Blue Owl Capital Corp III (OBDE)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 was steady: NII per share of $0.41 matched Q2 and continued to out-earn the $0.35 regular dividend; NAV per share ticked down modestly to $15.49 on select credit-related markdowns while non‑accruals improved to 0.2% of debt fair value .
• Deployment normalized after a strong Q2: $575M of new commitments vs $1.0B in Q2, with 98%+ first‑lien focus and a portfolio weighted‑average yield at fair value of 11.1% (down from 11.5% in Q2) .
• Dividend visibility remains high: Q4 base dividend of $0.35 declared; third $0.06 special dividend payable on or before Dec 13 (record Nov 29). If the OBDC merger closes in early Jan, management expects two remaining $0.06 specials plus ~$0.29/share of spillover income post‑close (Board approval required) .
• Merger with OBDC advancing: N‑14 effective Oct 21; shareholder votes set for Jan 8, 2025; management reiterates expected immediate NII accretion via higher portfolio yield, lower funding costs, and operating synergies—closing anticipated shortly after the vote, subject to approvals/conditions .

What Went Well and What Went Wrong

• What Went Well

  • Consistent earnings power: NII/share held at $0.41, again exceeding the $0.35 regular dividend; management cited “consistent credit performance” and leverage near the high end of the target range supporting earnings .
  • Credit quality improved: non‑accruals declined to 0.2% of debt fair value (from 0.5% in Q2), and management emphasized resilience, with the watch list stable and interest coverage ~1.7x .
  • Strategic progress on scale: merger process with OBDC advancing toward Jan close; management expects immediate NII accretion from yield, funding cost, and cost savings, plus better trading profile and liquidity for shareholders .

• What Went Wrong

  • NAV drifted lower: NAV/share fell to $15.49 from $15.56 in Q2 driven by credit‑related markdowns on a select few investments .
  • Yield compression and lighter originations: weighted‑avg total yield at fair value slipped to 11.1% (from 11.5% in Q2), and new commitments moderated to $575M from $1.0B in Q2 as activity normalized .
  • Elevated expense base YoY: total expenses rose YoY on higher management/incentive fees post‑listing and higher interest expense from increased leverage and borrowing rates (incentive fees weren’t incurred pre‑listing) .

Financial Results

Segment/Portfolio Mix (% of portfolio fair value)

Key KPIs

Note on estimates: S&P Global consensus data for OBDE was unavailable due to CIQ mapping limitations; therefore, “vs. estimates” comparisons could not be assessed this quarter.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and performance
  • “We saw continued strong momentum in the third quarter, delivering stable portfolio performance to generate an attractive return on equity of 10.5%... Credit quality remains excellent, and our predominantly first‑lien portfolio is well‑positioned to produce healthy returns through all rate environments.” — CEO Craig Packer .
  • “We achieved a double‑digit ROE… NII was $0.41 per share… well in excess of our $0.35 dividend… We’re excited about the proposed merger with OBDC… expected to be immediately accretive to NII.” — CEO Craig Packer .
• Portfolio positioning
  • “Over 98% of this quarter’s origination activity consisted of first lien… weighted average total yield of 11.1%… roughly 2/3 of fundings were to existing borrowers in refinancings or add‑ons.” — President Logan Nicholson .
  • “Nonaccrual rate… decreased to 16 bps of fair value… average interest coverage ~1.7x… easing effects of lower base rates beginning to appear.” — President Logan Nicholson .
• Capital returns and merger
  • “We meaningfully over‑earned our regular dividend… Board declared a base dividend of $0.35… third $0.06 special payable Dec 13… If the merger closes in early January… expect the last 2 $0.06 specials plus a payment of undistributed spillover income totaling an estimated $0.29 per share.” — CFO Jonathan Lamm .

Q&A Highlights

The accessible portions of the Q3 transcript contained prepared remarks; Q&A content was not available due to document retrieval limitations. Management’s prepared comments addressed dividend timing (regular and special), expected spillover distribution contingent on merger close, leverage positioning near the high end of the target range, and merger accretion mechanics (yield, funding cost, and synergies) .

Estimates Context

• S&P Global consensus estimates for OBDE were unavailable this quarter due to a Capital IQ mapping limitation, so we could not assess “vs. estimates” comparisons. We will update once S&P Global mappings are available.

Key Takeaways for Investors

• Earnings durability: NII/share held at $0.41 despite lower base rates and normalized originations, continuing to out‑earn the $0.35 dividend .
• Credit backdrop favorable: non‑accruals improved to 0.2% FV with stable watch list and ~1.7x interest coverage, cushioning downside risk .
• Yield compression modest: portfolio yield at FV declined to 11.1% from 11.5%, but leverage near the high end helped sustain NII; watch for further rate‑driven pressure vs. offsetting levers .
• Near‑term cash returns: Q4 $0.35 dividend plus $0.06 special in December; if merger closes, two additional $0.06 specials and ~$0.29/share spillover bolster early‑2025 cash distributions (Board approval required) .
• Merger catalyst: OBDC/OBDE vote Jan 8, with close expected shortly after; management frames immediate NII accretion, lower funding costs, and better trading/liquidity as benefits—key stock catalyst into/after close .
• Trading setup: Stability in earnings and visible distributions, combined with a potential re‑rating on merger completion, could support near‑term sentiment; monitor rate path and credit marks as primary swing factors .

Supporting detail and disclosures:

• Third quarter highlights and full financials from OBDE’s 8‑K and furnished press release (Exhibit 99.1) dated Nov 6, 2024 .
• Prior‑quarter comparisons from Q2 (Aug 7, 2024) and Q1 (May 8, 2024) 8‑Ks .
• Earnings call prepared remarks (Nov 7, 2024) for strategic and outlook commentary .