Business Context and Reporting Period
This Form 8-K filing by Owl Rock Capital Corporation (ORCC) reports events occurring on May 22, 2018, with the report filed on May 23, 2018. The filing details the entry into a material definitive agreement and the creation of a direct financial obligation by ORCC Financing II LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company.
Key Financial Metrics and Debt Structure
The filing establishes a new Secured Credit Facility with the following terms:
- Maximum Principal Amount: $250 million.
- Structure: Term loans and revolving loans (revolving commitments available for up to two years).
- Maturity Date: May 22, 2026.
- Interest Rate: LIBOR plus a spread ranging from 2.00% to 2.50%.
- Commitment Fee: 0.50% to 1.00% per annum on undrawn revolving amounts.
- Collateral: Secured by a perfected first priority security interest in the assets of ORCC Financing II.
- Availability Conditions: Subject to an overcollateralization ratio test, interest coverage ratio test, concentration limits, and collateral quality tests.
The filing does not provide specific values for revenue, profit, cash flow, or existing liquidity metrics, as this is a transactional report rather than a periodic financial statement.
Material Changes and Operational Impact
The primary material change is the establishment of the Secured Credit Facility to finance the origination and acquisition of eligible assets. ORCC expects to sell and contribute certain investments to the subsidiary, ORCC Financing II, pursuant to a Sale and Contribution Agreement. No gain or loss will be recognized on these contributions. Borrowings by the subsidiary are considered borrowings of the parent company for asset coverage requirements under the 1940 Act.
Guidance, Risks, and Contingencies
Management Commentary: Proceeds from the facility will be used to finance asset origination and acquisition. Excess cash flows from assets (principal, interest, dividends, fees) must first pay fees, expenses, and interest on borrowings; the remainder may be returned to the Company subject to conditions.
Risks and Covenants: The facility includes customary financial maintenance covenants, limitations on incremental indebtedness, and events of default. A key risk is that assets pledged to lenders are not available to pay the debts of the parent company.
Key Facts for Investor Verification
- Verify the specific overcollateralization and interest coverage ratios required to access the full $250 million facility.
- Confirm the exact spread (2.00% vs. 2.50%) and commitment fee (0.50% vs. 1.00%) applicable based on current leverage or credit metrics.
- Review the attached Sale and Contribution Agreement (Exhibit 10.2) to understand the specific assets being transferred to the subsidiary.
- Monitor the impact of this new debt on the Company's overall asset coverage ratio under the 1940 Act.