Moody’s highlighted the strong management capabilities of Blue Owl Capital’s affiliate as a pivotal factor behind the rating upgrade. Since Blue Owl’s inception in April 2016 as a business development company (BDC), it has demonstrated robust underwriting discipline and careful risk oversight. This is evident from its minimal annual net loss rate, standing at approximately 27 basis points, underlining the company's ability to manage credit quality effectively.
The rating agency anticipates that Blue Owl Capital will modestly decrease its leverage from a gross debt-to-equity ratio of 1.27x reported as of September 30, 2025. This deleveraging is expected to enhance the firm’s asset coverage ratio beyond the current 19% threshold to exceed 20%, thereby strengthening its financial buffers.
Blue Owl’s loan portfolio predominantly targets upper middle market enterprises operating in less cyclical industries, with a portfolio-weighted average EBITDA of $229 million. As of the end of the third quarter in 2025, first-lien and unitranche loans constituted roughly 74% of the investment portfolio valued at fair market. Despite a rise in non-accrual loans to 3.2% of debt investments at amortized cost from 2.1% in the previous year’s same quarter, the firm has persisted in maintaining a comparatively low level of non-accruals alongside steady earnings performance. The company recorded net income to average assets of 4.1% over the last twelve months up to September 30, 2025.
Regarding liquidity, Blue Owl Capital holds significant reserves, with $3.0 billion in available cash and undrawn secured facility commitments. This contrasts with outstanding senior notes amounting to $1.0 billion maturing in July 2026 and approximately $1.9 billion in unfunded loan commitments. The firm’s secured debt proportion remains moderate at circa 26% of total assets.
Moody’s suggested criteria for possible further rating enhancements include sustained strong profitability across multiple credit cycles, consistent superior asset quality, maintaining gross debt to equity ratios below 1.0x, reducing secured debt funding levels to 20% or lower, and increasing emphasis on first-lien loan investments. Conversely, potential rating downgrades could stem from diminished profitability, failure to preserve an asset coverage cushion above 20%, increases in secured debt exceeding 30% of assets, reductions in first-lien exposure, or a deterioration in liquidity positions.