Business Context and Reporting Period
This Form 8-K filing by Owl Rock Capital Corporation (the "Company") reports a material definitive agreement and the creation of a direct financial obligation. The report date is May 31, 2019, covering events occurring on May 28, 2019 (the "Closing Date"). The Company is an emerging growth company incorporated in Maryland.
Key Financial Metrics and Transaction Details
The Company completed a $596.1 million collateralized loan obligation (CLO) transaction. The capital structure and asset composition are as follows:
- Total Debt Issued: $390 million in Secured Notes and $50 million in Class A Loans (Total Debt: $440 million).
- Secured Notes Breakdown:
- $242 million AAA(sf) Class A Notes (Floating rate: 3-month LIBOR + 1.80%).
- $30 million AAA(sf) Class A-F Notes (Fixed rate: 4.165%).
- $68 million AA(sf) Class B Notes (Floating rate: 3-month LIBOR + 2.70%).
- Class A Loans: $50 million floating rate loans (3-month LIBOR + 1.80%), exchangeable for Class A Notes.
- Preferred Shares: Approximately $206.1 million (206,106 shares at $1,000/share) issued by the Issuer and purchased by the Company to satisfy risk retention regulations.
- Collateral Portfolio: Approximately $575 million par amount of middle market loans ($247 million sold by the Company; $328 million purchased from ORCC Financing II LLC).
- Maturity Date: May 20, 2031.
Material Changes and Use of Proceeds
The primary material change is the establishment of the CLO structure to refinance existing obligations. The proceeds from the issuance of Debt, net of fees, were used to repay revolving loans borrowed by ORCC Financing II LLC under a credit agreement dated May 22, 2018. The Company entered into loan sale agreements to transfer middle market loans to the Issuer to serve as collateral for the new debt.
Outlook, Management Commentary, and Risks
Management Role: Owl Rock Capital Advisors LLC ("ORCA") serves as the collateral manager. ORCA has waived its right to receive management fees but retains the right to rescind this waiver at any time.
Future Operations: Through May 20, 2023, the Issuer may use proceeds to purchase additional middle market loans under the direction of ORCA, subject to the Company's investing strategy.
Risks and Contingencies:
- The Secured Notes are privately placed and not registered under the Securities Act of 1933; they cannot be offered or sold in the U.S. absent registration or an applicable exemption.
- The Debt is secured by middle market loans and participation interests, subject to customary covenants and events of default.
- The Company acts as a retention holder for the Preferred Shares to comply with U.S. and EU securitization regulations.
Investor Verification Checklist
- Verify the specific terms of the Indenture and Credit Agreement (Exhibits 10.1 and 10.2) regarding covenants and events of default.
- Confirm the composition and credit quality of the initial $575 million collateral portfolio.
- Monitor the status of ORCA's fee waiver and potential future fee rescission.
- Review the Company's ability to originate eligible middle market loans for the reinvestment period ending May 20, 2023.
- Assess the impact of the $206.1 million Preferred Shares on the Company's balance sheet and risk retention compliance.