Investing.com -- S&P Global Ratings has revised the outlook for Blue Owl Capital Inc. from negative to stable, based on improved credit metrics and reduced risk associated with the company’s recent mergers and acquisitions. The ratings agency also affirmed the ’BBB’ issuer credit rating and issue-level ratings for the firm’s senior unsecured debt.

Blue Owl Capital’s fee revenue increased by over 30% in 2024, resulting in an enhancement of its credit metrics. The company successfully completed four acquisitions in 2024, with the most recent transaction, IPI, closing in the first quarter of 2025. The integration risk associated with these acquisitions is now considered manageable, and the company’s leverage is expected to be below 3.0x, with an interest coverage between 10x-15x.

The revised stable outlook reflects Blue Owl’s continued growth in fee-paying assets under management (FPAUM) and earnings, robust liquidity, a debt to EBITDA ratio of 2.5x-3.0x, and an EBITDA interest coverage of 10x-15x.

The company’s EBITDA growth in 2024 improved credit metrics, with leverage exceeding 3x. However, the recently acquired companies are expected to continue to drive fundraising and further FPAUM over time, reducing the weighted average leverage below 3x.

The stable outlook also takes into account the expectation that Blue Owl will continue to grow FPAUM and earnings over the next 18-24 months, while maintaining its strong liquidity, debt to EBITDA of 2.5x-3.0x, and EBITDA interest coverage of 10x-15x.

S&P Global Ratings’ base-case forecast assumes that Blue Owl’s management fees will grow around 20% in 2025 and 15% in 2026. The agency also expects that mergers and acquisitions will be limited, given the uncertain market environment, and that the company will successfully integrate the four businesses it acquired.

The ratings could be lowered if the weighted average leverage is well above 3x due to additional debt-financed acquisitions, its FPAUM growth and investment performance stagnate, and weighted average EBITDA interest coverage is below 10x. An upgrade is considered unlikely in the next 18-24 months. However, over the long term, ratings could be raised if Blue Owl maintains debt to EBITDA of below 2x and EBITDA interest coverage above 10x, while demonstrating significant growth in FPAUM and further investment product and asset class diversification.

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