Business Context and Reporting Period
This Form 8-K filing by Owl Rock Capital Corporation (ORCC) reports events occurring on March 9, 2023. The company, a Maryland corporation trading on the NYSE under the symbol ORCC, executed a significant capital structure transaction involving a collateralized loan obligation (CLO) and the termination of a prior credit facility.
Key Financial Metrics and Transaction Details
The filing details a $397.7 million term debt securitization transaction (the "CLO Transaction") completed by the company's consolidated subsidiary, Owl Rock CLO X, LLC. The capital structure of this transaction includes:
- Secured Notes: $260 million total issuance.
- $228 million of AAA(sf) Class A Notes (Interest: 3-month term SOFR + 2.45%).
- $32 million of AA(sf) Class B Notes (Interest: 3-month term SOFR + 3.60%).
- Preferred Shares: Approximately $137.7 million (137,700 shares at $1,000 par), purchased entirely by ORCC to satisfy risk retention regulations.
- Collateral Portfolio: The notes are secured by approximately $390.3 million in middle market loans ($248.99 million sold by ORCC and $141.306 million sold by ORCC Financing III LLC).
- Maturity: Secured Notes mature on April 20, 2035.
Additionally, ORCC Financing III LLC terminated its existing Secured Credit Facility, repaying all outstanding loans in full.
Material Changes Versus Prior Period
The primary material change is the replacement of the terminated Secured Credit Facility with the new CLO Transaction. This shift alters the company's debt profile from a traditional credit facility to a securitized structure with a longer maturity horizon (2035) and a specific collateral pool of middle market loans. The company also entered into new definitive agreements, including an Indenture, Loan Sale Agreements, and a Collateral Management Agreement with Owl Rock Capital Advisors LLC (ORCA).
Guidance, Outlook, and Management Commentary
ORCC intends to use the net proceeds from the Secured Notes for general corporate purposes. The company retains the ability to direct the Issuer to purchase additional middle market loans through April 20, 2027, subject to the company's origination capabilities and investment strategy. Regarding fees, ORCA has waived its right to receive collateral management fees for the Issuer; however, this waiver can be rescinded at any time. If rescinded, the management fee payable to the Adviser under the existing Investment Advisory Agreement will be offset by the collateral management fee attributable to the CLO X Issuer's equity or notes owned by the Company.
Investor Verification Checklist
- Verify the specific terms of the Indenture and Loan Sale Agreements filed as Exhibits 10.1, 10.3, and 10.4 to understand covenants and events of default.
- Confirm the composition and credit quality of the initial $390.3 million collateral portfolio securing the Secured Notes.
- Monitor the status of the fee waiver by ORCA and any potential impact on the company's overall management fee expense.
- Review the company's ability to originate eligible middle market loans to support the reinvestment period ending April 20, 2027.
- Assess the impact of the terminated Secured Credit Facility on the company's historical liquidity and leverage ratios.