Investing.com -- Moody’s Ratings has upgraded Blue Owl Capital Corporation’s (NYSE:OBDC) long-term issuer and senior unsecured ratings to Baa2 from Baa3, with the outlook changed to stable from positive.
The upgrade also applies to the senior unsecured ratings from Blue Owl Capital Corporation III that were assumed by OBDC, which have been raised to Baa2 from Baa3.
Moody’s cited OBDC’s strong management by an affiliate of Blue Owl Capital as a key factor in the upgrade. The business development company (BDC) has demonstrated strong underwriting and risk management capabilities, reflected in its low annual net loss rate of only 27 basis points since inception in April 2016.
The rating agency also noted its expectation that OBDC will modestly reduce its leverage from the current 1.27x gross debt to equity ratio (as of September 30, 2025), which would improve its asset coverage ratio to above 20% from the current 19%.
OBDC focuses on lending to upper middle market companies in less cyclical industries, with its borrowers having a weighted average EBITDA of $229 million. As of September 30, 2025, 74% of OBDC’s investments at fair value were in first-lien and unitranche loans.
Despite an increase in non-accrual investments to 3.2% of debt investments at amortized cost in the third quarter of 2025 from 2.1% a year earlier, OBDC has maintained relatively limited non-accruals and consistently healthy earnings. The company’s net income to average assets was 4.1% for the last 12 months ending September 30, 2025.
OBDC maintains substantial liquidity with $3.0 billion in cash and committed undrawn capacity under secured facilities, compared to $1.0 billion in senior notes due in July 2026 and $1.9 billion in unfunded loan commitments. The company’s secured debt reliance is modest at about 26% of assets.
Moody’s indicated that future upgrades could occur if OBDC demonstrates strong profitability through multiple credit cycles, achieves superior asset quality performance, sustains a gross debt to equity ratio below 1.0x, reduces secured debt funding to 20% or less, and increases its exposure to first-lien investments.
Conversely, downgrades could result from weaker profitability, an asset coverage ratio cushion below 20%, secured debt to assets above 30%, decreased first-lien exposure, or weakened liquidity.
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