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Blue Owl Capital Corporation III, Blue Owl Capital Inc, Blue Owl Capital Corp

Blue Owl Capital Corporation III Reports Third Quarter Net Investment Income Per Share of $0.41 and Net Asset Value Per Share of $15.49

NEW YORK , Nov. 6, 2024 /PRNewswire/ -- Blue Owl Capital Corporation III (NYSE: OBDE, or the "Company") today announced financial results for its third quarter ended September 30, 2024.

THIRD QUARTER 2024 HIGHLIGHTS

  • Third quarter net investment income ("NII") per share of $0.41, in-line with the prior quarter and exceeding the regular dividend of $0.35 per share by 17%
  • As previously announced in January, the Board of Directors (the "Board") declared five special dividends of $0.06 per share; the third of which will be payable on or before December 13, 2024 to shareholders of record as of November 29, 2024
  • 10.6%1 annualized dividend yield based on third quarter net asset value ("NAV") per share
  • NAV per share of $15.49, as compared with $15.56 as of June 30, 2024
  • Originations for the third quarter were $575.1 million, offset by $649.1 million of sales and repayments, as compared with $1.0 billion of originations and $338.3 million of sales and repayments for the three months ended June 30, 2024
  • Investments on non-accrual decreased to 0.2% of the total fair value of the debt portfolio, as compared with 0.5% as of June 30, 2024

"We saw continued strong momentum in the third quarter, delivering stable portfolio performance to generate an attractive return on equity of 10.5%," commented Craig W. Packer, Chief Executive Officer. "Credit quality remains excellent, and our predominantly first-lien portfolio is well-positioned to produce healthy returns through all rate environments."

Merger Update
 On August 7, 2024, OBDE entered into an agreement to merge with Blue Owl Capital Corporation (NYSE: OBDC), an affiliated business development company managed by Blue Owl Credit Advisors, LLC, with OBDC as the surviving entity.

On August 16, 2024, the Company filed a preliminary registration statement on Form N-14, which included a joint proxy statement of the Company and OBDC and the Company's prospectus. On October 11, 2024, the Company filed an amended registration statement on Form N-14. The registration statement was declared effective by the SEC on October 21, 2024, and the special meetings for each of the Company's and OBDC's shareholders are scheduled for January 8, 2025. The merger is expected to close shortly after the special meetings, subject to shareholder approvals and other customary closing conditions.

Dividend Declarations
 The Company's Board declared a fourth quarter 2024 dividend of $0.35 per share for stockholders of record as of December 31, 2024, payable on or before January 15, 2025.

In addition, and as previously announced, the Board declared a series of five special dividends of $0.06 per share, payable to stockholders of record quarterly. The third special dividend of $0.06 per share will be payable on or before December 13, 2024 to shareholders of record as of November 29, 2024. A full schedule of the record and payment dates can be found on the Company's website.

PORTFOLIO AND INVESTING ACTIVITY

For the three months ended September 30, 2024, new investment commitments totaled $575.1 million across 21 new portfolio companies and 16 existing portfolio companies. This compares to $1.0 billion for the three months ended June 30, 2024 across 31 new portfolio companies and 24 existing portfolio companies.

For the three months ended September 30, 2024, the principal amount of new investments funded was $536.4 million. For this period, the Company had $649.1 million aggregate principal amount in sales and repayments.

For the three months ended June 30, 2024, the principal amount of new investments funded was $765.7 million. For this period, the Company had $338.3 million aggregate principal amount in sales and repayments.

As of September 30, 2024 and June 30, 2024, the Company had investments in 185 and 207 portfolio companies with an aggregate fair value of $4.2 billion and $4.3 billion, respectively. As of September 30, 2024, the average investment size in each portfolio company was $23.0 million based on fair value.

As of September 30, 2024, based on fair value, the portfolio consisted of 84.9% first lien senior secured debt investments, 5.2% second lien senior secured debt investments, 1.6% unsecured debt investments, 3.3% preferred equity investments, 4.9% common equity investments and 0.1% joint ventures.

As of June 30, 2024, based on fair value, the portfolio consisted of 85.0% first lien senior secured debt investments, 5.4% second lien senior secured debt investments, 1.5% unsecured debt investments, 3.6% preferred equity investments, and 4.5% common equity investments.

As of September 30, 2024 and June 30, 2024, approximately 90.1% and 90.4% of the portfolio was invested in secured debt, respectively. As of September 30, 2024, 97.3% of the debt investments based on fair value in the portfolio were at floating rates.

As of September 30, 2024 and June 30, 2024, the weighted average total yield of accruing debt and income-producing securities at fair value (which includes interest income and amortization of fees and discounts) was 11.1% and 11.5%, respectively, and the weighted average total yield of accruing debt and income-producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 11.1% and 11.5%, respectively.

As of September 30, 2024, loans on non-accrual represented 0.2% of the total fair value of the debt portfolio.

RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2024

Investment Income
 Investment income increased to $129.0 million for the three months ended September 30, 2024 from $107.2 million for the same period in the prior year primarily due to higher interest income, resulting from an increase in our debt investment portfolio at par. Included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns which are non-recurring in nature. Period-over-period, these fees increased due to an increase in repayment activity for the period. We expect that investment income will vary based on a variety of factors including the pace of our originations and repayments.

Expenses
 Total expenses increased to $79.2 million for the three months ended September 30, 2024 from $37.9 million for the same period in prior year due to an increase in management fees, incentive fees and interest expense. The increase in interest expense was driven by an increase in leverage, average daily borrowings and average interest rate period-over-period. Management and incentive fees increased due to an increase in our investment portfolio at fair value as well as the increased fee rates effective as of the Company's listing date, January 25, 2024. Incentive fees were not incurred prior to the listing date. As a percentage of total assets, professional fees, directors' fees and other general and administrative expenses increased period-over-period.

Liquidity and Capital Resources
 As of September 30, 2024, the Company had $151.3 million in cash, $2.5 billion in total principal value of debt outstanding, and $367.6 million of undrawn capacity on our credit facilities. The Company's weighted average interest rate on debt outstanding was 7.1% and 7.1% for the three months ended September 30, 2024 and June 30, 2024, respectively. Ending net debt-to-equity was 1.21x and 1.22x as of September 30, 2024 and June 30, 2024, respectively.

CONFERENCE CALL AND WEBCAST INFORMATION

Conference Call Information:
 The conference call will be broadcast live on November 7, 2024 at 11:00 a.m. Eastern Time on the Events section of OBDE's website at www.BlueOwlCapitalCorporationIII.com. Please visit the website to test your connection before the webcast.

Participants are also invited to access the conference call by dialing one of the following numbers:

  • Domestic: (877) 407-9714
  • International: +1 (201) 689-8865

All callers will need to reference "Blue Owl Capital Corporation III" once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected.

Replay Information:
 An archived replay will be available for 14 days via a webcast link located on the Events section of OBDE's website, and via the dial-in numbers listed below:

  • Domestic: (877) 660-6853
  • International: +1 (201) 612-7415
  • Conference ID: 13748670

ABOUT BLUE OWL CAPITAL CORPORATION III

Blue Owl Capital Corporation III (NYSE: OBDE) is a specialty finance company focused on lending to U.S. middle-market companies. As of September 30, 2024, OBDE had investments in 185 portfolio companies with an aggregate fair value of $4.2 billion. OBDE has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. OBDE is externally managed by Blue Owl Diversified Credit Advisors LLC, an SEC-registered investment adviser that is an indirect affiliate of Blue Owl Capital Inc. ("Blue Owl") (NYSE: OWL) and is a part of Blue Owl's Credit platform.

Certain information contained herein may constitute "forward-looking statements" that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about OBDE, its current and prospective portfolio investments, its industry, its beliefs and opinions, and its assumptions. Words such as "anticipates," "expects," "intends," "plans," "will," "may," "continue," "believes," "seeks," "estimates," "would," "could," "should," "targets," "projects," "outlook," "potential," "predicts" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond OBDE's control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including, without limitation, the risks, uncertainties and other factors identified in OBDE's filings with the SEC. Investors should not place undue reliance on these forward-looking statements, which apply only as of the date on which OBDE makes them. OBDE does not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law.

INVESTOR CONTACTS
 Investor Contact:
 BDC Investor Relations
Michael Mosticchio
credit-ir@blueowl.com

Media Contact:
 Prosek Partners
Josh Clarkson
pro-blueowl@prosek.com

 

FINANCIAL HIGHLIGHTS




For the Three Months Ended

($ in thousands, except per share amounts)


September 30, 2024


June 30, 2024


September 30, 2023

Investments at Fair Value


$                4,249,075


$              4,346,302


$                  3,565,615

Total Assets


$                4,464,334


$              4,502,757


$                  3,672,136

Net Asset Value Per Share


$                       15.49


$                     15.56


$                         15.40








Investment Income


$                   129,042


$                 123,175


$                     107,216

Net Investment Income


$                     50,493


$                   50,381


$                       69,083

Net Income


$                     42,161


$                   39,615


$                       73,493








Net Investment Income Per Share


$                         0.41


$                       0.41


$                           0.56

Net Realized and Unrealized Gains (and
  Losses) Per Share


$                        (0.07)


$                      (0.09)


$                           0.04

Net Income Per Share


$                         0.34


$                       0.32


$                           0.60

Distributions Declared from Net
  Investment Income Per Share


$                         0.35


$                       0.35


$                           0.48

Weighted Average Yield of Accruing Debt
  and Income Producing Securities at Fair
  Value


11.1 %


11.5 %


12.0 %

Weighted Average Yield of Accruing Debt
  and Income Producing Securities at
  Amortized Cost


11.1 %


11.5 %


12.0 %

Percentage of Debt Investments at Floating
  Rates at Fair Value


97.3 %


97.5 %


97.9 %

 

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(Amounts in thousands, except share and per share amounts)




September 30, 2024

(Unaudited)


December 31, 2023

Assets





Investments at fair value





Non-controlled, non-affiliated investments (amortized cost of
$4,099,669 and $3,479,371, respectively)


$                  4,122,000


$                  3,498,800

Non-controlled, affiliated investments (amortized cost of
$127,653 and $97,482, respectively)


121,608


91,901

Controlled, affiliated investments (amortized cost of $5,473 and
$--, respectively)


5,467


—

Total investments at fair value (amortized cost of $4,232,795 and
$3,576,853, respectively)


4,249,075


3,590,701

Cash


151,341


141,448

Interest receivable


37,585


25,147

Receivable for investments sold


22,288


—

Prepaid expenses and other assets


4,045


3,801

Total Assets


$                  4,464,334


$                  3,761,097

Liabilities





Debt (net of unamortized debt issuance costs of $23,428 and
$25,623, respectively)


$                  2,444,152


$                  1,754,496

Distribution payable


43,175


60,779

Management fee payable


15,813


4,517

Incentive fee payable


10,711


—

Payables to affiliates


5,398


896

Payable for investments purchased


4,908


—

Accrued expenses and other liabilities


29,432


29,297

Total Liabilities


$                  2,553,589


$                  1,849,985

Commitments and contingencies (Note 7)





Net Assets





Common shares $0.01 par value, 500,000,000 shares authorized;
123,356,823 and 122,817,625 shares issued and outstanding,
respectively


$                          1,234


$                          1,228

Additional paid-in-capital


1,837,067


1,829,029

Accumulated undistributed (overdistributed) earnings


72,444


80,855

Total Net Assets


$                  1,910,745


$                  1,911,112

Total Liabilities and Net Assets


$                  4,464,334


$                  3,761,097

Net Asset Value Per Share


$                          15.49


$                          15.56

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share amounts)

(Unaudited)



For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,


2024


2023

2024


2023

Investment Income







Investment income from non-controlled, non-affiliated investments:







Interest income (excluding payment-in-kind ("PIK") interest income)

$    110,102


$      89,904

$    309,664


$    253,929

PIK interest income

10,749


10,249

31,568


35,121

Dividend income

4,321


4,937

14,352


16,311

Other income

1,683


1,545

4,379


4,850

Total investment income from non-controlled, non-affiliated investments

126,855


106,635

359,963


310,211

Investment income from non-controlled, affiliated investments:







Interest income (excluding PIK interest income)

353


—

1,142


—

PIK interest income

60


129

89


129

Dividend income

1,774


444

4,463


939

Other income

—


8

5


8

Total investment income from non-controlled, affiliated investments

2,187


581

5,699


1,076

Total Investment Income

129,042


107,216

365,662


311,287

Expenses







Interest expense

48,490


31,104

126,975


89,356

Management fee

15,813


4,490

43,155


13,346

Performance based incentive fees

10,710


—

28,537


—

Professional fees

2,463


1,186

5,657


3,761

Directors' fees

228


289

683


682

Listing advisory fees

—


—

6,040


—

Other general and administrative

1,579


838

5,486


2,209

Total Expenses

79,283


37,907

216,533


109,354

Net Investment Income (Loss) Before Taxes

49,759


69,309

149,129


201,933

Income tax expense (benefit), including excise tax expense (benefit)

(734)


226

(20)


1,619

Net Investment Income (Loss) After Taxes

$      50,493


$      69,083

$    149,149


$    200,314

Net Realized and Change in Unrealized Gain (Loss)







Net change in unrealized gain (loss):







Non-controlled, non-affiliated investments

$         2,170


$         6,057

$          (646)


$      30,028

Non-controlled, affiliated investments

(2,153)


(1,672)

(464)


(2,048)

Controlled, affiliated investments

(6)


—

(6)


—

Translation of assets and liabilities in foreign currencies

284


(168)

552


(1)

Income tax (provision) benefit

(154)


1

(153)


—

Total Net Change in Unrealized Gain (Loss)

141


4,218

(717)


27,979

Net realized gain (loss):







Non-controlled, non-affiliated investments

$       (8,401)


$            216

$     (11,653)


$     (11,249)

Foreign currency transactions

(72)


(24)

(942)


(45)

Total Net Realized Gain (Loss)

(8,473)


192

(12,595)


(11,294)

Total Net Realized and Change in Unrealized Gain (Loss)

(8,332)


4,410

(13,312)


16,685

Net Increase (Decrease) in Net Assets Resulting from Operations

$       42,161


$       73,493

$     135,837


$     216,999

Earnings (Loss) Per Share - Basic and Diluted

$           0.34


$           0.60

$           1.10


$           1.78

Weighted Average Shares Outstanding - Basic and Diluted

123,356,823


122,405,716

123,236,215


121,831,273

 

PORTFOLIO AND INVESTMENT ACTIVITY



For the Three Months Ended
September 30,

($ in thousands)

2024


2023

New investment commitments




Gross originations

$                575,130


$               78,516

Less: Sell downs

—


(1,454)

Total new investment commitments

$                575,130


$               77,062

Principal amount of investments funded:




First-lien senior secured debt investments

$                526,490


$               53,404

Second-lien senior secured debt investments

—


—

Unsecured debt investments

—


—

Preferred equity investments

732


—

Common equity investments

3,729


10,934

Joint ventures

5,469


—

Total principal amount of investments funded

$                536,420


$               64,338

Principal amount of investments sold or repaid:




First-lien senior secured debt investments

$               (624,503)


$              (50,755)

Second-lien senior secured debt investments

(5,883)


(6,068)

Unsecured debt investments

—


—

Preferred equity investments

(18,667)


(4,462)

Common equity investments

(15)


—

Joint ventures

—


—

Total principal amount of investments sold or repaid

$               (649,068)


$              (61,285)

Number of new investment commitments in new portfolio
companies(1)

21


7

Average new investment commitment amount

$                  23,815


$                 5,762

Weighted average term for new debt investment commitments (in
years)

4.6


5.8

Percentage of new debt investment commitments at

   floating rates

99.6 %


90.5 %

Percentage of new debt investment commitments at

   fixed rates

0.4 %


9.5 %

Weighted average interest rate of new debt investment

   commitments(2)

9.6 %


11.8 %

Weighted average spread over applicable base rate of new floating
rate debt investment commitments

5.0 %


6.4 %

________________

(1) Number of new investment commitments represents commitments to a particular portfolio company.

(2) For the three months ended September 30, 2024 and 2023, assumes each floating rate commitment is subject to the greater of the interest rate floor (if applicable) or 3-month SOFR, which was 4.59% and 5.40% as of September 30, 2024 and September 30, 2023, respectively.

Forward-Looking Statements

Some of the statements in this press release constitute forward-looking statements because they relate to future events, future performance or financial condition of OBDC or OBDE or the two-step merger (collectively, the "Mergers") of OBDE with and into OBDC. The forward-looking statements may include statements as to: future operating results of OBDC and OBDE and distribution projections; business prospects of OBDC and OBDE and the prospects of their portfolio companies; and the impact of the investments that OBDC and OBDE expect to make. In addition, words such as "anticipate," "believe," "expect," "seek," "plan," "should," "estimate," "project" and "intend" indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with (i) the timing or likelihood of the Mergers closing; (ii) the expected synergies and savings associated with the Mergers; (iii) the ability to realize the anticipated benefits of the Mergers, including the expected accretion to net investment income and the elimination or reduction of certain expenses and costs due to the Mergers; (iv) the percentage of OBDC and OBDE shareholders voting in favor of the proposals submitted for their approval; (v) the possibility that competing offers or acquisition proposals will be made; (vi) the possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived; (vii) risks related to diverting management's attention from ongoing business operations; (viii) the risk that shareholder litigation in connection with the Mergers may result in significant costs of defense and liability; (ix) changes in the economy, financial markets and political environment; (x) the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing war between Russia and Ukraine and the escalated conflict in the Middle-East, including the Israel-Hamas conflict, and general uncertainty surrounding the financial and political stability of the United States (including uncertainties related to the 2024 U.S. presidential election), the United Kingdom, the European Union and China, on financial market volatility, global economic markets, and various markets for commodities globally such as oil and natural gas; (xi) future changes in law or regulations; (xii) conditions to OBDC's and OBDE's operating areas, particularly with respect to business development companies or regulated investment companies; (xiii) an economic downturn, elevated interest and inflation rates, ongoing supply chain and labor market disruptions, including those as a result of strikes, work stoppages or accidents, instability in the U.S. and international banking systems, and the risk of recession or a shutdown of government services could impact business prospects of OBDC and OBDE and their portfolio companies or following the closing of the Mergers, the combined company; (xiv) the ability of Blue Owl Credit Advisors LLC (the "Adviser") to locate suitable investments for the combined company and to monitor and administer its investments; (xv) the ability of the Adviser to attract and retain highly talented professionals; and (xvi) other considerations that may be disclosed from time to time in OBDC's and OBDE's publicly disseminated documents and filings with the Securities and Exchange Commission ("SEC"). OBDC and OBDE have based the forward-looking statements included in this press release on information available to them on the date hereof, and they assume no obligation to update any such forward-looking statements. Although OBDC and OBDE undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that they may make directly to you or through reports that OBDC and OBDE in the future may file with the SEC, including the Joint Proxy Statement and the Registration Statement (each as defined below), annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Additional Information and Where to Find It

In connection with the Merger, OBDC and OBDE have filed with the SEC and intend to mail to their respective shareholders a joint proxy statement/prospectus (the "Joint Proxy Statement") and OBDC has filed with the SEC a registration statement on Form N-14 (the "Registration Statement") that includes the Joint Proxy Statement and a prospectus of OBDC. The Joint Proxy Statement and the Registration Statement contains important information about OBDC, OBDE, the Merger and related matters. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. SHAREHOLDERS OF OBDC AND OBDE ARE URGED TO READ THE JOINT PROXY STATEMENT AND THE REGISTRATION STATEMENT AND OTHER DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT OBDC, OBDE, THE MERGER AND RELATED MATTERS. Investors and security holders will be able to obtain the documentation filed with the SEC free of charge at the SEC's website, http://www.sec.gov and for documents filed by OBDC, from OBDC's website at https://www.blueowlcapitalcorporation.com and for documents filed by OBDE, from OBDE's website at https://www.blueowlcapitalcorporationiii.com. 

Participation in the Solicitation
OBDC, its directors, certain of its executive officers and certain employees and officers of the Adviser and its affiliates may be deemed to be participants in the solicitation of proxies in connection with the Merger. Information about directors and executive officers of OBDC is set forth in the Joint Proxy Statement. OBDE, its directors, certain of its executive officers and certain employees and officers of Blue Owl Diversified Credit Advisors LLC and its affiliates may be deemed to be participants in the solicitation of proxies in connection with the Merger. Information about directors and executive officers of OBDE is set forth in the Joint Proxy Statement. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the OBDC and OBDE shareholders in connection with the Merger is contained in the Joint Proxy Statement. These documents may be obtained free of charge from the sources indicated above.

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SOURCE Blue Owl Capital Corporation III