ORCC - Earnings call transcript Q4 2019 | Blue Owl Capital Corporation

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Operator

Good morning and welcome to Owl Rock Capital Corporation's Fourth Quarter and Year Ended 2019 Earnings Call.

I would like to remind our listeners that remarks made during the call may contain forward-looking statements.

Forward-looking statements are not guarantees of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Owl Rock Capital Corporation's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements.

call recorded this replay reminder, a is for being purposes. As December press company fourth posted ended issued the release quarter XXXX. its year the Yesterday for earnings and presentation an and XX, earnings filed be reviewed SEC. with Form with This presentation on in XX should February the conjunction company's XX-K the the The company throughout will the to today. refer presentation earnings call

please that presentation have available So to you.

presentation company's website. As the a on reminder, is available the earnings

to Craig Rock will Packer, Executive I call now Owl the Officer Capital over Corporation. turn of Chief

Craig Packer

morning Good today quarter call. and Operator. Thank of thank us Capital This Rock and Packer Owl you, for joining Owl Partners. Co-Founder everyone for you Craig Corporation of our earnings and I'm Rock Capital fourth CEO is

Officer; and Sclafani, of me everyone is Relations. Head today who Dana Welcome Alan Investor with us today. Chief is call Operating on Financial the joining our our So Chief Kirshenbaum, Officer and

to I'd on return update an investing financing I of with our start our and then activities on results closing more highlighting the will providing like and fourth before an overview financial Alan results provide in by activities our quarter comments. quarter. our detail

as the quarter net with our per strong third investment into for maintain dividends. per activity quarter track the continued share $X.XX record we Net Today quality. pleased earn share We report to of continue Getting asset and another our value a from saw performance. quarter $XX.XX, was for results. to $X.XX the another We quarter the strong origination quarter. are to quarter credit fourth ended income the of robust over up we

XXX%. dividend our covered quarter income approximately by investment net Our this

per per in a on of per declared previously to XX.X% annualized the a addition $X.XX quarter for share, first for Board declared forward quarter, which equates special dividend an of of dividend first share to of value. has yield $X.XX book share dividend Looking dividend total $X.XX the our

October. will executed public notes more become Along financing the bond public access $XXX markets to on focus but the cover with with more this investment with we call expanding highlighting expect attractive bond Last of liabilities improved we our maturity. our again in these issuing story the we last quarter, at we to issuance costs public unsecured continued senior market familiar X.X-year grade to to continue later, credit by rates. began pleased are of million as see continue over markets and a detail Alan tap time in our month,

of also important quarter place outcome. share cover like which the an to milestone after first the end, to release I’d was

issued July release the This months million XX at million we a XXX IPO. our a IPO of these lock-up to and about at of shares one-third shares six, reminder, primary our of nine on shares last lock-up the provided pre-IPO outstanding. XX.X are As and post shareholders XXX% subject for

shares Approximately January billion became price. float or on stock shares XXX freely tradable approximately $X.X XX, at million increasing million to XXX today's

on million Another and be XX last from April on XX. one-third lock-up XXX will will released be released shares July the

positive is we the stock it a public lock-up to larger saw release, float. in increased activity and our for As our expected, trading believe shareholders following have

XXXX. the which included also below buying features, trades February net effect. will friendly stock $XXX when buyback program, run XXbX-X a the number a value IPO Our through share features which These of which include remain a in million of asset volume daily and shareholder starts trading average

IPO. and has a as To-date this not day since single above been not our have buyback traded have NAV utilized each purchased we we share

will later quarter began will XXXX. the XXXX of you Alan call. in the details the of time IPO We of that dividends, and announced run a approved had the at consecutive of quarterly special the our Board series fourth six remind third through also of quarter in the which

was active an of another was million quarter $XXX of originations billion fourth which million $XXX served investment new most and companies on with new activity The $XXX of administrative this investment agent $X as perspective million funded portfolio origination and net quarter activity. investment one of of added of net this sales commitments, and seven repayments. fundings, new our from volume. to on investment We Moving

portfolio also We three of our to capital additional provided add-on who acquisitions. existing are pursuing companies

future We of they pleased growing continue investment capital companies incumbent support can and our as lending a additional growth are to relationships, be roster have portfolio excited to to seek which for drive activity.

quarter unitranche modest in Of or expect we to this of pick origination them note, quarter, XXXX. was this see remained repayments term up lien loans. While first new activity XXX% our

that second saw last may recall quarter increased we You lien activity.

conservative then, first see changed posture to focus opportunities may market even our a in shift though lending As we not we quarter to lien on noted from investment has quarter.

saw the were quarter we opportunities and attractive quarter five new seven This this unitranche of unitranches. investments

they unitranche we've first-lien and attachment as loans As we highlighted previously, the attractive $X are like point. loans protection of with spreads

borrower available deals of increases, and these are and given of we we size advantage scale our capital, take believe positioned to well for unitranches the demand trends. As

This our benefits the quarter strategy. continued to we of see

upper scale factor on are we able as size. the a We primarily to leave is and XXX million on in middle between companies. market million anchor differentiating focused and are $XXX or sponsor-backed We believe deals our

building. the are highly of on We remain focused book the we quality

historical total of quarter high across stands Consistent positions portfolio quality XX% secured rate positions floating for directly first-lien the portfolio of portfolio approximately the XX Our which with loans of unitranche at originated ended accounted XX% $X.X now quarters, portfolio. with companies. billion senior the

to on in quarter-end our companies. $XX of portfolio. remain middle the large well diversified of end market on businesses. squarely XX industries We EBITDA recession upper was the average We at approximately across stable continue borrowers remaining focus The resistant weighted million our

sector increased X.X% our to exposure our it the distribution quarter industry. to This largest making

deal see to each flow. largest expect We upon our some movement sectors quarter depending among

portfolio now of the I'd current our our this deals industries. XX% X% the invested and investment portfolio. we breadth XX than groups for six fully note individual positions different Further, as of greater the across executed quarter industry Top no represents of represent

our saw of result yield quarter the was the the The LIBOR rates. the Fed in versus portfolio cutting quarter, a of third reflected for which as X.X% that asset drop in X.X% we

yield, Although the impact our rates by minimizing we lower seeking are the focused reduced wider on spreads. asset

highest in helped market investments market investments spread on obtain quarter unitranche X.X%, of lien syndicated spreads. average us were or attractive carry last the overall, The weighted typically weighted new the is and successfully quarters. second higher of X.X% which our to this first Weaker all was average wider The we liens spread. which conditions very no given did the was four spread a portfolio

highlight our new a of of investments. done you we've give wanted this deals sense the To to quarter, I two

the unitranche platform, The of support is $XXX Across acquisition million to full market, acquisition the in serving leading of share foodservice committed product nature and driven Kelso's the foodservice whole Individual as they of facility products reoccurring or Owl revenue agent. Rock attractive the IFS. purchases. was We loan janitorial administrative a end IFS highly the to we supplies. by stability first non-cyclical serve, and and the FoodService like company markets a distributor given the

are provides we and manufacturing acquisition $XXX and Partners' centers pleased million quarter a served structured Rock of transportation first-lien Spot and Owl facilities. Lazer Lazer as with financing acquisition This Harvest Spot facility. administrative. support within the led services also distribution to

attributes have IFS our national largely resistant we beverage, spreads, Spot attractive such areas covenants, reasonable economically Lazer and ratio. investments, in from positions structured market value attractive the Both as and in the versus resilient company to only As with food, the exposure benefits scale end products. like consumer to a and businesses smaller with economies recession and markets of maintenance player, loan competitors

any report to In losses have defaults. to are addition had no since we to in our strong have origination or pleased XXXX on status that our not non-accrual activity, investments we inception and principal continue

portfolio in closely credit to our signs companies continue performance. any change monitor for We of

you'll remains rating previous presentation of on XX As performance consistent of that internal portfolio five-point the scale, quarters. our see with mix the Page across earnings

pleased investment see mitigate continue that our to portfolio across our recession sectors very are quarter. U.S. with this our and solid focus borrowers growing again, modestly help We on with with believe resistant in we we growth activity line Once which cyclicality. reflects economic a economy, performance performance

detail I will our results. presentation to on cover financings turn the Alan additional to our quarterly now and over

Alan Kirshenbaum

Good morning, Craig. you, Thank everyone.

can investments net assets total Slide earnings quarter the of and fourth total billion. X presentation. ended billion, our start $X of follow on $X.X portfolio billion, you and along $X starting To of outstanding with We off of debt

Our was as net share $XX.XX $XX.XX compared asset value per as December to of of XXth. XXst September

And again. Our dividend per earning was quarter fourth share $X.XX share net plus $X.XX dividend. our special income investment $X.XX a over dividend the our for per per share was

we $XXX X%. quarter million can quarter Slide as quarters several slide, next next the income total $XX building We from target investments the This for increases fourth back revenue the the in see On previous to to up our X, continue is approximately million. see for portfolio approximately to to fully invested. total billion or was generally ramp is should up expect when leverage $XX investment the you

expenses, for total the million higher entirely quarter-over-quarter. up almost leverage the from previous with waivers XX%, million. our was which quarter fourth or net due fee quarter $X expenses As interest was increasing for of This connection is $XX to expense about in

saw quarter. of share per $X.XX value this an increase Our net asset

earnings can see X You on NAV presentation. bridge of our a Slide

As over was in asset quarter. earning on by the increase value see dividend you this can driven our this slide, net

low structure public for we fee phase to five As structure and with XX points private our our waived BDC a quarters basis IPO, reminder management keep fee. in performance industry zero connection fee best-in-class fee of our

XX-K the fee see the effectively incentive our XX.X% of expenses you in that expense our shown fee operating under our just X.X% this contra management total will fees expense our and are the through reflects our we will income XX-K in way represent a waiver lines flow line and waiving. and portion is a structure The statement

fees. far $XX.X quarter, In waived $XX.X public, For fourth total so million we we million going waived since fees. of of have the

on shareholders our has of We are declared. the special to waiver this fee in Board form dividends the previously passing our

our approved first which the as our For dividend we Board share, of of $X.XX think of quarter dividend. a XXXX, long-term per

achievable this a a In our of IPO, was connection Board long-term view consecutive approved reminder, six our which a with Board dividend also a quarterly dividend level. As special with level our felt we series at set dividends. an conservative

shaded fourth of see portion and and the earnings You mentioned, the XXXX bar dividends, is can for of through These XXXX on third just top the in of Slide picture I the waiver at our our started slide. structure the rest of effectively each run quarter fee These XXXX. include of the XX quarter a presentation. of special of this dividend

$X.XX can quarter of is share per quarter. you year, the As per special dividend see this for each

is additional on XXXX throughout four top special So in This XXXX dividends effectively alone, $X.XX our we're the of quarters' to add dividends. paying per that up total an share. dividend regular

dividends to special of our on you can see back provided first our XXXX the for dividends we all last approved of the ourselves target this Board through a with the special already record as quarter quarter. leverage also third as our we these shareholders of from have Directors of quarter of ratio. of Again, As respective slide, ramp ramp XXXX day each by of been

activity, quarter able to another our back of strong progress back of the On continue origination ramping leverage. towards we to were target to

As commitments level a equity to operating prior from IPO to the investors. were IPO, private called debt our a up we our we equity phase remaining leading at times as delevered capital debt to and to reminder, to X.XX just our we X.XX times

debt our debt to currently increased on the end debt months. the third We to back X.XX X.XX ended six leverage quarter equity fourth times and times times equity quarter, target our of by we expect approximately get the to this at quarter to equity. progress Based to X.XX in to

we again it very financings, active As were this quarter. to our relates

of CLO of activity two XX public You and bond SPV facilities presentation. Slide can our issuances October did see financings takeout of we all from of To in we our did up an and our another sum January. one overview on our earnings drop-down unsecured here,

We these will very active of remain to areas. in continue both

of we spread bond recent five-year overview, a XXX XXX our As year almost priced treasuries most over last deal public quick tightening. our month basis repriced at five issuance treasuries, at initial and points XX.X over

with execution. this We very are clearly pleased

in issuances. I some think room there further still future tightening is for

priced issuances, bond public and coupon. fixed percent a three fixed percent coupon and These three coupon, at five quarter and X% quarters fixed

the not level negative economics. a the due the swapped rate floating the fixed we be not have to either attractive unattractive not swaps. and if deals continues reminder, to of enter into the if rates economics We to two a but issuance the are to swapped last made decision of low carry to enough. As There are first swap

our us under conditions, So rate. portion expect current as keep of a fixed should to market balance you see sheet to

few the a down the call little we IPO. our our quarters inexpensive paid CLO gone added with down of a recent commented in costs. facility can Due ago that coming to down Slide go of earnings decrease up has also has I our I on had and unsecured LIBOR of mentioned, would cost connection just capital debt debt XX issuances, presentation. cost since our you of our financings before in takeouts to course funding lower our The as see

closing So, to wrap with here points. two up

it First, date. we feel to have achieved about build-out our today where the relates of we and financing landscape, we very are as good to what

have place from of are a with that We our set matched balance a duration sheet. the in left well diversified financings of perspective side

facilities corporate of billion, lenders are a of way our right across have two which bond We to good are about off revolver, and facilities, sheet. include billion lending initial $X.X drop-down now very about completed and $X.X the finance efficient balance issuances an unsecured CLO of secured are of diversified side our SPV which and we balance financings, to

We more unsecured conditions bonds. facilities. takeouts on focus from plan. financings of continue could Over strong SPV CLO so will unsecured bonds more can we our financing time an this efficiently to we XX% to we are doing continue overall that or on execute drop-down be expect issuing The believe and our more

number buyback working our dividends, the friendly structural well. are in waiver, special Second, in lock-ups, connection fee the include all a our we with the shareholder of IPO These XXbX-X place and program. put features that

on Craig, call. to us back your support for Thank joining you and for you. today's much very all

Craig Packer

Thanks Alan.

closing, the a sentiment macroeconomic thought on investor experienced conditions In and the the issues market in would global weakened fourth market lending appetite environment. quarter, risk loan In I touch direct weak were syndicated due I to market off for the concerns. current broadly market new as

to saw in high the which new and direct saw market capture the the investment the towards able as spreads markets quality lending direct move quarter. in One some shift were terms, and the market our documentation benefit the that weakness we away lending is from market fourth investments opportunities in of on public to quarter the syndicated whole a also improved we

other however, signal has the modestly, loan year, the economy hope to strengthened continue alongside this would trend and banks into low to to We the grow the continues new market central commitment have rates syndicated continued most markets. broadly

In in conditions target the this short we level of we in the to X.XX we he earlier term, comments, back second six end some of to the In Alan's expect remove had quarter. leverage experienced tailwinds from highlighted quarter. months for times be fourth the approximately market the expect our to of

previously of on achieve would quarter, either but that our to several the second visibility first had we current range end factors. reflects given the this indicated pipeline. trending target end or wider now that the our This We deal at of are

been sponsors. The Those with among first subdued. first financial has activity the quarter generally thing level sponsors in activity cash plus is slower are

be to credit. have selective as continue on we highly Additionally, we always been

on more lower to as to return deals move closer expect being yielding even pursue we're incremental profile we the and fewer new opportunities. focused for invested, fully However,

expect to see portfolio we Finally, increased the to continues as repayments season.

we reasons, target expect these the our estimates. for to level to of leverage get So on original longer-end our

capabilities most new are years and returns. we investments our are we at at find finding opportunities like As we've competitively over ever. high are We've franchise we scaling of and successful few continue deals than and will attractive last to believe quite the very attractive you quality successful and been been portfolio confident our aware, finding in stronger

selection don't prudent position from to this We've want typically on very premier record We're closing, highly is middle point demonstrated we be be we credit deployment. deals operating the are and to of on we In cycle quality disciplined and strong at while franchise capital feel complacent, high originating with cautious strength. equally a a built a backed track sponsors. in financial of by comfortable that middle-market upper it

investment our in invest and capabilities. and grow management portfolio to continue We team

are We to of growth. choice lender large on the to was a positions, company believe incumbent having again equity community which the a display this incremental lead of private are number and that lending of benefits quarter. just portfolio We we for beginning should see

with excited pleased for are results shareholders. financial both and our deliver are to We and strong continue activity returns our to origination

accomplished, today remain and We dialogue close your our to progress. what quality your overall in are on credit further the want build maintaining team; the Rock for interest Owl of our Alan, to ongoing and proud apprised time as an behalf discipline again for we everyone Owl portfolio of forward but keeping We progress. entire the myself, thanking focused Rock. have maintaining look our on of and you and we to of On look by

please With that, line open the operator, questions. for

Operator

the first of Our comes Mickey Instructions] question [Operator Schleien Ladenburg. line from from

line open. Your is

Mickey Schleien

quarter-to-quarter. about more I drove One us that ask wanted other and income, background fee Could which what give little question is to you climbed a increase? on

Alan Kirshenbaum

Sure. We through. fee and a downs had we quarter if level paydowns you decent look back coming XQ, had also income some of to this

As had bit Hillstone, a our and you a companies; a a paydown Brewing, portfolio appreciate, City but on of extent smaller can ConnectWise. it's idiosyncratic, we couple with

Mickey Schleien

These are Alan? pre-payment fees then,

Alan Kirshenbaum

These prepayment down syndication we took and City and OID on Brewing fees are from ConnectWise. in acceleration some the pieces the of selling Hillstone of fees and then

Craig Packer

OID It's [indiscernible]. between split much and evenly pretty

Mickey Schleien

Feradyne on And any Outdoors they understand and background a valuations you right, and give on appreciate are going what's Go? I but there? bit that can us outlook little you could that. I private All quarter-to-quarter I Give discuss the are of down their noticed companies, and

Craig Packer

had a struggled bit, certainly Sure. It's private made firm ultimately some hunting Snow of appropriate be put on company part still We've expectations continue additional to by felt XXXX. capital May Feradyne investment recovery our where to we is equity it get it on They expect We based performance supportive amendments. and Snow or feel it, it but Phipps' very owned an It's a in in. expectations. Phipps. has its hit a have of manufacturer it to products. The a of is. market hasn't

all on it's I one. So, that can say about

has quarter. Go, That's crossed radar one believe and have marked this I so understand It a T.H. company space. loan. They've issues firm. Lee, in fairly that a I has your Give a up screen. operational controlled by might large first-lien cost It's buyout And it mark actually why food some had term traded publicly and the a structure issues. It low some

past in We're folks company I a tap in you expect to quarter we probably up say the this like it's its view term condition smaller But there's little on had would I part modest a so it could how but ultimately a a into appropriately. modestly fairly part a second-lien And improved think we loan. to get of and get marked is broader there, Similarly recovery bit. feel marked doing.

Mickey Schleien

[technical difficulty]

Alan Kirshenbaum

Mickey, we can hear you.

Craig Packer

hear you. cannot We

Mickey Schleien

[technical difficulty]

Alan Kirshenbaum

You're fading now, out Mickey.

Craig Packer

question hear later? maybe We Why can to and we next can you. barely the he switch don't phone

Operator

Instructions] [Operator Alexander line question Point. Our of with next the from Casey comes Compass

Your is line open.

Casey Alexander

thing of But Cathy, been questions. that's a not the worst couple I I've called, have

been how determine and issues all, have portfolio supply you do to from guys China your polling to that chain you potential of exposure your and looking through First companies feel portfolio? about

Craig Packer

we degree we And The exposure. sure, for still great early about it's of we are like have any and say answer fine would we don't feel is where yes. feel while I

Our businesses. businesses US oriented a lot finance and are primarily of we businesses services

sectors; industrial not global chains. that software, have of businesses healthcare, generally biggest look you at big supply If they're distribution; some our

close We have to. attention are we to pay a going few that

think big it's service I particularly the businesses is it's of say no going more we industrial to which exposure to or we that US of more resistant are virtues primarily cycle. a But that towards we BDC on businesses recession than want and it. lending are oriented say complacent businesses there's one are don't - to are would I generally So,

Casey Alexander

On Well, appreciate current going that. does does course we're debt, unused And matter X.X%, the I'm a almost be to debt of thank to that what include sure you a that have that's can fees? your given ask cost BDC you conditions probably at just for cost of that question are. every of

Alan Kirshenbaum

Yes, it does.

Casey Alexander

like are LIBOR out definition characterized guys of I Okay, unitranche which as exposure. that we always it that you of you is you terrific. control of the is everything discussed you can thought and Craig, it appears realize your except second you first unitranche kind and for first kind though controlling of combines lien that that Well, mean whereas as lien I've lien something control.

doesn't lien, stack location about actually you its you second capital the it's into or of lien? in of your when So first are in kind it attachment the as describe unitranche that talking land reach the point

Craig Packer

Sure.

I'll first-lien So, the instrument instruments of unitranche. as can. definition. call There's Look, clear different a term following that will a I Different loan. an lenders we're as we It's is no art. When universal has characteristics. unitranche unitranche, describing describe be term

is first extends more second However, loan level the typical of point a something typical leverage for that a to lien lien. beyond which or

it's It's - it's claim on as first-lien matter, There's a contractual doubt first got it. ahead debt. no So of assets. company's the

folks to However, the be would first-out sell acknowledged level in tranches on in would spread. an the within space, case an another calling unitranche and that boost lower what's lender that loan. or loan, a would to additional unit by at higher loan itself it's unitranche then position they a called effort the first-lien leverage do we typically then of a it Historically the return

piece. boost last out would the remaining they return the on So,

At once just prefer Owl the control because maybe it entire done we or We've Rock, done typically twice we have loan. not to that.

helpful so us, we exactly percentage to the We And lien. there out out. is first you it is I know and call call it others for a so unitranche how and percentage find know much because that

As blended first ago, a between $X. getting rate moment I it we you're and you're like a however the said second attaching lien, because

lingering a folks the we in have don't typically And ago, have a lien some on. have moment said so a there you out So all downside I concern being of that any know an with first as lender I have the lender. first issue to extent protection the don't credit, issues there's inter-creditor we that

percentage. first at lien, It point highlighting we make is what trying of but a all we're be So, cute also of the words. not to

you check much unitranche so We disclose so point exactly it exactly subjective. quarter unitranche every see unitranche is same just how we XX-K because can do or - characterize may the quarter every have - Different our how judgment we the how have. loan quarterly number as in the that we much leverage of can not of lenders also you

does help? that So,

Operator

of comes question the from next line Mickey with Schleien Our Ladenburg.

Your open. line is

Mickey Schleien

Can everybody hear me?

Alan Kirshenbaum

We Mickey, can, yes.

Mickey Schleien

I just over timing up. good carrying So, Alan. understand obviously What amount wanted Alan, you to cash pieces of of expect kind cash it but the you're can balance? million. sheet follow there's moving efficient, lot there and terms on balance a run $XXX pretty I optimally a not issue, could of rate that's of be in your

Alan Kirshenbaum

two always Mickey, after a waterfalls on facilities SPV that and happens timing idiosyncratic just right, driven idiosyncratic. that based the financing you're place are the more what cash we It we're a we you little other know quarterly series if that a shortly those factors. have drop-down deals when gets in of One, funding is by I from at less immediately quarter-end. bit the deal it after of release little quarter-end. as could And and largely of part think a is And have closing and or we run a facilities

Mickey Schleien

conditions and and with And leverage your credit agencies? to question, including the market Board raising disposed the your current given consider portfolio how last the relationships structure the my obviously curious stakeholders, is target rating

Craig Packer

that discussion. with management the Candidly, Board Sure. not engaged has

considering a leverage to to topic today, we some way quite IPO, get work significantly. our This got an still We've here lot where talked are delevered to do level. back increase. we in working that our level, about context we to a is the our outlined of we've much As target less

access grade BDC placed get we a able to a market. We at ratings were We our in as to have strategic bond early went priority before very grade be lifecycle public. investment very keeping to private much the - fortunate investment very

And - tapped ratings we've occasions. and very bond we we've highlighted, much those IG are market as on - that multiple value that

anything we've profile, are feel return that right were got we to ratings do targets. the important We it’s And generate. given on leverage our with so not we the strategically able where disrupt to profile. current balance that like given We

something not Board. it's So - we've with the discuss even

to certainly characterize wouldn't to We want disposition So their the right feel now. place like we're I right in it.

Operator

the next JMP line from Our Securities. York comes Please Chris question from ahead. of go

Your line is open.

Chris York

we So peers terms tend new peer this that growing to to big borrower from often some entrants. are BDCs hear more Craig, attribute of these friendly yields both and

So as how a investors seek your your that comment continue this many flow the should to they're new other tend growth deals? you entrance, to clubbing with on but reconcile big and BDCs with often fact deal

Craig Packer

rather guess Well, really Look, your I I than that's what great a question. - would say answer question.

what You're is making more but competitor solutions. more which you and private with years seeing. just rather an the What comfortable observation becoming last lending I equity than think we're guess community direct our few been what about - talk I'll the tell I - would share, I saying, is is has happening over

investment bigger with, but really from not, ways that attractive competitive market. In of ours solutions sponsors, with only many those to part firms relationships and relative much big have the like have ability that to provide capital because are trusted The team. to are pools them available features they in provide syndicated investment

more deals more And so, and Owl with they're lenders direct doing like Rock.

investment we think first great I partner make and being are we that yes, And Every a a pass built to - sponsors. financial - has provide spectrum credit leader our for because around foremost. business in we've a

at We middle. care negotiate about our the on deals experienced look We quite We're is sponsors. the documents that. than continue of There deeply to in We we close documentation. with X% at. the bilaterally less no bank

attractive first vast about our covenants deals The we to have maintenance our the and because our always majority reported control can that in we for care documentation. think we very leading offers deals return We we term returns profile, the risk results, see reward for almost and We lien lead shareholders. yourself. our risk portfolio, you our loans for of and get our just our think

and them. ask for our have to what we're saying, As you competitors

and market many deals. - I coming as entrant, a maybe itself we've a come reflects some as that I competitors comments. that to our But and or you in into frustration there noted, think those that around folks are understand that new some jealously maybe in, of

they So ask how to you reconcile them that. have

Chris York

I enough. wanted Dyal. Fair received to switch or so by gears, recently the - investment manager

external opportunity could grow team, you investment which and niches? does those potential that with on So that provide just be? could could to platform, opportunities specialty opportunity origination to allow even expand what you potentially maybe increase growth So, recent the the comment into manager

Craig Packer

all is to And yes. Sure and platform. answer that the help the investment Rock going from grow capital is to we the reason took be Dyal the used Owl

As we my and bootstrapped start own did firm. folks Owl our Rock capital. really the investors partners with We outside take I know,

We million today still $XXX in million $XXX ORCC than personally and the funds. various in invested Owl have Rock more invested

So commitment. at tremendous personal platform. growing our had have great success We've we

to We want want us. to borrow to from invest with find continue investors that and us borrowers that

so, intend to platform. we proceeds the use our And continue grow to to dollar

about talked lending is direct additional lending space. the direct generally we've What in We'd investment product. like

investment the would get to be in into process that to in should the arena, you portfolio direct credit, were - more continue underwriting to continue our the we'll leveraging much we So, in launch management far our new expect underwriting, to to flung relationships both team, areas, that. invest lending funds have I origination, expect we see not but we us and absolutely should do and team

size we've here huge of is check that a positive highlighted highlighted platform to our other think we large - our a write - is and competitive cases we've it's up think a in and ability advantage. I So

- and all the of benefit So, continue I grow. to as our funds we will investors all think

Chris York

sense. the year-over-year the just full number the of were at of platform us maybe Could and of maybe what employees you XXXX and Makes growth? let know end time at the a then lot FTE elaborate,

Alan Kirshenbaum

XXX year today probably to Sure, employees about XX at Chris. in we XX. We're were a and the ago, XX,

Chris York

Awesome, thanks Alan.

Next second on lien. question is your

So the know but guys as hasn't last the that that mix materially portfolio taking high are mix XX%. year, as comfortable over you I do moved

the the think portfolio how So today's about environment? in forward mix for expectation investors in going should any changes

Craig Packer

it's that in that here as you'll XX%. first so as history second XX% so in low point the sub lien. year recall lien to when portfolio we XXXX. skilled, not was folks is started of second Today, just but the or Sure, high remind really Obviously, on at we were investing

and I cycle. think good focused are we and will cycle, on are credit at that being loans only loans that the withstand extremely defensive this very point doing confident the we're

And And so to us that of an have where cycle. in drive near are up will we that term our given led to XX%. north change lien first has the the economic in don't we expectation

disadvantaged cushion beneath typically Second and in middle an that and cycle significant companies we don't liens, or second have ourselves when businesses typically large to upper only that spread we liens a don't expect do offer us volatility, find do position. equity very in so we we attractive them market have that any

we and them. would found do this spread in get attractive environment, those we If could we an

in fourth any. haven't we seen in three. that So, didn't see the happen we we of but the we many those third see do to quarter We didn’t them quarter any did

- don't the in us want would - I expect So, be to I in the a I to I high-teens, have low but crystal XXs, ball. don't think near-term,

expect market And bigger we middle to thought that to but do I if we We conditions don't in wouldn't that we've was it high would this shareholders I allowed to so, imagine soon, opportunities us that, anytime saw rule We XXs. XX%. happen, out take got year this prudent the to it market for the and it. but to up and of do our percentage cracked don't

now it in we Certainly, XX% think we're we'll at So, to between the given, - is we'll and today. only calls make probably reaching I live. where XXs update when have XX%

Chris York

is for times interest end interest What coverage at XXXX? insights year and portfolio. was for the the coverage was just helpful. housekeeping, X.X year end Last context XXXX very question That

Alan Kirshenbaum

we going be - that we're I offline give you have think happy to to think and going - we're a do to but of folks have - call we’ll question nobody's a refinanced you, that I sorry. provide lot here, to

Operator

next Please of Our go question from line ahead. Dodd comes Robert the Raymond with James.

Your line is open.

Robert Dodd

periods, of et low where compressing cetera? typically know remarks prepared activity] beginning - other repayment activity you expect what at - the of pick up gave Craig, you given repayment, less the and we that other yield the if in and On are loans was accelerates given about comments your Generally, color the spreads [we to paid in XXXX. some - some are in

compressing I right repayments you how accompany and yields yields that far the willing LIBOR. down up mean are were mean willing don't spreads new were I you slightly. are it I mean far can by this How control - spreads really that that spread think you [reconcile] about to go on investment spreads is could way to you to go obviously quarter portfolio

- that spread reconcile were can but all the repays your us? lower you on So some of investments, for the

Craig Packer

factors the asked Sure There you to Oftentimes position us. I go get rate, a get sold it that public. portfolio strategic, refinance the other - it I while guess way of the adjust may repaid we repayments get would don't gently certainly company's company rate another when sold. It may environment that to gets decision. question. are financial the ability lot will drive the for sold our will maybe impact of the I sub sponsor,

where some There done Oftentimes the catalyst, capital grown, improved. revisiting that's LBO has financed it's have its it's driven might structure. will we is profile company The and success. credit so an company be it, sponsor corporate company's the by

virtue regardless yes financing of improved. So market may - cost get just environment has credit the the it conditions, of credit by a fact lower the of

structure first enough it’s the decided lien Maybe market large they all lien to go second to take a Maybe to grown do improved. to - the company syndicated us has out. leverage has because and

scientific This that rate. rates happening. at generally goes that speaking, been Just help companies can I But say of and a purely is Obviously, lot in into would is then all, but I it more what's refinance. don't. not the say, I

company sell that's It's the the or driving refinancings. improvement in credit

that's drive is portfolio think So will still common in the what reason is still I guess are because will our I why increase modest. relatively repayments hours relatively our young

know, they're typically seven We As to years. five assume on three-year are our loans average life. you

investing started We in have XXXX.

in pace XXXX. up of But considerably XXXX picked and XXXX, our investment obviously has

environment expect to improved maturity have our hasn’t refinance Companies wait improved we rate business natural generally to their don't don't just repayments increase and it's their and so, would even And the as companies refinance. like debt. if companies hasn’t until their to generally to go

are would companies positioned refinance be do fine expect And just at and that done well we’ll incumbency. that do given in our just spreads have to the early to same our we so portfolio exact and given that obviously

don't think I I think, So, that's I how I just answered it. about but your question, think

Robert Dodd

it, of that. process How [Dyal if all better - the I Dual], vertical credit, lack does platform from into said for that areas mean you Got on add of whole platform answer a question. answer good. much all question term investors private from no which would one event go a expanding benefit could thought I Chris funds to tangential appreciate and that to the you that's into and follow-up to ORCC? as the do then eligible in another your sense if to you the

How much investors kind mean, you in assets I might up, type if security of to high about kinds. heads be of it give change they different any would even are

if shareholders whatever? the investors changes how - or concept at notice same can in kind So you of level mix much about BDC security get color and even it's would on us the any give any

Craig Packer

our is following totally ORCC's the am about I seriously. question. put company. and take responsibility a strategy But what say would fund intend I in sure and to not disclosure our We public quite your I'm Well, we

and and underneath the have is and a Rock And on the regular laid strategy we to Owl and platform. calls basis. Owl additional extent investors speak that obviously funds to these you sort Rock the and have we our We analysts of out the well-defined research our

our We to of funds subject will deals today and to exempted relief. continue invest across SEC

very, the detailed too think and want that funds I be strategy policy but - want about be to don't an might to allocation a that, what of able across very to much don't other platform funds different We time with have governors might to it's I we spend talking thorough or advantage the our put deals be.

say, But flavor We're strategy extent it. different just a fund the we those not Owl different had - have strategy it is Rock just there a platform to ORCC, different out going the than that to a because that a have to under alter investments going might to ORCC's and that funding. fund

I we're going raise wouldn't any So or to it's to want at we're for ORCC's, would executing concern grow folks that our clear it. strategy on very on call change and certainly that platform strategy because our our

Operator

line of Ryan question with Lynch comes from ahead. KBW. next Our the Please go

is open. Your line

Ryan Lynch

taking slightly broadly have guys syndicated syndicated quarter or that guys may loan loan the they now of kind talked covenants and kind of loans. broadly in the you the First that curious the crossover just market lending structures those terms the are be broadly loan those the I'm lending and of some market you about able of negotiate borrowers route. bringing one, versus direct route structures are over terms opportunities fourth lending are the market direct syndicated there or to to choosing coming the direct route, on better of those from

Craig Packer

on. loan glad a are our borrowers the some When I'm maintenance we that our topic satisfaction. of this term to that think I confusion of Vast Sure, make that because are, of have you structure majority lien - is there asked not what is there that is first events. terms but loan, we a regardless loans

all market it lite. the As is almost of broadly you syndicated covenant know,

our everything they maintenance on, of covenants, the dividends pay documents company. must quite it's the of and can negotiating plus every liens govern about extensive to incredible say everything, we page addition put they borrow, in And and can spent I out, time are aspect XXX it. documents amounts can

getting benefits from a provide in syndicated borrower When solution documents direct have broadly are the a and But they're a market. much chooses some We lending to tighter certainty. that. would they agreeing they

upon market provide doesn't depends deal it market, execution certainty, their syndicated conditions. the While

market don't know syndicated We are. hold who the your paper, hold the doesn't papers, broadly you lenders

certainty are sponsors choosing tighter with lending for the value. exchange higher they direct the to So and live that and and spreads documents relationship

clear. are Our economics

they with a also which only lending the very we get what initial along given of arranging market, could direct to versus and would where one core and improved the but virtues additional the borrow premium, the the OID in of see can plus spread we are, get banks of not the we spread You broadly of documentation. financing, potentially is typically that think be syndicated combination this the are that attractive OID, terms

a importantly the got we diligence, more And detailed do due of lastly versus and most the to borrowers syndicated. on much level broadly maybe

delivering in feel broadly get good. attractive a investments I as on the syndicated We're could more So really otherwise than our they to investors package, a market. much package,

The attractive. They volatile. are at attractive. this period a that are sponsors gotten is it find were We've more even trade Again generally strong. off, markets markets where finding where quite a time more

Ryan Lynch

guys or you offset just trying on because spreads you're wider an you the spreads, guys in market spread So the do then comments, that LIBOR. your seek as loans it little you mentioned, to a doesn't decline overall seem provide intend Can how in color do you just that? changing help accomplish had doing meaningfully? in seek how wider to are And how to prepared some you

Craig Packer

it's Hope it you've else, like long. got anything

able were do. You've on. credits the got you find the In find that to you're package an And economic got that do fourth to to that like. quarter, willing you've we to

markets signaled but - on general of not conditions, the general only going supply when capital, based deals As of it's the market but down the and amount in the financing. amount for demand it's I've and up first to move field, quarter, harder, public

compensated We want our capital. get to properly for

out, the fourth we're first for put It's in getting depending the dollars foremost disrupt good additional the and pushing to market that of is the harder. credit, We Our success we and sure also in it. is properly quarter upon quarter, heated had is make up but market conditions. down we want market. for sorts to monthly as first as There's up that's all spread things going compensated move quarterly,

attractive have the for can. our margin. speaking We is going profound XX spreads IRRs. basis points, we on push on think that a XX we the to company, their When shareholders a to generally it's another all not most to buying the it's important impact are Again, sponsors get that

on to we'll basis. continue it. do It's a so by And battle deal deal

that's So - I can the guess best you. it for I that's characterize

Operator

comes of Please go Wells with Securities. line Fargo O'Shea Our question ahead. next Finian from the

open. is line Your

Finian O'Shea

lot about I talked appreciate. a been which It's today,

a re-recapitalized this ConnectWise company, portfolio at on quarter. upsized you Just

forward point, anything you and much XXX, leverage in terms versus Just a is how us there market spread structure question XXX on can forth. widening was the so for look break on versus the you of attachment that down

Craig Packer

don't happen I are a that deal similar one into sponsor it's acquisition portfolio get to - on doing sponsor getting to was credit ConnectWise. we too without us made may pricing, come detail or to the things There to context an to company's the much doing deal. of and new I'll specific any on was say driven the is. additional appropriate time just there. time generally. with in on based in think into any financing they're anything - adjusted anything That spread it don't up rate the or is and we've what down it I what market reached happening it think adjustment from an

Finian O'Shea

fees was upfront the fee able some on some mentioned income the retain there there with a circumstance of all to the syndication the you - advisor. BDC that, to split related in or were And was

Alan Kirshenbaum

time, we of saw from the little on risk just from to to time positions time, everything warrants in I will sell-down BDC downs perspective a time fees from a current also and sell we And and might OID I fees, quarter So in to was at income current full. back to or pay the those syndication the prepayment that and my were comments. in and I my tuck-in the in when think accelerated company part referring down BDC comments mentioned go quarter.

Finian O'Shea

revert up And capital of materially you that matter fee the of you’ll scaled fee upfront fee, advisor just Can you and as the goes on how on us whether structuring at the or BDC? have an the sort you to to give market look update structure. the soon, now the

Craig Packer

Finn and on you I past no between mean, as fee fees quarters, handle I - might is no there how relationship fund charging Sure. in structure there talked an with mean we've on the - we're is we about the individual to to to we call talked time time per related disclosed. companies. not as take about just with you, certain the we've performance other for as And They're advisor we'll services, the fees the advisor this on from deal. we've each

new place, basis certainly deal about ongoing. deal, to to we only close our we has talk is selective or anywhere going it's that talked every not about been that on process It's and in but every it practice We've a selected to done circumstances, with nothing we've on really and as have. talked not, that about, in do structure there. it's to be fee nothing It's there do done

Operator

[Operator Markets. go Lee ahead. comes Kenneth Please next line RBC of from Instructions] with Capital Our question the

Your line is open.

Kenneth Lee

pick remarks seasonality sponsors, expect to your some on prepared wondering you on as slower through. elaborate to activity is could due you the how see Thanks. of up year seeing if whether goes much kind Wondering and among

Craig Packer

bit go may activity, capital. seasonality. Of down, of even the it's I this. amount they have and on a would Sure. room tremendous I to capital little a don't, think this slowdown will in I like and sponsor activity of that think sponsor it's views, be don't just in be up sponsors different deploying

think of we're been has again, peers well. we their a out what seeing. don't any slower, that could consistent our that opportunities deal flow. first it new what is appropriate it just as I quarter, it dime. this what there's find flag the I through quickly; It think only put seeing in they disposition, seeing less So you're change quarter we're but based thought they on change quarter, to capital on the And that's change and can could when I in are we it midway was other think But with saw

have capital, I still time still period are want that and they've economic don't attractive, raised some deploy, attractive. environment expect of that valuations because to to be is prolonged they a they

we for of in idiosyncratic just where it's ourselves think quarter XXXX. happen I the first to find

Operator

the no There I'll are Craig remarks. to for Packer turn closing further this telephone at now time. questions back call

Craig Packer

thanks Great. always your appreciate well, soon. with and separately. then Thanks dialing additional All look and have seeing you in. available, right, out speaking We're you forward your us to everyone just questions reach if We for to questions. for time

Operator

your This conference participation. call. concludes today's Thank you for

disconnect. You may now

Blue Owl Capital (OBDC) 20 Feb 202019 Q4 Earnings call transcript