KBRA Assigns Rating to Blue Owl Technology Finance Corp.'s $500 Million Senior Unsecured Notes due 2029
KBRA assigns a rating of BBB to Blue Owl Technology Finance Corp.'s (NYSE:OTF, the company", )) $500 million 6.50% senior unsecured notes due October 15, 2029. The rating Outlook is Stable.
Key Credit Considerations
The rating is supported by the company's ties to the significant $159.2 billion Blue Owl Credit platform as well as the derived benefits from OTF's SEC exemptive relief to co-invest with other funds 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 $14.2 billion of total investments at fair value as of March 31, 2026. The investment portfolio is well diversified consisting of 203 technology focused portfolio companies with 77.6% of the investment portfolio at FV comprised of senior secured first lien loans. The top three sector exposures by end market are Systems Software (18.5%), Application Software (14.1%), and Health Care Technology (12.9%). 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 $284.7 million with a weighted average revenue of $936.8 million as of 1Q26. Credit quality remains solid with two portfolio companies on non-accrual status, accounting for only 0.3% and 0.1% of total investments at cost and FV, respectively. Furthermore, 91.5% 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 rating is 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 35.8% at March 31, 2026, providing adequate asset encumbrance for unsecured noteholders and financial flexibility. Gross and net leverage were relatively low at 0.92x and 0.85x, but increased QoQ from 0.79x and 0.75x, respectively, reflecting the company's NAV decline in 1Q26. However, leverage remains within OTF's target net leverage range of 0.90x to 1.25x and allows for a solid cushion for market volatility. KBRA expects leverage to remain moderate given its technology focus and high but declining exposure to preferred and common equity investments (15.4%). As of March 31, 2026, the company had adequate liquidity, with ~$1.3 billion in available bank lines and $488 million of unrestricted cash set against $1.325 billion of notes maturing within the next two years. The proceeds from the issuance will repay existing debt, remaining leverage neutral. The company also had ~$2.0 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 $315+ 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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Methodology
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan's Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
Doc ID: 1015284
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Analytical Contacts
Teri Seelig, Managing Director (Lead Analyst)
+1 646-731-2386
teri.seelig@kbra.com
Josh Mandelbaum, Director
+1 301-969-3186
josh.mandelbaum@kbra.com
Business Development Contact
Constantine Schidlovsky, Senior Director
+1 646-731-1338
constantine.schidlovsky@kbra.com
