Business Context and Reporting Period
Company: Owl Rock Capital Corporation (Note: Filing text identifies registrant as Owl Rock Capital Corporation, though metadata references Blue Owl Capital Corp).
Filing Type: Form 8-K (Current Report)
Reporting Period: May 5, 2021 (Event Date) / May 7, 2021 (Filing Date)
Context: The Company completed a material definitive agreement involving a $397.77 million term debt securitization transaction (Collateralized Loan Obligation or "CLO Transaction") through its consolidated subsidiaries, Owl Rock CLO VI, Ltd. and Owl Rock CLO VI, LLC.
Key Financial Metrics
Transaction Size: $397.77 million total term debt securitization.
Debt Structure (Secured Notes):
- Class A Notes: $224 million (AAA(sf) rating), interest at 3-month LIBOR + 1.45%.
- Class B-1 Notes: $26 million (AA(sf) rating), interest at 3-month LIBOR + 1.75%.
- Class B-F Notes: $10 million (AA(sf) rating), interest at 2.83%.
- Maturity Date: June 20, 2032.
Equity/Preferred Structure:
- Preferred Shares: Approximately $137.77 million (137,775 shares at $1,000/share).
- Ownership: All Preferred Shares were purchased by the Company (Owl Rock Capital Corporation) to satisfy regulatory retention requirements.
Collateral Portfolio: Approximately $370.2 million in middle market loans and participation interests ($205.55 million sold by the Company; $164.65 million purchased from ORCC Financing IV LLC).
Liquidity and Cash Flow: The filing does not provide specific cash flow statements or liquidity ratios. Proceeds from the issuance are designated for general corporate purposes.
Material Changes
Balance Sheet Impact: The Company incurred a new direct financial obligation of $397.77 million in secured notes. Concurrently, the Company acquired $137.77 million in preferred shares of the Issuer, representing an equity investment in the securitization vehicle.
Asset Transfer: The Company transferred approximately $205.55 million of middle market loans to the Issuer, reducing its direct loan holdings while increasing its exposure to the CLO structure via the retained preferred shares.
Outlook, Risks, and Management Commentary
Management Commentary: The Company intends to use net proceeds for general corporate purposes. Owl Rock Capital Advisors LLC (ORCA) serves as the collateral manager and has waived its right to receive fees, though this waiver may be rescinded. If rescinded, the management fee payable to the Adviser will be offset by the collateral management fee attributable to the CLO VI Issuers' equity or notes owned by the Company.
Future Operations: Through June 20, 2024, the Issuer may use proceeds to purchase additional middle market loans under the direction of ORCA.
Risks and Contingencies:
- LIBOR Transition: Interest rates on Secured Notes are tied to LIBOR. Upon triggering events related to the end of LIBOR, a different benchmark rate will replace it.
- Regulatory Compliance: The Secured Notes are not registered under the Securities Act of 1933 and may not be offered or sold in the U.S. absent registration or an applicable exemption.
- Default Risk: The Indenture includes customary covenants and events of default.
Investor Verification Checklist
- Verify the exact amount of fees and expenses deducted from the $397.77 million proceeds before allocation to general corporate purposes.
- Confirm the specific terms of the fee waiver rescission and the calculation method for offsetting management fees.
- Review the full text of the Indenture (Exhibit 10.1) for specific covenant restrictions and events of default.
- Monitor the transition plan for the LIBOR benchmark rate replacement as referenced in the filing.
- Assess the credit quality and concentration of the initial $370.2 million loan portfolio backing the Secured Notes.