Business Context and Reporting Period
This Form 8-K filing by Owl Rock Capital Corporation (ORCC) reports a material definitive agreement and the creation of a direct financial obligation. The report date is April 12, 2021, covering events occurring on April 9, 2021. The company is a Maryland corporation with its principal executive offices in New York, NY.
Key Financial Metrics and Transaction Details
The filing details a $398.1 million term debt securitization refinancing (CLO Refinancing) executed by the Company's consolidated subsidiaries, Owl Rock CLO II, Ltd. and Owl Rock CLO II, LLC. The transaction structure includes:
- Secured Notes Issued:
- $204 million of AAA(sf) Class A-LR Notes (3-month LIBOR + 1.55%).
- $20 million of AAA(sf) Class A-FR Notes (Fixed rate 2.48%).
- $36 million of AA(sf) Class B-R Notes (3-month LIBOR + 1.90%).
- Maturity Date: April 20, 2033.
- Preferred Shares: Approximately $1.5 million of additional subordinated securities issued, bringing the total to $138.1 million (138,100 shares at $1,000 per share). The Company purchased all Preferred Shares.
- Collateral: Middle market loans, participation interests, and other assets of the Issuer.
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period, as this is a current report focused on a specific financing event rather than a periodic financial statement.
Material Changes and Use of Proceeds
The primary material change is the refinancing of existing debt. Proceeds from the CLO Refinancing were used to redeem in full the classes of notes issued on the Original Closing Date (December 12, 2019). Additionally, ORCC expects to use the net proceeds from the issuance of the Secured Notes to repay revolving loans borrowed by ORCC and its subsidiaries under existing credit facilities.
Outlook, Management Commentary, and Risks
Investment Strategy: Through April 20, 2025, a portion of the proceeds received by the Issuer may be used to purchase additional middle market loans under the direction of Owl Rock Capital Advisors LLC (ORCA), the Company's investment advisor and collateral manager.
Fee Waiver: ORCA is entitled to receive collateral management fees but has currently waived its right to receive them, though it may rescind this waiver at any time.
Risks and Contingencies:
- LIBOR Transition: Upon the occurrence of certain triggering events relating to the end of LIBOR, a different benchmark rate will replace LIBOR as the reference rate for interest accruing on the Secured Notes.
- Regulatory Compliance: The Company acts as a retention holder for the Preferred Shares to satisfy U.S. and European Union regulations requiring sponsors to retain exposure to securitized assets.
- Unregistered Securities: The Secured Notes have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption.
Key Facts for Investor Verification
- Verify the exact amount of revolving loans repaid by ORCC using the net proceeds from this transaction.
- Confirm the status of the LIBOR transition benchmark replacement for the floating-rate notes.
- Monitor whether ORCA rescinds its waiver of collateral management fees.
- Review the full text of the Indenture and security agreements, which are referenced as exhibits to the Form 10-Q for the quarter ended June 30, 2021.
- Assess the composition and performance of the middle market loan portfolio backing the Secured Notes.