A Deeper Look at Owl Rock
January 29, 2020 | Luke Schmidt | Blue Vault
On January 23, 2020, Blue Vault Partners hosted a webinar covering the performance history of Owl Rock Capital Partners (“Owl Rock”). Owl Rock is an alternative asset manager founded in 2016 offering direct lending solutions to U.S. middle market companies while providing income-seeking investors access to private credit strategies. Owl Rock reported assets under management of $14.6 billion as of September 30, 2019. Among the programs covered were (1) Owl Rock Capital Corporation, (2) Owl Rock Capital Corporation II, and (3) Owl Rock Technology Finance Corp.
Owl Rock Capital Corporation
Owl Rock Capital Corporation (“ORCC”) is a publicly traded BDC focused on providing direct lending solutions to middle market companies. ORCC was formed in 2015 and raised capital through private offerings to investors who made capital commitments to purchase shares of common stock on an as-needed basis as determined by ORCC. The Company raised $5.5 billion in total capital commitments from its investors.
As of September 30, 2019, ORCC reported total assets of $8.6 billion with total investments of $8.3 billion. The investment portfolio consisted of 96 portfolio companies with 99% of the investments being senior secured and 100% bearing floating rates.
The Company completed its IPO on July 22, 2019 and began trading on the NYSE under the symbol “ORCC” on July 18, 2019 and currently operates as the second largest publicly traded BDC. On its first day of trading, ORCC closed at $15.49 per share. The Company’s stock price closed at its highest point on December 27, 2019 at $19.13 per share before dropping and closing at $15.88 per share on January 21, 2020.
Owl Rock Capital Corporation II
Owl Rock Capital Corporation II (“ORCCII”) is a public nontraded BDC offering the potential to generate income by originating loans to, and making debt investments in, U.S. middle market companies. ORCCII became effective in February 2017 and currently reports a net asset value per share of $9.03 and a maximum public offering price of $9.51. Since inception and through September 30, 2019, the Company reported an annualized total return of 8.1% with a cumulative total return of 20.3%.
ORCCII has dominated the capital raise in the nontraded BDC space over the past two years. Capital raise totaled approximately $365 million in 2018 and $367 million through the first nine months of 2019. Their 2019 year-to-date capital raise represents approximately 90% of the nontraded industry total. Based on figures reported to Blue Vault by ORCCII, monthly capital raise has increased from $17.4 million in January 2018, to $46.7 million in January 2019, and finally ending the year with $58.5 million in December 2019. Cumulative capital raise from inception through January 15, 2020 totaled approximately $1.01 billion.
As of September 30, 2019, ORCCII reported total assets of approximately $1.31 billion with investments totaling approximately $1.28 billion. The investment portfolio consisted of 86 portfolio companies with 99.5% of the investments being senior secured and 100% bearing floating rates.
ORCCII has consistently paid a distribution rate hovering around 7.00% and has gradually increased the amount of distributions that come from net investment income, a good sign for ongoing distribution payments. Additionally, the total amount of expense support/waivers as a percentage of total distributions has steadily declined, also a good sign for the sustainability of distributions. The taxable income payout ratio and GAAP earnings payout ratio are good indicators for the sustainability of distributions. Both ratios come in below 100%, a good sign for distribution payments going forward for the Company.
Owl Rock Technology Finance Corp.
Owl Rock Technology Finance Corp. (“ORTF”) is a private nontraded BDC formed to originate and make debt and equity investments in a broad range of established and high growth technology and life sciences related companies based primarily in the United States. It was formed in 2018 and is currently raising capital through private offerings, the same path taken by ORCC when it first formed. As of September 30, 2019, ORTF had accumulated $2.2 billion in capital commitments with $1.6 billion undrawn.
The Company commenced loan origination and investment activities in August 2018 and made its first portfolio company investment in September 2018. As of September 30, 2019, ORTF reported total assets of approximately $1.5 billion with total investments of $1.3 billion. The investment portfolio consisted of 29 portfolio companies with 96% of the investments being senior secured and 100% bearing floating rates. The average investment size for ORTF was $46.2 million as of September 30, 2019.
