Owl Rock Capital Corporation II
11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:25
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this section should be read in conjunction with "ITEM 1. FINANCIAL STATEMENTS". This discussion contains forward-looking statements, which relate to future events or the future performance or financial condition of Blue Owl Capital Corporation II and involves numerous risks and uncertainties, including, but not limited to, those described in our Form 10-K for the fiscal year ended December 31, 2025, in "ITEM 1A. RISK FACTORS". This discussion also should be read in conjunction with the "Cautionary Statement Regarding Forward Looking Statements" set forth on page 3 of this quarterly report on Form 10-Q ("Quarterly Report"). Actual results could differ materially from those implied or expressed in any forward-looking statements.
Overview
Blue Owl Capital Corporation II (the "Company", "we", "us", or "our") is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). Formed as a Maryland corporation on October 15, 2015, we are externally managed by Blue Owl Credit Advisors LLC (the "Adviser", "our Adviser") which is responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments and monitoring our portfolio on an ongoing basis. Our investment objective is to generate current income, and to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Our investment strategy focuses on primarily originating and making loans to, and making debt and equity investments in, U.S. middle market companies. Within this space, we predominantly focus on investing in institutionally-backed, upper middle market businesses, which we categorize as those generating greater than $50 million of EBITDA annually. We invest in senior secured or unsecured loans, subordinated loans or mezzanine loans, broadly syndicated loans and, to a lesser extent, equity and equity-related securities including warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company's common equity. We may hold our investments directly or through specialty financing portfolio companies and joint ventures. Except for our specialty financing company investments, our equity investments are typically not control-oriented investments and we may structure such equity investments to include provisions protecting our rights as a minority-interest holder.
We have elected to be treated as a regulated investment company ("RIC") under subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. On February 28, 2017, we formed a wholly-owned subsidiary, OR Lending II LLC, a Delaware limited liability company, which holds a California finance lenders license. OR Lending II LLC makes loans to borrowers headquartered in California.
The Adviser is registered with the U.S. Securities and Exchange Commission (the "SEC") as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), is an indirect affiliate of Blue Owl Capital Inc. ("Blue Owl") (NYSE: OWL) and is part of Blue Owl's Credit platform. Subject to the overall supervision of our board of directors (the "Board" or "our Board"), the Adviser manages our day-to-day operations, and provides investment advisory and management services to us. The Adviser or its affiliates may engage in certain origination activities and receive attendant arrangement, structuring or similar fees. The Adviser is responsible for managing our business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring our portfolio companies on an ongoing basis through a team of investment professionals.
In April 2017, we commenced our continuous public offering, commenced operations and made our first portfolio company investment. We terminated our continuous public offering as of April 30, 2021. Prior to the termination of our continuous public offering, we issued 151,364,239 shares of our common stock for gross proceeds of approximately $1.39 billion, including seed capital contributed by our Adviser in September 2016 and approximately $10.0 million in gross proceeds raised in the private placement from certain individuals and entities affiliated with our Adviser.
The Adviser also serves as investment adviser to Blue Owl Capital Corporation and Blue Owl Credit Income Corp.
Blue Owl consists of three investment platforms:
•Credit, which includes several strategies, including (i) direct lending, which generally offers privately negotiated financing solutions to primarily upper-middle-market companies; (ii) alternative credit, which targets credit-oriented investments in markets underserved by traditional lenders or the broader capital markets, with deep expertise investing across specialty finance, private corporate credit and equipment leasing; (iii) investment grade credit, which focuses on generating capital-efficient investment income through asset-backed finance, private corporate credit, and structured products; (iv) liquid credit, which focuses on the management of CLOs; and (v) our other adjacent investment strategies (e.g., strategic equity and healthcare opportunities),
•GP Strategic Capital, which primarily focuses on acquiring equity stakes in, and providing debt financing to, large, multi-product private equity and private credit firms through two investment strategies (GP minority stakes and GP debt financing), and also includes a professional sports minority stakes strategy, and
•Real Assets, which includes a net lease strategy, which focuses on acquiring net-leased real estate occupied by investment grade and creditworthy tenants; a real estate credit strategy which offers a diverse range of competitive financing solutions; and digital infrastructure, which focuses on acquiring, financing, developing and operating data centers and related digital infrastructure assets. The Adviser is part of the direct lending strategy of Blue Owl's Credit platform which focuses on lending to primarily upper-middle market companies, both private equity-sponsored and non-sponsored and provides a range of customized financing solutions across debt and equity-related instruments. In addition to the Adviser, Blue Owl's Credit platform's direct lending strategy is comprised of the Adviser, Blue Owl Technology Credit Advisors LLC ("OTCA"), Blue Owl Credit Private Fund Advisors LLC ("OPFA"), Blue Owl Technology Credit Advisors II LLC ("OTCA II") and Blue Owl Diversified Credit Advisors LLC ("ODCA" and together with OTCA, OPFA, OTCA II and the Adviser, the "Blue Owl Credit Advisers"), which also are registered investment advisers. As of September 30, 2026, the Adviser and its affiliates had $162.78 billion of assets under management across Blue Owl's Credit platform.
The management of our investment portfolio is the responsibility of the Adviser and the Diversified Lending Investment Committee. The Adviser's investment team (the "Investment Team") is led by Douglas I. Ostrover, Marc S. Lipschultz and Craig W. Packer and is supported by certain members of the Adviser's senior executive team and Blue Owl's Credit platform's direct lending investment committees. Blue Owl's four direct lending investment committees focus on a specific investment strategy (Diversified Lending, Technology Lending, First Lien Lending and Opportunistic Lending). Douglas I. Ostrover, Marc S. Lipschultz, Craig W. Packer and Alexis Maged sit on each of Blue Owl's direct lending investment committees. In addition to Messrs. Ostrover, Lipschultz, Packer and Maged, the Diversified Lending Investment Committee is comprised of Matthias Ederer, Patrick Linnemann, Meenal Mehta and Logan Nicholson. We consider the individuals on the Diversified Lending Investment Committee to be our portfolio managers. The Investment Team, under the Diversified Lending Investment Committee's supervision, sources investment opportunities, conducts research, performs due diligence on potential investments, structures our investments and will monitor our portfolio companies on an ongoing basis.
The Diversified Lending Investment Committee meets regularly to consider our investments, direct our strategic initiatives and supervise the actions taken by the Adviser on our behalf. In addition, the Diversified Lending Investment Committee reviews and determines whether to make prospective investments (including approving parameters or guidelines pursuant to which certain investments may be made or sold consistent with our investment objective), structures financings and monitors the performance of the investment portfolio. Each investment opportunity requires the approval of a majority of the Diversified Lending Investment Committee. Follow-on investments in existing portfolio companies may require the Diversified Lending Investment Committee's approval beyond that obtained when the initial investment in the portfolio company was made. In addition, temporary investments, such as those in cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less, may require approval by the Diversified Lending Investment Committee. The compensation packages of Diversified Lending Investment Committee members from the Adviser include various combinations of discretionary bonuses and variable incentive compensation based primarily on performance for services provided and may include shares of Blue Owl.
We may be prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, the prior approval of the SEC. We rely on an order for exemptive relief (the "Order") to co-invest with other funds managed by the Adviser or certain affiliates, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to such Order, we are generally permitted to co-invest with certain of our affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Order. The Order requires that a "required majority" (as defined in Section 57(o) of the 1940 Act) of directors who are not "interested persons" of us, the Adviser, or any of their respective affiliates, as defined in the 1940 Act ("Independent Directors") make certain conclusions in connection with certain co-investment transactions, including (1) in most instances when we co-invest with an affiliated entity (as defined in the co-investment application) in an issuer where an affiliated entity has an existing investment in the issuer unless the transaction is completed on a pro rata basis, and (2) if we dispose of an asset acquired in a co-investment transaction unless the disposition is done on a pro rata basis or the disposition is of a tradable security. Pursuant to the Order, the Board oversees our participation in the co-investment program. As required by the Order, we have
adopted, and the Board has approved, policies and procedures reasonably designed to ensure compliance with the terms of the Order. The Board, including a required majority of the Independent Directors, also reviewed the Co-Investment Policies of the Adviser to ensure that they are reasonably designed to prevent us from being disadvantaged by participation in the co-investment program. The Adviser and our Chief Compliance Officer will provide reporting to the Board.
The Blue Owl Credit Advisers' investment allocation policies seek to ensure equitable allocation of investment opportunities and addresses the co-investment restrictions set forth under the 1940 Act. As a result of the Order, there could be significant overlap in our investment portfolio and the investment portfolio of the BDCs, interval fund, private funds and separately managed accounts managed by the Blue Owl Credit Advisers (collectively, the "Blue Owl Credit Clients") and/or other funds managed by the Adviser or its affiliates that avail themselves of the Order. In addition, the Adviser and its affiliates are permitted to allocate an investment to a number of products across platforms that it views as appropriate for the particular investment objectives, strategies and characteristics of such products.
From time to time, we may form wholly-owned subsidiaries to facilitate our normal course of business.
Certain of our consolidated subsidiaries are subject to U.S. federal and state corporate-level income taxes.
We have elected to be regulated as a BDC under the 1940 Act and as a regulated investment company ("RIC") for U.S. federal income tax purposes. As a result, we are required to comply with various statutory and regulatory requirements, such as:
•the requirement to invest at least 70% of our assets in "qualifying assets", as such term is defined in the 1940 Act;
•source of income limitations;
•asset diversification requirements; and
•the requirement to distribute (or be treated as distributing) in each taxable year at least the sum of (i) 90% of our investment company taxable income and (ii) 90% of our tax-exempt interest for that taxable year.
Our Investment Framework
Our investment objective is to generate current income, and to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Our investment strategy focuses primarily on originating and making loans to, and making debt and equity investments in, U.S. middle market companies. Since our Adviser and its affiliates began investment activities in April 2016 through September 30, 2026, our Adviser and its affiliates have originated $202.71 billion aggregate principal amount of investments, of which $198.11 billion aggregate principal amount of investments prior to any subsequent exits or repayments, was retained by either us or a corporation or fund advised by our Adviser or its affiliates. We seek to participate in transactions sponsored by what we believe to be high-quality private equity and venture capital firms capable of providing both operational and financial resources. We seek to generate current income primarily in U.S. middle market companies, both sponsored and non-sponsored, through direct originations of senior secured loans or originations of unsecured loans, subordinated loans or mezzanine loans, broadly syndicated loans and, to a lesser extent, investments in equity and equity-related securities including warrants, preferred stock and similar forms of senior equity. We may hold our investments directly or through specialty financing portfolio companies and joint ventures. Except for our specialty financing company investments, our equity investments are typically not control-oriented investments and we may structure such equity investments to include provisions protecting our rights as a minority-interest holder.
In general, we define "middle market companies" to mean companies with earnings before interest expense, income tax expense, depreciation and amortization, or "EBITDA," between $25 million and $500 million annually and/or annual revenue of $125 million to $5 billion. Within this space, we predominantly focus on investing in upper middle market businesses, where we can structure larger transactions, which we believe to be more resilient and of greater strategic significance. We categorize "upper middle market" companies as those generating $50 million or more of EBITDA annually. We may on occasion invest in smaller or larger companies if an attractive opportunity presents itself, especially when there are dislocations in the capital markets, including the high yield and syndicated loan markets. We note that over time, the average EBITDA of companies in our portfolio has grown significantly as the scale of private market solutions has grown. Across our investments, we typically seek to be senior in the capital structure, targeting a loan-to-value ratio (the amount of outstanding debt as a percentage of the value of the company) of 50% or below on average, which may provide a level of downside protection and help preserve capital.
We expect that our portfolio composition will be comprised predominantly of directly originated debt and income producing securities, with a lesser allocation to equity or equity-linked opportunities which we may hold directly or through specialty purpose vehicles and joint ventures. In addition, we may invest a portion of our portfolio in opportunistic investments and publicly traded debt investments and we may evaluate and enter into strategic portfolio transactions that may result in additional portfolio companies that we are considered to control. These types of investments are intended to supplement our core strategy and further enhance returns to our shareholders. These investments may include high-yield bonds and broadly-syndicated loans, including "covenant light" loans (as defined below), and other publicly traded debt instruments, typically originated and structured by banks on behalf of large corporate borrowers with employee counts, revenues, EBITDAs and enterprise values larger than those of middle market companies, and equity investments in portfolio companies that make senior secured loans or invest in broadly syndicated loans, structured products, asset-based solutions or other forms of specialty finance, which may include, but is not limited to, investments such as life settlement, royalty interests and equipment finance.
Our portfolio composition may fluctuate from time to time based on market conditions and interest rates.
Covenants are contractual restrictions that lenders place on companies to limit the corporate actions a company may pursue. Generally, the loans in which we expect to invest may have financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company's financial performance or may take the form of "covenant-lite" loans which generally refer to loans that do not have a complete set of financial maintenance covenants. Generally, "covenant-lite" loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower's financial condition. Accordingly, to the extent we invest in "covenant-lite" loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.
As of September 30, 2026, our average debt investment size in each of our portfolio companies was approximately $4.2 million based on fair value. The investment size will vary with the size of our capital base and market conditions. As of September 30, 2026, excluding certain investments that fall outside of our typical borrower profile, our portfolio companies representing 95.8% of our debt portfolio based on fair value, had weighted average annual revenue of $992.2 million, annual EBITDA of $214.3 million, interest coverage of 1.8x, net leverage of 6.7x, and an average net loan-to value of 55%.
The companies in which we invest use our capital to support their growth, acquisitions, market or product expansion, refinancings and/or recapitalizations. The debt in which we invest typically is not rated by any rating agency, but if these instruments were rated, they would likely receive a rating of below investment grade (that is, below BBB- or Baa3), which is often referred to as "high yield" or "junk."
Key Components of Our Results of Operations
Investments
We focus primarily on the direct origination of loans to institutionally-backed, upper middle market companies domiciled in the United States.
Our level of investment activity (both the number of investments and the size of each investment) can and will vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make.
In addition, as part of our risk strategy on investments, we may reduce the levels of certain investments through partial sales or syndication to additional lenders.
Revenues
We generate revenues primarily in the form of interest income from the investments we hold. In addition, we generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of three to ten years. As of September 30, 2026, 95.6% of our debt investments based on fair value bear interest at a floating rate, subject to interest rate floors, in certain cases. Interest on our debt investments is generally payable either monthly or quarterly.
Our investment portfolio consists primarily of floating rate loans, and our credit facilities bear interest at floating rates. Macro trends in base interest rates like the Secured Overnight Financing Rate ("SOFR") and any other alternative reference rates may affect our net investment income over the long term. However, because we generally originate loans to a small number of portfolio companies each quarter, and those investments vary in size, our results in any given period, including the interest rate on investments that were sold or repaid in a period compared to the interest rate of new investments made during that period, often are idiosyncratic, and reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macro trends. Generally, because our portfolio consists primarily of floating rate loans, we expect our earnings to benefit from a prolonged higher rate environment.
Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts under U.S. generally accepted accounting principles ("U.S. GAAP") as interest income using the effective yield method for term instruments and the straight-line method for revolving or delayed draw instruments. Repayments of our debt investments can reduce interest income from period to period. The frequency or volume of these repayments may fluctuate significantly. We record prepayment premiums on loans as interest income. We may also generate revenue in the form of commitment, loan origination, structuring, or due diligence fees, fees for providing managerial assistance to our portfolio companies and possibly consulting fees.
Dividend income on equity investments is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded companies.
Our portfolio activity also reflects the proceeds from sales of investments. We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the amortized cost basis of the investment without regard to
unrealized gains or losses previously recognized. We record current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized gains (losses) on investments in the consolidated statements of operations.
Expenses
Our primary operating expenses include the payment of the management fee, the incentive fee, expenses reimbursable under the Administration Agreement and Investment Advisory Agreement, legal and professional fees, interest and other debt expenses and other operating expenses. The management fee and incentive fee compensate our Adviser for work in identifying, evaluating, negotiating, closing, monitoring and realizing our investments.
Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory and management services to us, the base compensation, bonus and benefits, and the routine overhead expenses of such personnel allocable to such services, are provided and paid for by the Adviser. We bear our allocable portion of the compensation paid by the Adviser (or its affiliates) to our chief compliance officer and chief financial officer and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs). We bear all other costs and expenses of our operations, administration and transactions, including, but not limited to (i) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Investment Advisory Agreement; (ii) our allocable portion of overhead and other expenses incurred by the Adviser in performing its administrative obligations under the Administration Agreement; and (iii) all other costs and expenses of our operations and transactions including, without limitation, those relating to:
•expenses deemed to be "organization and offering expenses" for purposes of FINRA Conduct Rule 2310(a)(12) (exclusive of commissions, the dealer manager fee, any discounts and other similar expenses paid by investors at the time of sale of our stock);
• cost of corporate and organizational expenses relating to offerings of shares of our common stock;
•cost of calculating our net asset value, including the cost of any third-party valuation services;
•cost of effecting any sales and repurchases of our common stock and other securities;
•fees and expenses payable under any dealer manager agreements, if any;
•debt service and other costs of borrowings or other financing arrangements;
•costs of hedging;
•expenses, including travel expense, incurred by the Adviser, or members of the Investment Team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, enforcing our rights;
•escrow agent, transfer agent and custodial fees and expenses;
•fees and expenses associated with marketing efforts;
•federal and state registration fees, any stock exchange listing fees and fees payable to rating agencies;
•U.S. federal, state and local taxes;
•independent directors' fees and expenses, including certain travel expenses;
•costs of preparing financial statements and maintaining books and records and filing reports or other documents with the SEC (or other regulatory bodies) and other reporting and compliance costs, including registration fees, listing fees and licenses, and the compensation of professionals responsible for the preparation of the foregoing;
•costs of any reports, proxy statements or other notices to our shareholders (including printing and mailing costs);
•costs of any shareholder or director meetings and the compensation of personnel responsible for the preparation of the foregoing and related matters;
•commissions and other compensation payable to brokers or dealers;
•research and market data;
•fidelity bond, directors' and officers' errors and omissions liability insurance and other insurance premiums;
•direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;
•fees and expenses associated with independent audits, outside legal and consulting costs;
•costs of winding up;
•costs incurred in connection with the formation or maintenance of entities or vehicles to hold our assets for tax or other purposes;
•extraordinary expenses (such as litigation or indemnification); and
•costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws.
Reimbursement of Administrative Services
We will reimburse our Adviser for the administrative expenses necessary for its performance of services to us. However, such reimbursement will be made at an amount equal to the lower of our Adviser's costs or the amount that we would be required to pay for comparable administrative services in the same geographic location. Also, such costs will be reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We will not reimburse our Adviser for any services for which it receives a separate fee, for example rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of our Adviser.
Leverage
The amount of leverage we use in any period depends on a variety of factors, including cash available for investing, the cost of financing and general economic and market conditions. Generally, our total borrowings are limited so that we cannot incur additional borrowings, including through the issuance of additional debt securities, if such additional indebtedness would cause our asset coverage ratio to fall below 200%, as defined in the 1940 Act.
In any period, our interest expense will depend largely on the extent of our borrowings. In addition, we may dedicate assets to financing facilities.
Market Trends
Broader geopolitical developments, including the conflict involving Iran and ongoing technology disruption, have contributed to elevated market volatility, even if they have not altered the fundamental operating environment for the U.S. companies in which we invest. We actively monitor these dynamics alongside other sources of risk. As part of our standard valuation and risk management processes, we conduct reviews of every investment in our portfolio on a quarterly basis and take additional, proactive steps to reassess risk across our portfolio through thematic stress tests. Year-to-date, our regular course portfolio monitoring and risk-specific stress tests, including those related to interest rates changes, tariffs and artificial intelligence, suggest that our portfolio is well positioned, supported by borrowers with strong business fundamentals and defensive characteristics.
We believe the middle market lending environment provides opportunities for us to meet our goal of making investments that generate attractive risk-adjusted returns.
Limited Availability of Capital for Middle Market Companies - The middle market is a large addressable market. According to GE Capital's National Center for the Middle Market Mid-Year 2026 Middle Market Indicator, there are approximately 200,000 U.S. middle market companies, which have approximately 48 million aggregate employees. Moreover, the U.S. middle market accounts for one-third of private sector gross domestic product ("GDP"). GE defines U.S. middle market companies as those between $10 million and $1 billion in annual revenue, which we believe has significant overlap with our definition of U.S. middle market companies. We believe U.S. middle market companies will continue to require access to debt capital to refinance existing debt, support growth and finance acquisitions. We believe that regulatory and structural factors, industry consolidation and general risk aversion, limit the amount of traditional financing available to U.S. middle market companies. Reportedly, many commercial and investment banks have, in recent years, de-emphasized their service and product offerings to middle market businesses in favor of lending to large corporate clients and managing capital markets transactions. In addition, these lenders may be constrained in their ability to underwrite and hold bank loans and high yield securities for middle market issuers as they seek to meet existing and future regulatory capital requirements. We also believe that there is a lack of market participants that are willing to hold meaningful amounts of certain middle market loans. As a result, we believe our ability to minimize syndication risk for a company seeking financing by being able to hold its loans without having to syndicate them, coupled with reduced capacity of traditional lenders to serve the middle market, present an attractive opportunity to invest in middle market companies.
Capital Markets Have Been Unable to Fill the Void in U.S. Middle Market Finance Left by Banks - Access to underwritten bond and syndicated loan markets is challenging for middle market companies due to loan issue size and liquidity. For example, high yield bonds are generally purchased by institutional investors, such as mutual funds and exchange traded funds ("ETFs") who, among other things, are focused on the liquidity characteristics of the bond being issued in order to fund investor redemptions and/or comply with regulatory requirements. Accordingly, the existence of an active secondary market for bonds is an important consideration in these entities' initial investment decision.
Syndicated loans arranged through a bank are done either on a "best efforts" basis or are underwritten with terms plus provisions that permit the underwriters to change certain terms, including pricing, structure, yield and tenor, otherwise known as "flex", to successfully syndicate the loan, in the event the terms initially marketed are insufficiently attractive to investors. Furthermore, banks are generally reluctant to underwrite sub-scale middle market loans because the arrangement fees they may earn on the placement of the debt generally are not sufficient to meet the banks' return hurdles. Loans provided by companies such as ours provide certainty to issuers in that we have a more stable capital base and have the ability to invest in illiquid assets, and we can commit to a given amount of debt on specific terms, at stated coupons and with agreed upon fees. As we are the ultimate holder of the loans, we do not require market "flex" or other arrangements that banks may require when acting on an agency basis. In addition, our Adviser has teams focused on both liquid credit and private credit and these teams are able to collaborate with respect to syndicated loans.
Secular Trends Supporting Growth for Private Credit - We believe that periods of market volatility, including volatility experienced in recent years driven by uncertainty regarding inflation, interest rates and monetary policy, geopolitical conditions, technological change, and exogenous shocks such as those to public health, have accentuated the advantages of private credit. The availability of capital in the liquid credit market is highly sensitive to market conditions whereas we believe private lending has proven to be a stable and reliable source of capital through periods of volatility. We believe the opportunity set for private credit will continue to expand even as the public markets remain open. Financial sponsors and companies today are familiar with direct lending and have seen firsthand the strong value proposition that a private solution can offer. Scale, certainty of execution and flexibility all provide borrowers with a compelling alternative to the syndicated loan and high yield markets. Based on our experience, larger, higher quality credits that have traditionally been issuers in the syndicated and high yield markets are increasingly seeking private solutions independent of credit market conditions. In our view, this is supported by financial sponsors wanting to work with collaborative financing partners that have scale and breadth of capabilities. This has driven substantial growth in direct lending portfolio companies over time. Given the dynamics mentioned above, we believe this trend is poised to continue and that the large amount of uninvested capital held by funds of private equity firms broadly, estimated by Preqin Ltd., an alternative assets industry data and research company, to be $2.70 trillion as of December 31, 2025, will continue to serve as a tailwind to the space.
Attractive Investment Dynamics - An imbalance between the supply of, and demand for, middle market debt capital creates attractive pricing dynamics. We believe the directly negotiated nature of middle market financings also generally provides more favorable terms to the lender, including stronger covenant and reporting packages, better call protection, and lender-protective change of control provisions. Additionally, we believe BDC managers' expertise in credit selection and ability to manage through credit cycles has generally resulted in BDCs experiencing lower loss rates than U.S. commercial banks through credit cycles. Further, we believe that historical middle market default rates have been lower, and recovery rates have been higher, as compared to the larger market capitalization, broadly distributed market, leading to lower cumulative losses. Lastly, we believe that in the current environment, lenders with available capital may be able to take advantage of attractive investment opportunities as the economy reopens and may be able to achieve improved economic spreads and documentation terms as financing activity rebounds from modest levels.
Conservative Capital Structures - With more conservative capital structures, U.S. middle market companies have exhibited higher levels of cash flows available to service their debt. In addition, U.S. middle market companies often are characterized by simpler capital structures than larger borrowers, which facilitates a streamlined underwriting process and, when necessary, restructuring process.
Attractive Opportunities in Investments in Loans - We invest in senior secured or unsecured loans, subordinated loans or mezzanine loans, broadly syndicated loans and, to a lesser extent, equity and equity-related securities. We believe that opportunities in senior secured loans are significant because of the floating rate structure of most senior secured debt issuances and because of the strong defensive characteristics of these types of investments. We believe that debt issues with floating interest rates offer a superior return profile as compared with fixed-rate investments, since floating rate structures are generally less susceptible to declines in value experienced by fixed-rate securities in a rising interest rate environment. Senior secured debt also provides strong defensive characteristics. Senior secured debt has priority in payment among an issuer's security holders whereby holders are due to receive payment before junior creditors and equity holders. Further, these investments are secured by the issuer's assets, which may provide protection in the event of a default.
Portfolio and Investment Activity
Our platform continues to find attractive investment opportunities for deployment, predominantly in first lien originations to large borrowers and we intend to continue investing in accordance with our investment objective.
During the third quarter of 2026, global equity and debt markets remained driven by expectations around inflation, interest rates, artificial intelligence ("AI")-related capital expenditures, and ongoing geopolitical tensions, including in the Middle East and their impact on certain energy prices. Equity indices saw modest appreciation during the third quarter despite lack of market breadth, with approximately two-thirds of S&P 500 and Russell 1000 stocks retreating during the quarter. The 10-year Treasury yield in the United States ended the third quarter of 2026 at 5.29%, approximately 85 basis points higher than June 30, 2026 and in late September, the Federal Reserve announced a rate hike of 25 basis points, increasing the federal funds target range to 3.75% to 4.00%. This represented a significant shift from the beginning of the year, when market participants had anticipated further reductions in the federal funds rate. Increases in base rates and credit spreads increase the yields available on our new investments and the income generated by our existing floating rate investments.
We continue to focus on our investments in upper middle market businesses in non-cyclical industries we view as recession resistant and that we are familiar with, including defensive service-oriented sectors that provide intangible mission critical solutions and products such as healthcare, business services, technology and insurance brokerage. These types of companies have diversified revenue streams, strong recurring cash flow profiles and healthy liquidity.
Blue Owl serves as the lead, co-lead or administrative agent on many of our investments and approximately 89% of our investments are supported by sophisticated financial sponsors who provide operational and financial resources.
The decline in value of our portfolio was primarily attributable to repayment activity over the quarter. Generally we are not seeing a meaningful increase in amendment activity, requests for increased revolver borrowings, missed payments or other signs of an overall, broad deterioration in our results or those of our portfolio companies at this time, there can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by economic conditions, which could have a negative impact on our future results.
In February 2026, we sold a portion of our portfolio company investments with aggregate fair value of $538.3 million and aggregate total debt commitments of $600.0 million, equivalent to 99.8% of par value to certain purchasers. See "Note 4 - Investments - Asset Sale" for details. Using the proceeds from these asset sales, on March 5, 2026, the Board declared a return of capital distribution of $2.50 per share which was paid to all of our shareholders of record as of March 24, 2026. Subsequently, we paid return of capital distributions of $0.42 per share to all of our shareholders of record as of April 20, 2026 and of $0.62 per share to all of our shareholders of record as of July 21, 2026. Each of these returns of capital was funded by proceeds from ordinary-course portfolio repayment activity.
Further, on October 15, 2026, the Board declared an additional return of capital distribution of $0.62 per share which was paid to all of our shareholders of record as of October 20, 2026 and funded by proceeds from ordinary-course portfolio repayment activity. Inclusive of the return of capital distributions of $3.54 per share previously paid in 2026, the Company's shareholders will have received return of capital distributions totaling $4.16 per share in 2026 and we will have returned approximately 50.3% of net asset value as of December 31, 2025. See "Note 12 - Subsequent Events" for details.
Subject to the approval of our Board, we intend to continue to prioritize additional return of capital distributions to our shareholders on a quarterly basis and expect to fund these quarterly returns of capital with repayments, earnings, proceeds from the sale of assets or strategic transactions. Based on our visibility of repayments in the short-term and long-term repayment expectations (generally 6-8% per quarter historically), we anticipate that we may return 5% or more of our then-prevailing NAV to shareholders each quarter.
We also expect, subject to the approval of our Board, to continue to make monthly cash dividends to our shareholders from the Company's net investment income.
Following this year's asset sales and repayments, the portfolio continues to perform as designed. Portfolio composition and sector concentrations remain well diversified and the average position size remains substantially unchanged compared to last quarter, even as the number of portfolio companies has declined. Other key metrics remain largely constant compared to last quarter including borrower weighted average EBITDA and interest coverage, as well as weighted average spread and maturities. We believe this consistency reflects our disciplined portfolio construction, which has underpinned our strong net annualized total return since inception. Many of the companies in which we invest are continuing to see modest growth in both revenues and EBITDA. However, in the event of future geopolitical, economic or financial market instability, in the U.S. and elsewhere, it is possible that the results of some of the middle market companies similar to those in which we invest could be challenged.
As of September 30, 2026, based on fair value, our portfolio consisted of 77.5% first lien senior secured debt investments (of which 65% we consider to be unitranche debt investments (including "last-out" portions of such loans)), 6.2% second-lien senior secured debt investments, 3.6% unsecured investments, 1.4% specialty finance debt investments, 2.7% preferred equity investments, 5.6% common equity investments, 2.9% specialty finance equity investments, and 0.1% joint venture investments.
As of September 30, 2026, our weighted average total yield of the portfolio at fair value and amortized cost was 9.9% and 8.8%, respectively, and our weighted average yield of accruing debt and income producing securities at fair value and amortized cost was 11.0% and 10.4%, respectively. Refer to our weighted average yields and interest rates table for more information on our calculation of weighted average yields. As of September 30, 2026, the weighted average spread of floating rate debt investments was 6.0%.
As of September 30, 2026, we had investments in 145 portfolio companies with an aggregate fair value of $597.2 million. As of September 30, 2026, we had net leverage of 0.22x debt-to-equity.
The table below presents our investment activity for the following periods (information presented herein is at par value unless otherwise indicated):
| For the Three Months Ended September 30, | |||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||
| New investment commitments: | |||||||||||
| Gross originations | $ | 22,500 | $ | 130,209 | |||||||
| Less: Sell downs | - | (873) | |||||||||
| Total new investment commitments | $ | 22,500 | $ | 129,336 | |||||||
| Principal amount of new investments funded: | |||||||||||
| First-lien senior secured debt investments | $ | 22,500 | $ | 87,732 | |||||||
| Second-lien senior secured debt investments | - | - | |||||||||
| Unsecured debt investments | - | 201 | |||||||||
|
Specialty finance debt investments
|
- | 972 | |||||||||
| Preferred equity investments | - | 405 | |||||||||
| Common equity investments | - | 1,952 | |||||||||
|
Specialty finance equity investments
|
- | 5,336 | |||||||||
| Joint venture investments | - | - | |||||||||
| Total principal amount of new investments funded | $ | 22,500 | $ | 96,598 | |||||||
| Drawdowns (repayments) on revolvers and delayed draw term loans, net | $ | 2,135 | $ | 7,892 | |||||||
| Principal amount of investments sold or repaid: | |||||||||||
|
First-lien senior secured debt investments(3)
|
$ | (74,182) | $ | (72,385) | |||||||
| Second-lien senior secured debt investments | - | - | |||||||||
| Unsecured debt investments | - | - | |||||||||
|
Specialty finance debt investments
|
- | - | |||||||||
| Preferred equity investments | - | (49) | |||||||||
| Common equity investments | (46,274) | (201) | |||||||||
|
Specialty finance equity investments
|
(1,913) | (3,518) | |||||||||
| Joint venture investments | - | - | |||||||||
| Total principal amount of investments sold or repaid | $ | (122,369) | $ | (76,153) | |||||||
|
Number of new investment commitments in new portfolio companies(1)
|
1 | 11 | |||||||||
| Average new investment commitment amount in new portfolio companies | $ | 22,500 | $ | 7,899 | |||||||
| Weighted average term for new investment commitments (in years) | 4.2 | 5.6 | |||||||||
| Percentage of new debt investment commitments at floating rates | 100.0 | % | 98.4 | % | |||||||
| Percentage of new debt investment commitments at fixed rates | - | % | 1.6 | % | |||||||
|
Weighted average interest rate of new investment commitments(2)
|
13.1 | % | 8.9 | % | |||||||
| Weighted average spread over applicable base rate of new debt investment commitments at floating rates | 9.0 | % | 5.0 | % | |||||||
(1)Number of new investment commitments represents commitments to a particular portfolio company.
(2)Assumes each floating rate commitment is subject to the greater of the interest rate floor (if applicable) or 3-month SOFR, which was 4.08% and 3.98% as of September 30, 2026 and 2025, respectively.
(3)Includes scheduled paydowns.
The table below presents investments at fair value and amortized cost as of the following periods:
| As of September 30, 2026 | As of December 31, 2025 | ||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||
|
First-lien senior secured debt investments(1)
|
$ | 495,017 | $ | 462,875 | $ | 1,251,162 | $ | 1,221,372 | |||||||||||||||
| Second-lien senior secured debt investments | 82,928 | 37,214 | 159,446 | 131,054 | |||||||||||||||||||
| Unsecured debt investments | 20,841 | 21,422 | 37,347 | 38,673 | |||||||||||||||||||
|
Specialty finance debt investments
|
8,518 | 8,526 | 7,483 | 7,491 | |||||||||||||||||||
|
Preferred equity investments
|
19,878 | 16,087 | 67,578 | 67,143 | |||||||||||||||||||
|
Common equity investments
|
28,970 | 33,576 | 55,486 | 80,120 | |||||||||||||||||||
|
Specialty finance equity investments
|
13,855 | 17,180 | 25,571 | 30,360 | |||||||||||||||||||
|
Joint ventures
|
334 | 314 | 334 | 337 | |||||||||||||||||||
| Total Investments | $ | 670,341 | $ | 597,194 | $ | 1,604,407 | $ | 1,576,550 | |||||||||||||||
_______________
(1)We consider 65% and 48% of first-lien senior secured debt investments to be unitranche loans as of September 30, 2026 and December 31, 2025, respectively.
The table below describes investments by industry composition based on fair value as of the following periods:
| As of September 30, 2026 | As of December 31, 2025 | ||||||||||||||||
| Advertising and media | 5.5 | % | 2.8 | % | |||||||||||||
| Aerospace and defense | 2.4 | 1.2 | |||||||||||||||
|
Asset Based Lending and Fund Finance(1)
|
5.3 | 2.3 | |||||||||||||||
| Automotive Services | 0.7 | 3.0 | |||||||||||||||
| Buildings and real estate | 2.4 | 5.1 | |||||||||||||||
| Business services | 2.2 | 2.0 | |||||||||||||||
| Chemicals | 7.7 | 4.7 | |||||||||||||||
| Consumer products | 1.6 | 2.7 | |||||||||||||||
| Containers and packaging | 1.5 | 2.4 | |||||||||||||||
| Distribution | 2.0 | 1.8 | |||||||||||||||
| Education | 0.5 | 0.5 | |||||||||||||||
| Energy equipment and services | - | 0.6 | |||||||||||||||
| Financial services | 2.8 | 4.4 | |||||||||||||||
| Food and beverage | 4.2 | 6.0 | |||||||||||||||
| Healthcare equipment and services | 1.6 | 2.7 | |||||||||||||||
| Healthcare providers and services | 13.2 | 9.8 | |||||||||||||||
| Healthcare technology | 10.2 | 7.8 | |||||||||||||||
| Household products | 6.2 | 2.4 | |||||||||||||||
| Human resource support services | 2.5 | 2.0 | |||||||||||||||
| Infrastructure and environmental services | 0.6 | 1.2 | |||||||||||||||
| Insurance | 1.4 | 2.0 |
(3)
|
||||||||||||||
| Internet software and services | 11.2 | 10.9 | |||||||||||||||
|
Joint ventures(4)
|
0.1 | 0.0 |
(5)
|
||||||||||||||
| Leisure and entertainment | 0.5 | 2.5 | |||||||||||||||
| Manufacturing | 5.6 | 9.8 | |||||||||||||||
|
Pharmaceuticals(2)
|
0.2 | 0.8 | |||||||||||||||
| Professional services | 2.5 | 3.2 | |||||||||||||||
| Specialty retail | 3.2 | 3.7 | |||||||||||||||
| Telecommunications | 0.5 | 0.2 | |||||||||||||||
| Transportation | 1.7 | 1.5 | |||||||||||||||
| Total | 100.0 | % | 100.0 | % | |||||||||||||
(1)Includes investments in Amergin AssetCo and BOCSO 2025.
(2)Includes investment in LSI Financing DAC as of September 30, 2026 and investments in LSI Financing DAC and LSI Financing LLC as of December 31, 2025.
(3)Includes investments in Fifth Season.
(4)Includes investments in Credit SLF and Blue Owl Leasing.
(5)Rounds to less than 0.1%.
The table below describes investments by geographic composition based on fair value as of the following periods:
| As of September 30, 2026 | As of December 31, 2025 | ||||||||||
| United States: | |||||||||||
| Midwest | 20.2 | % | 22.3 | % | |||||||
| Northeast | 14.1 | 18.3 | |||||||||
| South | 41.2 | 38.4 | |||||||||
| West | 19.5 | 15.3 | |||||||||
| International | 5.0 | 5.7 | |||||||||
| Total | 100.0 | % | 100.0 | % | |||||||
The table below presents the weighted average yields and interest rates of our investments at fair value as of the following periods:
| As of September 30, 2026 | As of December 31, 2025 | |||||||||||||
|
Weighted average total yield of portfolio(1)
|
9.9 | % | 9.9 | % | ||||||||||
|
Weighted average total yield of accruing debt and income producing securities(1)
|
11.0 | % | 10.3 | % | ||||||||||
| Weighted average interest rate of accruing debt securities | 10.1 | % | 9.7 | % | ||||||||||
| Weighted average spread over base rate of floating rate debt investments | 6.0 | % | 5.8 | % | ||||||||||
_______________
(1)For non-stated rate income producing investments, computed based on (a) the dividend or interest income earned for the respective trailing twelve months ended on the measurement date, divided by (b) the ending fair value. In instances where historical dividend or interest income data is not available or not representative for the trailing twelve months ended, the interest or dividend income is annualized.
The weighted average yield of our accruing debt and income producing securities is not the same as a return on investment for our shareholders but, rather, relates to our investment portfolio and is calculated before the payment of all of our and our subsidiaries' fees and expenses. The weighted average yield was computed using the effective interest rates as of each respective date, including accretion of original issue discount and loan origination fees, but excluding investments on non-accrual status, if any. There can be no assurance that the weighted average yield will remain at its current level.
Our Adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action with respect to each portfolio company. Our Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:
•assessment of success of the portfolio company in adhering to its business plan and compliance with covenants;
•periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;
•comparisons to other companies in the portfolio company's industry; and
•review of monthly or quarterly financial statements and financial projections for portfolio companies.
An investment will be placed on the Adviser's credit watch list when select events occur and will only be removed from the watch list with oversight of the Diversified Lending Investment Committee and/or other agents of Blue Owl's Credit platform. Once an investment is on the credit watch list, the Adviser works with the borrower to resolve any financial stress through amendments, waivers or other alternatives. If a borrower defaults on its payment obligations, the Adviser's focus shifts to capital recovery. If an investment needs to be restructured, the Adviser's workout team partners with the Investment Team and all material amendments, waivers and restructurings require the approval of a majority of the Diversified Lending Investment Committee.
As part of the monitoring process, our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser rates the credit risk of all investments on a scale of 1 to 5. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors. The rating system is as follows:
| Investment Rating | Description | |||||||
| 1 |
Investments rated 1 involve the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since origination or acquisition are generally favorable;
|
|||||||
| 2 |
Investments rated 2 involve an acceptable level of risk that is similar to the risk at the time of origination or acquisition. The borrower is generally performing as expected and the risk factors are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2;
|
|||||||
| 3 |
Investments rated 3 involve a borrower performing below expectations and indicates that the loan's risk has increased somewhat since origination or acquisition;
|
|||||||
| 4 |
Investments rated 4 involve a borrower performing materially below expectations and indicates that the loan's risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due); and
|
|||||||
| 5 | Investments rated 5 involve a borrower performing substantially below expectations and indicates that the loan's risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered. | |||||||
Our Adviser rates the investments in our portfolio at least quarterly and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments rated 3, 4 or 5, our Adviser enhances its level of scrutiny over the monitoring of such portfolio company.
The Adviser has built out its portfolio management team to include workout experts who closely monitor our portfolio companies and who, on at least a quarterly basis, assess each portfolio company's operational and liquidity exposure and outlook to understand and mitigate risks; and, on at least a monthly basis, evaluates existing and newly identified situations where operating results are deviating from expectations. As part of its monitoring process, the Adviser focuses on projected liquidity needs and where warranted, re-underwriting credits and evaluating downside and liquidation scenarios.
The Adviser focuses on downside protection by leveraging existing rights available under our credit documents; however, for investments that are significantly underperforming or which may need to be restructured, the Adviser's workout team partners with the Investment Team and all material amendments, waivers and restructurings require the approval of a majority of the Diversified Lending Investment Committee. As of September 30, 2026, 2.7% of our portfolio at fair value is on non-accrual. Our average annual gain (loss) ratio is (0.20)%.
The table below shows the composition of our portfolio on the 1 to 5 rating scale as of the following periods:
| As of September 30, 2026 | As of December 31, 2025 | |||||||||||||||||||||||||
| Investment Rating | Investments at Fair Value |
Percentage of Total Portfolio(1)
|
Investments at Fair Value |
Percentage of Total Portfolio(1)
|
||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| 1 | $ | 31,829 | 5.3 | % | $ | 182,103 | 11.6 | % | ||||||||||||||||||
| 2 | 403,203 | 67.5 | 1,177,657 | 74.7 | ||||||||||||||||||||||
| 3 | 145,934 | 24.4 | 190,376 | 12.1 | ||||||||||||||||||||||
| 4 | 3,349 | 0.6 | 9,000 | 0.6 | ||||||||||||||||||||||
| 5 | 12,879 | 2.2 | 17,414 | 1.1 | ||||||||||||||||||||||
| Total | $ | 597,194 | 100.0 | % | $ | 1,576,550 | 100.0 | % | ||||||||||||||||||
(1) Totals presented may not sum due to rounding.
The table below shows the amortized cost and fair value of our performing and non-accrual investments as of the following periods:
| As of September 30, 2026 | As of December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Percentage |
Fair Value
|
Percentage | Amortized Cost | Percentage | Fair Value | Percentage | |||||||||||||||||||||||||||||||||||||||
| Performing | $ | 600,566 | 89.6 | % | $ | 580,966 | 97.3 | % | $ | 1,554,266 | 96.9 | % | $ | 1,553,996 | 98.6 | % | |||||||||||||||||||||||||||||||
| Non-accrual | 69,775 | 10.4 | 16,228 | 2.7 | 50,141 | 3.1 | 22,554 | 1.4 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 670,341 | 100.0 | % | $ | 597,194 | 100.0 | % | $ | 1,604,407 | 100.0 | % | $ | 1,576,550 | 100.0 | % | |||||||||||||||||||||||||||||||
Investments are generally placed on non-accrual status when it is not probable that principal or interest will be collected in full. Accrued interest receivable is generally not carried as an asset once a loan is placed on non-accrual status unless collection is considered probable. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Cash receipts on non-accrual loans are recognized as interest income only when collection of principal is probable and otherwise are applied as a reduction of the loan's recorded investment. Management may make exceptions to this treatment and determine to not place an investment on non-accrual status if the investment has sufficient collateral value and is in the process of collection.
Specialty Financing Portfolio Companies and Joint Ventures
We leverage the expanding role that private lenders are being asked to play in the broader credit markets to evaluate cross-platform opportunities including strategic equity and accretive joint venture investments that have cash flow and credit profiles that provide consistent income.
Specialty Financing Portfolio Companies
Amergin was created to invest in a leasing platform focused on railcar, aviation and other long-lived transportation assets. Amergin acquires existing on-lease portfolios of new and end-of-life railcars and related equipment and selectively purchases off-lease assets and is building a commercial aircraft portfolio through aircraft financing and engine acquisition on a sale and lease back basis. Amergin consists of Amergin AssetCo and Amergin Asset Management LLC, which has entered into a Servicing Agreement with Amergin AssetCo. As of September 30, 2026, the fair market value of our investment in Amergin Asset Management LLC was $2.2 million. We made an initial equity commitment to Amergin AssetCo on July 1, 2022. As of September 30, 2026, the fair market value of our investment in Amergin AssetCo was $13.1 million, of which $4.6 million is equity and $8.5 million is debt, and we had an unfunded equity commitment of $0.9 million.
Fifth Season is a portfolio company created to invest in life insurance based assets, including secondary and tertiary life settlement and other life insurance exposures using detailed analytics, internal life expectancy review and sophisticated portfolio management techniques. On July 18, 2022, we made an initial equity commitment to Fifth Season. On February 12, 2026, we sold our equity investment in Fifth Season.
LSI Financing DAC is a portfolio company formed to acquire contractual rights to revenue pursuant to earnout agreements generally in the life sciences space. On December 14, 2022, we made an initial equity commitment to LSI Financing DAC. As of September 30, 2026, the fair value of our investment in LSI Financing DAC was $0.2 million.
LSI Financing LLC is a separately managed portfolio company formed to indirectly own royalty purchase agreements and loans in the life sciences space. The Adviser provides consulting services to a subsidiary of LSI Financing LLC in exchange for a fee. The Adviser has agreed to waive a portion of the management fee payable by us pursuant to the Investment Advisory Agreement equal to the pro rata amount of such consulting fee. On November 25, 2024, we redeemed a portion of our interest in LSI Financing DAC in exchange for common shares of LSI Financing LLC. In the second quarter of 2026, we redeemed our interest in LSI Financing LLC for proceeds of $10.6 million and recognized a $1.05 million gain on the transaction. As of September 30, 2026, the Company's remaining commitment on LSI Financing LLC was $2.0 million.
Blue Owl Cross-Strategy Opportunities 2025-1 LLC (fka Blue Owl Cross-Strategy Opportunities LLC) ("BOCSO 2025"), which was formed to invest in alternative credit assets, including asset-based finance ("ABF"). ABF is a subsector of private credit focused on generating income from pools of financial, physical or other assets. We believe exposure to alternative credit presents an attractive opportunity as alternative credit is a growing subsector of private credit. On September 18, 2025, we made an initial equity contribution to BOCSO 2025. As of September 30, 2026, our investment at fair value in BOCSO 2025 was $10.2 million and our total commitment was $10.2 million. As of September 30, 2026, the portfolio consists of six investments totaling $0.73 billion and $0.72 billion at cost and fair value, respectively, ranging in costs from $24.9 million to $187.4 million and with a fair value ranging from $24.9 million to $184.5 million. The largest investment is 25.8% of the total cost of BOCSO 2025's portfolio. As of September 30, 2026, the portfolio asset class composition was 51.1% ABF - Specialty finance, 45.5% ABF - Leasing, and 3.4% ABF - Commercial Real Estate.
We do not consolidate our equity interests in our specialty financing portfolio companies.
Joint Ventures
Credit SLF is a joint venture between the Credit SLF Members. Credit SLF's principal purpose is to make investments primarily in senior broadly syndicated loans to U.S. middle-market companies. It was formed in May 2024 and made its first portfolio company investment in July 2024.
Credit SLF is managed by a board consisting of an equal number of representatives appointed by each Credit SLF Member and which acts unanimously. Investment decisions must be approved by Credit SLF's board.
Refer to Exhibit 99.1 for the Credit SLF's Supplemental Financial Information.
Blue Owl Leasing is a joint venture between the Blue Owl Leasing Members. Blue Owl Leasing's principal purpose is to make investments primarily in fixed-rate equipment leases and loans. These investments are generally secured by essential-use equipment and critical software. It was formed in June 2025 and made its first portfolio company investment in October 2025.
Blue Owl Leasing is managed by the Blue Owl Leasing Members who must unanimously approve investment decisions. The Blue Owl Leasing Members coinvest through Blue Owl Leasing, or its wholly owned subsidiaries.
As of September 30, 2026, our investment at fair value in Blue Owl Leasing was $89 thousand. As of September 30, 2026, Blue Owl Leasing had a $55.2 million investment.
Refer to Exhibit 99.2 for the Blue Owl Leasing's Supplemental Financial Information.
Results of Operations
The below table presents our operating results for the following periods:
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | |||||||||||||||||||||||||||||
| Total Investment Income | $ | 16,829 | $ | 46,182 | $ | (29,353) | $ | 76,603 | $ | 150,715 | $ | (74,112) | |||||||||||||||||||||||
| Less: Total Operating Expenses | 8,493 | 28,472 | (19,979) | 52,397 | 90,833 | (38,436) | |||||||||||||||||||||||||||||
| Net Investment Income (Loss) Before Taxes | 8,336 | 17,710 | (9,374) | 24,206 | 59,882 | (35,676) | |||||||||||||||||||||||||||||
| Less: Income tax expense (benefit), including excise tax expense (benefit) | (1,656) | 316 | (1,972) | (1,019) | 1,173 | (2,192) | |||||||||||||||||||||||||||||
| Net Investment Income (Loss) After Taxes | 9,992 | 17,394 | (7,402) | 25,225 | 58,709 | (33,484) | |||||||||||||||||||||||||||||
| Net change in unrealized gain (loss) | (17,860) | (16,164) | (1,696) | (37,723) | (18,796) | (18,927) | |||||||||||||||||||||||||||||
| Net realized gain (loss) | 16,944 | (9) | 16,953 | (4,388) | (18,700) | 14,312 | |||||||||||||||||||||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 9,076 | $ | 1,221 | $ | 7,855 | $ | (16,886) | $ | 21,213 | $ | (38,099) | |||||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations can vary from period-to-period as a result of various factors, including the level of investment originations and exit activity, expenses, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. As a result, comparisons of net increase (decrease) in net assets resulting from operations may not be meaningful.
Investment Income
The table below presents the investment income for the following periods:
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | |||||||||||||||||||||||||||||
| Interest income from investments | $ | 12,877 | $ | 38,892 | $ | (26,015) | $ | 56,670 | $ | 126,049 | $ | (69,379) | |||||||||||||||||||||||
| PIK interest income | 2,189 | 2,764 | (575) | 7,370 | 10,793 | (3,423) | |||||||||||||||||||||||||||||
| Dividend income | 1,645 | 3,938 | (2,293) | 9,080 | 12,158 | (3,078) | |||||||||||||||||||||||||||||
| Other income | 118 | 588 | (470) | 3,483 | 1,715 | 1,768 | |||||||||||||||||||||||||||||
| Total Investment Income | $ | 16,829 | $ | 46,182 | $ | (29,353) | $ | 76,603 | $ | 150,715 | $ | (74,112) | |||||||||||||||||||||||
We expect that investment income will vary based on a variety of factors, including the pace of our originations and repayments.
Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
Investment income decreased by $29.4 million for the three months ended September 30, 2026, as compared to the same period in the prior year, primarily due to decreases in interest income and dividend income. The decreases in interest income of $26.0 million
and in dividend income of $2.3 million, were driven by a strategic reduction in our debt portfolio at par from $1.6 billion as of September 30, 2025, to $0.6 billion as of September 30, 2026, as a part of our effort to prioritize return of capital distributions of 5% or more to shareholders each quarter during the year ended December 31, 2026. Additionally, contributing to a lesser degree to the decline in our investment income was the reduction in the weighted average yield of our portfolio from 10.5% to 9.9% period-over-period. 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 and which decreased period-over-period, from $0.7 million to $0.3 million due to a decrease in repayment. PIK interest income and other income remained relatively flat period-over-period. Other income also includes fees that are generally available to us as a result of closing investments and generally paid at the time of closing.
Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
Investment income decreased by $74.1 million for the nine months ended September 30, 2026, as compared to the same period in the prior year, primarily due to a decrease in interest income, PIK interest income and dividend income, partially offset by an increase in other income. Interest income, PIK interest income and dividend income declined by $69.4 million, $3.4 million and $3.1 million, respectively, due to a reduction in our debt portfolio at par from $1.6 billion as of September 30, 2025, to $0.6 billion as of September 30, 2026, largely due to sales of our portfolio investments as a part of our effort to prioritize return of capital distributions of 5% or more to shareholders each quarter we announced in 2026, and to a lesser degree due to a decrease in weighted average yields from 10.5% to 9.9% year-over-year. 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 which decreased period-over-period from $4.9 million to $1.7 million primarily due to a decrease in repayment activity. Other income increased period-over-period, by $1.8 million, primarily due to earned fees on an equity investment redemption. Other income also includes fees that are generally available to us as a result of closing investments and generally paid at the time of closing.
Expenses
The table below presents expenses for the following periods:
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | |||||||||||||||||||||||||||||
| Interest expense | $ | 2,970 | $ | 15,975 | $ | (13,005) | $ | 33,230 | $ | 50,783 | $ | (17,553) | |||||||||||||||||||||||
| Management fees, net | 2,441 | 6,492 | (4,051) | 10,072 | 20,663 | (10,591) | |||||||||||||||||||||||||||||
| Performance based incentive fees | - | 3,688 | (3,688) | - | 12,451 | (12,451) | |||||||||||||||||||||||||||||
| Professional fees | 1,331 | 1,160 | 171 | 3,990 | 3,378 | 612 | |||||||||||||||||||||||||||||
|
Directors' fees
|
195 | 195 | - | 590 | 590 | - | |||||||||||||||||||||||||||||
| Other general and administrative | 1,556 | 962 | 594 | 4,515 | 2,968 | 1,547 | |||||||||||||||||||||||||||||
| Total Operating Expenses | $ | 8,493 | $ | 28,472 | $ | (19,979) | $ | 52,397 | $ | 90,833 | $ | (38,436) | |||||||||||||||||||||||
Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
Total operating expenses decreased by $20.0 million for the three months ended September 30, 2026, as compared to the same period in the prior year, primarily due to decreases in interest expense, management fees and incentive fees. The decrease in interest expense was driven by a decrease in our daily weighted average borrowings from $719.8 million to $174.5 million and a decrease in our weighted average interest rate from 8.4% to 6.2% (including the impact of fees on undrawn portions of our credit facilities) period-over-period. The decrease in incentive fees of $3.7 million was due to a decrease in investment income, primarily as a result of lower interest income earned period-over-period, as noted above. The decrease in management fees of $4.1 million is due to a decrease in average gross assets driven by sales and repayments of portfolio investments.
Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
Total operating expenses decreased by $38.4 million for the nine months ended September 30, 2026, as compared to the same period in the prior year, primarily due to decreases in interest expense, incentive fees and management fees. The decrease in interest expense of $17.6 million was driven by a decrease in our daily weighted average borrowings from $789.0 million to $386.4 million, partially offset by an increase in our weighted average interest rate from 8.1% to 9.3% (including the impact of fees on undrawn portions of our credit facilities) period-over-period. The decrease of $12.5 million in incentive fees was due to a decrease in investment income, primarily as a result of lower interest income earned period-over-period, as noted above. The decrease in management fees of $10.6 million was due to a decrease in average gross assets driven by sales and repayments of portfolio investments.
Net Unrealized Gain (Loss)
We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. During the following periods, net unrealized gains (losses) were comprised of the following:
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | |||||||||||||||||||||||||||||
| Net change in unrealized gain (loss) on investments | $ | (24,575) | $ | (15,433) | $ | (9,142) | $ | (43,614) | $ | (20,264) | $ | (23,350) | |||||||||||||||||||||||
| Translation of assets and liabilities in foreign currencies | (8) | (674) | 666 | (855) | 1,610 | (2,465) | |||||||||||||||||||||||||||||
| Income tax (provision) benefit | 6,723 | (57) | 6,780 | 6,746 | (142) | 6,888 | |||||||||||||||||||||||||||||
| Net Change in Unrealized Gain (Loss) | $ | (17,860) | $ | (16,164) | $ | (1,696) | $ | (37,723) | $ | (18,796) | $ | (18,927) | |||||||||||||||||||||||
Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025
For the three months ended September 30, 2026, the net unrealized loss was primarily driven by reversals of prior period unrealized gains that were realized during the period, partially offset by increase in the fair value of certain debt investments, as further detailed below. For the three months ended September 30, 2025, the net unrealized loss was primarily driven by decreases in the fair value of certain debt investments as further detailed below.
The tables below present the ten largest contributors to the change in net unrealized gain (loss) on investments for the following periods:
| Portfolio Company |
For the Three Months Ended September 30, 2026
|
Portfolio Company |
For the Three Months Ended September 30, 2025
|
|||||||||||||||||
| ($ in thousands) | ($ in thousands) | |||||||||||||||||||
|
Windows Entities
|
$ | (26,104) |
ASP Conair Holdings
|
$ | (5,178) | |||||||||||||||
|
Notorious Topco, LLC (dba Beauty Industry Group)
|
(1,652) |
Notorious Topco, LLC (dba Beauty Industry Group)
|
(3,041) | |||||||||||||||||
|
National Dentex Labs LLC (fka Barracuda Dental LLC)
|
(785) |
Loparex Midco B.V.
|
(2,559) | |||||||||||||||||
|
Pluralsight, LLC
|
(778) |
Peraton Corp.
|
(1,510) | |||||||||||||||||
|
Loparex Midco B.V.
|
(765) |
Pluralsight, LLC
|
(1,276) | |||||||||||||||||
|
Cornerstone OnDemand, Inc.
|
(536) |
New PLI Holdings, LLC (dba PLI)(1)
|
(973) | |||||||||||||||||
|
Norvax, LLC (dba GoHealth)
|
762 |
National Dentex Labs LLC (fka Barracuda Dental LLC)
|
(824) | |||||||||||||||||
|
Peraton Corp.
|
1,104 |
Advancion Holdings, LLC (fka Aruba Investments Holdings, LLC)
|
(686) | |||||||||||||||||
|
Nscale Limited
|
1,461 |
PetVet Care Centers, LLC
|
(455) | |||||||||||||||||
|
Advancion Holdings, LLC (fka Aruba Investments Holdings, LLC)
|
1,777 |
Cornerstone OnDemand, Inc.
|
666 | |||||||||||||||||
| Remaining portfolio companies | 941 | Remaining portfolio companies | 403 | |||||||||||||||||
| Total | $ | (24,575) | Total | $ | (15,433) | |||||||||||||||
(1)Portfolio company is a non-controlled, affiliated investment.
Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025
For the nine months ended September 30, 2026 and 2025, the net unrealized losses were primarily driven by decreases in the fair value of certain debt and equity investments, as well as reversals of prior period unrealized gains that were realized in the current period and exits of certain equity investments as detailed below.
The tables below present the ten largest contributors to the change in net unrealized gain (loss) on investments for the following periods:
| Portfolio Company |
For the Nine Months Ended September 30, 2026
|
Portfolio Company |
For the Nine Months Ended September 30, 2025
|
|||||||||||||||||
| ($ in thousands) | ($ in thousands) | |||||||||||||||||||
|
Loparex Midco B.V.
|
$ | (29,379) |
ASP Conair Holdings LP
|
$ | (10,959) | |||||||||||||||
|
Windows Entities
|
(26,104) |
National Dentex Labs LLC (fka Barracuda Dental LLC)
|
(8,682) | |||||||||||||||||
|
Cornerstone OnDemand, Inc.
|
(9,319) |
Notorious Topco, LLC (dba Beauty Industry Group)
|
(8,402) | |||||||||||||||||
|
Pluralsight, LLC
|
(4,661) |
PCF Holdco, LLC (dba PCF Insurance Services)
|
(5,619) | |||||||||||||||||
|
Notorious Topco, LLC (dba Beauty Industry Group)
|
(1,962) |
EOS Finco S.A.R.L.
|
(3,506) | |||||||||||||||||
|
Nscale Limited
|
2,215 |
Peraton Corp.
|
(3,133) | |||||||||||||||||
|
Advancion Holdings, LLC (fka Aruba Investments Holdings, LLC)
|
2,260 |
Cornerstone OnDemand, Inc.
|
2,309 | |||||||||||||||||
|
EOS Finco S.A.R.L
|
5,703 |
Valence Surface Technologies LLC
|
2,331 | |||||||||||||||||
|
Walker Edison Furniture Company LLC(1)
|
11,955 |
CIBT Global, Inc.
|
4,774 | |||||||||||||||||
|
Conair Holdings LLC
|
18,015 |
H-Food Holdings, LLC
|
17,223 | |||||||||||||||||
| Remaining portfolio companies | (12,337) | Remaining portfolio companies | (6,600) | |||||||||||||||||
| Total | $ | (43,614) | Total | $ | (20,264) | |||||||||||||||
_______________
(1)Portfolio company is a non-controlled, affiliated investment.
Net Realized Gain (Loss)
The table below presents the realized gains and losses on fully exited and partially exited portfolio companies during the following periods:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||||
| Net realized gain (loss) on investments | $ | 25,335 | $ | (444) | $ | 25,779 | $ | 3,512 | $ | (19,114) | $ | 22,626 | ||||||||||||||||||||||||||
| Net realized gain (loss) on foreign currency transactions | 3 | 435 | (432) | 494 | 414 | 80 | ||||||||||||||||||||||||||||||||
|
Realized income tax (expense) / benefit
|
(8,394) | - | (8,394) | (8,394) | - | (8,394) | ||||||||||||||||||||||||||||||||
| Net Realized Gain (Loss) | $ | 16,944 | $ | (9) | $ | 16,953 | $ | (4,388) | $ | (18,700) | $ | 14,312 | ||||||||||||||||||||||||||
Three and Nine Months Ended September 30, 2026 Compared to the Three and Nine Months Ended September 30, 2025
For the three and nine months ended September 30, 2026, we recognized net realized gains on investments of $25.3 million and $3.5 million, respectively, as compared to losses of $0.4 million and $19.1 million, respectively, in the prior year periods, primarily driven by the full or partial sales of investments and the restructuring of certain debt investments. The gains in the current year period were partially driven by a gain of $1.9 million from the asset sale described in "Note 4 - Investments" to our consolidated financial statements included in this Quarterly Report.
The tables below present the largest contributors to the change in net realized gain (loss) on investments for the following periods:
| Portfolio Company |
For the Three Months Ended September 30, 2026
|
|||||||
| ($ in thousands) | ||||||||
|
Windows Entities
|
$ | 26,104 | ||||||
|
Norvax, LLC (dba GoHealth)
|
(762) | |||||||
| Remaining portfolio companies | (7) | |||||||
| Total | $ | 25,335 | ||||||
| Portfolio Company |
For the Three Months Ended September 30, 2025
|
|||||||
| ($ in thousands) | ||||||||
|
Norvax, LLC (dba GoHealth)
|
$ | (426) | ||||||
|
BCTO WIW Holdings, Inc. (dba When I Work)
|
(99) | |||||||
|
Icefall Parent, Inc. (dba EngageSmart)
|
68 | |||||||
| Remaining portfolio companies | 13 | |||||||
| Total | $ | (444) | ||||||
| Portfolio Company |
For the Nine Months Ended September 30, 2026
|
|||||||
| ($ in thousands) | ||||||||
|
Windows Entities
|
$ | 26,104 | ||||||
|
MINDBODY, Inc.
|
1,099 | |||||||
|
LSI Financing LLC(1)
|
1,045 | |||||||
|
VCI Asset Holdings LLC
|
772 | |||||||
|
EOS Finco S.A.R.L
|
(5,874) | |||||||
|
Conair Holdings LLC
|
(8,947) | |||||||
|
Walker Edison Furniture Company LLC(1)
|
(12,122) | |||||||
| Remaining portfolio companies | 1,435 | |||||||
| Total | $ | 3,512 | ||||||
_______________
(1)Portfolio company is a non-controlled, affiliated investment.
| Portfolio Company |
For the Nine Months Ended September 30, 2025
|
|||||||
| ($ in thousands) | ||||||||
|
H-Food Holdings, LLC
|
$ | (15,359) | ||||||
|
CIBT Global, Inc.
|
(4,785) | |||||||
|
PCF Holdco, LLC (dba PCF Insurance Services)
|
4,057 | |||||||
|
HFS Matterhorn Topco, Inc.
|
(1,625) | |||||||
|
GoHealth, Inc.
|
(974) | |||||||
|
Norvax, LLC (dba GoHealth)
|
(426) | |||||||
| Remaining Portfolio Companies | (2) | |||||||
| Total | $ | (19,114) | ||||||
Realized Gross Internal Rate of Return
Since we began investing in 2017 through September 30, 2026, our exited investments have resulted in an aggregate cash flow realized gross internal rate of return to us of approximately 9.7% (based on total capital invested of $4.2 billion and total proceeds from these exited investments of $5.2 billion).
IRR is a measure of our discounted cash flows (inflows and outflows). Specifically, IRR is the discount rate at which the net present value of all cash flows is equal to zero. That is, IRR is the discount rate at which the present value of total capital invested in each of our investments is equal to the present value of all realized returns from that investment. Our IRR calculations are unaudited.
Capital invested, with respect to an investment, represents the aggregate cost basis allocable to the realized or unrealized portion of the investment, net of any upfront fees paid at closing for the term loan portion of the investment.
Realized returns, with respect to an investment, represents the total cash received with respect to each investment, including all amortization payments, interest, dividends, prepayment fees, upfront fees (except upfront fees paid at closing for the term loan portion of an investment), administrative fees, agent fees, amendment fees, accrued interest, and other fees and proceeds.
Gross IRR, with respect to an investment, is calculated based on the dates that we invested capital and dates we received distributions, regardless of when we made distributions to our shareholders. Initial investments are assumed to occur at time zero.
Gross IRR reflects historical results relating to our past performance and is not necessarily indicative of our future results. In addition, gross IRR does not reflect the effect of management fees, expenses, incentive fees or taxes borne, or to be borne, by us or our shareholders, and would be lower if it did.
Aggregate cash flow realized gross IRR on our exited investments reflects only invested and realized cash amounts as described above and does not reflect any unrealized gains or losses in our portfolio.
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are generated primarily from cash flows from interest, dividends and fees earned from our investments and principal repayments and proceeds from sales of our investments, our credit facilities, debt securitization transaction and other secured and unsecured debt. The primary uses of our cash are for (i) investments in portfolio companies and other investments and to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying our Adviser), (iii) debt service, repayment and other financing costs of any borrowings and (iv) cash distributions, including returns of capital, to the holders of our shares.
We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities or issue additional debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 200%. In addition, from time to time, we may seek to retire, repurchase, or exchange debt securities in open market purchases or by other means, including privately negotiated transactions, in each case dependent on market conditions, liquidity, contractual obligations, and other matters. The amounts involved in any such transactions, individually or in the aggregate, may be material.
As of September 30, 2026 and December 31, 2025, our asset coverage ratios were 481% and 240%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 200% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund.
Cash as of September 30, 2026, taken together with our available debt of $102.2 million, is expected to be sufficient for our investing activities and to conduct our operations in the near term.
Our long-term cash needs will include principal payments on outstanding indebtedness and funding of additional portfolio investments. Funding for long-term cash needs will come from unused net proceeds from financing activities. We believe that our liquidity and sources of capital are adequate to satisfy our short and long-term cash requirements. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future.
As of September 30, 2026, we had $21.2 million in cash, including foreign cash. During the nine months ended September 30, 2026, cash provided by operating activities was $953.8 million, primarily as a result of repayments and selldowns of portfolio investments of $951.4 million and other operating activities of $32.7 million, partially offset by funding portfolio investments of $30.3 million. Lastly, we used $991.8 million of cash for financing activities during the period, as a result of $409.4 million of return of capital distributions in addition to net repayments on our credit facilities of $548.1 million, dividends of $32.9 million paid to our shareholders, and deferred financing costs paid of $1.4 million.
As of September 30, 2025, we had $49.1 million in cash, including foreign cash. During the nine months ended September 30, 2025, cash provided by operating activities was $254.8 million, primarily as a result of selldowns and repayments of portfolio investments of $408.0 million and other operating activities of $49.7 million, partially offset by funding portfolio investments of $202.9 million. Lastly, we used $256.6 million of cash for financing activities during the period, as a result of distributions paid of $38.7 million, repurchased shares of $151.7 million, and deferred financing costs paid of $1.2 million, and net repayments on our credit facilities of $65.0 million.
Share Issuances
We currently have the authority to issue 450,000,000 common shares at $0.01 per share par value. Prior to our continuous public offering, we issued 100 shares of common stock to our Adviser and 277,788 shares of our common stock to certain individuals and entities affiliated with the Adviser in a private placement. We issued 151,364,239 shares of common stock in our continuous public offering prior to its termination on April 30, 2021.
The table below summarizes transactions with respect to shares of our common stock during the following periods:
|
For the Three Months Ended
|
||||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||||||||||||
| ($ in thousands, except share amounts) |
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||
| Reinvestment of distributions | - | $ | - | 1,151,700 | $ | 9,817 | ||||||||||||||||||||
| Repurchased shares | - | - | (7,138,809) | (60,323) | ||||||||||||||||||||||
| Total shares/net proceeds | - | $ | - | (5,987,109) | $ | (50,506) | ||||||||||||||||||||
|
For the Nine Months Ended
|
|||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||
| ($ in thousands, except share amounts) |
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||
| Reinvestment of distributions | 699,880 | $ | 5,756 | 3,743,243 | $ | 32,373 | |||||||||||||||||
| Repurchased shares | - | - | (17,598,030) | (150,967) | |||||||||||||||||||
| Total Shares/Net Repurchases | 699,880 | $ | 5,756 | (13,854,787) | $ | (118,594) | |||||||||||||||||
During the three and nine months ended September 30, 2026 and 2025, shares issued pursuant to the dividend reinvestment plan were issued as follows:
| Date of Issuance | Record Date | Number of Shares | Purchase Price per Share | |||||||||||||||||
| January 29, 2025 | January 28, 2025 | 404,165 | $ | 8.79 | ||||||||||||||||
| February 13, 2025 | December 31, 2024 | 133,727 | 8.80 | |||||||||||||||||
| February 26, 2025 | February 25, 2025 | 407,046 | 8.78 | |||||||||||||||||
| March 26, 2025 | March 25, 2025 | 394,211 | 8.75 | |||||||||||||||||
| April 30, 2025 | April 29, 2025 | 400,981 | 8.63 | |||||||||||||||||
| May 13, 2025 | March 31, 2025 | 65,631 | 8.72 | |||||||||||||||||
| May 28, 2025 | May 27, 2025 | 402,219 | 8.62 | |||||||||||||||||
| June 25, 2025 | June 24, 2025 | 383,563 | 8.61 | |||||||||||||||||
| July 30, 2025 | July 29, 2025 | 385,457 | 8.57 | |||||||||||||||||
| August 27, 2025 | August 26, 2025 | 388,223 | 8.55 | |||||||||||||||||
| September 25, 2025 | September 24, 2025 | 378,020 | 8.45 | |||||||||||||||||
| January 28, 2026 | January 27, 2026 | 347,777 | 8.26 | |||||||||||||||||
| February 25, 2026 | February 24, 2026 | 352,103 | 8.19 | |||||||||||||||||
On February 17, 2026, the Board determined to terminate the Company's dividend reinvestment plan. All future distributions are expected to be paid in cash.
Distributions
Our Board has authorized and declared monthly and/or quarterly distribution amounts per share of common stock, in each case payable monthly and/or quarterly in arrears. The following table presents cash distributions per share for shareholders of record during the following period:
|
For the Nine Months Ended September 30, 2026
|
||||||||||||||||||||||||||||||||
| Declaration Date | Record Date | Payment Date | Dividend |
Distribution Per Share(1)
|
Distribution Amount | |||||||||||||||||||||||||||
| ($ in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
| November 4, 2025 | January 27, 2026 | January 28, 2026 | Monthly | $ | 0.0533 | $ | 6,127 | |||||||||||||||||||||||||
| February 18, 2026 | February 24, 2026 | February 25, 2026 | Monthly | 0.0533 | 6,145 | |||||||||||||||||||||||||||
| February 18, 2026 | March 17, 2026 | March 18, 2026 | Monthly | 0.0533 | 6,163 | |||||||||||||||||||||||||||
|
March 5, 2026(2)
|
March 24, 2026 | March 26, 2026 | Return of capital | 2.5000 | 289,115 | |||||||||||||||||||||||||||
| April 14, 2026 | April 17, 2026 | April 20, 2026 | Monthly | 0.0350 | 4,048 | |||||||||||||||||||||||||||
|
April 14, 2026(2)
|
March 31, 2026 | April 21, 2026 | Return of capital | 0.4200 | 48,571 | |||||||||||||||||||||||||||
| May 5, 2026 | May 26, 2026 | May 27, 2026 | Monthly | 0.0300 | 3,469 | |||||||||||||||||||||||||||
| May 5, 2026 | June 30, 2026 | July 1, 2026 | Monthly | 0.0300 | 3,470 | |||||||||||||||||||||||||||
|
July 16, 2026(2)
|
July 21, 2026 | July 22, 2026 | Return of capital | 0.6200 | 71,700 | |||||||||||||||||||||||||||
| May 5, 2026 | July 28, 2026 | July 29, 2026 | Monthly | 0.0300 | 3,469 | |||||||||||||||||||||||||||
| August 4, 2026 | August 25, 2026 | August 27, 2026 | Monthly | 0.0250 | 2,891 | |||||||||||||||||||||||||||
| August 4, 2026 | September 29, 2026 | September 30, 2026 | Monthly | 0.0250 | 2,891 | |||||||||||||||||||||||||||
| Total | $ | 3.8749 | $ | 448,059 | ||||||||||||||||||||||||||||
(1)Totals presented may not sum due to rounding.
(2)Represents in aggregate special cash return of capital distributions reflecting approximately 43% of the Company's NAV as of December 31, 2025. See "Note 12 - Subsequent Events" for details related to an additional return of capital distribution of $0.62 per share declared on October 15, 2026.
During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a shareholder's investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the tax character of the distributions will be mailed to our shareholders. The tax character of the distributions is not determined until the Company's taxable year end.
The following table presents cash distributions per share for shareholders of record during the following period:
|
For the Nine Months Ended September 30, 2025
|
||||||||||||||||||||||||||||||||
| Declaration Date | Record Date | Payment Date | Dividend |
Distribution Per Share
|
Distribution Amount | |||||||||||||||||||||||||||
| ($ in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
| November 8, 2024 | January 28, 2025 | January 29, 2025 | Monthly | $ | 0.06 | $ | 7,664 | |||||||||||||||||||||||||
| February 18, 2025 | February 25, 2025 | February 26, 2025 | Monthly | 0.06 | 7,696 | |||||||||||||||||||||||||||
| February 18, 2025 | March 25, 2025 | March 26, 2025 | Monthly | 0.06 | 7,720 | |||||||||||||||||||||||||||
| February 18, 2025 | March 31, 2025 | May 15, 2025 | Quarterly | 0.01 | 1,249 | |||||||||||||||||||||||||||
| February 18, 2025 | April 29, 2025 | April 30, 2025 | Monthly | 0.06 | 7,492 | |||||||||||||||||||||||||||
| May 6, 2025 | May 27, 2025 | May 28, 2025 | Monthly | 0.06 | 7,520 | |||||||||||||||||||||||||||
| May 6, 2025 | June 24, 2025 | June 25, 2025 | Monthly | 0.06 | 7,542 | |||||||||||||||||||||||||||
| May 6, 2025 | June 29, 2025 | July 30, 2025 | Monthly | 0.06 | 7,192 | |||||||||||||||||||||||||||
| August 5, 2025 | August 26, 2025 | August 27, 2025 | Monthly | 0.06 | 7,215 | |||||||||||||||||||||||||||
| August 5, 2025 | September 24, 2025 | September 25, 2025 | Monthly | 0.06 | 7,238 | |||||||||||||||||||||||||||
| Total | $ | 0.55 | $ | 68,528 | ||||||||||||||||||||||||||||
We may fund our cash distributions to shareholders from any source of funds available to us, including but not limited to offering proceeds, net investment income from operations, capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies. In no event, however, will funds be advanced or borrowed for the purpose of distributions, if the amount of such distributions would exceed our accrued and received net revenues for the previous four quarters, less paid and accrued operating expenses with respect to such revenues and costs.
Share Repurchases
Prior to the third quarter of 2025, we offered, on a quarterly basis, to repurchase shares of our common stock on such terms as may be determined by our Board in its complete discretion. The Board has complete discretion to determine whether we will engage in any share repurchase, and if so, the terms of such repurchase. At the discretion of our Board, we may use cash on hand, cash available from borrowings, and cash from the sale of our investments as of the end of the applicable period to repurchase shares.
All shares purchased by us pursuant to the terms of each offer to repurchase will be retired and thereafter will be authorized and unissued shares.
Any periodic repurchase offers are subject in part to our available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively.
| Offer Date | Tender Offer Expiration | Tender Offer | Purchase Price per Share | Shares Repurchased | ||||||||||||||||||||||
| ($ in thousands, except share and per share amounts) | ||||||||||||||||||||||||||
| February 19, 2025 | March 24, 2025 | 36,805 | $8.75 | 4,206,258 | ||||||||||||||||||||||
| May 16, 2025 | June 27, 2025 | 53,838 | 8.61 | 6,252,963 | ||||||||||||||||||||||
| August 18, 2025 | September 25, 2025 | 60,324 | 8.45 | 7,138,809 | ||||||||||||||||||||||
Total Return Since Inception
Cumulative total return for the period April 4, 2017 to September 30, 2026 was 76.4% (without upfront sales load) and 67.5% (with maximum upfront sales load). The following table presents cumulative total returns for the nine months ended September 30, 2026, rolling 1-year, 3-year and 5-year periods and since inception.
| Shareholder Returns (Without Sales Charge) | Shareholder Returns (With Maximum Sales Charge) | |||||||||||||||||||||||||||||||||||||||||||
| Annualized Total Return | ||||||||||||||||||||||||||||||||||||||||||||
| YTD | 1-Year |
3-Year(3)
|
5-Year(3)
|
Since Inception(3)
|
Cumulative Total Return Since Inception(3)
|
Cumulative Total Return Since Inception(3)
|
||||||||||||||||||||||||||||||||||||||
|
Total Shareholder Returns(1)(2)
|
(1.8)% | (1.5)% | 3.3% | 5.5% | 8.0% | 76.4% | 67.5% | |||||||||||||||||||||||||||||||||||||
_______________
(1)Compounded monthly.
(2)Unless otherwise indicated, total return is calculated as the change in NAV per share (assuming dividends and distributions, if any, are reinvested in accordance with the Company's dividend reinvestment plan), if any, divided by the beginning NAV per share.
(3)For the purposes of calculating total return for periods starting prior to the termination of our continuous public offering on April 30, 2021, beginning NAV is equal to the net offering price in effect at that time.
Past performance does not guarantee future results. Returns reflect reinvestment of distributions and the deduction of ongoing expenses that are borne by investors, such as management fees, incentive fees, interest expense, offering costs, professional fees, director fees and other general and administrative expenses. An investment in the Company is subject to a maximum upfront sales load of 5% of the offering price, which will reduce the amount of capital available for investment. Operating expenses may vary in the future based on the unpredictable variables.
Debt
As of September 30, 2026, we had in place an Amended and Restated Senior Secured Revolving Credit Agreement (as amended from time to time, the "Revolving Credit Facility"), as well as a special purpose vehicle asset credit facility and in the future, we may enter into additional borrowing arrangements of these types. See "Note 5 - Debt" to our consolidated financial statements included in this Quarterly Report.
Aggregate Borrowings
Our debt obligations consisted of the below as of the following periods:
| As of September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) |
Maturity Date
|
Aggregate Principal Committed | Outstanding Principal |
Unused Portion(3)
|
Amount Available(1)
|
Unamortized Debt Issuance Costs |
Net Carrying Value
|
||||||||||||||||||||||||||||||||||
|
Revolving Credit Facility(2)
|
1/12/2029 | $ | 75,000 | $ | - | $ | 75,000 | $ | 75,000 | $ | (1,203) | $ | (1,203) | ||||||||||||||||||||||||||||
| SPV Asset Facility I | 11/30/2030 | 200,000 | 128,500 | 71,500 | 27,161 | (1,592) | 126,908 | ||||||||||||||||||||||||||||||||||
| Total Debt | $ | 275,000 | $ | 128,500 | $ | 146,500 | $ | 102,161 | $ | (2,795) | $ | 125,705 | |||||||||||||||||||||||||||||
_______________
(1)The amount available reflects any limitations related to each credit facility's borrowing base.
(2)There were no outstanding borrowings on the Revolving Credit Facility as of September 30, 2026.
(3)The unused portion is the amount upon which commitment fees, if any, are based.
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Maturity Date | Aggregate Principal Committed | Outstanding Principal |
Unused Portion(3)
|
Amount Available (1)
|
Unamortized Debt Issuance Costs |
Net Carrying Value
|
||||||||||||||||||||||||||||||||||
|
Revolving Credit Facility(2)
|
1/12/2029 | $ | 225,000 | $ | 11,598 | $ | 213,402 | $ | 213,402 | $ | (2,314) | $ | 9,284 | ||||||||||||||||||||||||||||
| SPV Asset Facility I | 11/30/2030 | 375,000 | 315,000 | 60,000 | 59,265 | (3,327) | 311,673 | ||||||||||||||||||||||||||||||||||
| 2026 Notes | 11/15/2026 | 350,000 | 350,000 | - | - | (2,150) | 347,850 | ||||||||||||||||||||||||||||||||||
| Total Debt | $ | 950,000 | $ | 676,598 | $ | 273,402 | $ | 272,667 | $ | (7,791) | $ | 668,807 | |||||||||||||||||||||||||||||
(1)The amount available reflects any limitations related to each credit facility's borrowing base.
(2)Net carrying value includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.
(3)The unused portion is the amount upon which commitment fees, if any, are based.
For the following periods, the components of interest expense were as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Interest expense | $ | 2,723 | $ | 15,030 | $ | 26,832 | $ | 47,658 | ||||||||||||||||||
| Amortization of debt issuance costs | 247 | 945 | 6,398 | 3,125 | ||||||||||||||||||||||
| Total Interest Expense | $ | 2,970 | $ | 15,975 | $ | 33,230 | $ | 50,783 | ||||||||||||||||||
|
Average interest rate(1)
|
6.2 | % | 8.4 | % | 9.3 | % | 8.1 | % | ||||||||||||||||||
| Average daily borrowings | $ | 174,478 | $ | 719,845 | $ | 386,368 | $ | 788,998 | ||||||||||||||||||
_______________
(1)Includes the impact of fees on undrawn portions of the Company's credit facilities for the three and nine months ended September 30, 2026, and 2025.
Senior Securities
The table below presents information about our senior securities as of the following periods:
| Class and Period |
Total Amount Outstanding Exclusive of Treasury Securities(1)
($ in millions)
|
Asset Coverage per Unit(2)
|
Involuntary Liquidating Preference per Unit(3)
|
Average Market Value per Unit(4)
|
||||||||||||||||||||||
| Revolving Credit Facility | ||||||||||||||||||||||||||
| September 30, 2026 (unaudited) | $ | - | $ | 4,813 | $ | - | N/A | |||||||||||||||||||
| December 31, 2025 | 11.6 | 2,395 | - | N/A | ||||||||||||||||||||||
| December 31, 2024 | 50.4 | 2,306 | - | N/A | ||||||||||||||||||||||
|
Promissory Note(5)
|
||||||||||||||||||||||||||
| December 31, 2020 | $ | - | $ | - | $ | - | N/A | |||||||||||||||||||
| December 31, 2019 | - | 2,687 | - | N/A | ||||||||||||||||||||||
| December 31, 2018 | - | 2,397 | - | N/A | ||||||||||||||||||||||
| December 31, 2017 | - | 4,969 | - | N/A | ||||||||||||||||||||||
| SPV Asset Facility I | ||||||||||||||||||||||||||
| September 30, 2026 (unaudited) | $ | 128.5 | $ | 4,813 | $ | - | N/A | |||||||||||||||||||
| December 31, 2025 | 315.0 | 2,395 | - | N/A | ||||||||||||||||||||||
| December 31, 2024 | 195.0 | 2,306 | - | N/A | ||||||||||||||||||||||
| December 31, 2023 | 60.0 | 2,390 | - | N/A | ||||||||||||||||||||||
| December 31, 2022 | 374.2 | 2,288 | - | N/A | ||||||||||||||||||||||
| December 31, 2021 | 412.2 | 2,213 | - | N/A | ||||||||||||||||||||||
| December 31, 2020 | 365.1 | 2,416 | - | N/A | ||||||||||||||||||||||
| December 31, 2019 | 265.7 | 2,687 | - | N/A | ||||||||||||||||||||||
| December 31, 2018 | 302.5 | 2,397 | - | N/A | ||||||||||||||||||||||
| December 31, 2017 | 20.0 | 4,969 | - | N/A | ||||||||||||||||||||||
|
SPV Asset Facility II(6)
|
||||||||||||||||||||||||||
| December 31, 2023 | $ | 125.0 | $ | 2,390 | $ | - | N/A | |||||||||||||||||||
| December 31, 2022 | 176.0 | 2,288 | - | N/A | ||||||||||||||||||||||
| December 31, 2021 | 255.0 | 2,213 | - | N/A | ||||||||||||||||||||||
| December 31, 2020 | 191.0 | 2,416 | - | N/A | ||||||||||||||||||||||
|
CLO XIII(8)
|
||||||||||||||||||||||||||
| December 31, 2025 | $ | - | $ | 2,395 | $ | - | N/A | |||||||||||||||||||
| December 31, 2024 | 260.0 | 2,306 | - | N/A | ||||||||||||||||||||||
| December 31, 2023 | 260.0 | 2,390 | - | N/A | ||||||||||||||||||||||
|
2024 Notes(7)
|
||||||||||||||||||||||||||
| December 31, 2023 | $ | 100.0 | $ | 2,390 | $ | - | N/A | |||||||||||||||||||
| December 31, 2022 | 450.0 | 2,288 | - | N/A | ||||||||||||||||||||||
| December 31, 2021 | 450.0 | 2,213 | - | N/A | ||||||||||||||||||||||
| December 31, 2020 | 350.0 | 2,416 | - | N/A | ||||||||||||||||||||||
| December 31, 2019 | 300.0 | 2,687 | - | N/A | ||||||||||||||||||||||
|
2026 Notes(9)
|
||||||||||||||||||||||||||
| December 31, 2025 | $ | 350.0 | $ | 2,395 | - | N/A | ||||||||||||||||||||
| December 31, 2024 | 350.0 | 2,306 | - | N/A | ||||||||||||||||||||||
| December 31, 2023 | 350.0 | 2,390 | - | N/A | ||||||||||||||||||||||
_______________
(1)Total amount of each class of senior securities outstanding at the end of the period presented.
(2)Asset coverage per unit is the ratio of the carrying value of our total assets, less all liabilities excluding indebtedness represented by senior securities in this table, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness and is calculated on a consolidated basis.
(3)The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The "-" in this column indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.
(4)Not applicable because the senior securities are not registered for public trading.
(5)Promissory Note expired on December 31, 2020.
(6)SPV Asset Facility II was terminated in 2024.
(7)2024 Notes matured in November 2024.
(8)CLO XIII was retired in October 2025.
(9)2026 Notes were repaid in May 2026.
Off-Balance Sheet Arrangements
Portfolio Company Commitments
From time to time, we may enter into commitments to fund investments in the form of revolving credit, delayed draw, or equity commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. We had the following outstanding commitments as of the following periods:
| ($ in thousands) |
As of September 30, 2026
|
As of December 31, 2025
|
||||||||||||
| Revolving loan commitments | $ | 26,874 | $ | 88,831 | ||||||||||
| Delayed draw loan commitments | 13,457 | 52,975 | ||||||||||||
| Debt commitments | $ | 40,331 | $ | 141,806 | ||||||||||
| Specialty finance equity commitments | $ | 2,889 | $ | 6,124 | ||||||||||
| Common equity commitments | 155 | 545 | ||||||||||||
| Equity commitments | $ | 3,044 | $ | 6,669 | ||||||||||
| Total Unfunded Commitments | $ | 43,375 | $ | 148,475 | ||||||||||
We seek to carefully consider our unfunded portfolio company commitments for the purpose of planning our ongoing financial leverage. Further, we consider any outstanding unfunded portfolio company commitments we are required to fund within the 200% asset coverage limitation. As of September 30, 2026, we believe we had adequate financial resources to satisfy the unfunded portfolio company commitments.
Other Commitments and Contingencies
In the ordinary course of business, we may guarantee certain obligations in connection with our portfolio companies (in particular, certain controlled portfolio companies). Under these guarantee arrangements, payments may be required to be made to third parties if such guarantees are called upon or if the portfolio companies were to default on their related obligations, as applicable.
From time to time, we may become a party to certain legal proceedings incidental to the normal course of our business. As of September 30, 2026, management was not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.
Related Party Transactions
We have entered into a number of business relationships with affiliated or related parties, including the following:
•the Investment Advisory Agreement;
•the Administration Agreement;
•the Expense Support Agreement; and
•the License Agreement.
In addition to the aforementioned agreements, we, our Adviser and certain of our Adviser's affiliates have been granted exemptive relief by the SEC to permit us to co-invest with other funds managed by the Adviser or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.
We invest in Credit SLF, Blue Owl Leasing and LSI Financing LLC, controlled affiliated investments, as defined in the 1940 Act. See "Note 3 - Agreements and Related Party Transactions" to our consolidated financial statements included in this Quarterly Report for further details.
Critical Accounting Policies
The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies should be read in connection with our risk factors as disclosed in our Form 10-K for the fiscal year ended December 31, 2025, in "ITEM 1A. - RISK FACTORS."
Investments at Fair Value
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
Rule 2a-5 under the 1940 Act establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Pursuant to Rule 2a-5, the Board designated the Adviser as our valuation designee to perform fair value determinations relating to the value of assets held by us for which market quotations are not readily available.
Investments for which market quotations are readily available are typically valued at the average bid price of those market quotations. To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available, as is the case for substantially all of our investments, are valued at fair value as determined in good faith by our Adviser, as the valuation designee, based on, among other things, the input of the independent third-party valuation firm(s) engaged at the direction of our Adviser.
As part of the valuation process, our Adviser, as the valuation designee, takes into account relevant factors in determining the fair value of our investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company's debt and equity), the nature and realizable value of any collateral, the portfolio company's ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.
Our Adviser, as the valuation designee, undertakes a multi-step valuation process, which includes, among other procedures, the following:
•With respect to investments for which market quotations are readily available, those investments will typically be valued at the average bid price of those market quotations;
•With respect to investments for which market quotations are not readily available, the valuation process begins with the independent valuation firm(s) providing a preliminary valuation of each investment to the Adviser's valuation committee;
•Preliminary valuation conclusions are documented and discussed with the Adviser's valuation committee;
•Our Adviser, as the valuation designee, reviews the recommended valuations and determines the fair value of each investment;
•Each quarter, our Adviser, as the valuation designee, provides the Audit Committee a summary or description of material fair value matters that occurred in the prior quarter and on an annual basis, our Adviser, as the valuation designee, will provide the Audit Committee with a written assessment of the adequacy and effectiveness of its fair value process; and
•The Audit Committee oversees the valuation designee and will report to the Board on any valuation matters requiring the Board's attention.
We conduct this valuation process on a quarterly basis.
We apply Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurements ("ASC 820"), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, we consider our principal market to be the market that has the greatest
volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:
•Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
•Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Transfers between levels, if any, are recognized at the beginning of the period in which the transfer occurred. In addition to using the above inputs in investment valuations, we apply the valuation policy approved by our Board that is consistent with ASC 820. Consistent with the valuation policy, our Adviser, as the valuation designee, evaluates the source of the inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), our Adviser, as the valuation designee, subjects those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, our Adviser, as the valuation designee, or the independent valuation firm(s), review pricing support provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs.
The Company applies the practical expedient provided by the ASC 820 relating to investments in certain entities that calculate net asset value per share (or its equivalent). ASC 820 permits an entity holding investments in certain entities that either are investment companies, or have attributes similar to an investment company, and calculate NAV per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment. Investments which are valued using NAV per share as a practical expedient are not categorized within the fair value hierarchy as per ASC 820.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize amounts that are different from the amounts presented and such differences could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.
Financial and Derivative Instruments
Rule 18f-4 requires BDCs that use derivatives to, among other things, comply with a value-at-risk leverage limit, adopt a derivatives risk management program, and implement certain testing and board reporting procedures. Rule 18f-4 exempts BDCs that qualify as "limited derivatives users" from the aforementioned requirements, provided that these BDCs adopt written policies and procedures that are reasonably designed to manage the BDC's derivatives risks and comply with certain recordkeeping requirements. Rule 18f-4 provides that a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has, among other things, a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due. Pursuant to Rule 18f-4, when we trade reverse repurchase agreements or similar financing transactions, including certain tender option bonds, we need to aggregate the amount of any other senior securities representing indebtedness (e.g., bank borrowings, if applicable) when calculating our asset coverage ratio. The Company currently qualifies as a "limited derivatives user" and expects to continue to do so. The Company has adopted a derivatives policy and complies with the recordkeeping requirements of Rule 18f-4.
Interest and Dividend Income Recognition
Interest income is recorded on the accrual basis and includes accretion and amortization of discounts or premiums. Certain investments may have contractual PIK interest or dividends, the majority of which is structured at initial underwriting. PIK interest or dividends represent accrued interest or dividends that are added to the principal amount or liquidation amount of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or at the occurrence of a liquidation event. Discounts and premiums to par value on securities purchased are accreted or amortized into interest income over the contractual life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion or amortization of discounts or premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.
Investments are generally placed on non-accrual status when it is not probable that principal or interest will be collected in full. Accrued interest receivable is generally not carried as an asset once a loan is placed on non-accrual status unless collection is considered probable. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Cash receipts on non-accrual loans are recognized as interest income only when collection of principal is probable and otherwise are applied as a reduction of the loan's recorded investment. Management may make exceptions to this treatment and determine to not place an investment on non-accrual status if the investment has sufficient collateral value and is in the process of collection.
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Distributions
We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under subchapter M of the Code. To obtain and maintain our tax treatment as a RIC, we must timely distribute (or be deemed to distribute) in each taxable year to our shareholders at least the sum of :
•90% of our investment company taxable income (which is generally our ordinary income plus the excess of realized short-term capital gains over realized net long-term capital losses), determined without regard to the deduction for dividends paid, for such taxable year; and
•90% of our net tax-exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for such taxable year.
As a RIC, we (but not our shareholders) generally will not be subject to U.S. federal tax on investment company taxable income and net capital gains that we distribute to our shareholders.
We intend to distribute annually all or substantially all of such income. To the extent that we retain our net capital gains or any investment company taxable income, we generally will be subject to U.S. federal income tax at corporate rates. We can be expected to carry forward our net capital gains or any investment company taxable income in excess of current year dividend distributions and pay the U.S. federal excise tax as described below.
Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax payable by us. We may be subject to a nondeductible 4% U.S. federal excise tax if we do not distribute (or are treated as distributing) during each calendar year an amount at least equal to the sum of:
•98% of our net ordinary income excluding certain ordinary gains or losses for that calendar year;
•98.2% of our capital gain net income, adjusted for certain ordinary gains and losses, recognized for the twelve-month period ending on October 31 of that calendar year; and
•certain undistributed amounts from previous years in which we paid no U.S. federal income tax.
While we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% U.S. federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed and as a result, in such cases, the excise tax will be imposed. In such an event, we will be liable for this tax only on the amount by which we do not meet the foregoing distribution requirement.
We intend to pay monthly distributions to our shareholders out of assets legally available for distribution. All distributions will be paid at the discretion of our Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as our Board may deem relevant from time to time.
To the extent our current taxable earnings for a year fall below the total amount of our distributions for that year, a portion of those distributions may be deemed a return of capital to our shareholders for U.S. federal income tax purposes. Thus, the source of a distribution to our shareholders may be the original capital invested by the shareholder rather than our income or gains. Shareholders should read written disclosure carefully and should not assume that the source of any distribution is our ordinary income or gains.
With respect to distributions, the Company has adopted an "opt-in" dividend reinvestment plan for common shareholders. However, on February 17, 2026 the Board determined to terminate the distribution reinvestment plan and as a result, commencing with distributions payable on or after March 18, 2026, all distributions will be paid in cash. With respect to distributions paid prior to March 18, 2026, each shareholder that had not "opted-in" to the dividend reinvestment plan had their dividends or distributions automatically received in cash rather than reinvested in additional shares of our common stock. Shareholders who received distributions in the form of shares of common stock were subject to the same U.S. federal, state and local tax consequences as if they had received cash distributions.
Income Taxes
We have elected to be treated as a BDC under the 1940 Act. We have also elected to be treated as a RIC under the Code beginning with our taxable year ended December 31, 2017 and intend to continue to qualify for tax treatment as a RIC. So long as we maintain our tax treatment as a RIC, we generally will not pay U.S. federal income taxes on any ordinary income or capital gains that we distribute at least annually to our shareholders as distributions. Rather, any tax liability related to income earned and distributed by us represents obligations of our investors and will not be reflected in our consolidated financial statements. However, we will be subject to U.S. federal income tax imposed at corporate rates on any income, including capital gains, not distributed (or deemed distributed) to our stockholders.
To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, we generally must distribute to our shareholders, for each taxable year, at least (i) 90% of our "investment company taxable income" for that year, which is generally our net ordinary income plus the excess, if any, of our realized net short-term capital gains over our realized net long-term capital losses and (ii) our net tax-exempt income. In addition, a RIC may, in certain cases, satisfy this distribution requirement by distributing dividends relating to a taxable year after the close of such taxable year under the "spillover dividend" provisions of Subchapter M. In order for us to not be subject to U.S. federal excise taxes, we must distribute annually an amount at least equal to the sum of (i) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) certain undistributed amounts from previous years on which we paid no U.S. federal income tax. We, at our discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. excise tax on this income.
Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes imposed at corporate rates.
We evaluate tax positions taken or expected to be taken in the course of preparing our consolidated financial statements to determine whether the tax positions are "more-likely-than-not" to be sustained by the applicable tax authority. Tax positions not deemed to meet the "more-likely-than-not" threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. There were no material uncertain tax positions through December 31, 2025. As applicable, our prior three tax years remain subject to examination by U.S. federal, state and local tax authorities.
Recent Developments
Distributions
On October 15, 2026, our Board declared a return of capital distribution of $0.62 per share funded by proceeds from ordinary-course portfolio repayment activity. Inclusive of the return of capital distribution of $3.54 per share previously paid in 2026, our shareholders will have received return of capital distributions totaling $4.16 per share in 2026. Inclusive of this distribution and previously paid return of capital distributions, we will have returned approximately 50.3% of net asset value as of December 31, 2025.
On November 3, 2026, our Board approved regular monthly distributions for November 2026, through January 2027. The regular monthly cash distributions, each in the gross amount of $0.022 per share, will be payable monthly to shareholders of record as of the monthly record date.
Owl Rock Capital Corporation II published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 21:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]