Earnings call transcript Q4 2022

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Operator

Greetings. Welcome to Owl Rock Capital Corp.'s Fourth Quarter 2022 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

now Investor conference Relations. I'll Sclafani, to time, of Head this turn over the Dana At Dana, may you now begin.

Dana Sclafani

quarter Thank and you, call. fourth welcome everyone, earnings to Owl operator. Rock Capital Good morning, Corporation's

are me and of Officer Officer, our Chief Joining management Operating morning Executive Craig Chief Chief other Packer, and Lamm; team. Officer, Jonathan senior Financial our members this

performance involve are remarks may contain call number like I'd not guarantee and that during a made uncertainties to and remind our are today's those or of control. of Actual as differ filings may risks a in of future results SEC. in statements, a result listeners described those forward-looking which results outside the that the a including company's materially with from factors, ORCC's number forward-looking of statements

makes no from or on to the The information release, our earnings been and available are verified. earnings materials, forward-looking statements. assumes this information. warranties presentation and XX-K portfolio Relations company and such to section third-party derived related earnings owlrockcapitalcorporation.com. this to any obligation companies, in Certain company website call update Investor was sources of ORCC's including our independently on discussed respect supplemental with not The no has information at representations

to I'll turn the With that, call Craig. over

Craig Packer

Dana. Thanks, us Good today. for you all and thank morning, joining everyone

of ongoing performance momentum with We the are strong pleased to portfolio. continued rates once quarter of that reflects earnings the of again strong results another very report pull-through higher our

record was since public. per Our we income net share, capping fourth investment year off a the $X.XX in quarter went

call NII the half at of over seen credit quarter that stable increased time. XX% the rising as we benefit quarter, the visibility and to of quarter have earn of rates performance. year highlighted in our of at this fourth in based and NII year our $X.XX least on we On perspective, we fourth expected last put versus the To in the second the last XX%

results. report We even are stronger pleased to

also The to announced a component we our reminder, dividend quarter of a results, actions increase and going with a dividend $X.XX third introduction several supplemental the As base in excess forward. our to capital $X.XX and the of dividend our including of in $X.XX supplemental dividend NII, given XX% our quarter. dividend increase increased to our in for equal supplemental base fourth earnings is

result a receive quarter. investors As fourth dividends dividend in XX%. At the price, a this annualized compelling new over our this is share current of generates dividend level will structure, yield for dividend we of $X.XX believe very what total

through growth see portfolio, Based NII continued on supplemental and to XXXX. dividend in flowing the the we rates expect visibility growth higher corresponding of in the throughout

NII year Our ago. was quarter fourth the a X.X% up XX% from ROE for

For we points generated the basis full XXXX. XXXX, XXX X.X% ROE, from a year up

which attractive steady levels, Looking to higher, ROEs of we see forward, risk-adjusted we expect great a XX% for first think primarily current is return an or runrate lien portfolio.

the these also which to Board $XX and our million we repurchase the power in a that near addition Owl vehicle had authorized quarter, purchase programs. announced Last the $XX a term million of was buying million in Blue investment through combined intention to to up stock from employee $XXX program,

We have plan. this repurchase in to programmatic progress to-date, part utilizing by significant are on pleased goal a made

dividend. our purchased, share capital these an average of February or at of stock of total value. coverage base million believe XXth, We company actions was the per alignment our shareholders, underscore while asset ORCC $XX bought providing net of a XX% As of $XX of of was by comfortable which price with million $XX.XX

quarter. In earnings, from addition per net value asset $X.XX to strong third $XX.XX, increased share also this to up our quarter the

the of X.X% this name rate quarter. the Our portfolio fair one of at nonaccrual value with added non-accrual remains low to

in performance non-accrual and strong six our only billion have continued points. portfolio borrowers, roughly placed basis our Since at names credit believe XX deployed across XXX which on process. loss of ratio our We reflects history, we have our underwriting than less conservative annualized remains $XX selection and inception, been standards

earnings cognizant new with challenges quarter, While that the we the likely we economy look are be also will of strong there for we fourth as are pleased ahead. the

broader expect and are our recession potential this the for We year. We a headwinds demonstrating believe for environment is well and resilience. later our portfolio economic borrowers this positioned already

has basis, to continue prior quarters. and revenue we quarter-over-quarter pace EBITDA report of growth borrowers that although on a growth Our slowed the note low-single-digit versus

rising across support have to not the borrowers of early indicators relief our from a Despite stress supply portfolio. pickup seen of moderation the of and has disruptions have in saw offset growth. experienced to any in EBITDA and which chain helped Many rates impact costs, we input this, the

stable Our portfolio and ratings internal remained marks quarter-over-quarter.

have not an requests we for additional lease borrowers seen covenant from increase liquidity. or Anecdotally, from

We continue over of people. team to process our and utilize with XXX a rigorous investment management portfolio monitoring

We have identify mitigate significant challenges. resources signs in to and of potential place early stress proactively

a have continuously on projected our downside we backdrop, liquidity credits evaluating needs, and market in liquidation reunderwriting scenarios. and current focus the heightened Given

This prior As X.Xx coverage. X.Xx interest reflection LTM to declined rates. expected, the and we is a of the quarter. reported is quarter fourth higher coverage in This metric

are X.X also we rate coverage levels peak course vast expected the to of with average of Xx. the and forecasted and expectations current year majority that between environment our remaining monitor the based However, over maintain coverage found on have market the borrowers adequate

which on a have the on more Across operating companies, or year experience value Based in expectations. we may evaluate over to than that expectations. we continue monitoring, with watchlist believe XXX line currently challenges our the our existing total portfolio next fair significant identified perform less newly so. the basis where and situations session heightened in monthly our deviated majority vast are X% portfolio we a We from of both results identified

that the at area these of is overall clear, we concern is our about statement To potential X% the problems, this rather we portfolio. will point current be which are is view, believe an health but encouraging the X%, not of this saying in have

in strength of the and We continue borrowers. the our process, to portfolio investment underlying come monitoring away from confidence our

is situations performance, in liquidity, accretive making operational tougher for with This recession-resistant sponsor-backed cutting better belief will as in credit employ confidence or such by bolstered fare in for initiatives, strategic additional that environment. initiatives, assets selling costs, acquisitions. as our providing weaker will Even companies large sectors such a sponsors

In credit our these lender. found that business provide protection have experience, for we runway as downside impactful us actions of additional be and the a value the for can to the realize to extending enhance in sponsors profile

our economic prepared We to Looking continued be the any resilient are portfolio economic We've built our will a and manageable challenging losses will the very that of varying or more by and face across believe well be potential forward, believe of we portfolio downturn. defaults in offset our for environments an fare environment. it earnings. strength in

a We highly this deliberately first and portfolio, defensible diversified on strategy and is built low economy. loan-to-value have sectors primarily investments lien highly non-cyclical a focused ratios believe a slowing with in

to With more turn it detail provide I'll that, Jonathan financial results. over to on our

Jonathan Lamm

the total Thanks, Craig. outstanding total with billion, billion, fourth ended $XX debt and $X.X $X.X investments of We net of portfolio billion. of quarter assets

quarter the This driven credit of $XX.XX, Our strong $XX.XX. dividend an NAV over-earning regular per share increase from performance. NAV and by increase was our was third

of quarter. our million, repayment in as value approximately deployments the muted which and M&A in saw in was benefited we activity which to match the fourth strategic line modest slowdown in refinancing Additionally, we new NAV Funded meaningful $XXX activity. of activity, quarter equity some the increase a in remains our with the positions, at broader

in was This continued Turning from increase portfolio. to the strong drove the the performance from income year. spread XX% our XXXX, up investment prior base quarter and higher record driven statement, fourth rates income average for higher by

While in we from higher first rates, while lien investments. of have portfolio, to diligently the spread portfolio we have working the also in majority our increase the maintaining benefited been

the yield basis in XX% over increased average in result, a XXXX. asset As portfolio the to points XXX

to From portfolio an rate reset expect the over first we our current of borrowers perspective, half continue year base average as increase the of to rates. the earnings will

basis base the average was base X.X% was in This elected the quarter end quarter. for an of additional XX at rate pull-through the points Our fourth rate a the the first and implies quarter of X.X%. fourth average

reminder, NII the share $X.XX equal, holding XXX expect in each base considering our points fees. effective we impact a quarterly of income-based As per additional rate increase approximately generate all in after else basis to

For of record shareholders Board which a dividend, declared be regular per XX our XX. of XXXX, April quarter will the share March to $X.XX before as of paid first on or

our For previously share on the paid between declared of supplemental XXXX, a and share, of per dividend the fourth dividend quarter shareholders to of $X.XXper of fourth be our supplemental $X.XX XX% which dividend. March Board March NII will on quarter XXth record $X.XX This Xrd. quarter fourth the declared difference is

Turning to sheet. the balance

where our within quarter. well-diversified a quarter to a unchanged net leverage equity balance ended At have remains X.XXx target net flexible with to end, the continue we range third We largely from financing debt our structure. at sheet

excess approximately unfunded our We also had commitments revolvers. half roughly liquidity of $X.X well in of $X of which of are billion, billion,

With average exposed weighted and at have we no rates, debt of cost only our maturities. our to near-term X.X%, total liabilities rising XX% remains low of

With closing to that, I'll turn comments. for back it Craig

Craig Packer

on is year we're close ahead. the expecting Thanks, I'll Jonathan. for today how with some ORCC thoughts positioned what and

the expect as year higher earnings base benefit power seeing further we to earnings the business we and of the growth We rates. over are from see

identifying through success generating yields careful have it not selection, earnings. optimize worked environment, hard portfolio also and entering strategic to by to asset we have which and exercising very levers, allowed multiple for The attractive risk-adjusted just position but credit is this us

which the portfolio re-underwrite overall on advantage to we've current less to to amendment rotating market requests, basis and terms. been market negotiate out part roughly by with spreads more basis spread backdrop we of over the And last recently, XX investments add points. by points increase reflect spreads opportunistically in of than the to XXX increased an We year, investments able take

strategic differentiated loans diversified generate ROEs loan XX% made each have the portfolio. are to Wingspire opportunities, portfolios over and also in of returns fund, and provide the prudent We investments which including senior that

equity over and recently, investments time. Season More select that made and provide earnings returns in enhance strong to have Fifth expect we businesses like we also Amergin

financing our locked liabilities have in low-cost We through the approach proactive to portfolio.

of are rate. fixed half earlier, noted Jonathan As liabilities our

outsized believe and more well-positioned half to play we expect higher to continue we the generating result, of benefit rates Earnings of first the year. in out returns today's in a to expand continue the ORCC As environment. is see

income. confident to noting The When in we increase in environment. is portfolio's It's eventually we repayment resulting are low also in a economic well rates an more normalize, is that activity company resiliency repayment expect and and activity, a a very pickup the repayment see challenging minimal worth performing in in of period repayment income. this even

about are to the ways we We excited the future delivering ORCC in which shareholders. differentiated returns are of and

deliver to attractive more why look forward investors we and pleased We May in we across sharing Day first will on market returns are that to are confident Investor with announce are hosting evolving ORCC our environments. detail

Dana of will the will be we in join weeks more that coming and be details the able call hope sharing on us. many you to

thank today always, for you line time now as will the that, we and open your With questions. for

Operator

Thank you. Please our question [Operator Instructions] from questions. your Casey And line the Alexander of proceed with with Compass Point. is first

Casey Alexander

have questions. Yeah, I hi, two good morning.

in it investments. all, XX% your down of the you asset equity over portfolio equity the of to release, equity between common First the press of structure that shows and break preferred dedicated investments

I this a high picking might up investor that, think a level. say that's that novice fairly

a But asset-backed by off-balance is I lot covered sheet lending of think that vehicles. and

out, were equity you that's as for interest-earning equity to actually would as fronting investments? opposed the you being portfolio to characterize how those true much carve being If of

Craig Packer

portfolios missed. can Jonathan loans, of I I'm could morning, today. just those our The largest question Good pieces and if our Sure. close on impression. start wrong fill glad investments balance you to I've weren't that of that the are in because create you it company, I'll the agree what secured in asked sit like investments Casey, sheet

got called As which lending, in lending. very asset-based a large business you conservative know, Wingspire investment does asset-based a we've

of – dividends. shows we XX% generate an so what that so highly And of very asset-based diversified up portfolio as But almost equity Wingspire consistent ORCC is investment. a you're getting owns that loans

it about call Similarly, couple a or about The of take. term in XX% our million piece Lake give that's names. is of loans and biggest fund. is well. a with the investment We loan used investment, as senior portfolio Sebago that next we terrific lien to that own really a ago, credit of years Similarly, senior changed first we $XXX performance secured large and

dividends. Those in And we so, of income ORCC far else – the gets like our everything portfolios just that book, through by those pieces. income, XX% and essentially generate are biggest

little We you what have equity like investment. consider might very pure

given sponsor-backed On companies to to typically we like the the do XX% preferreds being opportunity and through large the also, think, – loan-to-value. predictable where a we about high are are and very -- opportunity very we they be quality structure preferred tend we

significant for not large $XXX $XXX consistent companies, dividend very beneath million EBITDA, very that So million, streams. this from $XXX the generate sponsor if million, more, equity of

are the underliers consistent. it's to the those that is So our a the and earnings and I overall biggest performance of and think part very book have components our very been accretive

Jonathan Lamm

you were about just remaining X%. if those look Casey, out items equity, just what's it's in common to and strip at

So it's a much number. lower

Casey Alexander

you. Great. helpful. Thank right. very That's All

your that we Applied Secondly, went mark you've the kind on quarter-over-quarter what investors of your plans are this it that given there? yet know quarter. an nonaccrual taken Cleveland update changed Mark, and give you confidence very it fact on the Could on in little. to And that, contour as nonaccrual

Craig Packer

Sure.

services a that with in our companies. consulting So FR different our business energy handful it and provides been of shows It's of inspection portfolio a Arsenal name, company We investments on Holdings. years. know and a quite the Applied to infrastructure for well. services It's Cleveland, up schedule

the It made but a COVID, to which maturity demand up its did us is payment impacted judgment the energy It that it we was easy an during there to refinanced. quarter, interest for we – reduced current a for path was services, in get us see by and was price coming declines. their given

consequence, non-accrual. we it on a As put

or may you of public have if seen haven't the see company. – seen, you'll disclosure, We subsidiary a you some

working So to the for you But closely not whole company one the company We're sponsor company solvent, of bankruptcy with repayment. overall particular take us filed and if technical generate their for reasons. for will. to the is some the actions businesses,

par, the on recovery, our despite to get that it very confidence in our not hopefully, very we par so nonaccrual. if And a close reflects the mark ability have to will, fact high you if

third-party us, to quarter. as we that. every for do We folks Duffel process every name, newer a a since are inception. to Same reminder, Just that mark use

with our I a and reasonable despite with non-accrual land observation lower the them. don't work fair us. think this are to see closely even it the we will has but over history, very it's is closely I extremely Duff plays and I market out the marked high situations levels there this that a not why wonder recovery I team probably name we we overpromise, to that in will in nonaccrual And a to believe we where is next get X X think the working how management want here but you'll and for and think months, in place

Casey Alexander

comfortable is Thank grow that? a you. JV the fund, of that? you lastly, All we typically as use right. Is And assets Great. plan simply senior that size sit as there lending to to in Do particular vehicle. BDCs of JV smaller the we room the grow Or see percentage much sleeve kind with today. of are that than you

Craig Packer

$XXX It's a we've million. question. committed – I great

We of funded have $XXX about that. million

our that very generates grow open, commitment will we returns north I ORCC the should you So of expect remainder think in over continue the XX%. would to continue we time, I It and expect to this attractive term, investment. invest certainly to for short really of be

it's of As just secured senior I portfolio loans. mentioned, a

so us And over it I grow time. to expect

time Just on. to Investor this it, commented a should a to you and spend to going expect our lot make back we're to that reference this topic we of May us first is have Day

structured not other ability Wingspire only that also a think our loan I returns our the higher investments. by but more to we senior exposure by drive couple and fund, in to have the the of growing portfolio, growing

think I accretive. very they're

deliberate very how about we we're think I it. do

of to XX% Collectively, will that the add reason I any worked it. couldn't today that to see it's plus. investments talk Over more it about in shows well, continue our Again, drive portfolio. ability don't and get out time, our to about returns portfolio. are to just why we'll the Day. But think those we higher continue be extremely at Investor X% I to

Casey Alexander

one still I right. have. more All should had question I then

So, my in for queue. taking thanks I’ll questions. But step out the

Craig Packer

lot. Okay. Thanks a

Operator

next with line the proceed of Raymond your Dodd Our with Please questions. comes from Robert question James.

Robert Dodd

very obviously, the bit this dividend did value the for up the you in been mean, did but fair a a little bit, capital On far. so When quarter, successful it it's you vote little guys. drop. Wingspire. more invest Hi I tell-you

already on what's any invested you on asset the return can XXX ROIC can the that long-term what So million as capital do give be that long-term it's us discussed. mean business? expect color of from equity, equity that it be assets is you sustained from you've to income-producing but I given

Craig Packer

loans in quality created writing, of pleased the the team. Wingspire look, and with that of they really what the we've and Wingspire the been our investment are quality there So has

recall, business percent, will on of very in This business, investment. certainly for you XX% – an a integrated XX-plus that we which north XX%, did return an As be and got finance acquisition should equipment nicely. equity

In any or into one higher million quarter, quarter. did the Liberty read I anything We be lower. $X X might the wouldn't there. $X dividend But million acquisition do or

being or down by dividend $X million. million So $X

business over credit. I at value of and dividend generate creating the will would Wingspire certainly hopefully XX%, but of think increase enterprise that, I and real year we're will deserve course Wisen And or David return. I and team created. XX% the the think that we've more Organically, a by of north like lot expect the XX%

and We income scratch today, we that paper, valuable stream we'll value clean a consistent built generate this more is from have we'll time a ORCC. to sheet think with and very business of a over

Robert Dodd

quarter. be prepay this NII income with to or $X.XX actually being quarter, I very said guess probably did was very you. a a little than [indiscernible] strong last thought you is is $X.XX prepayment least My mean, you Thank quarter it. you $X.XX. Got point, income going say higher to at your

anything we're above so because what speak, obviously, surprised prepay XX, despite least that was was to fact income XX, there So XX, low. you, the so -- at well that

that pushed were So it into what the above – drivers what uptick of were kind the the XX?

Craig Packer

significant years, that I under know most were $X.XX. tremendous that at So, for seven was are operating us Robert. to think think least that now promise there surprises, the this momentum. is, What deliberate any I XX, at and deliver. of I watch has those closely I we try said don't portfolio we I very hope over estimates

the talked about in today, The rates our all driving in despite script are repayment. that's going It's no And through. increases quarter earnings. further and we earlier first

are guidance, I to is we not think disposed our think investors give – where we strength that instinctively, given I sure naturally the to out I we've our understand stock built. of what traded, So make want

put out the make we would said. we on to certainly that, sure wanted what guidance did did. we we that if we We So deliver

company Portfolio continues well. up just to I – we've surprises. that be performance. the continued big already the rolling in rates quarter, based experienced already no So, on the NII have to expect higher credit strong our through first do

Robert Dodd

Thank Got it. you.

Craig Packer

Robert. Thanks.

Operator

is Please the of question Lynch with from Next your Ryan question. proceed line KBW. with

Ryan Lynch

Jonathan. Hey, good morning, Craig. morning, Good

question your was problems experience prepared mentioned those guarantee of your the kind in you that's be less portfolio you And current X% like in monitoring investments may closely. are again, anything or had but future. comments, the than I First may of that, not a

two the of portfolio? rates those profile you and their that more businesses – maybe that fundamentals combination higher business in with curious, are rates small of some having help higher of from those pressure just their higher your it leverage of I'm subset are earnings a or Or and concerned more can is fundamentals problems weakening potentially? you combination experiencing clarify with

Craig Packer

X potential is the on to up economy rates where this are world year. know Sure. weakening of portfolio Ryan. higher topic investors' much Look, the and we hold a Thanks, how later going is in minds probably

we since all that's just way inception. our are operate We and portfolio just – over the

month watch every of every And so inception, XX% scrubbing portfolio about happens a quarter watch the and and very of our so, since we what have happens portfolio. had consistently list

to have XX%, of concerned what environment, about would this underperformed that there's But various higher economy, investors credit for are wanted happen insight weakening concern reasons. really we're in rates half in from Those we further that only with specific offer it given generally might heightened about we that a within that say that companies about.

why it themes, to of your not the And material from the all weakening be I'd say demand any that debt in operational to service. or challenges costs come might is costs tends company, that just factors issues you the or specific expect coupled themselves, broader question, with might a business higher guts labor to

take so was a pressure debt service that And potentially weaker put now on struggling higher the obviously it. going to business really and is

the than of we comfort expect see in pickup but stress And folks we're companies. two hopefully, some take so less portfolio, talking to that would acknowledging really handfuls we're only that about in

service So businesses. it's higher specific, coupled for underlying with debt credit is theme the those

a not don't every have concerns. I'd – sitting context with But really number. own thinking one. decisions about each we're I take to here comfort so small can like sit a make of have their They going here am to rather the single plans some some problem hopefully low I their investors portfolio share overall relatively and address just

Ryan Lynch

shared information of portfolio. frame it's appreciate you helpful that things to your kind regarding I and

had, in far. a sort The indicators I'd your what I stress. all really other environment. the signs because indicators that's not as believe love those portfolio early early to question very focusing in that of in of you stress thus of or pickup credit monitor this that metrics you're said important hear seeing theme, just you on I

Craig Packer

that are Sure. in a -- I companies mean come it's a Obviously, us to that in a violate difficult material negotiation. going a that to of are things. in way result covenants handful

think I way. now not a happening meaningful that's in

in companies cash seeing because to take pressures. meaningful a Companies of not We're not pay make happens, revolvers, it We're saw revolvers Obviously, that X the interest pick dramatically. seeing [indiscernible] -- liquidity drawing our that any that drawing factor. whatsoever But pickup that. behavior change on very they liquidity for that's any certainly and companies we are COVID, way. because need their for in in request when

but but broadly, for sure, the defaults but of elevated some, in them, – conversations say the But for had we've are is the those amendments doing, only having portfolio. more obviously, things, we're some we're variety amendments. the those not there mean, not always things, part there we're are lot discussion the not for a most not I'd tangible I around potential is always garden

like company with I'm And where drawn that's And we're result out, not bad a deep the might conversations course I suffering credit hard grinding something seeing the there expect again, these pickup yet. just some of not out a that in is outcome. it in year.

It'd be know unrealistic to are really think look I not, don't don't that but some I think right if that either, And factors but I comfort now. that folks any much helps. the week some should expect there next we take at. those isn't of

Ryan Lynch

for Craig. that, I appreciate That’s all me.

Craig Packer

Ryan. Thanks,

Operator

Next question from Fultz question. Kevin of proceed the JMP. Please with with your line is

Kevin Fultz

for and my thank you good taking Hi, questions. morning

X So about in comes the Slide on of presentation funding [Indiscernible] XX% fourth of to activity the quarter.

Craig Packer

there Kevin, you to a Is your any tweak out hard could way hear make – to sorry, microphone you. Kevin, interrupt, or little sorry it's it's really something?

Kevin Fultz

now? Can you better Sure. me hear

Craig Packer

a better. way lot. it’s Yeah, Thanks

Kevin Fultz

could Okay, problem. a an believe provide overview investments, I No okay. Fifth of investments. was by investment from increased in Fifth high-level Season Season driven that, interest you that

Craig Packer

part the that again. need front, could we you, Kevin, that of part So kind hear of that we where

Sorry about that.

Kevin Fultz

well Season was to as you Sure. the your Fifth funding I XX the activity I Fifth quarter. the the fourth driven problem. company. I business provide as And overview was in was XX% in to in the equity Sure, common invest presentation opportunity no I improvement asset of believe that Slide of see funding. saying was level about that could high just Season's investments. if led a increased you curious by investment shows

Craig Packer

Sure.

an from of it's life easy we've of about Season A structured policies opportunities. some in who – an ago, team couple liquidity Fifth a in had Season, policies Fifth an management a who – we quarters offer with have have very made talking to way business. their been insurance don't experienced insurance we from investment So, life on these get they companies. investment Essentially, settlements consumers those

get a on – to liquidity way offer They those policies. to

But non-correlated our a with generate were – So into from They to a can of asset sure with that we going a like don't we think nice consumers, had little it's amount complicated working We originate it's business a great returns middleman. and very I we consumers that a am management work class direct it's with very worth team. experienced them. not detail. working portfolio, bit

in they not acquisition life a subsequent early to essentially, but to that There of space we that the are to looking assets funded their build and was make in out purchases happening, potential that, portfolio additional business.

to have good non-correlated to should as of low generate think us returns predictable to vehicles. grow other very we underwriting that structured as You investment expect Fifth similar a Again, Season. double-digit it's rates returns actuarial, long practices, see we continue could comparable our

Kevin Fultz

considered and recurring I'm the if then, paid Okay. in if dividend I October just November? over there. that and And the see the quarter. I appreciate dividend investment the of next the with increased expect you few that is your also comments fourth dividend season size a scale small ORCC of curious improves the quarters in

Jonathan Lamm

We loan. It ... a was a on dip dip repayment made of loan the a

Craig Packer

had offered and that time, is over Season, in that acquisition. you connection Over will that's But acquisition confusing. we financing happens. are seeing essentially, didn't we when that from potential It But a happening Fifth that with way that a up up wasn't wind dividends dividend. I this mentioned that. was and see will showing representative call It of payment in we'll essentially see out be you repaying not may some it time, the but it

Kevin Fultz

congratulations nice helpful. it. a Very Got Okay. on very quarter. That’s

Craig Packer

Thanks, Kevin.

Operator

is Our Hughes from Mark the next question. your of with question line Truist. Please with proceed

Mark Hughes

morning. Good Thanks.

increased wonder wider break by spreads. out the a presumably possible? and value getting about those I effects, offset if talked from strategic boost two you You NAV the maybe could investments if

Craig Packer

Sure.

basically So, for quarter, for the flat quarter. our this were secured loans

were first Our negative. liens slightly

they flat were essentially, Our than slightly were for liens less But basis second the quarter. points. positive, XX

had a because capital second the one particular part for publicly structure of we The up lien quarter. slightly traded that is positive traded that

increase. was a very it So observable

our equity in an and equity investments, not talking earning value just our structured by So growth the our NAV in been was quarter dividend through that we've increase driven out about. investments the is this which in

X% investments that a for of really were performed will driver dividends we've owned very about The for Our of we've the a on followed there Windows, company The know markup a portfolio. has biggest business have performed equity part company quarter. that It's is was called a which of well so extremely was while, this. has well. up that out little leverage it. Folks very and the in taken nice us

increase, out little million of bit, a those the Wingspire of was up the the $XX were biggest $XX X pieces million.

a drove NAV increase the slight in for that quarter. So,

Mark Hughes

Appreciate that. on X.Xx the estimate? talked basis. a is interest coverage, point then You trailing And a there about

think if X.X should to you current curve, interest I they interest if on the now at the said does a stand leverage rates you X. the you use between on it on Where look forward, coverage? be

Craig Packer

that of the than in the X.X months, a that think I probably rates afternoon X.X like of take to the at roll you as there. of part we towards ran the said, and more year X. X the So, those we'll if to are to through, range, this X.X rates for to somewhere XX range get end just it's part where X.X, the they If stayed

still towards you'll EBITDA a the XX is and – there, rolled X. half But I it take there But lower rates right something the you forward, spot months, of in think get X.X tremendous like. variables today's to gives Obviously, I for sense. the of that range you just number a the and if that's of range.

Mark Hughes

you. that. Appreciate Thank

Craig Packer

you. Thank

Operator

with The from Thalmann. the Instructions] question Mickey Schleien Please is line next your proceed [Operator with Ladenburg questions. of

Mickey Schleien

everyone. about morning, Craig, question from capital just more good Yes, me one allocation.

environment, this UTI thoughts some taxes sheet undistributed help in more to which excise by the the your the are can income curious of formula? what you distributing supplemental dividends according taxable bolster on likelihood reducing of potentially that continuing the balance to versus market Just retain beyond the have

Jonathan Lamm

side. Mickey, gain Jonathan. undistributed number relatively $X about Yes. now We maybe like of cap is and million million it's the had on NII still The right small. $XX

lot excise So it's significant a not tax. a driving number, not of

doing anything no with and have going So, based continue we're spillover that dividend works, bit for structured to point. on we anticipate spill the way we that this over little at policy would to more a our plans

Mickey Schleien

it morning. this thanks, No, Jonathan. for That’s me

Jonathan Lamm

Thanks, Mickey.

Operator

from with RBC comes Please of Lee question with the Capital Markets. line question. proceed your Next Kenneth

Kenneth Lee

the morning taking good and thanks for Hey, question.

for Just expectation the XX%. a rate one ROE about run of on

some mentioned continue rates wondering assumptions you that could leverage if And there were embedded like? are be increasing. there upside aren't rates think to I of just other of does that things mean what changed, assuming and terms if that in

Craig Packer

XX% least at higher, XX%. or said We Sure.

I perform could portfolio rates continues are, signaling if they well. think even higher stay to we're be clearly extremely where it

the the ROE and first really from quarter will have the and continue in higher in credit We have effect will from rates quarter excellent we through that roll carryover benefit that fourth performance. to

strategically not are ORCC we're are imperatives. strategic ratings our we So stay – to range. Investment-grade within we're within staying important target extremely to target That's leverage assuming our range.

unusual anything assuming not there. we're So

earnings on We from are which just assuming continued grind also generate investments, higher equity that high environment, strong I think the to rate we'll these returns. do higher continue – are

to I continue in Again, further through. earnings this visibility going then that there. topic because to if participate in will to think it the Day kind effort good that's be like very they that of go higher, where have call an are from stay out, I going are May just think environment, make upside I'd or nice And to we're to think there's – our Investor to you we've rates to they be go got really in

the to hopefully think north will while stock we earnings basis, that why not strong address a traded return better up story it continuing ROE the us We and stock the to I that. predictable on continues an very demonstrate ongoing XX% have it's nice today, think we're and of powerful is has that puzzle that given

Kenneth Lee

one near talk there. just the be Very Wondering may. Got helpful activity? could what originations over I follow-up, what if just given potential seeing – around just drivers could sponsored if you term, for about other of deal key And flow? Any you. you're M&A Thanks level either the

Craig Packer

last XX% year. I Overall, M&A down And quite modest. M&A activity remains think about was

activity seeing for going to pickup in Direct like never all any higher. been while is share significant has But direct Owl lower. lenders. that lenders It's are We Rock activity. lenders the is direct market positive overall not

financial universe Rock fortunate and here of we see with sponsors that size the that's lending and and done out I'd relationships extremely at in transaction is being deep are have say everything direct the any do. Owl position spreads, best we that deals history there we've deals we great covenants the the in in selective some with doing to on our be and And are we're –amongst fortunate are levels, a leverage seen credit like. the primarily

recognize The ORCC, leverage We're is not challenge to repayment almost consequence, We're and really So to the that repayments deal a repayments. age for for new flow. as doing. there sticking is having target. loans is challenge to origination our the like levels. lot a no matching I we're

pick take really need levels us we to repayment advantage So for up of that. to

in been to environment where should or additional amendments. advantage are have asked and capital the take we this able situations for I of we doing say, we

like in marking amendments much had good performing have repricing the nice in context cases XX% We success the the that and those and credits of at portfolio as as essentially them with we market in of acquisitions.

redeploy think So point, you improve us market I that at at at to this we which point repayments capital. pickup happen there. returns, and some year, to the that some will think should the we a will benefiting some M&A that allow But in will are point significant point, see if

today, I all generate continue I So and the we from that to benefit again, and barely it it's but Xx to it any whatsoever. the the in expect fourth think think the performance repayments we've without earnings quarter – quarter earnings is significant that said probably we first generated

fortunate down be you've we're a lever flow line some environment a there's got deal the that. great another at and if that And lender will to But to the so point return. have it's

Kenneth Lee

Very Thanks Got you. there. helpful again.

Craig Packer

Kenneth. Thanks,

Operator

of Derek proceed the your of Our line next Hewett America. from with question. Bank Please question with is

Derek Hewett

take morning, Good one. you this Craig, maybe everyone. can

continue to look So, credit they income like looks trends, good, PIK increased. has although

of So revenue year. X.X% in I was think total a a versus it's little I prior it above XXXX the think little roughly X% of under

PIK at worrisome? start it So to level become would what income of

Craig Packer

PIK income so a do XX% not from either XX%, for were was the of our PIK all with majority income. and is It's to asked we it's credit problems, portion our vast reasons. credit of the PIK structure With or from get-go, we thought specific our specific at like reasonable investment it to where deals

credit have We little very PIK problems. from income

not just an indicator – of So, not it's the just – stress in portfolio. it's it's not

me, think it's the asking we I right you're about are If double-digits, low about where PIK. level of

that I take don't So to expect we number think higher.

mentioned is situations, so that's very nothing place request at the a look is no – there are of not as indicator and not portfolio I As for should a not you seeing before, PIK what from in it's we but there there comfortable troubled we're cause of. of because concern credit an

Derek Hewett

Thank great. you Okay,

Operator

for end over time, this the question-and-answer I'll to Packer call turn At now reached remarks. you. of the session. we've Thank closing the Craig

Craig Packer

you, appreciate time We're Thank it. today. All very right. everyone. really your for Thanks I accessible.

If forward Thank first reach look Sclafani, enjoy at and to you in the day. out have please Dana more to you. seeing questions, our Investor Day everyone May

Operator

This will conference. conclude today's

may Thank lines your disconnect participation. You you at time. your this for

Blue Owl Capital (OBDC) 23 Feb 232022 Q4 Earnings call transcript