a first-quarter base dividend of $0.37 per share, payable April 15, 2026, to shareholders of record March 31, 2026. Lamm said spillover income stood at $0.36 per share and supported the dividend.
Packer said the company expects forward earnings to be affected by two dynamics: lower base rates flowing through a majority floating-rate portfolio and tighter spreads on new and repriced assets. He noted there can be a delay between rate cuts and their full impact on the portfolio, and said the weighted average spread on the portfolio has compressed by about 30 basis points over the past year.
While the dividend was maintained for the quarter, Packer said management will evaluate the payout with the board each quarter as the impact of rates and spreads becomes more fully reflected in earnings, adding that the company prefers a stable base dividend but will review coverage and outlook.
Capital allocation: repurchases, leverage reduction, and liquidity
Management highlighted significant share repurchase activity during the quarter amid industry volatility. Packer said OBDC repurchased $148 million of stock at an average discount to NAV of 14%, calling the buybacks accretive to NAV per share. Lamm said the company repurchased 11.6 million shares in the quarter, adding roughly $0.05 to NAV per share, and described it as the largest repurchase in OBDC’s history.
The board also authorized a new repurchase program of up to $300 million, replacing the prior $200 million plan. Even with buybacks, net leverage declined to 1.19x from 1.22x, within the company’s stated target range of 0.9x to 1.25x. Nicholson said OBDC had $820 million of fundings against $1.4 billion of repayments in the quarter, contributing to lower leverage.
On liquidity, Lamm said OBDC had about $4 billion in total cash and capacity on its facilities, which he said exceeded unfunded commitments. Management also pointed to a Moody’s upgrade in late January to Baa2, which it said could improve execution on future unsecured issuance.
Looking ahead, executives said they remain constructive on portfolio fundamentals and do not expect broad-based credit issues, while acknowledging that lower rates and tighter spreads may pressure net investment income. They added that renewed macro uncertainty could create opportunities if spreads widen, and said they will continue weighing new investment deployment against buying back stock when shares trade below book value.
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.
