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Blue Owl BDC sees refinancing slowdown as Q2 activity muted
The BDC reported $219 million in gross fundings versus $747 million of sales and repayments in Q2, while its portfolio fair value fell to about $15.0 billion.
Blue Owl Capital Corporation said new investment activity in Q2 was subdued as depressed deal flow and a sharp drop in refinancing reduced transaction volumes, with President Logan Nicholson pointing to refinancing and extension activity as a major source of quarterly work in prior periods. During an Aug. 6 earnings call, Nicholson said activity had effectively ground to a halt in a spread widening environment.
The BDC reported that its portfolio contracted after several consecutive quarters of net repayments. It recorded $219 million of gross fundings in Q2 compared with $747 million of sales and repayments, and it said the fair value of its portfolio declined to roughly $15.0 billion, down from $16.9 billion one year earlier.
Blue Owl also described exits and credit pressure in the quarter. It said it collected about $274 million in cash, including $66 million of accrued PIK interest, tied to its exit from a large preferred equity investment in Mavis Tire, which it called its largest PIK investment realization to date.
On the loan side, the company reported $99.4 million of net unrealized losses, driven by a significant markdown on its loans to Loparex Group. Yahoo Finance reports that first- and second-lien loans to Loparex were moved to non-accrual in Q2, second-lien marks were reduced to about 5 cents on the dollar from 63 cents, first-lien marks were reduced to about 34 cents from 99 cents, and Loparex missed a June 30 interest payment and entered a forbearance agreement that expires Aug. 17.