Owl Rock(US:OBDC)2023-08-09 20:00Investment Portfolio - As of June 30, 2023, Blue Owl Capital Corporation has originated an aggregate principal amount of investments totaling $78.0 billion, with $74.4 billion retained by the company or its advised funds [475]. - The average debt investment size in portfolio companies was approximately $63.9 million based on fair value, with portfolio companies having a weighted average annual revenue of $852 million and a weighted average annual EBITDA of $186 million [479]. - The company targets middle market companies with EBITDA between $10 million and $250 million and/or annual revenue of $50 million to $2.5 billion [476]. - The investment portfolio is primarily composed of floating rate loans, which may be affected by macro trends in base interest rates like LIBOR and SOFR [486]. - The company has a strategy to invest primarily in senior secured loans, subordinated loans, and mezzanine loans, with a focus on generating current income [475]. - The company expects to maintain a majority of its portfolio in debt or income-producing securities, with a lesser allocation to equity investments [477]. - As of June 30, 2023, the portfolio consisted of 69.1% first lien senior secured debt investments, 14.1% second lien senior secured debt investments, and 2.1% unsecured debt investments [504]. - The weighted average total yield of the portfolio at fair value was 11.7%, with a weighted average yield of accruing debt and income-producing securities at 12.2% [505]. - The company had investments in 187 portfolio companies with an aggregate fair value of $12.9 billion and a net leverage of 1.14x debt-to-equity [506]. - The company focuses on investing in recession-resistant industries, including software, insurance, food and beverage, and healthcare [507]. - The middle market is a large addressable market with approximately 200,000 U.S. middle market companies, accounting for one-third of private sector GDP [499]. Financial Performance - Total investment income for the three months ended June 30, 2023, was $394.2 million, a 44.1% increase from $273.3 million in the same period of 2022 [558]. - Net investment income after taxes for the six months ended June 30, 2023, was $364.5 million, compared to $247.5 million for the same period in 2022, reflecting a growth of 47.2% [555]. - Interest income from investments for the six months ended June 30, 2023, was $594.9 million, up from $418.3 million in the same period of 2022, a rise of 42.2% [559]. - The net increase in net assets resulting from operations for the six months ended June 30, 2023, was $397.3 million, compared to $9.0 million for the same period in 2022 [555]. - The company recorded a net realized loss of $52.4 million on investments for the six months ended June 30, 2022, while for the same period in 2023, the net realized gain was $4.6 million [578]. Debt and Leverage - The current target leverage ratio is between 0.90x and 1.25x, with total borrowings limited to maintain an asset coverage ratio above 150% [495]. - The average interest rate on debt increased to 7.0% for the three months ended June 30, 2023, compared to 2.8% for the same period in 2022 [554]. - Total debt as of June 30, 2023, is $8,691,275, with outstanding principal of $7,176,450 and available amount of $1,469,048 [605]. - The weighted average total cost of debt was 5.3% as of June 30, 2023, with a target leverage ratio of 0.90x-1.25x [589]. - The company maintains sufficient borrowing capacity within the 150% asset coverage limitation to cover outstanding unfunded commitments [590]. Market Conditions - The company believes that the current lending environment is favorable for direct lenders, allowing for wider spreads and better credit protections [507]. - Historical middle market default rates have been lower, and recovery rates have been higher compared to larger market capitalizations [501]. - The company expects the pace of originations to vary with repayment volumes, which have been moderate due to rising interest rates and market uncertainty [507]. Asset Management - As of June 30, 2023, the company had $73.8 billion of assets under management across its Credit platform [467]. - The company has received an exemptive relief order from the SEC to co-invest with certain affiliates, allowing for potential overlap in investment portfolios [469]. - The company added five new investment commitments in the new portfolio during the three months ended June 30, 2023, down from 16 in the same period of 2022 [510]. - The company has adequate liquidity and sources of capital to meet both short and long-term cash requirements [592]. Shareholder Returns - Distributions declared for the six months ended June 30, 2023, included $0.33 per share on February 21 and May 9, along with supplemental dividends of $0.04 and $0.06 [596]. - The company repurchased 2,743,812 shares under the 2022 Stock Repurchase Program, with an average price of $12.61 per share during the first half of 2023 [603]. Operational Expenses - Total operating expenses for the six months ended June 30, 2023, were $401.5 million, an increase from $287.5 million in the same period of 2022, reflecting a growth of 39.5% [561]. - Total expenses increased to $205.2 million for the three months ended June 30, 2023, up from $146.6 million in the same period of the prior year, primarily due to a $42.6 million increase in interest expense [562]. Investment Strategy - The company continues to invest in specialty financing portfolio companies, which may lead to increased dividend income supported by diversified portfolios [509]. - The company has a total of 14 debt facilities, including various CLOs and notes, with the largest being the July 2026 Notes at $1,000,000 [605]. - The company acts as the retention holder for the CLO III Transaction to comply with U.S. and EU regulations [662].