Business Context and Reporting Period
Company: Owl Rock Capital Corporation (Note: Metadata referenced "Blue Owl Capital Corp," but the filing identifies the registrant as Owl Rock Capital Corporation).
Filing Type: Form 8-K (Current Report)
Reporting Date: December 22, 2017 (Event Date: December 21, 2017)
Context: The Company entered into material definitive agreements to raise capital through a private placement of senior unsecured notes and the establishment of a new special purpose vehicle (SPV) asset facility. Proceeds were utilized to pay down existing revolving credit facilities.
Key Financial Metrics and Capital Structure
- Senior Unsecured Notes Issued: $150,000,000 aggregate principal amount.
- Notes Issuance Schedule: $138.5 million issued on December 21, 2017; $11.5 million expected in January 2018.
- Notes Interest Rate: Fixed at 4.75% (subject to increase up to 5.50% if investment grade rating is lost).
- Notes Maturity: June 21, 2023.
- SPV Asset Facility: $400,000,000 maximum principal amount (subject to borrowing base tests).
- SPV Interest Rate: LIBOR + 2.25% (ramping to 2.50%, then 2.75%, and 3.00% over time).
- SPV Maturity: December 21, 2022.
- Interest Rate Swap: Notional amount of $150,000,000 to align fixed-rate liabilities with floating-rate assets. Matures December 21, 2021.
Material Changes vs. Prior Period
This filing reports a discrete event rather than a comparative financial period. The primary material change is the restructuring of debt obligations:
- Debt Paydown: Proceeds from the new Notes and SPV Asset Facility were used to pay down debt under the Senior Secured Revolving Credit Agreement (SunTrust Bank) and the Revolving Credit Agreement (Wells Fargo Bank).
- New Subsidiary: Formation of ORCC Financing LLC, a Delaware limited liability company, to serve as the borrower for the SPV Asset Facility.
Outlook, Risks, and Management Commentary
Management Commentary: The Company entered into an interest rate swap to hedge against interest rate risk, receiving fixed interest at 4.75% and paying variable interest based on 1-month LIBOR plus 2.545%. The SPV Asset Facility allows for the financing of eligible assets, with the Company retaining a residual interest.
Risks and Contingencies:
- Covenants: The Note Purchase Agreement includes affirmative and negative covenants, including maintenance of Business Development Company (BDC) status, minimum stockholders' equity, and minimum asset coverage ratios.
- Rating Risk: The interest rate on the Notes may increase to 5.50% if the Notes cease to have an investment grade rating.
- Change in Control: The Company is obligated to offer to repay the Notes at par if certain change in control events occur.
- Collateral Restrictions: Assets pledged to lenders under the SPV Asset Facility are not available to pay the debts of the Company.
Investor Verification Checklist
- Verify the exact amount of debt paid down under the SunTrust and Wells Fargo credit agreements using the proceeds.
- Confirm the Company's current credit rating to assess the risk of the Notes' interest rate increasing to 5.50%.
- Review the "borrowing base test" criteria for the $400 million SPV Asset Facility to understand drawdown limitations.
- Examine the impact of the new fixed-rate debt and swap agreement on the Company's overall interest expense and asset-liability matching.
- Check subsequent filings for the issuance of the remaining $11.5 million of Notes in January 2018.