A fresh raise with a fat coupon
Looking to keep its lending engine humming, Blue Owl Technology Finance Corp. closed a $150 million private placement on Friday. The notes, which are senior unsecured, carry a 7.6% coupon and have a final maturity in September 2032. OTF is part of Blue Owl's family of business development companies.
Per Bloomberg data, the 7.6% coupon is the highest OTF has paid since it issued debt at an 8.5% yield in a $75 million transaction completed in September 2023. The latest sale marks OTF's third financing since June.
How the capital stack is shifting
With this deal, OTF's total borrowing activity since the close of the second quarter reaches $800 million. In August, the fund placed $400 million of notes due in 2029 at 6.5% and separately secured $250 million through a special purpose vehicle that is collateralized by a basket of its own investments.
Earlier in the year, OTF refreshed its $2.7 billion revolving credit line during the second quarter, and every existing bank participant continued its commitment. At quarter end, the fund reported north of $2 billion when combining cash on hand and unused borrowing room across those facilities.
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What the market is weighing
CEO Craig Packer said, "This added flexibility positions us to grow the portfolio and capitalize on an increasingly attractive environment for technology investing." The backdrop is tricky: many investors have turned cautious on private credit this year, worried about how loans are underwritten and about lenders' exposure to software names that could be upended by artificial intelligence.
OTF has been buying back stock to support its share price, and it has clawed back part of its decline beginning in the first days of last month after company leaders noted that its borrowers were seeing only limited effects from AI so far. Even so, the shares are still down roughly 21% in 2024. Credit quality wobbled in the second quarter as loans on non-accrual - where borrowers have missed payments - increased to 0.6% of the portfolio at cost from 0.3% the prior period.
Why it matters for your money
For regular investors, the story here is about confidence and capacity. OTF keeps finding funding at meaningful yields, has ample liquidity to keep making software loans, and is signaling that AI has not yet dinged its borrowers in a big way. The flip side is the stock's slump and a mild uptick in missed payments, which is exactly what the market is debating. If you follow income-focused lenders, this is a clean snapshot of how a big tech-focused BDC is navigating higher coupons, cautious sentiment, and a still-open credit window.
