Blue Owl Capital Corp.

The stable outlook is based on OBDC's strong originations, successful underwriting record, and favorable funding. Over the next 12-24 months, S&P Global Ratings expects the company will report stable asset quality, maintain debt to ATE of 0.9x-1.25x, an adequate cushion to the 150% modified asset coverage ratio, and sufficient liquidity to meet draws by portfolio companies against revolvers and delayed draw term loans. We could lower the ratings if: OBDC's debt to ATE exceeds 1.5x, Its asset coverage ratio declines to 165%, or Asset quality or earnings materially weaken. We could raise the ratings in the next 12-24 months if leverage remains within expectations, and loss experience and operating performance are favorable relative to peer BDCs. OBDC is a specialty

...Blue Owl Capital Corp.'s (OBDC) leverage, measured as debt to adjusted total equity (ATE), is above our base-case expectation. S&P Global Ratings-adjusted debt to adjusted total equity (ATE) was around 1.4x as of Dec. 31, 2023, which is above our base-case expectation, though it remains below our downside threshold of 1.5x. The company's measurement of its leverage ratio (net debt to equity) at year-end was around 1.1x, within management's target leverage range of 0.9x-1.25x. OBDC is exposed to unitranche and second-lien loans, which we view as a key risk. As of Dec. 31, 2023, OBDC's exposure to unitranche and second-lien loans at cost was around 60%. The company has balanced this risk with a strong underwriting record. However, as with other business development companies (BDC), its investments tend to be relatively illiquid, which may constrain financial flexibility in adverse market conditions. Given continued high interest rates, we expect payment-in-kind (PIK) income to increase for...

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