KBRA Affirms Ratings for Blue Owl Technology Finance Corp.

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

Key Credit Considerations

OTF's ratings are supported by the company's ties to the significant $157.8 billion Blue Owl Credit platform as well as the derived benefits from OTF's SEC exemptive relief to co-invest with other fund managed by the adviser and its affiliates, including the $26 billion deployed across the technology strategy. Furthermore, the experienced management team which 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 40+ tech dedicated investment professionals in Menlo Park, CA and New York, NY which supports origination and risk management.

Following the completion of the 2025 merger with its affiliated technology business development company, OTF has $14.3 billion of total investments at fair value as of December 31, 2025. The investment portfolio is well diversified consisting of 199 technology focused portfolio companies with 76.9% of the investment portfolio at FV comprised of senior secured first lien loans. The top three sector exposures by end market are Systems Software (17.9%), Health Care Technology (13.9%), and Application Software (13.6%). The company has invested in 41 sectors that are diversified by subsectors and end-markets. The portfolio companies are backed by high quality private equity sponsors with significant dry powder, which can support portfolio companies in adverse markets. The portfolio companies had a weighted average EBITDA of $289.6 million with a weighted average revenue of $945.2 million as of 4Q25. Credit quality remains solid with two portfolio companies on non-accrual status, accounting for only 0.4% and 0.2% of total investments at cost and FV, respectively. Furthermore, 91.2% of the portfolio is internally rated at the highest ratings of 1 or 2, which indicate that the loan is performing at or above at underwriting expectations.

Further supporting the ratings are the company's diversified funding sources, including bank revolving credit facilities, SPV asset facilities, CLOs, and unsecured notes. The company has solid access to the capital markets, raising unsecured debt multiple times over the past few years. Unsecured debt to total debt outstanding was 33.1% at December 31, 2025, providing adequate asset encumbrance for unsecured noteholders and financial flexibility. Gross and net leverage were relatively low at 0.79x and 0.75x, respectively, with asset coverage of 226%, allowing for a solid cushion for market volatility. While the leverage is low and below its target leverage range of 0.9x to 1.25x, KBRA believes it is appropriate given the company's asset mix with relatively high though declining exposure to preferred and common equity (15.5%), which are more volatile. As of December 31, 2025, the company had adequate liquidity, with ~$1.45 billion in available bank lines and $282.9 million of unrestricted cash set against $675 billion of notes maturing within the next two years. In 1Q26, the company issued $400 million of senior unsecured notes in anticipation of upcoming maturity. The company also had $1.8 billion of unfunded commitments, of which, a portion is tied to covenants and transactions and are not expected to be drawn.

Counterbalancing these strengths are the company's requirement to distribute 90% of earnings, negating the ability to retain earnings, illiquid assets and increased Net Asset Value (NAV) volatility with a relatively sizeable portfolio of equity and preferred stock investments relative to peers. While these investments have declined meaningfully, the company has elevated exposure to software and other technology-related sectors that heighten sensitivity to shifts in market sentiment, particularly amid uncertainty around AI-driven disruption and evolving competitive dynamics. Furthermore, there is potential for increased non-accrual investments with a more uncertain economic environment with high base rates, inflation,and geopolitical risks.

Formed in July 2018 as a Maryland corporation, Blue Owl Technology Finance Corp. is a publicly traded externally managed, closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940 and has elected to be treated as a regulated investment company for tax purposes. OTF is externally managed by Blue Owl Technology Credit Advisors LLC ("the Adviser"). The Adviser is an indirect subsidiary of Blue Owl Capital (NYSE: OWL), a global alternative asset manager with $307+ billion of AUM.

Rating Sensitivities

A rating upgrade is not expected over the medium term. 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 OTF's earnings performance, asset quality, and leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.

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