, which is a comfortable range for us given the strength of our current portfolio. Our strong capital position affords us the ability to continue to opportunistically seek to expand our portfolio, and we remain focused on maintaining both a durable and diversified set of income-generating assets. We see ample opportunity to deploy capital in our core markets, and we’re well-positioned to capitalize on these opportunities while also maintaining the strong asset quality that we have historically been recognized for. Our continued confidence in the durability of our income stream and the credit quality of our portfolio led us to further strengthen our shareholder returns. Our total dividends paid during the quarter of $0.41 mark a more than 30% increase over the past year, demonstrating our continued commitment to returning capital to our shareholders. In summary, we are pleased with the strong third quarter results, and we are confident in our ability to continue to deliver value to our shareholders. We will now open the line for questions. Thank you.
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Blue Owl Capital Corporation Third Quarter 2023 Earnings Call
Participants:
– Craig William Packer; President, CEO & Director
– Dana Sclafani; Head of Investor Relations
– Jonathan Lam; CFO & COO
– Brian J. Mckenna; VP & Equity Research Analyst; JMP Securities LLC, Research Division
– Erik Edward Zwick; Director; Hovde Group, LLC, Research Division
– Mark Douglas Hughes; MD; Truist Securities, Inc., Research Division
– Mickey Max Schleien; MD of Equity Research & Supervisory Analyst; Ladenburg Thalmann & Co. Inc., Research Division
– Robert James Dodd; Director & Research Analyst; Raymond James & Associates, Inc., Research Division
– Ryan Lynch; MD; Keefe, Bruyette, & Woods, Inc., Research Division
Presentation:
Operator:
Greetings and welcome to the Blue Owl Capital Corporation Third Quarter 2023 Earnings Call. (Operator Instructions). As a reminder, this conference is being recorded. At this time, I’d like to turn the call over to Dana Sclafani, Head of Investor Relations. Thank you. You may begin.
Dana Sclafani:
Thank you, operator. Good morning, everyone, and welcome to Blue Owl Capital Corporation’s third quarter earnings call. Joining me this morning are our Chief Executive Officer, Craig Packer; and our Chief Financial Officer and Chief Operating Officer, Jonathan Lam. We’re also joining this quarter as senior members of our team, including Alexis Maged, our Chief Credit Officer; and Logan Nicholson, who joined the firm in September and serve as a portfolio manager for several of our diversified direct mining funds, including OBDC. I’d like to remind our listeners that remarks made during today’s call may contain forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company’s control. Actual results may differ materially from those forward-looking statements as a result of a number of factors, including those described in OBDC’s filings with the SEC. The company assumes no obligation to update any forward-looking statements. Certain information discussed on this call and in our earnings material, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information. OBDC’s earnings release, 10-Q and supplemental earnings presentation are available on our website at blueowlcapitalcorporation.com. With that, I’ll turn the call over to Craig.
Craig William Packer:
Thanks, Dana. Good morning, everyone, and thank you all for joining us today. In the third quarter, we saw continued strong momentum, delivering excellent credit performance across the portfolio and another quarter of record earnings. Net investment income was $0.49 per share, reflecting our third consecutive quarter of record NII. This was driven by increased interest income due to higher rates and solid dividend income from our resilient portfolio performance. These increased earnings translated into an attractive return on equity of 12.7% and in addition to growing distribution for our shareholders. Our Board has declared a supplemental dividend for the third quarter of $0.08 per share called with our previously declared regular dividend of $0.33. The business is generating record earnings, and we continue to share those earnings with our shareholders. Net asset value per share increased to $15.40, up $0.14 from the second quarter. Our nonaccrual rate remains low at 0.9% of the fair value of the debt portfolio with just 3 names on nonaccrual unchanged from last quarter. Borrowers operating performance remained solid, continuing to reflect the strength of the U.S. economy. Our largest sectors, software, insurance, food, beverage, and healthcare, continued to deliver strong results, reflecting the durable nature of these industries and the less discretionary services they provide. Over the course of this year, we have seen interest coverage levels come down as rates have increased, with coverage moving from 2.3x to 1.8x today. We expect that the vast majority of our borrowers will maintain an adequate coverage cushion and strong operating performance through this period. With that, I’ll turn it over to Jonathan to provide more detail on our financial results.
Jonathan Lam:
Ended the quarter with total portfolio investments of $12.9 billion, outstanding debt of $7.1 billion, and total net assets of $6 billion. Our third quarter NAV per share was $15.40, a $0.14 increase from our second quarter NAV per share of $15.26. In terms of deployment, we continue to largely match originations with repayments to maintain a fully invested portfolio. OBDC had $500 million of new investment commitments of which $387 million were funded, offset by the $390 million of repayments for the quarter. The weighted average total yield of the portfolio was 11.8% and up from 10% in the third quarter of the prior year. We continue to maintain significant liquidity of $1.9 billion and ended the quarter with net leverage of 1.13x, which is a comfortable range for us. Since we instituted the supplemental dividend in the third quarter of 2022, we have paid out $0.28 of additional dividends per share. As a result, we have $0.26 of spillover income through the end of the third quarter. In summary, we are pleased with the strong third quarter results, and we are confident in our ability to continue to deliver value to our shareholders. We will now open the line for questions. Thank you.
