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Software-linked credit became one of the most debated corners of private lending during late 2025 and early 2026. The Bloomberg US Leveraged Loan Index‘s software sub-index dropped more than 7% year-to-date by early March 2026, the sharpest two-month pullback for that slice of the loan market since early 2020. Blue Owl Capital’s own software portfolio told a more specific story.
Public market sentiment painted the entire sector with one brush. What Blue Owl Capital’s year-end disclosures revealed was a portfolio where the underlying borrowers were performing well even as the broader credit market flinched.
Five Data Points Worth Knowing
Start with structure. Blue Owl Capital’s software lending book carried loan-to-value ratios of approximately 30% at year-end 2025. The firm’s loans represented less than a third of the total enterprise value of the companies it was lending to. 90% of those software exposures sat in first-lien senior secured positions, the highest-priority claims in each borrower’s capital structure (https://www.fool.com/earnings/call-transcripts/2026/02/19/blue-owl-obdc-q4-2025-earnings-call-transcript/).
Operating results were equally specific. Software borrowers within the portfolio posted trailing-12-month revenue growth of 10% and EBITDA growth of 16% through December 2025. Across the entire OBDC portfolio, non-accrual rates declined to 1.1% at fair value by year-end. That moved in the opposite direction from what the public market selloff would have suggested (https://www.prnewswire.com/news-releases/blue-owl-capital-corporation-announces-december-31-2025-financial-results-302692010.html).
Market Price vs. Portfolio Reality
The disconnect between sector-level pricing and borrower-specific performance is sharper than it first appears. A 30% LTV position in a company growing EBITDA at 16% sits in a fundamentally different risk category than a sector index suggests. As the borrower’s earnings expand, the equity cushion beneath the debt actively thickens.
Bloomberg reported that investors in the February selloff were often dumping the loans that were easiest to sell rather than the weakest credits. Liquid, larger-cap loans took the first hit because they were tradable, not because they were impaired. Blue Owl Capital holds private loans that don’t trade on an index. The quality of those specific credits isn’t captured by sector-level fear.
Sector headlines create useful shorthand. They also paint with a brush that can’t distinguish between a 55% LTV covenant-lite loan to a shrinking software company and a 30% LTV first-lien loan to one growing EBITDA at 16%. Blue Owl Capital’s portfolio sits firmly in the latter camp.
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