Good morning, everyone, and welcome to Blue Owl Technology Finance's listing conference call. As a reminder, this call is being recorded. I'd like to remind listeners that remarks made during today's call may contain forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. The company assumes no obligation to update any forward-looking statements. Certain information discussed on this call and in the company's publicly available material, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information.
In addition, all numbers referenced on today's webcast are as of March 31st, 2025, unless otherwise noted. Please note that the company will not take questions on this call, but further information on the company and the listing process is available on the company's website at www.blueowltechnologyfinance.com, and any questions can be directed to investor relations at credit-ir@blueowl.com. With that, I will turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Thank you. Please go ahead.
Thank you, Operator, and welcome to today's call as we announce the proposed listing of Blue Owl Technology Finance Corp. Joining us on the call today is the senior management team of OTF, including our CEO, Craig Packer, President Erik Bissonnette, and CFO, Jonathan Lamm. During our remarks today, we will be referring to specific pages in the listing presentation, which was filed publicly in an 8-K and is also available on the company's website. We encourage you to view this presentation as you listen to this call. To that end, I'd like to start on page two of the presentation and offer a little background on this announcement and how we got here. Yesterday, Blue Owl Technology Finance Corp, or OTF, issued a press release announcing our intention to publicly list. We view this listing as a natural step in the evolution of this BDC.
OTF was launched in 2018 as our flagship technology direct lending fund. Since then, we have scaled OTF to be the largest technology-focused BDC by total assets, and the listing will make OTF the second largest publicly traded BDC by net assets. While many BDCs have exposure to technology investments or venture debt, this is the only fund in the market dedicated exclusively to upper-middle-market technology direct lending, which we are excited to discuss with you today. When we launched OTF seven years ago, we committed to our private investors that we would eventually pursue a path to liquidity, and today we are excited to announce this important milestone. We expect the company's shares to start trading on the New York Stock Exchange on June 12th, 2025, under the ticker OTF. On page three, you'll find a summary overview of the proposed listing.
OTF has net assets of $7.9 billion, or $17.09 per share. All OTF investors agree to a lock-up provision covering 100% of the company's shares outstanding. In connection with the listing, our Board of Directors waived the lock-up for 5% of each investor's position, which will be freely tradable at the time of listing. This represents 23.3 million shares, or approximately $400 million of initial float. Each investor's remaining position will be released in three equal tranches at 180, 270, and 365 days after the effective listing date. You can find those dates in the appendix of the presentation. To be clear, we are not raising any additional primary capital with this listing. Our Board of Directors has also declared a second-quarter regular dividend of $0.35 per share to be paid on July 15th, 2025, to shareholders of record as of June 30th, 2025.
Additionally, in connection with the listing, the Board declared five special dividends of $0.05 per share to be paid quarterly beginning in the third quarter of 2025. Our Board of Directors has also authorized a share repurchase program of up to $200 million in open market purchases from time to time. Page four provides a roadmap for the next few months. After this announcement, the management team will be available for investor meetings through June 11th ahead of the anticipated start of trading on June 12th. We plan to release our second-quarter results and host an earnings call in August, which will align with the release of OBDC earnings. Please note additional investor resources, including our listing presentation and an investor FAQ, are available on the company's website listed on this page.
I'll now turn the call over to Craig to walk through Blue Owl's technology lending platform and why we believe now is the right time to pursue a listing for OTF.
Thanks, Mike. Good morning, everyone, and thank you all for joining us today. We're very excited to be announcing our intention to list OTF, an important milestone for the company and our credit platform as a whole. Today, I'm going to share some more about OTF and its positioning. I'll then hand it over to OTF's President, Erik Bissonnette, who will dive into our strategy for software as an asset class. Finally, the fund's CFO, Jonathan Lam, will close with an overview of the financial structure and earnings power. For those of you who are less familiar with Blue Owl, we are a leading alternative asset manager with over $139 billion of credit AUM, and of that, over half of these assets are invested in our BDCs. Since our founding in 2016, we have grown to become a true market leader in this segment.
From the beginning, we have focused on originating loans for high-quality, sponsor-backed, upper-middle-market companies in non-cyclical sectors. With this focus in mind, we intentionally designed our credit platform with software investing as a core competency because we believe these assets offer some of the most compelling credit attributes and risk-adjusted returns in the market. The nature of these businesses, with their highly recurring and predictable revenue streams and defensive market positioning, typically underpinned by multi-year contracts for mission-critical products and services, makes them particularly attractive for direct lending. Typically, these credits offer tighter covenants, lower loan-to-value ratios, and higher spreads, characteristics that contribute to a better return profile. All of these factors led us to launch OTF as a dedicated technology strategy focused on software in 2018 to give investors the opportunity to invest in the secular growth of the software industry.
By focusing our efforts in this sector, we believe we can maximize value for investors while maintaining the credit discipline that has always defined Blue Owl. Since then, we've built a high-quality, diversified software-focused portfolio that has generated attractive risk-adjusted returns. We have deployed approximately $32 billion across our dedicated technology funds while maintaining excellent credit quality with net gains since inception. Earlier this year, in March, OTF merged with OTF2, creating the largest technology-focused BDC in the market while positioning the combined entity for future success through the benefits of scale and improved ROEs. Moreover, performance continues to be exceptionally strong, demonstrating the quality of the portfolio with less than five basis points of the portfolio on non-accrual. Finally, we believe the broader market environment remains supportive for a listing. Despite the recent uncertainty surrounding tariffs, the market has displayed resilience.
Furthermore, our focus on enterprise software that is integral to daily operations, that powers essential business processes and increases the efficiency of internal operations, should be particularly attractive in these uncertain and volatile market conditions. We believe this combination of factors creates the right environment for this listing and ultimately for Blue Owl to deliver on our promise to our investors through this liquidity event. Now, I'll turn it over to Erik for more detail on our technology strategy and OTF.
Thanks, Craig. To start, I'll provide an overview of our technology strategy. A few stats here on pages 14 and 15 to tell the story. Our technology lending strategy has been consistent since the beginning. We lend to large, high-quality companies in what we believe are the most stable industries, backed by large and sophisticated private equity firms with significant equity beneath our loans. We aren't trying to time an economic cycle, and we aren't a lender that will put a price on any risk. We are focused on building a highly diversified technology portfolio of predictable businesses to deliver annuity-like cash flows to our investors. While we think this has always made sense, we believe this message is even more compelling in the current investment landscape. Blue Owl has an experienced direct lending team of 130-plus investment professionals, including approximately 35 investment professionals focused exclusively on technology.
The team has offices in Menlo Park and New York, which provides us with differentiated sourcing. We organize our teams by key subsectors that we think are the most important and actionable today. We have dedicated teams focused on cybersecurity, healthcare information technology, fintech, and many others. Our credit franchise is built on pools of permanent capital that allow us to benefit from significant scale and remain active in the market across all environments. This is especially important as deal volumes in our space continue to grow, and given our scale and permanent capital, we believe we are viewed as a preferred lender and partner of choice to borrowers. Technology can be categorized into several subsectors, including software, IT services, technology hardware, and semiconductors. Our focus at Blue Owl is on software, as we generally do not invest in these other sectors.
We believe that digital transformation is one of the most important secular trends in the business world today, and we have observed that it shows no signs of slowing down. Digital solutions have evolved from utilities to essential pillars upon which companies build their strategic advantage in a rapidly changing market landscape. Perhaps most importantly, due to its durable characteristics, software has historically been resilient across multiple cycles, with lower default rates compared to other industries. We believe our focus in this area provides us with significant downside protection in uncertain macroeconomic environments like these. On page 19, I want to emphasize where we focus our strategy and, of equal importance, the areas we intentionally avoid. Consistent with all Blue Owl BDCs, we are credit-driven, downside-oriented investors. We construct our portfolio in a defensive-minded manner by focusing on large, stable, recession-resistant software assets.
We are not focused on early or mid-stage opportunities, nor are we focused on venture debt lending. Turning to page 20, we do not view software as a sector, but rather as an asset class. Software is an enabling technology that can serve every sector and company in the world. Software touches all end markets. As we construct our portfolio, we focus on industry and end market diversification, favoring sectors such as healthcare, education, and financial services, where we believe the end markets are the most stable, and avoiding the more cyclical areas of the economy, such as retail, consumer products, energy, and power. We view software as having two major categories: horizontal and vertical. Horizontal software is utilized by a wide range of businesses, regardless of industry or size, and is not custom-built for a specific end market.
Vertical software is tailored to the specific needs of a particular industry or market segment, designed to address the unique requirements of its end market. On page 21, as we think about our portfolio construction, there are certain key attributes which we believe drive differentiated outcomes. Great software businesses provide mission-critical solutions for their customers. They enhance productivity, drive efficiency, and replace analog and error-prone ways of conducting business. Once these solutions are adopted, they often become deeply embedded in the workflows of their end users. Business outcomes are driven by these investments. The next set of fundamentals we concentrate on is quality of revenue, which has three major components: sustainability, predictability, and profitability. High-quality revenue is recurring. We typically look for 90% or higher concentration of recurring revenue from subscriptions or maintenance when evaluating opportunities.
It is predictable, with diverse customer bases that generally renew their contracts at a 90% or greater rate and have minimal to no concentration, and it has high operating margins. Lastly, strong unit economics create substantial return on investment as the businesses scale. Just as important as quality of revenue, and margin profiles is capital efficiency. These companies derive working capital from upfront payments by customers, and they require minimal capex to support their operations. Let's put that all together. High margins plus customer-funded working capital plus low capex equals high free cash flow conversion. A typical portfolio company for us converts 80%-90% of its EBITDA to cash. The combination of these attributes leads to stable, highly visible operating performance with strong free cash flow, which as a lender is exactly what we should be seeking out.
Our thesis directly correlates to how we have constructed our portfolio at OTF. Our focus, as you said multiple times today, is top-line revenue stability and downside protection. Unsurprisingly, as you can see on page 22, the vast majority of our investments in our portfolio, approximately 81%, are senior secured. We also have a portion of our investments in structured capital and equities, mostly preferred. As we think about the go-forward portfolio mix, we will continue to emphasize senior secured loans and opportunistically invest in other parts of the capital structure, including unsecured and structured equities. We also believe there is an opportunity to expand the portfolio's exposure to joint ventures. Now we wanted to spend a few moments highlighting some of the unique characteristics of our portfolio.
First, on page 23, recurring revenue loans have become a part of the direct lending landscape in our own portfolio, but it's often a misunderstood one. We believe these companies are among the best businesses we lend to, with scaled revenue streams, efficient growth, and large open-ended market opportunities. In exchange for that, we get lower loan-to-value, better pricing, and tighter structures and covenants. Our track record in this space reflects this strength. In OTF, we have deployed about $5.5 billion across ARR loans, with approximately half either converting to traditional EBITDA-based metrics as planned or being fully repaid, while the other half are performing as expected and are marked at 99.3%, with an average LTV of 19%. These investments also come with premium pricing, with a weighted average spread of 650 basis points, approximately 100 basis points higher than our senior secured portfolio spread.
Next, on our preferred equity investments on page 24. Most of these investments generate contractual current income with the potential for meaningful upside through warrants, discounted conversion rates, minimum guaranteed returns, or other similar features. Most importantly, they have structural protections and negative covenants designed to protect our invested capital. As you've heard, we are drawn to software because we see it as defensive, yet providing growth upside. We focus on the upper-middle market because we think larger businesses have more resilient financial structures, enabling them to navigate any cycle they might face. As these investments execute their business plans, we see opportunities for excess return given their scale and growth profile. Finally, on page 25, we selectively offer pick flexibility with the intent of achieving a premium return for our investors and to help us competitively attract high-quality borrowers through customization in the direct lending market.
Importantly, roughly 96% of OTF's pick income was structured at initial underwrite, not implemented retroactively because of credit underperformance. Our pick investments often represent some of our most attractive investments and are typically made in businesses with larger enterprise value and primarily consist of first-lien senior secured loans. Further, these transactions are structured with loan-to-values significantly below our platform average. At OTF, more recently, our pick exposure has been trending down as loans convert to cash pay or are repaid. Next, on page 27, I want to expand upon why we believe now is the right time to bring OTF to the public market. It is well-positioned for success, given its scaled and highly diversified portfolio, focused on downside protection, and proven track record of excellent credit quality and performance.
As we have highlighted on today's call, we continue to believe Blue Owl's scale is a competitive advantage, which allows us to primarily focus on larger borrowers that we believe are well-positioned to withstand market volatility. Accordingly, OTF's debt portfolio's weighted average enterprise value, revenue, and EBITDA are $5.3 billion, $880 million, and $251 million, respectively. Significant presence allows us to be lead or co-lead lender on 90% of our deals and administrative agent on approximately 65% of transactions. This allows us to achieve the size that we want in deals and control documentation while having direct access to real-time information on borrower performance. Further, our software portfolio prioritizes first-line investments in non-cyclical, recession-resistant end markets, which we believe provides investors with consistent and attractive risk-adjusted returns. In addition, our investments are supported by conservative LTV ratios of 31% on average.
We believe this is key to protecting our downside and supporting robust recoveries during tough times. Credit track record, with a non-accrual rate of less than five basis points, only two names are non-accrual in our entire operating history, and 18 basis points of net gains since inception demonstrates our consistently high credit quality. Following the merger with OTF2, OTF is well-capitalized, with net leverage of 0.5x and ample liquidity of $4 billion, which allows us to opportunistically deploy capital into new opportunities. Because the company has an established track record with substantial undistributed earnings, we are able to provide visibility into the near-term dividend profile, having declared a regular dividend, further supported by five special dividends declared in connection with the listing. To close, we believe we have the right investment strategy to deliver long-term risk-adjusted returns for our shareholders today and into the future.
As Craig said, this is the right time, and we have the right team to deliver performance for our investors for years to come. We could not be more excited about bringing OTF to the public market, that more investors can access the skilled portfolio with excellent credit quality. Now I'll turn the call over to Jonathan to provide more detail on OTF's financial profile.
Thank you, Erik. Moving to page 29, our results would not have been possible without the well-diversified financing structure and flexible balance sheet that we have proactively built since the company's inception. We have broad access to the capital markets with financings across unsecured notes, SPVs, CLOs, and our revolving credit facility. We also benefit from staggered maturities with a weighted average maturity of 5.4 years on committed debt.
On page 30, you'll see how this performance and our results have translated into solid total returns for our shareholders. Since inception, OTF has generated a total return of 61% and NAV growth of 16%. Turning to page 31, I want to spend a minute on the dividend profile for OTF as a public company. Our Board of Directors approved a regular dividend for the second quarter of $0.35 per share. Additionally, in connection with the listing, our Board has declared five special dividends of $0.05 per share, each to be paid quarterly beginning in the third quarter of 2025. In aggregate, these special dividends provide an additional $0.25 per share in distributions to our shareholders.
Reflecting the second quarter regular dividend and special dividends starting in Q3 of 2025, shareholders would earn $0.40 of total dividends, equating to a 9.4% estimated dividend yield based on current NAV. We believe this is not only competitive with other public BDCs in the market today, but also provides OTF shareholders with increased visibility into its expected distributions through next year, a unique advantage in what could be a more uncertain rate environment. On page 32, we illustrate paths to further upside relative to the current return profile. Obviously, the rate look is uncertain, but for illustrative purposes, using today's rates and assuming a target leverage level, we believe ROE can increase by over 200 basis points annually adjusted for OTF's post-listing fee structure.
To close, we have focused on delivering long-term shareholder value at OTF since inception, both in how we invested and how we manage the fund. We will continue to follow our playbook as a public company and look forward to leveraging the benefits of scale to deliver attractive risk-adjusted returns for our shareholders. On behalf of the OTF team, thank you for your continued support. As Mike mentioned at the beginning of the call, additional resources are available on our website, and we look forward to speaking with many of you in the coming weeks. Thank you again for your time today.
Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.