Blue Owl private credit fund cuts dividend as borrowing costs rise

(Corrects headline, paragraphs 1 and 2 ‌to show one ​fund cut ​its dividend, not two)

By Matt Tracy and Isla Binnie

May 6 (Reuters) - A Blue Owl Capital publicly traded private credit fund cut its dividend on Wednesday as it reported ‌a decrease in net asset value per share in the first quarter, a ⁠move the firm attributed to higher borrowing costs.

Blue Owl Capital Corp said in a filing it was reducing its dividend to ‌31 cents per share from 36 ‌cents per share. Another fund, Blue Owl Technology Finance Corp declared a 35 cent per share dividend plus an additional five cent per share special dividend, matching the previous quarter.

The two ​funds bought back a combined $85 million of their own stock in the first quarter, they said.

Blue Owl Capital Corp's net asset value (NAV) per share dropped 2.7% to $14.41 in the first quarter, ⁠while Blue Owl Technology Finance Corp's NAV per share fell 4.8% to $16.49 per share, according to their filings.

Both funds have traded down ​over the past year along with many similar funds as jitters grew around private credit. Blue Owl Capital Corp was the focus of investor concern last ​year when Blue Owl proposed merging a smaller, non-traded ‌fund into the vehicle. Blue Owl Technology Finance Corp was designed to invest in software, a sector that has been buffeted by fears of disruption from artificial ⁠intelligence.

In February, Blue Owl sold a $1.4 billion portfolio of senior secured loans to boost liquidity in its Blue Owl Capital Corp II fund after elevated investor redemption requests.

"The quarter reflected a more challenging earnings environment driven by ⁠lower base rates and tighter spreads," the fund's CEO, Craig Packer, said in a statement. But, he added, "our portfolio ​is delivering solid performance, and our balance sheet is strong."

The filings showed the rate of investments on non-accrual, meaning they have missed repayments or are unlikely to be repaid, dipped from the last quarter.

Blue Owl Capital Corp ‌had 16% of its portfolio in software names at the end of March, according to its quarterly report. Blue Owl Technology Finance Corp reported application ‌and systems software borrowers made up 33% of its portfolio at the end of the first quarter.

Private credit ⁠lender Gladstone Capital Corp also reported first-quarter ‌earnings on Wednesday. Its NAV ​per share remained relatively unchanged in the first quarter compared to six months ago, it said.

(Reporting by Matt Tracy and Isla Binnie; Editing by Chris Reese and ‌Nia Williams)

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