ORCC - Earnings call transcript Q1 2021 | Blue Owl Capital Corporation

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Operator

Good morning and welcome to Owl Rock Capital Corporation's First Quarter 2021 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 guarantee 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 XXXX. press company first posted XX, issued the release quarter its March the Yesterday, for earnings and presentation an ended earnings with This the May presentation with SEC. the reviewed should in X Company's XX-Q filed be Form on conjunction will the today. company throughout the earnings The presentation refer call to

presentation that have please to you. So available

Rock over the Capital Officer will now I a the reminder, website. Executive earnings As Chief the Corporation. presentation to call company's of Packer, is Owl available on Craig turn

Craig Packer

you, our call. thank I'm today Craig Thank Rock Capital morning, for you Owl Partners. and and of Rock Capital operator. everyone, first Good Corporation joining us co-founder and CEO Packer, This for of Owl earnings a quarter is

and of joining will my the our for call. of NII before recovery value up $X.XX assets COO; the portfolio and update We Joining quarter discussing today today. was the the remarks. the by and me process. back Dana on briefly asset before the Investor providing of mark value who financial is of that Welcome discuss our CFO Head quality to The of on us everyone on today's call on on the I call fourth highlights, highlights the is of will investment $XX.XX I down with Alan Alan outlook closing view start our our full quarter. our share XX% covers first value of first Getting in Relations. par financial this our average believe quarter Sclafani, results, the an the quarter. to quarter course income later reflects Then, also credit was investment we and our where financial discuss activity it after deal into in and We I will is was current strong COVID. some portfolio $X.XX year our future over closing Alan fair our portfolio market quarter make share detail expected remarks. the will provide per from ended as this more had net per the in and net our the earnings Kirshenbaum,

Looking second XXXX. the forward quarter of for

$X.XX declared have amount same a paid our regular each since board the dividend IPO. of has per quarter share Our we

We are this pleased quarter, as the fourth were activity than across with expected the although our volumes origination lower we quarter. market

made up year-over-a the up which net deals of We've coming of of with times, at last end We and X.XX times leverage forward Given in to the from of is the year. to expect ended times the quarter range from quarters. that of progress X.X quarter X and modestly in end X.XX the pull last quarter get within year. our steady low our X.X increase range to leverage a targeted to

$X.X strong In cost our with overall balance our addition, we lower remains available liquidity billion of of today to and sheet continue financing.

received shareholder we is agreement in for our As expansion a for the overwhelming will shareholders Owl business of beneficial expected for ORCC. believe a and with sourcing transaction. combination the approve week, close in appreciate approval last for our that special will its Owl business platform hold combination and Dyal that XX. we XX for control platform a May to and provide If capabilities proposals connection with the are expanded it our on the on We approved, announced shareholders meeting to improved on Capital. shareholders March meeting change of mentioned on resources approve will Altimar Rock the Earlier XX the our this special call, what to be advisory Blue proposal held support May

Turning strong. very remains performance portfolio, to the our credit

the because industries saw including of these distribution. revenue drivers portfolio COVID impacted is in food of businesses, of the many software in already XX% EBITDA nearly quickly of year cases period. showing in performance of many and key often healthcare, or some companies sector. many and and improve see trends are and insurance, overall will LTM grow quarters. is reopening well our the the call the achieving about software COVID portfolio this see borrowers portfolio, our saw well borrowers levels. in companies, Across economy. vaccinations broader recurring certain our Many cases streams particular, which economy the to for our revenue faster to optimistic economic of sectors, of the predictable these strength period COVID like our want one for companies of environment. our the performance that modestly trend the continue on strength Across and the the We software, expect performance by continue pace In of only growth businesses actually the borrowers the strong experiencing back excess environment. for and the is we positive consistent portfolio positioned in are pre-COVID fundamental throughout towards positioning sector, this our I This rather attention operational have the year. of the of We and in believe growth We they rebounded average largest or largest in are positive and continue in to believe rest over given trending coming the we financial We outlook to our continued to beverage course conditions and

loan of In loans in. addition, we invest the the of value above often we give sectors the average credit solid provide software any returns, lowest and us documents to

education as of meaningfully childcare, sectors, more sectors outlook including a travel, aerospace. these a recovery. and including and the strong are now more acutely small been Certainly growth leisure seeing nice is products, which And impacted meaningful have number were consumer XXXX. impacted we're other For expecting businesses in

are versus be cautiously even portfolio. seen of we improved and seeing performance matrix sectors, trends the the outperformance in year. small have the a We have and few beginning Still, to given these here, investments recent of a they reopening reasons since forecasts revised industry optimistic the are of although pace travel portion the

credit the the internal at no the Looking few portfolio. material rating or value percentage of signed quite one across below No of our remains lowest the rated The results overall stable, but now five two largely our names in and or at four largely consistent categories rating quarters. low roughly ratings portfolio is XX% Names are of last rated fair our the remain were category. And amendments in quarter. unchanged there three XX%. names our

COVID activity to time-to-time. from expect ended. amendments we believe of due that has while to forward We period have elevated Going amendment

would As our have as with to ordinary discussions small a management of borrowers typical, expect portfolio we occasionally is course activities. number part of

non-accrual added name status one of the As of continue quarter. we borrowers to total the end, in X.X% of and new cost representing have the of to non-accrual No X.X% quarter were fair portfolio just on value.

on Moving funded originations, we sales originations of investment in Net of were with our given of million as $XXX some repayments. million we vintage and well repayments received activity markets, funded originations investments. majority financing M&A million to of We had full anticipated $XXX $XXX from of Gross the our six million reflecting as the the strength were this of which quarter. $XXX borrowers, activity. pleased with were combined or

companies quarter. attractive sell to high with some In the prices. we spread six paper addition, eight terms sectors at new portfolio added similar opportunity quality quarter, obtained. well but the was pleased with in borrowers We last to the we diversified lower Activity and across took were we

unitranche deals of loans. second close incumbency. term the certainly not We benefits add-ons bar these of borrowers evaluated did we for continue as deals, investments. executed high. Almost ultimately were for XX our see of to also many any We lien types quarter lien investments but on or second this remains lien new first all our We

points first our on Our feel with largely commitments X.X% portfolio reflects average the deals facilities. originate portfolio. the lien quarter. and the is quarter fact was tightened the ability public spreads flat given to Overall, basis loan attractive continue which yield spreads our markets despite over X.X%, that in was This optimize spread to unitranche to we last at XX attractive at activity new in was new saw

were over strong across now continued portfolio companies. we XXXX ramped the was construction portfolio of from optimization. our in to formed fully $XX.X portfolio is now as the We approached with happy targeted ORCC stands at performance. size Our billion shifting portfolio focus very credit portfolio XXX our

We on increase to unitranche expect repayments look we second and to see as get will we in redeploy capital investments. lien select occasion repayments, that or

rigorous quality the of than we've same closing that inception. and those Having credit standards and maintain opportunities will across over at X% selectivity less on X,XXX ultimately the looked employed platform deals. We since

results in Now Alan to I'll discuss turn to over detail. more our financial it

Alan Kirshenbaum

earnings our Craig. Good Slide start-off everyone. presentation. To of morning, Thank X on you,

$XX.X that You of first can investments quarter billion the debt total assets see billion. net $X.X and portfolio billion total ended outstanding of with we $X.X of

share value billion $X.X as per as end equity in quarter financings. pro $XX.XX net to times Our $XX.XX increased with compared of debt XX XX. liquidity net for quarter ended of and We asset leverage the forma December to post of to X.XX March

Our $X.XX $X.XX net per was investment quarter first share, share. income dividend was for the per our and

waiver. $X.XX the from paydown recall our that per $X.XX the per per one-time fee share benefited $X.XX remarks and share us, quarter including from from quarter, we last you Dentex had in As National share items partial

items been As of $X.XX a would one-time share. result, the fourth benefit quarter per without the these have

in approximately do repayments, we repayments NII that see an million the $X.XX of or fees. by do from and share QX generate accelerated not the that please this benefit reflects OID plus of that new same which penny since originations to So to and $XXX originations repayments had from of the while as half benefit of additional quarter. and we grew quarter. benefit was prepayment as NII quarter full amortization note sales, compared Then, per of This we sales provide sales not first the net sales roughly

continue our to a fees expectations. result, from lag As repayments

year of repayments had higher I that on on quarter. Craig in our portfolio. so, to and yielding past pick or based do been note the seasoning I year this continued have repayments later over would early expect we the the up As discussing we some also

a not of the As penny growth were Craig noted lien per the originations share again one is QX weighted also net of as benefit of end which our and full largely the NII result, once investments, of quarter reflective originations. in the first toward were

this company from In income penny per million quarter, declined approximately contribution last share. also from one one by NII impacted The which lower dividend was by addition, $X quarter. portfolio

just continues income seasonality. is ahead may results company operating of year, the as its side noted. our Thinking target the the while within and However, on over leverage we increase quarter have expect each And interest of dividend quarters, to increase fluctuate Craig to left strong sheet coming our range. balance to this based our to performance, optimize we modestly continue variable as as rest the we and

priced in expense can the not we the expenses On change million million transactions net our and first $XX.X incentive you basis We And the blended quarter tightest our to coupon fees funding interest final $XXX continuing financing right helped cost fixed million of further past, in of $XX two expect notable CLO in management quarter from fourth we of had bonds, as waiver the we very side, one to side of than on mentioned this regard, management spread a seventh slightly points that at us going on $XX.X that the we for and great incremental or fee of did costs sixth increased And focus to print fees at And of see one with this as $XX.X for costs. to balance fourth efficient interest our meaningfully financing up. expense in increased the a expense million the reducing incremental $XXX In XXX our continue leverage to optimizing quarter. and ever. I've million other us. sheet. for million in X.XXX% printand from a increase issued we that

on our strongest of earn sheets back Craig, balance us we have starting off feel profiles we joining the funding are And We in we in call. you half your position year. be feel you. good today's one and on to track overall, all continue very dividends the the year. to much to we in industry. the this and back of a for Thank support for So

Craig Packer

about our our Thanks, current to how perspective over close, share year. the provide market Alan. on wanted to on the thinking trajectory I of this some To we're thoughts earnings course

the but seen we anticipated in conditions to the As first fourth market was were levels active activity down have in the quarter very overall constructive, quarter. relative market

find attractive the both leverage see to activity deals While not have and of the and credit quality we with quality, We're competitive, level the the Overall, of changed. investments returns. with appropriate pipeline is in packages covenant pleased market we're we continue seeing. deal levels risk our adjusted the

given Although and we continued the are conditions seeing some strength strong spread in compression syndicated the market market.

prefer to which sectors rebounded or impact. quickly have impacted been have continue which from either We less the COVID economic

are Lastly, have and around names pleased we position we the in or we to the sole the we in demonstrate to lead of successful be win. able winning and that conviction our deals. In want to are that sponsor high the a in continue these situations where asset platform deals often take value

will reflection close ever to provide the in highlights this over this Rock the the commitments Thoma top the facility attractive it increasingly reflects opportunities. space. announced to solutions market. Bravo’s It done for that direct a borrowers this, software be the of finance which space financing billion expected syndicated choosing later is Calypso, to recently expertise a As in sizeable as our tier are is great Owl we example We larger of unitranche was year. ability our unitranche private of acquisition believe lending Calypso leaving loan investment the of largest $X.X is continued the and credit growth also U.S.

base, the Given to accommodative a trend. Rock monetary positioned also dividend the our the for wanted XXXX. year. for investment very touch Overall, earnings I market economy capital opportunities attractive on positive will we rest and create over outlook remainder and this that Owl believe large is strongly of policy coverage for our outlook well recovering of the and is

expected temporarily first As we down. quarter NII was

meaningful of here dividend and don't and and is with Activity quarter quarter of our but originations can we incumbency in We in earning will half guidance, believe of second forward I quarter. say that still we However, the we sitting deals typically We both year. quarter today are NII new expect expecting the dividends. line more our our from are by in active positions. towards cover benefit fourth that excess we make track as second progress a very to in on first driven second the the the provide fully the

private execute, tuck-in through we're believe front, flexibility portfolio across of sponsors equity and deal as capital strategies from continue gives opportunities sourcing across us advantage. and new a the permanent On seeing a consumer and insurance technology, the to variety healthcare, sponsors our buy-and-build sectors. we And companies scale many M&A,

For will we as the visibility second have improve believe continue leverage fees quarter, call also we unexpected, we in and borrowing net the ID additional accelerated generate level on increase which Based our effect pipeline Oh increased earnings to from something modestly second will on protection. the pre-payments, quarter. well as of

thoughts occur share To our capital first on highlight billion then since expect QX covering deployed As to expect make that some ultimately a second grow we we towards has ORCC solid I’d with across and this borrowers. $XX XXX to $X.XX result, our per earnings progress of year. of XXXX, close in which dividend, half the portfolio.

has average rebounded today the to a portfolio more from at we Given investment above have of offers attractive one today XX% to of period marked non-accrual of the scale on annualized and are the of the than the portfolio of very $X. points an single our XX X.X% loss had rate since levels inception. to mark Further, We loss the basis portfolio. $X.XX an platform, only challenging with only And portfolio value think fair roughly pre-COVID investment have of come this out yield. proud is one

of XX. a average billion secured covenant strong directly compelling with protections of points basis mix have with an that's loans asset mark plus XXX to think spread originated average relative other and an We roughly $XX of LIBOR senior We classes. asset very

compared to which index, when approximately leveraged example, For currently X.XX%. loan S&P the yields

portfolio upper $XXX sponsor across They've on across our have EBITDA XX% is successfully of well only with portfolio. out positions focus executed the up Today the about our We continued names total diversified backed and middle to at diversification make also weighted a of on portfolio borrowers. to the the million -- top set average industries market inception. we XX XX achieve

our bolstered types across the of our Our sheet strength by which maturities to platform capitalized financing with diversified is will match remains and balance further well assets.

we feel diverse built an we portfolio and a together have scale defensive Taken by supported financing profile. of attractive

would high permanent a and it Owl I $XX note this billion, of the coming we us that be resulting platform. pool strength a Lastly, scale capital the see of of we source benefits significant The allows total view from broader capital, AUM differentiator. from much significant Having to resources, Rock remain originators, and a large large a highly a office. allow opportunities management including of finance, and expertise, us investment produce and as support underwriting invested funnel portfolio quality middle to selective. well also They've as which of significantly team, deal group to back

keeps equity scale our mind for addition, for solutions. In financing sponsors to turn customized top us sizable who us private of

adjusted up to your us today. competitive look looks speaking returns forward our to line we again and growth excited the expect quarters look to closing. generate the very quarter. our come. Operator please questions. transaction forward more of and Thank leveraging believe Owl the strong outlook for on support you next opportunities Owl deliver in continue sourcing year Blue to the about forward in of and detail interest result for that to to advantages half to we're We you for the and continued attractive platform continued shareholders. a platform the to for the We the discussing second appreciate Finally, the of the risk we We joining Blue as look

Operator

Devin JP -- Your JPM question line comes from Ryan Morgan of Securities first securities. Instructions] [Operator the from

Devin Ryan

in Thanks to the know I from on level here Devin the guess, that's hard And first the into but I just the expectation predict Difficulty] higher JMP. second somewhat taking [Technical for for the thanks comment one in quarter. questions, Hi, outlook. factored

kind half were quarter how you the thinking kind back of a year, expectations constructed [Technical just more of higher repayment just conditions? that's about the the think for par Difficulty] with current you about environment broadly, of guys are If Difficulty]. of the that's kind just that [Technical kind or of that conditions continued in And very

Craig Packer

I higher that a repayments we Sure. your Well, quarter. break second it's our for you half the two important to position. that that the if about his sales Alan to try But see first expect me repayments, remarks. made attention this think, in comments pieces. those half weren't minutes in us will I to something let were just I couple sold of said they call the which we of into ago repayments of quarter

$XXX had quarter. pre-payment the we as that are That remains actual in go And to up get So penalties. on very materially that to the OID of repayments, obviously recognize repayments. and we only is for about able number those million earnings. investments second impactful we Because through we expect oftentimes,

So refinancing, it's structure of tilted company gets portfolio our say calling one of in question we point earnings. were repayments repayments the to more light broader the re-does a because actually And would are broader attention first we're looking. I in how capital the generates your But comes and the new quarter. biggest when The and two the to buyer and one. it drivers to of first or that are things sold

getting We high, certainly market. experience economic driven we our it's by refinanced get we're up there's out environment would sold. have companies is in market from constructive where are syndicated also out. or access markets. more it's refinanced companies more particularly given so The the M&A. marking on the that And time-to-time a a strong one is And because it I we're than syndicated wind volumes to no M&A M&A outlook. where strong getting say often one very But very it's that in a

had repayment and is portfolio, as low some a case, So up. out particular, our pick think COVID, repayments, the our I which very out function activity. we expect of In somewhat companies well of we've the vintage re-paint sales of in re-financings just as to pushed our

dividend in So pick experiencing what I to will last we've excessive something a relative years for not our and And normal earnings think good repayments case, an healthy very been we think in to couple that's will to coverage. specifically, terms be of that level, of up level.

So citing. it's of robust all levels experience, I trends repayments that managers think I'm and given one to be the going the will meaningful

Devin Ryan

Okay, more you. and over maybe weren't kind of in Thank opportunity job in kind just you've reward XX a into then a maybe perspective? economic is available maybe great less kind interested curious of and been the in pockets active. or backdrop potentially on emerging, I'm is hopping right vaccine healthcare attractive radar last more maybe industries and And and pandemic sectors color the with or maybe the on industry securities like done that of there. obviously areas it here you're you're technology other great are evolving risk attractive focus the bit from the recovery areas that strong months, have in but navigating that a are accurate an as little a leaned

Craig Packer

to So when make loan, seven the it's five we state -- six we years. a obvious

hold And and -- we're maturity. so it -- to we

ourselves we are to the to we're know of market. withstand economic up pick to got really fundamental a so in And moment credits going pick we've to going that and And the We're loans go And investors. life not consider in traders, because down. our conditions not our orientation that. trying credit long-term are and over we're

we throughout are regardless been cycle, strong year cyclicals the to businesses for served out, don't now -- on what concerned going be business really avoiding well expect would going margin. and it's of influence course, say, or not to the that regardless not years see sticking we've Those are here. of inception, very really But, well, happens on of where pay after going on shouldn't the margin that think potentially we're we bet and can we on to might of we are do -- the growing us we to after attention us to would that five And two. endure a in don't So the where economy's But I because really, be to companies you that. I cyclicals to to cycle. say try

software said, found in recovered software that attractive, we have -- have my we it largest remarks, our and differentiated the technology really in I the is generally, and but we're expertise when As most is sector, sector, and find our particular interesting COVID continue impacted that we particularly quickly. now have to [indiscernible]. resource there we sectors and that that Certainly, are very have were sector by

And pockets say up I sectors have kind those so been that COVID doing those were ago. during would open I now are shut very six minded the of think of be we really where and might would healthcare not months that open back about we

we'll in certainly on value the really to not making be there, know, for may the any [Dyal] differently, a good better sectors may make I portfolio. adjust just there how you to changes shouldn't really but see cycle, we run and Rock it us So we but do I expect the significant Owl it's managers other do the

Devin Ryan

Thanks that. the appreciate I color. for

Craig Packer

Thanks, Devin. Great.

Alan Kirshenbaum

Devin. Thanks,

Operator

from Your next of question Raymond Dodd James. line from comes Robert the

Robert Dodd

question Hi, it. taking to -- does question. you talked generate on there's for two elevated obviously fees, and guys the prepayment there's A is the it pre-payments -- about thanks pre-pay components

We should expect you ageing pre-payment aged COVID protection OID accelerated call on the the or that do still OID you call protection the the component of kind going have repayments? has assets? obviously accelerated So call OID kind with we makes portfolio – be and of protection the out portfolio So to starting paid? the the fee? of within cycle have Hopefully of and part somewhat that's to for a the then for that collect sense. reset Should chunk

Craig Packer

my it's OID. try today, Yes, books calculated the we on million a question, but this or We've answer do that's of it. but you about themes. got have precise just $XXX disclosed. mathematically is OID But answer this best I Robert. just to information don't calculated publicly I'll a to give I the this, great you to I'll

loan going tomorrow, a every that obviously isn't So would if happen, NII. repaid be which share to of $X.XX

does get from will would you few that's -- years. repaid years, in spread come of year it's giving That's on or $X.XX number call that they-- will on or we XXX We a what per Now this repay fingertips, call they what is specific at on over amortization two. they me to very because your alone thrust have I suggesting will happen that any equate part get got just really maybe of it? that. tremendous loans don't But happens pre-payable top we OID one they the will out just If of just of the top not pre-payments have of highest quickly, year. of that's going of next to offer some average to oftentimes premiums at protection. To And we aged amounts that the to just later material. over some attractive -- the would will of pre-pay. have on best excuse is companies of a amount or of you're performers, quote to going way usually substantial? I'm question. the those is quite well, we of of but the question, the next OID the business your don't my It's we I'm NII elements three quarter any come XXX it for the quality the loans

the of be go don't it'll to more I think think going but So don't weighted amortization it's I -- OID. I And zero. to to

impediment pickup don't think there's for income some the I us that that kind getting So of we're expecting.

Robert Dodd

But I appreciate really there. granularity that

any on may variable. you it And don't drop the this se, proposed dividend the we if would control this level dividend range, is or that'd is per more or from forward $X is one variable the expect the you of color end the expect on range more of can, Just but helpful? this it should the low the I middle quarter, obviously, million be that be going

Craig Packer

a The company is up to it. type investment, terrific is gets spending more It's it's schedule equity it's different than goes investment. window been But shows our referring in which is investment. a no normal our an Sure. investments debt on investments we're of very on holding, it's investment with

income and form So -- portion their we're of and they the we they in dividends. pay-out a shareholder enjoy of those dividends

those been If you extraordinarily see, [$XX] investment, at already originally would million [$XX] looked over dividends. invested and received million we've you we with went profitable back and of it's an it,

So when And dividends. business. based move on variable, of the up extraordinary. the they really to it's and performance it's The timing that's pay -- the choose going down of to

reasonable to quarter it's business that's first level. project it's activity a good variable. go out variable by assume a is but it is just driven to a and it this underlying And think their is I forward

you so there's going -- to be like does it it's quarters really dividend. upset than lower that and just And But because as if about inherently to it's the as be I tweak fourth be well predictable [exceed] where and I quarter going either. data investment a that variable wouldn't just that, not

Robert Dodd

Okay, got it. Thank you.

Craig Packer

Thanks, right. All Robert.

Alan Kirshenbaum

Robert. Thanks,

Operator

line Schleien Next from question comes Ladenburg. Mickey from of the

Mickey Schleien

to are loose fogginess the vis-à-vis very the able covenants. broader in the the deals, and very morning, the be curious given is I obviously record the choose deal very they about you in interesting. this go that I with comment think market, tight of structuring mind company we I'm imagine do your those deal when broader pricing found the may where Alan. if Good the Unitranche of of Craig, Craig loan, the company, manage size size. of and size markets terms And and how

risk how you that the market asking essentially, on the attack broader So without I'm market? of do taking

Craig Packer

Well, let sure. not me --

they we're that a solution, equity answer. get to of are the it, bigger why I'll lending an private offer inception certainty, driver not the example picks lenders You equity mean, be we've to direct I frankly, reasons I few who for years. rate, And, not the and re-ask there lending and The direct over seen bigger we're Owl firm trend there. like the privacy, leaders When question, deal enough. packages, one firms. private solutions of pools of last lenders might the Rock, of can it's many the since it, is not I'll covenant certainly for give their a close the opportunities an they a it's the just we the in like there but Calypso just are, is capital, know certainly what -- we have you which if of the see will with challenges. are know the like they

We are billion we're lending finance to a seeing greater of now deeper and the we've direct seen and it. the greater leveraged we've deeper and markets. a receptivity seeing beneficiary into been billion $X unitranche it's And solutions $X And and unitranche. penetrating

if our would in just be I time is I moment on trending This syndicated the a in then think choppy, that So where And next markets there'll a will you say, that pointed about my yet be fire. to in favor. gets the market And it's it. think slightly is direction. are that And trend moment still in trend in opinion. years couple the syndicated where accelerate

to see that in Owl that spirited charge market, market. Rock of core also spreads we in really continuing syndicated why solutions. the it's covenants very distribute of and a can rate spreads of the just So the otherwise private get we you able we maintenance economics what about deal. capture very we get remind the equity but all we excess a with that. those covenants, banks at and go get started the to continue business. to pay firms the premium also that kinds But we're It's to would to feel We to provide to of for much And discussions to fees They're the terms we're you get certainly the good. our the our positive

but So sponsor, that our to investors. the incremental not benefit that's economics are

economic question, part proposition the not that's I'm direct for hopefully, so so get Well, welcome to sure your answered something I lending. quite I but of it. didn't And you're ask

Mickey Schleien

much questions. I was very A that than And any the no, that for if No, couple of Sebago? actually What is description. is outlook Wingspire dividend which now appreciate a question. simpler larger my from

Craig Packer

portfolio constructed we to with the what some a put optimistic and and and as team about very the want building we're thoughtful about being building pleased Wingspire in are capital really make too -- very the We're portfolio. thoughtful sure out report that want they're there. dividend the really help for precise a more to We direction out, we'll earnings. right Wingspire. continued be progress obviously, question. on that, long-term I'm to Good over trending their run able build we're We've to I it, few next be but don't in year our Wingspire. a And it's quarters the of that'll there well.

Mickey Schleien

of you’re expecting range Wingspire? Could you on us give a the ROE perhaps

Craig Packer

But enthusiastic we can you I'm if think Wingspire wouldn't take in, just or ROE portfolio. we as Rock didn't the hope a into Wingspire, assumption could next lot really make. And results over -- about use ROE detail. done also rate our have to and being consistent it reasonable get quarters, to it's promise you in under Owl a we we above over in ROE But a to excess. an for when we a if Rock that be deliver, average to We proxy. we'll of would want something ROE I the have at and take go overall run so but I few the the getting try to Owl probably report, with

Mickey Schleien

appreciate that if have? income the already amount Alan per sure And you is mentioned I'm undistributed taxable that. What share not of Okay, it.

Alan Kirshenbaum

We we don't -- don't have distributions. undistributed make

Mickey Schleien

some excise Okay, right, so you did Alan? tax accrue

Alan Kirshenbaum

I believe we did.

Mickey Schleien

you up Thank I I those with questions. taking follow that later that’s may Okay, you it you. all questions. then, on appreciate are my

Craig Packer

Thanks, Mickey.

Operator

of from line Paul comes the Jackson from question Next KBW.

Paul Jackson

available questions guys. cost obviously, what of potentially obviously and attractive extremely to maybe brief. additional more to secured financing one you're forward you have your balance built pretty to of of a good -- not debt? comfortable and maintain on been securitized -- I'll costs of of stack. some guys debt, I I'm liability the questions kind -- low looking kind I with more your, my that have just was Hey, debt asked, replacing sort today, you of or just have low a appetite for given of your be my [indiscernible] trying you'd structure. sort be reached unsecured if at going issuing issue curious get most I aggressive too morning, would be around But but

Craig Packer

keeping Thanks, a we're on a Look question. did the always just -- of couple our nice And deal ago. eye we good markets you good it's it's Paul. size weeks saw, a a

unsecured of In we'll out look taking that. terms at to continue secured,

also on sheet. our And continue do is issuances, over the the balance the way to CLO we LIBOR to recent really which just basis I so balance We efficient. side of is, one is most right was The a mentioned optimizing focus really points that XXX sheet. finance efficient

an continue expect repricing So to you CLO our issuances and to see should to keep way see as go great continue over finance eye unsecured time continues portfolio a on the to markets to there. us doing to

Paul Jackson

Sure.

sector? of at that or have accelerating like that's just there Okay. obviously of by guys’ of on kind you And in talks given look Do any near-term? do curious, carried being floated do of lastly, in M&A any sheer a that raised the think the just still kind effect would capital picture. Understand. you more been proposal on you that deals -- I'm bigger around specifically proposals, more the this you amount just President with of the that PE tax non-event part out Or Congress? interest of kind possibly

Alan Kirshenbaum

Well, fair it's question. a

getting the that the think end that year. of the I changes -- there's the tax in a amount quarter by drove fourth possibility good saw certainly of done we of activity

some want cause types it to are cap around of stands could changes. sell the sellers specifics Now to those and reason prior that to to that certainly gains, state there taxes that

general dollars dry think regardless quite think, capital. of going lots to very the of if I general, to of which private and activity, equity it raising going is not it's is we I'm could equity anything for a get already and in live alter firms, So private trajectory powder be sitting a invested propellant because be the robust. There's regime continues trillion private I trajectory don't in that M&A equity in strong. in, tax private what to of of equity

the that robust and these as particular in eye proposed nothing on to there's we've been expect we've activity about. tax -- the things So got tax markets adjust we continued market, talking our tend changes

Paul Jackson

you. all are Appreciate that. Those that. for Thanks my questions. Thank Okay.

Alan Kirshenbaum

Thank you.

Craig Packer

Paul. Thank

Operator

Your next question of Kenneth comes the from RBC from line Lee Capital.

Kenneth Lee

question. my taking for thanks Hi,

then on quarter? seeing investments how of first in by just Just the there. want in the and of understanding generating this could ultimately new to will and a in full interest complete be And improvement the NII some quarter one expectation that of drivers income second second key the get better much of meaningful driven the for Thanks. quarter, quarter

Craig Packer

closed first We as said with weren't and have a is on if robust visibility in that that than line high it the of Sure, now investments will have but the the say of we to it. were a fourth get -- imminently. it, highly deals the confident I tail close quarter the wouldn't of full not is I'm already be originations quarter the part the modest super certainly I going in pipeline, part towards very first benefit some in we quarter. I that's quarter say, of. that would others the that of expected more mean, to done granular, But only are end we're we'll

the biggest on visibility And driver. actual well. repayments as So high have also that's then we

the make right expect during something visibility on unforeseen, based we're So further we now, quarter to have material we seeing NII what which on. on borrowing progress

Kenneth Lee

that's if bit saw Great, at Thanks. time And lien? that second is very just you in close lien didn't second versus in you a helpful. want the get the this and more point some first little loans color, may, attractive and what unitranche up potential quarter, I you of on the lien what investments made more mentioned the to just follow I in one any

Craig Packer

last few liens, We've we Sure. like right this -- -- situations. We the situations, about we for so years. those the second about but talked over picky we're

are stable, commitments to companies. want very only do on tend bigger like we substantial to and than to the second average portfolio -- equity to lien really only that first companies we So businesses lien be

the second average million $XXX average Our are EBITDA liens the the $XXX or EBITDA portfolio, across take. million, is or give for

second doing with for same we just feel but a premium tend bigger it lien, get all do have getting of equity we cushion get spread so we companies like quality that So to and we're and in lots high the businesses. were

a first we few, signalling -- pretty thin quarter any we we hope of take overall quarter second a I'm the lien. be the that I it context, in so those could that since And, did about amount I set. at going liens, didn't our see a track I just also is deal do a so have lien activity just remember per are this not going of very hope So parameters I we're liens but make And see doesn't more been I second think felt will It's second and small in But quite really easily it. when disciplined which inception percentage remain we're very bar one our But well. opportunity served selective. quarters and second us really to high. is we're up, trend. quarter one that we

Kenneth Lee

helpful. That's Great. very Thanks.

Craig Packer

Thanks.

Alan Kirshenbaum

Thank you.

Operator

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

Casey Alexander

kind generate? of a attention like deal Hi, deal to and that the like just spans does a great. how not of what closing that the got type on that Calypso closed my would ARCC position does and portfolio fees you the When size

Craig Packer

ARCC I'll a on the the give you Well, ORCC. mulligan I versus send -- we Casey, [indiscernible]. you

Casey Alexander

problem. No

Craig Packer

No problem.

tech healthy dedicated to folks take other We our that like know, business Owl call to extremely it have sizable of attention Thoma Corp, and going that, when opportunity so, benefits very a Finance a and of to other position Rock it's Bravo funds folks is a our the when in and as it through or many defer as can put it manage very ORCC which deal like Calypso, have manage to Technology our a it's -- and we a can Frankly, in position BDC them is just we an we well. vehicles it's -- investment large. close. not will we We one the We joining to we it. haven't company say, platform said because, on there's wanted

it'll So across the one entire investments be platform. of largest our

deal out time. sit size moment we closer, in the we'll at figure As that exact the where gets on based

a to And terrific but can't a investment sizable and high a it's quality in business. for be specific, that's more us opportunity company I large have really deal. So great a

Casey Alexander

mean, believe the NII the kind Okay, run core half, thanks but the guidance rate Calypso, that a of still such including be quarter, for dividend as that that. deals is within the by you correct? Would can by would you the second unusual you cover that that I fourth -- not

Craig Packer

the Yes, I we We the deal, -- reminding that to meant want take me, OID a I that yes thanks thanks When of life loan. we the for in to -- cover that. we -- close over on amortize deal.

that. income to in when So we -- I because on we earnings big going amounts I'm do don't that. of on unto drive to comment in not But going unusual to closing we itself on that take a just close isn't we're deal other us. And deals, quarter managers don't for

are that systematically some a the by systematically in Now, income. we're occasionally earnings driven be. that But might way that -- on manager a upfront some larger sell not originations generate down would can our the way takes deal, we all not

didn't focused we're to we entire So $X.X going when to just but holding sake close. obvious, [indiscernible] mean, Calypso billion I all alone. assuming commit clarity, not it's too billion I $X.X the say for is should get the [indiscernible]. clearly wouldn't this of the I And on I'm

have us us. lenders Rock committed be to with and very And other funds. lenders and Owl other we'll are other it appropriate close size in So there'll with lenders, they for the

Casey Alexander

helpful. you Thank very That's Perfect. very much.

Craig Packer

Casey. Thanks

Alan Kirshenbaum

you. Thank

Operator

Wells Fargo Finian from comes Securities. question final your And O'Shea from

Finian O'Shea

good Hi, morning. everyone,

Craig Packer

Hi, Finian.

Finian O'Shea

Hi.

So impact flat you or in yield yields. strong. better the will obviously like yields the or more activity the is pipeline you help. of expect touch terms But worse origination can will new look on some the It sounds outlook pretty

Craig Packer

-- quarter. in the first from quarter the So in fourth down spread the was our

wider So quarter markets would spread the here compression visibility second bit first there right -- our a now, and visibility bit The quarter strong. we'd in reflects to to have put gotten the spreads I the we quarter. expect I say that been have would has be I of just sitting we my up, remarks, a been than alluded as on

quarter cases, have probably it's I I say to with higher, lower. weighted of think this move higher. But in that market some around second strong, But So a our going if slightly that in continuing some the our investments portfolio, average it'll the But stays we're range. modestly find cases kind in condition -- a we're today's to think would bit. a spread in consistent spread visibility I stay

Finian O'Shea

any that's to be management It's with Should releases adviser place -- the Okay, in stages like in a it expect that around? there press the we forth, BDC. And final or so will then this. has team Owl helpful. shuffling Alan would couple remain of its be Rock, attached looks yourself, mostly the

Alan Kirshenbaum

more we'll that our dedicate but super team ORCC. and thoughtful Obviously be had going able to we're resources resources and forward. we're going if be platform we've the our Look, maintaining to to and anything, committed about bigger to success it's strategy have to continue to a

So on report nothing any to changes.

the excited So do shortly on and done closed will to to our the it transaction here shareholders. best get we for continue

Finian O'Shea

Okay, very well. That's all for me. Thank you.

Craig Packer

Fin. Thanks

Alan Kirshenbaum

Thanks Fin.

Operator

over And Mr. the I’d closing now turn like Packer remarks. to to back call for

Craig Packer

for All accessible. right, all questions. Really you for interest Thank perfect. the generally the appreciate

get your we to take chance didn't So question. a

And Just we'll reach out. appreciate We're you see everyone's next happy quarter. support. to talk offline and

Operator

participating. concludes conference you Thank This call. for today's

You now disconnect. may

Blue Owl Capital (OBDC) 6 May 212021 Q1 Earnings call transcript