Owl Rock(US:OBDC)2021-05-05 20:07Part I: Financial Information This section presents the company's consolidated financial statements, management's discussion and analysis, and market risk disclosures Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, and investment schedules Consolidated Statements of Assets and Liabilities As of March 31, 2021, total assets were $11.59 billion, total net assets $5.80 billion, and NAV per share $14.82 Consolidated Statements of Assets and Liabilities (in thousands USD) | Account | March 31, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Total investments at fair value | $11,240,472 | $10,842,072 | | Cash and Foreign cash | $255,265 | $357,911 | | Total Assets | $11,588,242 | $11,304,357 | | Liabilities | | | | Debt (net) | $5,545,891 | $5,292,722 | | Total Liabilities | $5,786,154 | $5,557,923 | | Net Assets | | | | Total Net Assets | $5,802,088 | $5,746,434 | | Net Asset Value Per Share | $14.82 | $14.74 | Consolidated Statements of Operations For the three months ended March 31, 2021, net assets increased by $157.8 million, a turnaround from a $312.6 million decrease in the prior year Consolidated Statements of Operations (in thousands USD) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total Investment Income | $221,573 | $204,732 | | Net Operating Expenses | $117,791 | $56,401 | | Net Investment Income After Taxes | $102,655 | $146,256 | | Total Net Realized and Change in Unrealized Gain (Loss) | $55,190 | $(458,846) | | Net Increase (Decrease) in Net Assets | $157,845 | $(312,590) | | Earnings Per Share - Basic and Diluted | $0.40 | $(0.79) | - Net operating expenses in Q1 2020 were significantly lower due to a $42.5 million waiver of management and incentive fees, which did not occur in Q1 202114 Consolidated Schedules of Investments As of March 31, 2021, total investments at fair value were $11.24 billion, primarily concentrated in first and second lien senior secured loans Total Investments by Type (in thousands USD) | Investment Type | March 31, 2021 (Fair Value) | December 31, 2020 (Fair Value) | | :--- | :--- | :--- | | First-lien senior secured debt | $8,744,469 | $8,404,754 | | Second-lien senior secured debt | $1,807,521 | $2,000,471 | | Unsecured debt | $191,211 | $59,562 | | Equity investments | $389,155 | $271,739 | | Investment funds and vehicles | $108,116 | $105,546 | | Total Investments | $11,240,472 | $10,842,072 | - As of March 31, 2021, one investment, CIBT Global, Inc., with an amortized cost of $57.1 million, was on non-accrual status1854 Notes to Consolidated Financial Statements The notes detail accounting policies, investment valuation, debt facilities, and shareholder equity, emphasizing the company's BDC and RIC regulatory status - The company is regulated as a Business Development Company (BDC) and a Regulated Investment Company (RIC), subject to specific diversification, income, and distribution requirements103 - The company's adviser, Owl Rock Capital Advisors LLC, is part of a planned merger to form Blue Owl Capital Inc., with shareholders approving a new advisory agreement106161 - The company uses a multi-step process involving its Adviser, an audit committee, and independent third-party firms to determine the fair value of its illiquid Level 3 investments114222 Management's Discussion and Analysis (MD&A) Management discusses the company's performance, financial condition, and outlook, covering investment framework, portfolio activity, operating results, and capital resources Overview Owl Rock Capital Corporation is a BDC focused on direct lending to U.S. middle-market companies, with its Adviser's parent company undergoing a merger - The company's investment objective is to generate current income and capital appreciation through investments in various loan types and equity403 - The Adviser's parent company is merging to form Blue Owl Capital Inc., resulting in a change of control for the Adviser, with shareholders approving a new advisory agreement407 Portfolio and Investment Activity The portfolio's fair value was $11.2 billion across 120 companies, primarily first lien senior secured debt, with a weighted average yield of 8.3% and stable credit quality Portfolio Composition by Fair Value | Investment Type | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | First lien senior secured debt | 77.8% | 77.5% | | Second lien senior secured debt | 16.0% | 18.5% | | Unsecured investments | 1.7% | 0.5% | | Equity investments | 3.5% | 2.5% | | Investment funds and vehicles | 1.0% | 1.0% | Investment Activity for the Three Months Ended March 31 (in millions USD) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Total new investment commitments | $863.5 | $731.0 | | Total principal funded | $684.4 | $615.8 | | Total principal sold or repaid | $(512.2) | $(417.9) | Portfolio Credit Quality by Fair Value | Investment Rating | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | 1 (Lowest Risk) | 12.6% | 10.1% | | 2 (Stable) | 77.8% | 79.6% | | 3 (Increased Risk) | 7.7% | 8.3% | | 4 (Materially Increased Risk) | 1.9% | 2.0% | | 5 (Substantial Risk) | 0.0% | 0.0% | - As of March 31, 2021, loans on non-accrual status represented 0.5% of the total debt portfolio at amortized cost, consistent with the prior quarter459 Results of Operations For Q1 2021, the company reported a net increase in net assets of $157.8 million, a significant turnaround from a $312.6 million net decrease in Q1 2020 Operating Results Comparison (in millions USD) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Investment Income | $221.5 | $204.7 | | Net Operating Expenses | $117.8 | $56.4 | | Net Investment Income After Taxes | $102.6 | $146.3 | | Net Change in Unrealized Gain (Loss) | $52.9 | $(459.2) | | Net Increase (Decrease) in Net Assets | $157.8 | $(312.6) | - The increase in net operating expenses was primarily due to the expiration of management and incentive fee waivers in October 2020, with $42.5 million waived in Q1 2020492493 - The net unrealized gain of $57.9 million in Q1 2021 was driven by improved valuations across the debt portfolio, with fair value as a percentage of principal increasing to 97.8%499 - Since inception through March 31, 2021, the company's exited investments have generated an aggregate cash flow realized gross internal rate of return (IRR) of over 11.8%503 Financial Condition, Liquidity and Capital Resources As of March 31, 2021, the company had $5.6 billion in total debt outstanding and $1.4 billion in available borrowing capacity, with an asset coverage ratio of 202% - As of March 31, 2021, the company had $255.3 million in cash and restricted cash and $1.4 billion available under its credit facilities514515 Debt Obligations as of March 31, 2021 (in millions USD) | Debt Type | Committed | Outstanding Principal | Available | | :--- | :--- | :--- | :--- | | Revolving Credit Facility | $1,455.0 | $553.5 | $870.3 | | SPV Asset Facilities | $1,300.0 | $725.0 | $575.0 | | CLOs | $1,658.0 | $1,658.0 | $0 | | Unsecured Notes | $3,025.0 | $3,025.0 | $0 | | Total Debt | $7,088.0 | $5,611.5 | $1,445.3 | - The Board approved a $100 million stock repurchase program in November 2020, set to terminate in November 2021, with no repurchases made as of March 31, 2021531653 - On May 5, 2021, the Board declared a Q2 distribution of $0.31 per share521 Quantitative and Qualitative Disclosures About Market Risk The company is subject to valuation risk for illiquid private investments and interest rate risk, with 99.9% of debt investments having floating rates - The company's primary market risks are valuation risk for its illiquid portfolio and interest rate risk686 Hypothetical Annualized Impact of Interest Rate Changes on Net Income (in millions USD) | Basis Point Change | Impact on Net Income | | :--- | :--- | | +300 | $158.4 | | +200 | $79.4 | | +100 | $0.9 | | +50 | $(9.2) | | -25 | $4.0 | - The company may use hedging instruments like interest rate swaps and foreign currency forwards to mitigate market risks690691 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter693 - No material changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2021694 Part II: Other Information This section covers legal proceedings, risk factors, unregistered equity sales, and other miscellaneous disclosures Legal Proceedings The company is not currently subject to any material legal proceedings, nor is it aware of any material threatened legal proceedings - As of the filing date, neither the company nor its Adviser was subject to any material legal proceedings697 Risk Factors The company highlights the significant risk associated with the upcoming decommissioning of LIBOR, which will require renegotiation of credit agreements - A key risk is the planned cessation of LIBOR, with most USD LIBOR tenors ceasing after June 30, 2023, as announced by the FCA701 - The transition from LIBOR to an alternative rate like SOFR will require renegotiation of credit agreements, potentially adversely affecting the company's financial condition and results of operations702 Unregistered Sales of Equity Securities and Use of Proceeds On January 19, 2021, the company issued 1,435,099 unregistered shares of common stock at $13.34 per share via its dividend reinvestment plan - In Q1 2021, the company issued 1,435,099 unregistered shares at $13.34 per share to satisfy the reinvestment portion of its dividend705 Other Disclosures The company reported no defaults upon senior securities, no mine safety disclosures, and no other material information required to be disclosed under Item 5 for the quarter - The company reported no defaults upon senior securities for the period706