Executive Summary

Q1 2024 delivered solid core results: NII of $0.39 per share covered the $0.35 regular dividend; NAV/share rose to a record $15.65 (fifth consecutive quarterly high). Management noted NII would have been $0.40 ex one-time listing costs and with a full-quarter post-listing fee structure .
Credit quality remained strong with non‑accruals at 0.3% of the debt portfolio (fair value) and portfolio mix shifted further to first lien (82%) as second lien repayments were refinanced; weighted average yield stepped down modestly to 11.7% from 12.1% in Q4 .
Balance sheet repositioning advanced: net debt/equity moved to 1.04x (from 0.86x), within the 0.9x–1.25x target range; liquidity remained ample with $140.2m cash, $2.2bn debt outstanding, and $345.8m of undrawn credit capacity as of quarter‑end .
Distribution visibility is a key investor catalyst: regular $0.35 dividend maintained for Q2 and a series of five $0.06 special dividends previously declared to be paid quarterly beginning Q2 2024 (designed to provide visibility through Q2 2025) .

What Went Well and What Went Wrong

What Went Well

Covered dividend and record NAV: NII/share of $0.39 exceeded the $0.35 dividend; NAV/share increased to $15.65, marking five straight record quarters. CEO: “OBDE delivered strong performance… record net asset value per share for the fifth consecutive quarter.” .
Portfolio quality and mix improved: Non‑accruals at 0.3% FV; first‑lien exposure rose to 82% as second‑lien repayments (≈75% of repayments) reduced risk; management highlighted rigorous second‑lien standards and strong borrower deleveraging and EBITDA growth pre‑refi .
Strategic funding and ratings momentum: Revolver upsized to $600m and a $300m SPV added; Moody’s revised outlook to Positive; total available liquidity ≈$840m vs ≈$350m unfunded commitments .

What Went Wrong

Sequential earnings down: NII/share fell to $0.39 from $0.58 in Q4 (also impacted by listing‑related costs and fee normalization), and weighted average yield edged down to 11.7% from 12.1% .
Expenses elevated: Total expenses rose to $64.8m vs $35.1m YoY, driven by higher management/incentive fees, interest expense, and non‑recurring listing advisory fees .
Spread pressure and softer deal mix: Management expects tighter spreads as the portfolio tilts more to first lien and with limited M&A activity, partly offsetting income benefits from higher leverage .

Financial Results

Headline Financials (USD unless noted)

Metric	Q3 2023	Q4 2023	Q1 2024
Investment Income ($mm)	$107.216	$111.542	$113.445
Net Investment Income ($mm)	$69.083	$71.647	$48.275
NII per Share ($)	$0.56	$0.58	$0.39
Net Income per Share ($)	$0.60	$0.66	$0.44
NAV per Share ($)	$15.40	$15.56	$15.65
Weighted Avg Yield (FV, %)	12.0%	12.1%	11.7%
Distributions Declared/Share ($)	$0.48	$0.49	$0.35
Net Debt / Equity (x)	0.86x	0.86x	1.04x

Notes: Management indicated NII would have been $0.40 ex one‑time listing costs and with full‑quarter post‑listing fees .

Portfolio Composition (Fair Value)

Asset Class (% of FV)	Q4 2023	Q1 2024
First Lien Senior Secured Debt	76.4%	82.3%
Second Lien Senior Secured Debt	12.1%	6.6%
Unsecured Debt	1.7%	1.5%
Preferred Equity	5.2%	4.9%
Common Equity	4.6%	4.7%

KPIs

KPI	Q4 2023	Q1 2024
Portfolio Companies (count)	153	188
Investments at Fair Value ($bn)	$3.59	$3.99
Total Assets ($bn)	$3.76	$4.18
Avg Investment Size ($mm, FV)	$23.5	$21.2
% Floating‑Rate Debt (FV)	98.1%	98.2%
Non‑Accruals (% of debt FV)	0.6%	0.3%
Weighted Avg Yield (FV)	12.1%	11.7%
Cash ($mm)	$141.4	$140.2
Total Principal Debt Outstanding ($bn)	$1.8	$2.2
Undrawn Credit Capacity ($mm)	$746.9	$345.8

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Regular Dividend/Share	Q2 2024	n/a	$0.35 per share declared	Maintained vs Q1 level
Special Dividends/Share	Q2 2024–Q2 2025	Series of five $0.06 quarterly special dividends announced with listing	Reaffirmed; designed to provide visibility through Q2 2025	Maintained
Leverage Target	Ongoing	n/a	0.9x–1.25x target range; progressing toward higher end	n/a
Earnings Outlook	2024	n/a	NII to benefit from higher leverage; partially offset by tighter spreads and limited M&A	Qualitative only

Dividend yield context: 10.5% annualized based on Q1 NAV ($15.65) and the $0.35 regular plus scheduled $0.06 special dividend framework .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023, Q4 2023)	Current Period (Q1 2024)	Trend
Dividend framework	Q3 distribution $0.48; Q4 distribution $0.49; Q1 2024 $0.35 declared; five $0.06 specials announced with listing	Q2 2024 regular $0.35 declared; specials reaffirmed to enhance visibility through Q2 2025	Stable, visibility reinforced
Leverage and earnings power	Net debt/equity 0.86x in Q3 and Q4	Reached 1.04x; target 0.9x–1.25x; expect NII uplift as leverage seasons	Increasing toward target
Origination environment	Q3 new commitments $77.1m; Q4 $435.9m	Q1 $736.4m commitments; third most active quarter despite more active public markets	Improving activity
Portfolio mix/credit	First lien 77%–76% (Q3–Q4); non‑accrual 0.6% (Q4)	First lien 82%; non‑accrual 0.3%; second lien repayments drove mix shift	De‑risking mix; strong credit
Rates/spreads	Weighted avg yield 12.0%–12.1% (Q3–Q4)	Yield 11.7%; management notes tighter spreads with more first lien weighting and limited M&A	Modest compression
Liquidity/ratings	Cash $141m; undrawn $747m (Q4)	Revolver upsized; new $300m SPV; ≈$840m total liquidity; Moody’s outlook to Positive	Strengthening profile

Management Commentary

“Net asset value per share increased to $15.65… our fifth consecutive quarter of record net asset value. Net investment income was $0.39 per share and more than covered our first quarter dividend of $0.35 per share… adjusted… NII would have been $0.40 per share.” — Craig Packer, CEO .
“Repayments were primarily in second lien investments… these companies grew EBITDA by approximately 50% on average and delevered by roughly 1.5 turns… It was natural they would look to refinance.” — Logan Nicholson, President .
“We finished the quarter with 1.04x debt to equity… within our target leverage range of 0.9x to 1.25x… We expect NII to benefit from our progress to increase leverage… partially offset by tighter spreads… and limited M&A.” — Jonathan Lamm, CFO .
“Our dividend framework… $0.35 regular dividend and a previously declared $0.06 special dividend… designed to give investors clear visibility… These dividends equate to an annualized dividend yield of 10.5% based on our first quarter NAV.” — Craig Packer .
“Non‑accruals currently account for just 0.3% of our debt portfolio at fair value… inception to date net loss rate remains low at only 7 basis points.” — Management remarks .

Q&A Highlights

The available Q1 2024 transcript content consists of prepared remarks; a Q&A section was not included in the retrieved document, so Q&A highlights were not available to review .

Estimates Context

Wall Street consensus (S&P Global) for OBDE’s Q1 2024 (EPS/NII and investment income) was unavailable via our S&P Global tool due to missing CIQ mapping for OBDE; therefore, no estimate comparisons could be made at this time [SpgiEstimatesError: Missing CIQ mapping for ticker 'OBDE' in spgi_ciq_company_map].

Key Takeaways for Investors

Distribution visibility remains a differentiator: $0.35 regular dividend maintained and five $0.06 specials reaffirmed, implying a 10.5% annualized yield on Q1 NAV; this supports income‑oriented demand .
Balance sheet on plan: leverage reached 1.04x (midpoint of the 0.9x–1.25x target); as new assets season through Q2, NII should benefit, though spread compression may temper upside .
Credit is pristine and mix de‑risking: non‑accruals at 0.3% and first‑lien exposure at 82% provide resilience if macro softens; second‑lien exposure is shrinking via refinancings .
Origination engine active despite competitive public markets: $736m commitments and net portfolio growth underpin earnings power and diversification (188 borrowers; avg position size down) .
Watch yields and fees: weighted avg yield dipped to 11.7% from 12.1%; post‑listing fee normalization and interest expense lifted costs this quarter; normalization (ex one‑time listing costs) would have added ~$0.01 to NII/share .
Liquidity and ratings support flexibility: revolver upsized, new $300m SPV, ≈$840m liquidity, and a Positive outlook from Moody’s enhance funding options for future growth .
Near‑term trading implication: Positive bias on income visibility and leverage progress; monitor spreads/M&A pace and any incremental fee drag vs. leverage‑driven NII tailwinds .

Citations

Q1 2024 8‑K and press release content including financial highlights, portfolio mix, liquidity, and distribution declarations: .
Q1 2024 earnings call transcript (prepared remarks on results, leverage, dividend framework, credit quality, liquidity, and ratings): .
Prior quarters (Q3 and Q4 2023) metrics and portfolio composition: .

Estimate availability note

S&P Global consensus estimates for OBDE Q1 2024 were not available via our tool at the time of analysis due to mapping limitations.

Blue Owl Capital Corp III (OBDE)·Q1 2024 Earnings Summary