Blue Owl Capital II Sees 27% Income Drop Amid Merger Plans

TL;DR

**Blue Owl Capital II is bleeding cash and merging with OBDC to stop the bleeding; get out now if you're not in for the long haul.**

AI Summary

Blue Owl Capital Corporation II reported a significant decrease in net investment income and net assets for the nine months ended September 30, 2025. Total investment income fell to $150,715 thousand for the nine months ended September 30, 2025, a 22.7% decrease from $195,003 thousand in the same period of 2024. Net investment income decreased by 26.9% to $58,709 thousand from $80,286 thousand year-over-year. The company experienced a substantial net change in unrealized loss of $18,796 thousand for the nine months ended September 30, 2025, compared to a loss of $4,444 thousand in 2024, and net realized loss increased to $18,700 thousand from $14,562 thousand. Consequently, the net increase in net assets resulting from operations plummeted by 65.4% to $21,213 thousand from $61,280 thousand. Net Asset Value Per Share declined to $8.41 as of September 30, 2025, from $8.80 as of December 31, 2024. A key strategic development is the proposed merger with Blue Owl Capital Corporation (OBDC) as per the Agreement and Plan of Merger dated November 5, 2025.

Why It Matters

This filing reveals a challenging period for Blue Owl Capital Corporation II, with significant declines in investment income and net assets, which directly impacts investor returns and confidence. The proposed merger with Blue Owl Capital Corporation (OBDC) is a critical strategic move, potentially offering scale and diversification benefits to counter the current financial headwinds. For employees, the merger could bring integration challenges or opportunities within a larger entity. Customers of Blue Owl Capital Corporation II's portfolio companies might see changes in financing terms or support as the combined entity streamlines operations. In the broader market, this merger could signal further consolidation in the business development company (BDC) space, influencing competitive dynamics and capital availability for middle-market companies.

Risk Assessment

Risk Level: high — The company reported a significant 65.4% decrease in net increase in net assets from operations, falling to $21,213 thousand for the nine months ended September 30, 2025, from $61,280 thousand in the prior year. Additionally, Net Asset Value Per Share declined from $8.80 to $8.41, indicating a deterioration in shareholder value. The ongoing merger with Blue Owl Capital Corporation introduces substantial execution risks, including the ability to realize anticipated benefits and potential litigation, as explicitly stated in the 'Cautionary Statement Regarding Forward-Looking Statements'.

Analyst Insight

Investors should carefully evaluate the terms of the proposed merger with Blue Owl Capital Corporation (OBDC) and consider the potential dilution or synergies. Given the significant decline in net investment income and net assets, a cautious approach is warranted. Monitor the progress of the merger and the performance of the combined entity closely before making further investment decisions.

Financial Highlights

debt To Equity

0.81

revenue

$150,715 thousand

operating Margin

N/A

total Assets

$1,778,090 thousand

total Debt

$780,949 thousand

net Income

$21,213 thousand

eps

N/A

gross Margin

N/A

cash Position

$49,064 thousand

revenue Growth

-22.7%

Revenue Breakdown

Key Numbers

• $150,715 thousand — Total Investment Income (Decreased by 22.7% for the nine months ended September 30, 2025, compared to $195,003 thousand in 2024.)
• $58,709 thousand — Net Investment Income (Decreased by 26.9% for the nine months ended September 30, 2025, compared to $80,286 thousand in 2024.)
• $18,796 thousand — Net Change in Unrealized Loss (Increased for the nine months ended September 30, 2025, from $4,444 thousand in 2024.)
• $18,700 thousand — Net Realized Loss (Increased for the nine months ended September 30, 2025, from $14,562 thousand in 2024.)
• $21,213 thousand — Net Increase in Net Assets from Operations (Decreased by 65.4% for the nine months ended September 30, 2025, compared to $61,280 thousand in 2024.)
• $8.41 — Net Asset Value Per Share (Decreased from $8.80 as of December 31, 2024, to $8.41 as of September 30, 2025.)
• 113,872,539 — Common Shares Outstanding (As of September 30, 2025, a decrease from 127,727,326 shares as of December 31, 2024.)
• $1,717,042 thousand — Total Investments at Fair Value (As of September 30, 2025, a decrease from $1,935,392 thousand as of December 31, 2024.)
• $780,949 thousand — Debt (net) (As of September 30, 2025, a decrease from $842,894 thousand as of December 31, 2024.)
• November 5, 2025 — Merger Agreement Date (Date of the Agreement and Plan of Merger with Blue Owl Capital Corporation.)

Key Players & Entities

• Blue Owl Capital Corporation II (company) — Registrant in the 10-Q filing
• Blue Owl Capital Corporation (company) — Company merging with Blue Owl Capital Corporation II
• OBDC (company) — Ticker for Blue Owl Capital Corporation
• Cowboy Merger Sub Inc. (company) — Wholly owned subsidiary of OBDC involved in the merger
• Blue Owl Credit Advisors LLC (company) — The Adviser for Blue Owl Capital Corporation II
• SEC (regulator) — Securities and Exchange Commission
• $150,715 thousand (dollar_amount) — Total investment income for the nine months ended September 30, 2025
• $58,709 thousand (dollar_amount) — Net investment income for the nine months ended September 30, 2025
• $18,796 thousand (dollar_amount) — Net change in unrealized loss for the nine months ended September 30, 2025
• $8.41 (dollar_amount) — Net Asset Value Per Share as of September 30, 2025

FAQ

Risk Factors

• Decreased Investment Income and Net Assets [high — financial]: Total investment income decreased by 22.7% to $150,715 thousand for the nine months ended September 30, 2025, from $195,003 thousand in 2024. Net investment income fell 26.9% to $58,709 thousand. This decline is exacerbated by a significant increase in net change in unrealized loss ($18,796 thousand vs $4,444 thousand) and net realized loss ($18,700 thousand vs $14,562 thousand).
• Deterioration in Asset Value and NAV Per Share [high — financial]: Total investments at fair value decreased from $1,935,392 thousand as of December 31, 2024, to $1,717,042 thousand as of September 30, 2025. Consequently, Net Asset Value Per Share declined to $8.41 from $8.80 over the same period.
• Increased Leverage and Interest Expense [medium — financial]: While total debt decreased from $842,894 thousand to $780,949 thousand, interest expense for the nine months ended September 30, 2025, was $50,780 thousand, a significant portion of the total investment income, indicating a substantial cost of capital.
• Market Volatility and Investment Performance [high — market]: The substantial increase in net change in unrealized loss ($18,796 thousand) highlights the company's exposure to market fluctuations and the potential for significant swings in portfolio value. This is a direct reflection of market conditions impacting the fair value of investments.
• Merger Integration Risks [medium — operational]: The proposed merger with Blue Owl Capital Corporation (OBDC) introduces integration risks, potential disruptions to operations, and challenges in realizing expected synergies. The success of the merger is critical for future strategic direction.
• Compliance and Regulatory Environment [medium — regulatory]: As a financial services company, Blue Owl Capital Corp II is subject to extensive regulatory oversight. Changes in regulations or failure to comply could result in fines, sanctions, or reputational damage.

Industry Context

The alternative asset management industry, where Blue Owl Capital Corp II operates, is characterized by intense competition and a need for specialized expertise. Companies in this sector focus on generating income and capital appreciation through various investment strategies, often involving private credit, private equity, and real estate. Industry trends include increasing demand for yield-oriented strategies and a growing focus on ESG factors.

Regulatory Implications

As a publicly traded investment company, Blue Owl Capital Corp II is subject to regulations from bodies like the SEC. Compliance with reporting requirements, investment company acts, and other financial regulations is paramount. The proposed merger may also trigger specific regulatory reviews and approvals.

What Investors Should Do

1. Monitor Merger Progress
2. Analyze Drivers of Income Decline
3. Evaluate NAV Per Share Trend
4. Assess Risk Management Effectiveness

Key Dates

• 2025-09-30: Nine Months Ended Financial Reporting — Reported a significant decrease in net investment income and net assets, with a decline in NAV per share to $8.41.
• 2024-09-30: Nine Months Ended Financial Reporting (Prior Year) — Provided a comparative baseline showing higher investment income and net assets.
• 2025-12-31: Year-End Financial Reporting (Prior) — Established the starting point for asset values and NAV per share before the reported declines.
• 2025-11-05: Merger Agreement Signed — Announced proposed merger with Blue Owl Capital Corporation (OBDC), a significant strategic event impacting future operations and structure.

Glossary

Net Investment Income

The income generated from a company's investments after deducting operating expenses, excluding any realized or unrealized gains or losses on investments. (A key profitability metric for investment companies, indicating the core earnings power from their investment portfolio.)

Net Asset Value (NAV) Per Share

The value of a company's assets minus its liabilities, divided by the number of outstanding shares. It represents the per-share market value of the company's holdings. (Crucial for investors to assess the underlying value of their investment and track performance over time.)

Unrealized Loss

A loss on an investment that has not yet been sold. The value of the investment has decreased, but the loss is not yet 'realized' until the asset is sold. (Indicates potential future losses if the investment is sold at its current lower value, impacting overall financial health.)

Realized Loss

A loss incurred when an investment is sold for less than its purchase price. (Represents an actual loss of capital that directly impacts the company's net income and equity.)

Payment-in-kind interest income

Interest income that is not paid in cash but is instead added to the principal balance of the loan, increasing the amount owed. (A form of interest income that does not provide immediate cash flow but accrues to the principal, impacting future cash generation.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, Blue Owl Capital Corp II has experienced a significant downturn. Total investment income has fallen by 22.7% to $150,715 thousand, and net investment income has decreased by 26.9% to $58,709 thousand. This is compounded by a sharp increase in both net unrealized losses ($18,796 thousand vs $4,444 thousand) and net realized losses ($18,700 thousand vs $14,562 thousand), leading to a 65.4% drop in the net increase in net assets from operations. The company's Net Asset Value Per Share has also declined to $8.41 from $8.80, reflecting a decrease in total investments and a reduction in outstanding shares.

Key Financial Figures

• $0.01 — had 114,256,063 shares of common stock, $0.01 par value per share, outstanding. i

Filing Documents

• obdc-20250930.htm (10-Q) — 7890KB
• obdcii-20250930x10qex211.htm (EX-21.1) — 15KB
• obdcii-20250930x10qex311.htm (EX-31.1) — 10KB
• obdcii-20250930x10qex312.htm (EX-31.2) — 10KB
• obdcii-20250930x10qex321.htm (EX-32.1) — 5KB
• obdcii-20250930x10qex322.htm (EX-32.2) — 5KB
• blueowlcreditslfllc-093020.htm (EX-99.1) — 1807KB
• 0001655887-25-000060.txt ( ) — 33722KB
• obdc-20250930.xsd (EX-101.SCH) — 76KB
• obdc-20250930_cal.xml (EX-101.CAL) — 64KB
• obdc-20250930_def.xml (EX-101.DEF) — 482KB
• obdc-20250930_lab.xml (EX-101.LAB) — 759KB
• obdc-20250930_pre.xml (EX-101.PRE) — 620KB
• obdc-20250930_htm.xml (XML) — 7344KB

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 45 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 79 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 114 Item 4.

Controls and Procedures

Controls and Procedures 116 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 117 Item 1A.

Risk Factors

Risk Factors 117 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 121 Item 3. Defaults Upon Senior Securities 121 Item 4. Mine Safety Disclosures 121 Item 5. Other Information 122 Item 6. Exhibits 123

Signatures

Signatures 124 ii CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Blue Owl Capital Corporation II (the "Company," "we" or "our"), our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as "anticipates," "expects," "intends," "plans," "will," "may," "continue," "believes," "seeks," "estimates," "would," "could," "should," "targets," "projects," "outlook," "potential," "predicts" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation: an economic downturn could impair our portfolio companies' ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies; an economic downturn could disproportionately impact the companies that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies; the impact of elevated inflation rates, fluctuating interest rates, ongoing supply chain and labor market disruptions, including those as a result of strikes, work stoppages or accidents, instability in the U.S. and international banking systems, changes in law or regulation, including the impact of tarif

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Consolidated Financial Statements

Item 1. Consolidated Financial Statements Blue Owl Capital Corporation II Consolidated Statements of Assets and Liabilities (Amounts in thousands, except share and per share amounts) As of September 30, 2025 (Unaudited) As of December 31, 2024 Assets Investments at fair value: Non-controlled, non-affiliated investments (amortized cost of $ 1,692,358 and $ 1,896,092 respectively) $ 1,678,418 $ 1,898,336 Non-controlled, affiliated investments (amortized cost of $ 44,830 and $ 41,914 , respectively) 38,358 36,865 Controlled, affiliated investments (amortized cost of $ 244 and $ 190 , respectively) 266 191 Total investments at fair value (amortized cost of $ 1,737,432 and $ 1,938,196 , respectively) 1,717,042 1,935,392 Cash 45,995 49,440 Foreign cash (cost of $ 3,007 and $ 1,477 , respectively) 3,069 1,451 Interest and dividend receivable 11,502 16,644 Prepaid expenses and other assets 482 914 Total Assets $ 1,778,090 $ 2,003,841 Liabilities Debt (net of deferred unamortized debt issuance costs of $ 10,656 and $ 12,549 , respectively) $ 780,949 $ 842,894 Payables to affiliates 12,747 14,993 Distribution payable — 2,555 Payable for investments purchased 1,014 — Accrued expenses and other liabilities 25,740 19,850 Total Liabilities 820,450 880,292 Commitments and contingencies (Note 7) Net Assets Common shares $ 0.01 par value, 450,000,000 shares authorized; 113,872,539 and 127,727,326 shares issued and outstanding, respectively 1,139 1,277 Additional paid-in-capital 1,019,664 1,138,120 Accumulated undistributed (overdistributed) earnings ( 63,163 ) ( 15,848 ) Total Net Assets 957,640 1,123,549 Total Liabilities and Net Assets $ 1,778,090 $ 2,003,841 Net Asset Value Per Share $ 8.41 $ 8.80 The accompanying notes are an integral part of these consolidated financial statements. 3 Blue Owl Capital Corporation II Consolidated Statements of Operations (Amounts in thousands, except share and per share amounts) (Unaudited) For

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