KBRA Affirms Ratings for Blue Owl Technology Income Corp.

KBRA affirms the issuer and senior unsecured debt ratings of BBB for Blue Owl Technology Income Corp. ("OTIC" or "the company"). The rating Outlook is Stable.

Key Credit Considerations

OTIC's ratings are supported by the company's ties to the significant $136 billion Blue Owl Credit platform as well as the derived benefits from OTIC's SEC exemptive relief to co-invest with other funds managed by the adviser and its affiliates, including the approximately $24.5 billion deployed across the technology strategy. Furthermore, the experienced management team that has decades of experience working in the private markets has built a high credit quality direct lending platform to finance mainly sponsor-backed portfolio companies in the upper-middle market. The company has a team of approximately 35+ tech-dedicated investment professionals and maintains an office in Menlo Park, CA in addition to New York, NY to support origination and risk management.

Ratings are also supported by the $5.2 billion diversified investment portfolio focused on providing financing to 171 technology-focused upper middle market portfolio companies. The investment portfolio was comprised of ~91% senior secured first lien loans with investments classified as traditional financing (94% of total investments by FV) having a weighted average EBITDA of $384 million, weighted average revenue of $1.2 billion, and enterprise value of $6.7 billion. The top three sectors by end markets are Systems Software (16.1%), Health Care Technology (13.0%), and Application Software (12.4%).

Furthermore, the ratings reflect the company’s low gross leverage of 0.76x, reflecting strong capital raises and a cautious approach to deploying capital as well as modest market transaction volume. Along with the low leverage is the high asset coverage ratio of 228%, providing for solid asset coverage cushion which KBRA believes should help OTIC absorb increased market volatility in uncertain markets. The company has continued to diversify its funding sources as well as increase its committed bank facilities. OTIC has a revolving credit facility, three SPV asset facilities, a CLO, and senior unsecured notes. As of December 31, 2024, the company's liquidity was adequate with $641 million of available committed lines and $199 million of cash with $100 million of senior unsecured debt due within two years and unfunded portfolio company commitments of $544.4 million. The company has been successful raising capital as a perpetual-life business development company ("BDC"). Since inception through December 31, 2024, the company raised ~$3.3 billion through its public offerings, private placements and reinvestment of distributions, and had $388 million of repurchased shares. While the company is not obligated to tender shares, OTIC intends to offer up to 5% of outstanding shares for repurchase quarterly. To ensure sufficient liquidity to meet these repurchases, including in more stressful markets, the company maintains adequate committed bank lines, cash, and investments in more liquid broadly syndicated loans.

The company has no non-accruals partially due to the generally short period of operations commencing less than three years ago. The strengths are counterbalanced by the potential risk related to the company’s illiquid investments as a BDC, its short operating history offset by the broader technology lending that has been a core part of the Blue Owl platform, high percentage secured debt, and retained earnings constraints as a regulated investment company (RIC).

Blue Owl Technology Income Corp. is a private, perpetual-life non-traded, externally managed, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s investment company taxable income. The company was formed in June 2021 as a Maryland corporation and commenced operations in May 2022. The company is managed by Blue Owl Technology Credit Advisors II LLC ("adviser"), an indirect subsidiary of Blue Owl Capital, Inc. (NYSE: OWL), which had approximately $251+ billion of AUM as of December 31, 2024.

Rating Sensitivities

A rating upgrade is not expected in the near future. If the company further diversifies its funding to include a higher proportion of unsecured debt and maintains solid credit metrics in a more challenging economic environment, the rating and/or Outlook could move in a positive direction. A rating downgrade and/or Outlook change to Negative could be considered if there is a significant downturn in the U.S. economy with negative impact on OTIC’s earnings performance, asset quality, or leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.

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