Business Context and Reporting Period
Company: Owl Rock Capital Corporation (Note: Filing metadata references Blue Owl Capital Corp, but the document identifies the registrant as Owl Rock Capital Corporation).
Filing Type: Form 8-K (Current Report).
Reporting Period: December 12, 2019 (Closing Date of the reported event).
Event: Entry into a Material Definitive Agreement and creation of a Direct Financial Obligation via a $396.6 million Collateralized Loan Obligation (CLO) transaction.
Key Financial Metrics
- Total Transaction Size: $396.6 million in term debt securitization.
- Secured Notes Issued: $260 million total, comprising:
- $157 million AAA(sf) Class A-1L Notes (3-month LIBOR + 1.75%).
- $40 million AAA(sf) Class A-1F Notes (Fixed 3.44%).
- $20 million AAA(sf) Class A-2 Notes (3-month LIBOR + 2.20%).
- $40 million AA(sf) Class B-L Notes (3-month LIBOR + 2.75%).
- $3 million AA(sf) Class B-F Notes (Fixed 4.46%).
- Preferred Shares Issued: Approximately $136.6 million (136,600 shares at $1,000/share), fully purchased by the Company.
- Collateral Portfolio: Approximately $400 million par amount of middle market loans ($210.6 million from Company; $189.4 million from ORCC Financing III LLC).
- Maturity Date: January 20, 2031.
- Use of Proceeds: Repayment of revolving loans borrowed by ORCC Financing III LLC under a credit agreement dated December 14, 2018.
Material Changes
The filing reports a significant change in the Company's capital structure and debt obligations:
- Debt Refinancing: Proceeds from the new CLO transaction are being used to repay existing revolving debt, effectively converting floating-rate revolving credit into long-term term debt.
- Asset Transfer: The Company transferred approximately $210.6 million of middle market loans to the CLO Issuer, removing these assets from the Company's direct balance sheet and placing them into the securitization vehicle.
- Regulatory Retention: The Company purchased all issued Preferred Shares to satisfy U.S. and EU risk retention regulations for securitization sponsors.
Outlook, Risks, and Management Commentary
- Collateral Management: Owl Rock Capital Advisors LLC (ORCA) serves as the collateral manager. ORCA has currently waived its right to receive management fees but retains the right to rescind this waiver at any time.
- Reinvestment Period: Through January 20, 2022, the Issuer may use loan proceeds to purchase additional middle market loans under the direction of ORCA.
- LIBOR Transition Risk: The Secured Notes include provisions to replace LIBOR with a different benchmark rate upon the occurrence of triggering events related to the end of LIBOR.
- Liquidity and Covenants: The Indenture includes customary covenants and events of default. The Secured Notes are privately placed and not registered under the Securities Act of 1933.
Investor Verification Checklist
- Verify the exact amount of revolving debt repaid by ORCC Financing III LLC to confirm the net impact on leverage.
- Review the attached Exhibits (10.1 through 10.4) for specific default triggers and covenant restrictions within the Indenture and Loan Sale Agreements.
- Monitor the status of the fee waiver by ORCA, as the rescission of this waiver will impact the CLO's net yield.
- Confirm the composition of the initial $400 million loan portfolio to assess credit quality and concentration risks.
- Track the LIBOR transition timeline to understand potential future interest rate adjustments on the floating-rate notes.