UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 814-01190
OWL ROCK CAPITAL CORPORATION
(Exact name of Registrant as specified in its Charter)
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Maryland |
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47-5402460 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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245 Park Avenue, 41st Floor |
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10167 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (212) 419-3000
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO x
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES o NO x
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES o NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer |
o |
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Accelerated filer |
o |
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Non-accelerated filer |
x |
(Do not check if a small reporting company) |
Small reporting company |
o |
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Emerging growth company |
x |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x
As of December 31, 2017, there was no established public market for the registrant’s common stock.
The number of shares of Registrant’s Common Stock, $0.01 par value per share, outstanding as of March 2, 2018, was 99,191,303.
Portions of the Registrant’s proxy statement relating to the 2018 annual meeting of shareholders are incorporated by reference into Part III of this Report.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) amends Owl Rock Capital Corporation’s (the “Company”) Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”) on March 5, 2018 (the “Original Filing”), solely to provide a revised version of KPMG LLP’s (“KPMG”) report that includes a statement inadvertently omitted from the previously filed version that confirms KPMG did not audit the Company’s internal control over financial reporting. In accordance with rules adopted by the SEC, the Company is not required to have an audit of its internal control over financial reporting.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Amendment No. 1 includes new certifications from the Company’s principal executive officer and principal financial officer dated as of the date of filing of this Amendment No. 1.
This Amendment No. 1 consists solely of the preceding cover page, this explanatory note, Part II., Item 8., “Consolidated Financial Statements and Supplementary Data,” in its entirety, Part IV., Item 15., “Exhibits and Financial Statement Schedules,” in its entirety, the signature page, and the new certifications from the Company’s Principal Executive Officer and Principal Financial Officer.
Amendment No. 1 speaks as of the date of the Original Filing, does not reflect events that may have occurred after the date of the Original Filing and does not modify or update in any way the disclosures made in the Original Filing, except as described above. Amendment No. 1 should be read in conjunction with the Original Filing and with the Company’s subsequent filings with the SEC.
Part II. Item 8. Consolidated Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Owl Rock Capital Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities of Owl Rock Capital Corporation and subsidiaries (the Company), including the consolidated schedules of investments, as of December 31, 2017 and 2016, the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Such procedures also included confirmation of securities owned as of December 31, 2017 and 2016, by correspondence with custodians, portfolio companies, or agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
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/s/ KPMG LLP |
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We have served as the Company’s auditor since 2016. |
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New York, New York |
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March 2, 2018 |
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Owl Rock Capital Corporation
Consolidated Statements of Assets and Liabilities
(Amounts in thousands, except share and per share amounts)
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December 31, |
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December 31, |
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Assets |
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Investments at fair value |
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Non-controlled/non-affiliated company investments (amortized cost of $2,307,886 and $959,768, respectively) |
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$ |
2,324,157 |
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$ |
967,399 |
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Controlled affiliated company investments (amortized cost of $65,028 and $0, respectively) |
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65,599 |
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— |
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Total investments at fair value (amortized cost of $2,372,914 and $959,768, respectively) |
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2,389,756 |
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967,399 |
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Cash (restricted cash of $2,638 and $0, respectively) |
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20,071 |
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209,353 |
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Receivable for investments sold |
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19,900 |
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— |
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Interest receivable |
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8,984 |
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3,349 |
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Receivable from a controlled affiliate |
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3,503 |
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— |
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Prepaid expenses and other assets |
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1,333 |
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723 |
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Total Assets |
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$ |
2,443,547 |
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$ |
1,180,824 |
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Liabilities |
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Debt (net of unamortized debt issuance costs of $12,568 and $3,094, respectively) |
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$ |
919,432 |
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$ |
491,906 |
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Management fee payable |
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11,152 |
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4,565 |
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Distribution payable |
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33,545 |
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— |
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Payables to affiliates |
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2,330 |
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1,860 |
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Accrued expenses and other liabilities |
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4,509 |
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1,968 |
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Total Liabilities |
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970,968 |
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500,299 |
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Commitments and contingencies (Note 7) |
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Net Assets |
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Common shares $0.01 par value, 500,000,000 shares authorized; 97,959,595 and 45,833,313 shares issued and outstanding, respectively |
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980 |
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458 |
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Additional paid-in-capital |
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1,451,886 |
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664,554 |
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Accumulated undistributed net investment income |
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1,197 |
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7,882 |
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Net unrealized gain (loss) on investments |
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16,842 |
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7,631 |
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Undistributed net realized gains (losses) |
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1,674 |
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— |
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Total Net Assets |
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1,472,579 |
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680,525 |
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Total Liabilities and Net Assets |
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$ |
2,443,547 |
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$ |
1,180,824 |
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Net Asset Value Per Share |
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$ |
15.03 |
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$ |
14.85 |
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The accompanying notes are an integral part of these consolidated financial statements.
Owl Rock Capital Corporation
Consolidated Statements of Operations
(Amounts in thousands, except share and per share amounts)
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Years Ended December 31, |
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2017 |
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2016 |
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Investment Income |
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Investment income from non-controlled, non-affiliated investments: |
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Interest income |
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$ |
151,246 |
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$ |
27,939 |
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Other income |
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5,130 |
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865 |
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Total investment income from non-controlled, non-affiliated investments |
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156,376 |
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28,804 |
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Investment income from controlled, affiliated investments: |
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Dividend income |
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125 |
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— |
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Other income |
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3,378 |
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— |
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Total investment income from controlled, affiliated investments |
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3,503 |
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— |
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Total Investment Income |
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159,879 |
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28,804 |
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Expenses |
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Initial organization |
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— |
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1,224 |
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Interest expense |
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24,580 |
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2,758 |
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Management fee |
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31,062 |
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9,238 |
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Professional fees |
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5,430 |
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3,029 |
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Directors’ fees |
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387 |
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315 |
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Other general and administrative |
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4,472 |
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2,882 |
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Total Expenses |
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65,931 |
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19,446 |
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Net Investment Income (Loss) Before Taxes |
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93,948 |
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9,358 |
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Excise tax expense |
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158 |
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352 |
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Net Investment Income (Loss) After Taxes |
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$ |
93,790 |
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$ |
9,006 |
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Net Realized and Unrealized Gain (Loss) on Investments |
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Net change in unrealized gain (loss): |
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Non-controlled, non-affiliated investments |
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$ |
8,640 |
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7,631 |
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Controlled affiliated investments |
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571 |
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— |
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Total Net Change in Unrealized Gain (Loss) |
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9,211 |
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7,631 |
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Net realized gain (loss): |
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Non-controlled, non-affiliated investments |
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739 |
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— |
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Total Net Realized Gain (Loss) |
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739 |
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— |
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Total Net Realized and Unrealized Gain (Loss) on Investments |
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9,950 |
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7,631 |
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Net Increase (Decrease) in Net Assets Resulting from Operations |
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$ |
103,740 |
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$ |
16,637 |
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Earnings Per Share - Basic and Diluted |
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$ |
1.55 |
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$ |
0.78 |
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Weighted Average Shares Outstanding - Basic and Diluted |
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67,082,905 |
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21,345,191 |
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The accompanying notes are an integral part of these consolidated financial statements.
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2017
(Amounts in thousands, except share amounts)
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Company(1)(14) |
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Investment |
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Interest |
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Maturity |
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Principal / |
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Amortized |
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Fair Value |
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Percentage |
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Non-controlled/non-affiliated company investments(2) |
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Debt Investments |
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Advertising and media |
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PAK Acquisition Corporation (dba Valpak)(4)(6) |
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First lien senior secured loan |
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L + 8.00% |
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6/30/2022 |
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$ |
77,900 |
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$ |
76,573 |
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$ |
78,290 |
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5.3 |
% |
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Aerospace and defense |
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Vencore, Inc.(4)(6) |
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Second lien senior secured loan |
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L + 8.75% |
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5/23/2020 |
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50,000 |
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49,347 |
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50,500 |
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3.4 |
% | |||
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Buildings and real estate |
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DTZ U.S. Borrower, LLC (dba Cushman & Wakefield)(4)(6) |
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Second lien senior secured loan |
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L + 7.75% |
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11/4/2022 |
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125,000 |
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123,864 |
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123,750 |
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8.3 |
% | |||
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Business services |
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Access Information(4)(5)(16) |
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First lien senior secured loan |
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L + 5.00% |
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10/17/2021 |
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39,593 |
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39,276 |
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39,830 |
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2.7 |
% | |||
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Access Information(4)(5) |
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Second lien senior secured loan |
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L + 8.75% |
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10/17/2022 |
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20,000 |
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19,265 |
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19,500 |
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1.3 |
% | |||
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CIBT Global, Inc. (4)(6) |
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Second lien senior secured loan |
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L + 7.75% |
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6/1/2025 |
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49,000 |
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47,854 |
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48,020 |
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3.3 |
% | |||
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GC Agile Holdings Limited (dba Apex Fund Services)(4)(6)(13) |
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First lien senior secured loan |
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L + 6.50% |
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8/29/2023 |
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38,426 |
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37,692 |
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37,657 |
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2.6 |
% | |||
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GC Agile Holdings Limited (dba Apex Fund Services)(4)(10)(11)(12)(13) |
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First lien senior secured multi draw term loan |
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L + 6.50% |
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8/29/2019 |
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— |
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(147 |
) |
(156 |
) |
— |
% | |||
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GC Agile Holdings Limited (dba Apex Fund Services)(4)(10)(11)(13) |
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First lien senior secured revolving loan |
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L + 6.50% |
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8/29/2023 |
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— |
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(37 |
) |
(39 |
) |
— |
% | |||
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Vestcom Parent Holdings, Inc.(4)(5) |
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Second lien senior secured loan |
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L + 8.50% |
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6/19/2024 |
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65,000 |
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64,123 |
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64,675 |
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4.4 |
% | |||
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212,019 |
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208,026 |
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209,487 |
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14.3 |
% | |||
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Consumer products |
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Feradyne Outdoors, LLC(4)(6) |
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First lien senior secured loan |
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L + 6.25% |
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5/25/2023 |
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114,923 |
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113,641 |
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113,486 |
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7.7 |
% | |||
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Containers and packaging |
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Ring Container Technologies Group, LLC(4)(5) |
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Second lien senior secured loan |
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L + 7.50% |
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10/31/2025 |
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55,000 |
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53,917 |
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53,900 |
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3.7 |
% | |||
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Distribution |
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ABB/Con-cise Optical Group LLC(4)(6) |
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First lien senior secured loan |
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L + 5.00% |
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6/15/2023 |
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59,698 |
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59,842 |
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59,698 |
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4.1 |
% | |||
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ABB/Con-cise Optical Group LLC(4)(6) |
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Second lien senior secured loan |
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L + 9.00% |
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6/17/2024 |
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25,000 |
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24,350 |
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24,750 |
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1.7 |
% | |||
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Dade Paper & Bag, LLC (dba Imperial-Dade)(4)(5) |
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First lien senior secured loan |
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L + 7.50% |
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6/9/2024 |
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33,333 |
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32,727 |
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32,833 |
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2.2 |
% | |||
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JM Swank, LLC(4)(6) |
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First lien senior secured loan |
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L + 7.50% |
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7/25/2022 |
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74,575 |
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73,374 |
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75,321 |
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5.1 |
% | |||
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Medical Specialties Distributors, LLC(4)(6) |
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First lien senior secured loan |
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L + 5.75% |
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12/6/2022 |
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96,113 |
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95,279 |
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96,113 |
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6.5 |
% | |||
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2017
(Amounts in thousands, except share amounts)
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Company(1)(14) |
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Investment |
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Interest |
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Maturity |
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Principal / |
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Amortized |
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Fair Value |
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Percentage |
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QC Supply, LLC(4)(5) |
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First lien senior secured loan |
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L + 6.00% |
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12/29/2022 |
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26,235 |
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25,672 |
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25,973 |
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1.8 |
% |
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QC Supply, LLC(4)(5)(10)(12) |
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First lien senior secured delayed draw term loan |
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L + 6.00% |
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12/29/2018 |
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2,484 |
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2,282 |
|
2,319 |
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0.2 |
% |
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QC Supply, LLC(4)(5)(10) |
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First lien senior secured revolving loan |
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L + 6.00% |
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12/29/2021 |
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1,988 |
|
1,888 |
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1,938 |
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0.1 |
% |
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|
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319,426 |
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315,414 |
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318,945 |
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21.7 |
% |
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Energy equipment and services |
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Keane Group Holdings, LLC(4)(6)(13) |
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First lien senior secured loan |
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L + 7.25% |
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8/18/2022 |
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124,126 |
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122,367 |
|
124,747 |
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8.4 |
% |
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Liberty Oilfield Services LLC(4)(5) |
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First lien senior secured loan |
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L + 7.63% |
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9/19/2022 |
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22,194 |
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21,810 |
|
22,194 |
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1.5 |
% |
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|
|
|
|
|
|
|
|
146,320 |
|
144,177 |
|
146,941 |
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9.9 |
% |
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Financial services |
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Cardinal US Holdings, Inc.(4)(7)(13) |
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First lien senior secured loan |
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L + 5.00% |
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7/31/2023 |
|
64,339 |
|
59,941 |
|
59,835 |
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4.1 |
% |
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NMI Acquisitionco, Inc. (dba Network Merchants)(4)(6) |
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First lien senior secured loan |
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L + 6.75% |
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9/6/2022 |
|
25,789 |
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25,165 |
|
25,144 |
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1.7 |
% |
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NMI Acquisitionco, Inc. (dba Network Merchants)(4)(10)(11) |
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First lien senior secured revolving loan |
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L + 6.75% |
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9/6/2022 |
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— |
|
(16 |
) |
(16 |
) |
— |
% |
|
|
|
|
|
|
|
|
|
90,128 |
|
85,090 |
|
84,963 |
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5.8 |
% |
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Food and beverage |
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Give and Go Prepared Foods Corp.(4)(6)(13) |
|
Second lien senior secured loan |
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L + 8.50% |
|
1/29/2024 |
|
42,000 |
|
41,597 |
|
41,580 |
|
2.8 |
% |
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Recipe Acquisition Corp. (dba Roland Corporation)(4)(6) |
|
Second lien senior secured loan |
|
L + 9.00% |
|
12/1/2022 |
|
32,000 |
|
31,486 |
|
32,000 |
|
2.2 |
% |
|
Tall Tree Foods, Inc.(4)(5) |
|
First lien senior secured loan |
|
L + 7.25% |
|
8/12/2022 |
|
58,750 |
|
58,037 |
|
57,869 |
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
132,750 |
|
131,120 |
|
131,449 |
|
8.9 |
% |
|
Healthcare providers and services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geodigm Corporation (dba National Dentex)(4)(6)(18) |
|
First lien senior secured loan |
|
L + 6.54% |
|
12/1/2021 |
|
78,627 |
|
77,910 |
|
78,234 |
|
5.3 |
% |
|
PetVet Care Centers, LLC(4)(6) |
|
First lien senior secured loan |
|
L + 6.00% |
|
6/8/2023 |
|
31,203 |
|
30,917 |
|
31,203 |
|
2.1 |
% |
|
PetVet Care Centers, LLC(4)(6)(10)(12) |
|
First lien senior secured delayed draw term loan |
|
L + 6.00% |
|
6/8/2019 |
|
9,702 |
|
9,569 |
|
9,702 |
|
0.7 |
% |
|
PetVet Care Centers, LLC(4)(8)(10) |
|
First lien senior secured revolving loan |
|
P + 5.00% |
|
6/8/2023 |
|
2,940 |
|
2,913 |
|
2,940 |
|
0.2 |
% |
|
TC Holdings, LLC (dba TrialCard)(4)(5) |
|
First lien senior secured loan |
|
L + 4.50% |
|
11/14/2023 |
|
62,220 |
|
60,874 |
|
60,845 |
|
4.1 |
% |
|
TC Holdings, LLC (dba TrialCard)(4)(10)(11)(12) |
|
First lien senior secured delayed draw term loan |
|
L + 4.50% |
|
6/30/2019 |
|
— |
|
(523 |
) |
(536 |
) |
— |
% |
|
TC Holdings, LLC (dba TrialCard)(4)(10)(11) |
|
First lien senior secured revolving loan |
|
L + 4.50% |
|
11/14/2022 |
|
— |
|
(108 |
) |
(111 |
) |
— |
% |
|
|
|
|
|
|
|
|
|
184,692 |
|
181,552 |
|
182,277 |
|
12.4 |
% |
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2017
(Amounts in thousands, except share amounts)
|
Company(1)(14) |
|
Investment |
|
Interest |
|
Maturity |
|
Principal / |
|
Amortized |
|
Fair Value |
|
Percentage |
|
|
Household products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hayward Industries, Inc.(4)(5) |
|
Second lien senior secured loan |
|
L + 8.25% |
|
8/4/2025 |
|
72,500 |
|
71,102 |
|
71,413 |
|
4.8 |
% |
|
Human resource support services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SABA Software, Inc.(4)(6) |
|
First lien senior secured loan |
|
L + 5.50% |
|
5/1/2023 |
|
44,824 |
|
44,331 |
|
44,600 |
|
3.0 |
% |
|
SABA Software, Inc.(4)(10)(11) |
|
First lien senior secured revolving loan |
|
L + 5.50% |
|
5/1/2023 |
|
— |
|
(55 |
) |
(25 |
) |
— |
% |
|
|
|
|
|
|
|
|
|
44,824 |
|
44,276 |
|
44,575 |
|
3.0 |
% |
|
Infrastructure and environmental services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FR Arsenal Holdings II Corp. (dba Applied-Cleveland Holdings, Inc.)(4)(6) |
|
First lien senior secured loan |
|
L + 7.25% |
|
9/8/2022 |
|
74,112 |
|
72,878 |
|
74,483 |
|
5.1 |
% |
|
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CD&R TZ Purchaser, Inc. (dba Tranzact)(4)(6) |
|
First lien senior secured loan |
|
L + 6.00% |
|
7/21/2023 |
|
34,563 |
|
32,814 |
|
33,871 |
|
2.3 |
% |
|
Internet software and services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accela, Inc.(4)(6) |
|
First lien senior secured loan |
|
L + 6.25% |
|
9/28/2023 |
|
53,865 |
|
52,565 |
|
52,518 |
|
3.6 |
% |
|
Accela, Inc.(4)(8)(10) |
|
First lien senior secured revolving loan |
|
P + 5.25% |
|
9/28/2023 |
|
1,755 |
|
1,612 |
|
1,605 |
|
0.1 |
% |
|
Infoblox Inc.(4)(5) |
|
Second lien senior secured loan |
|
L + 8.75% |
|
11/7/2024 |
|
30,000 |
|
29,471 |
|
29,700 |
|
2.0 |
% |
|
Trader Interactive, LLC (fka Dominion Web Solutions, LLC)(4)(5) |
|
First lien senior secured loan |
|
L + 6.00% |
|
6/17/2024 |
|
93,760 |
|
92,440 |
|
92,353 |
|
6.3 |
% |
|
Trader Interactive, LLC (fka Dominion Web Solutions, LLC)(4)(10)(11) |
|
First lien senior secured revolving loan |
|
L + 6.00% |
|
6/15/2023 |
|
— |
|
(79 |
) |
(87 |
) |
— |
% |
|
|
|
|
|
|
|
|
|
179,380 |
|
176,009 |
|
176,089 |
|
12.0 |
% |
|
Leisure and entertainment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troon Golf, L.L.C.(4)(6)(9) |
|
First lien senior secured term loan A and B |
|
L + 6.38% (TLA: L + 3.5%; TLB: L + 7.1%) |
|
9/29/2023 |
|
148,700 |
|
146,546 |
|
146,470 |
|
9.9 |
% |
|
Troon Golf, L.L.C.(4)(10)(11) |
|
First lien senior secured revolving loan |
|
L + 6.38% |
|
9/29/2023 |
|
— |
|
(207 |
) |
(216 |
) |
— |
% |
|
UFC Holdings, LLC(4)(5)(16) |
|
Second lien senior secured loan |
|
L + 7.50% |
|
8/18/2024 |
|
35,000 |
|
34,705 |
|
35,497 |
|
2.4 |
% |
|
|
|
|
|
|
|
|
|
183,700 |
|
181,044 |
|
181,751 |
|
12.3 |
% |
|
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ideal Tridon Holdings, Inc.(4)(8) |
|
First lien senior secured loan |
|
P + 5.50% |
|
7/31/2023 |
|
42,216 |
|
41,419 |
|
41,583 |
|
2.8 |
% |
|
Ideal Tridon Holdings, Inc.(4)(8)(10) |
|
First lien senior secured revolving loan |
|
P + 5.50% |
|
7/31/2022 |
|
964 |
|
876 |
|
892 |
|
0.1 |
% |
|
Pexco LLC (dba Spectrum Plastic Group)(4)(6) |
|
Second lien senior secured loan |
|
L + 8.00% |
|
5/8/2025 |
|
37,000 |
|
36,683 |
|
37,000 |
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
80,180 |
|
78,978 |
|
79,475 |
|
5.4 |
% |
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2017
(Amounts in thousands, except share amounts)
|
Company(1)(14) |
|
Investment |
|
Interest |
|
Maturity |
|
Principal / |
|
Amortized |
|
Fair Value |
|
Percentage |
| |||
|
Oil and gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Discovery DJ Services, LLC (dba Discovery Midstream Partners)(4)(7) |
|
First lien senior secured loan |
|
L + 7.25% |
|
10/25/2022 |
|
37,259 |
|
36,554 |
|
36,513 |
|
2.5 |
% | |||
|
Discovery DJ Services, LLC (dba Discovery Midstream Partners)(4)(10)(11) |
|
First lien senior secured revolving loan |
|
L + 7.25% |
|
10/25/2022 |
|
— |
|
(53 |
) |
(55 |
) |
— |
% | |||
|
Discovery DJ Services, LLC (dba Discovery Midstream Partners)(4)(10)(11)(12) |
|
First lien senior secured delayed draw term loan |
|
L + 7.25% |
|
4/25/2019 |
|
— |
|
(585 |
) |
(607 |
) |
— |
% | |||
|
|
|
|
|
|
|
|
|
37,259 |
|
35,916 |
|
35,851 |
|
2.5 |
% | |||
|
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Pomeroy Group LLC(4)(6) |
|
First lien senior secured loan |
|
L + 6.00% |
|
11/30/2021 |
|
59,095 |
|
57,273 |
|
57,618 |
|
3.9 |
% | |||
|
Specialty retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Saje Natural Business, Inc.(13) |
|
Second lien senior secured loan |
|
12.00% PIK |
|
4/21/2022 |
|
37,656 |
|
37,061 |
|
37,091 |
|
2.5 |
% | |||
|
Transportation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Lytx, Inc.(4)(6) |
|
First lien senior secured loan |
|
L + 6.75% |
|
8/31/2023 |
|
36,146 |
|
35,110 |
|
35,242 |
|
2.4 |
% | |||
|
Lytx, Inc.(4)(10)(11) |
|
First lien senior secured revolving loan |
|
L + 6.75% |
|
8/31/2022 |
|
— |
|
(56 |
) |
(50 |
) |
— |
% | |||
|
|
|
|
|
|
|
|
|
36,146 |
|
35,054 |
|
35,192 |
|
2.4 |
% | |||
|
Total non-controlled/non-affiliated portfolio company debt investments |
|
|
|
|
|
|
|
2,347,573 |
|
2,305,126 |
|
2,321,397 |
|
157.6 |
% | |||
|
Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Oil and gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Discovery DJ Services, LLC (dba Discovery Midstream Partners) |
|
LLC Interest |
|
N/A |
|
N/A |
|
2,760 |
|
2,760 |
|
2,760 |
|
0.2 |
% | |||
|
Total non-controlled/non-affiliated portfolio company equity investments |
|
|
|
|
|
|
|
2,760 |
|
2,760 |
|
2,760 |
|
0.2 |
% | |||
|
Total non-controlled/non-affiliated portfolio company investments |
|
|
|
|
|
|
|
2,350,333 |
|
2,307,886 |
|
2,324,157 |
|
157.8 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Controlled/affiliated portfolio company investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Investment funds and vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Sebago Lake LLC(13)(15)(17) |
|
|
|
N/A |
|
N/A |
|
65,028 |
|
65,028 |
|
65,599 |
|
4.5 |
% | |||
|
Total controlled/affiliated portfolio company investments |
|
|
|
|
|
|
|
65,028 |
|
65,028 |
|
65,599 |
|
4.5 |
% | |||
|
Total Investments |
|
|
|
|
|
|
|
$ |
2,415,361 |
|
$ |
2,372,914 |
|
$ |
2,389,756 |
|
162.3 |
% |
|
|
|
Interest Rate Swaps as of December 31, 2017 |
| |||||||||||
|
|
|
Company |
|
Company |
|
Maturity Date |
|
Notional |
|
Hedged |
|
Footnote |
| |
|
Interest rate swap |
|
4.75 |
% |
L + 2.545% |
|
12/21/2021 |
|
$ |
150,000 |
|
2023 Notes |
|
Note 6 |
|
|
Total |
|
|
|
|
|
|
|
$ |
150,000 |
|
|
|
|
|
(1) Certain portfolio company investments are subject to contractual restrictions on sales.
(2) Unless otherwise indicated, all investments are considered Level 3 investments.
(3) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2017
(Amounts in thousands, except share amounts)
(4) Loan contains a variable rate structure and may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR) or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement.
(5) The interest rate on these loans is subject to 1 month LIBOR, which as of December 31, 2017 was 1.56%.
(6) The interest rate on these loans is subject to 3 month LIBOR, which as of December 31, 2017 was 1.69%.
(7) The interest rate on these loans is subject to 6 month LIBOR, which as of December 31, 2017 was 1.84%.
(8) The interest rate on these loans is subject to the Prime Rate (“Prime” or “P”), which as of December 31, 2017 was 4.50%.
(9) The first lien term loan is comprised of two components: Term Loan A and Term Loan B. The Company’s Term Loan A and Term Loan B principal amounts are $28.8 million and $119.9 million, respectively. Both Term Loan A and Term Loan B have the same maturity date. Interest disclosed reflects the blended rate of the first lien term loan. The Term Loan A represents a ‘first out’ tranche and the Term Loan B represents a ‘last out’ tranche. The ‘first out’ tranche has priority as to the ‘last out’ tranche with respect to payments of principal, interest and any amounts due thereunder.
(10) Position or portion thereof is an unfunded loan commitment. See Note 7 “Commitments and Contingencies”.
(11) The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan.
(12) The date disclosed represents the commitment period of the unfunded term loan. Upon expiration of the commitment period, the funded portion of the term loan may be subject to a longer maturity date.
(13) This portfolio company is not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of total assets.
(14) Unless otherwise indicated, the Company’s portfolio companies are pledged as collateral supporting the amounts outstanding under the Revolving Credit Facility and SPV Asset Facility. See Note 6 “Debt”.
(15) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Other than for purposes of the 1940 Act, the Company does not believe that it has control over this portfolio company. The Company’s investment in affiliates for the year ended December 31, 2017, were as follows:
|
($ in thousands) |
|
Fair Value as |
|
Gross |
|
Gross |
|
Change in |
|
Fair value as |
|
Dividend |
|
Other Income |
| |||||||
|
Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Sebago Lake LLC |
|
$ |
— |
|
$ |
65,028 |
|
$ |
— |
|
$ |
571 |
|
$ |
65,599 |
|
$ |
125 |
|
$ |
3,378 |
|
|
Total Controlled Affiliates |
|
$ |
— |
|
$ |
65,028 |
|
$ |
— |
|
$ |
571 |
|
$ |
65,599 |
|
$ |
125 |
|
$ |
3,378 |
|
(16) Level 2 investment.
(17) Investment is not pledged as collateral for the credit facilities.
(18) The Company may be entitled to receive additional interest as a result of an arrangement with other lenders in the syndication.
The accompanying notes are an integral part of these consolidated financial statements.
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2016
(Amounts in thousands, except share amounts)
|
Company(1)(4) |
|
Investment |
|
Interest |
|
Maturity |
|
Principal / Par |
|
Amortized Cost(2) |
|
Fair Value |
|
Percentage |
| |||
|
Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Advertising and media |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
PAK Acquisition Corporation(3) |
|
First lien senior secured loan |
|
L + 8.00% (9.00%) |
|
6/30/2022 |
|
$ |
82,000 |
|
$ |
80,362 |
|
$ |
80,360 |
|
11.8 |
% |
|
Aerospace and defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Vencore, Inc.(3) |
|
Second lien senior secured loan |
|
L + 8.75% (9.75%) |
|
5/23/2020 |
|
50,000 |
|
49,115 |
|
49,750 |
|
7.3 |
% | |||
|
Business services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Vestcom Parent Holdings, Inc.(3) |
|
Second lien senior secured loan |
|
L + 8.50% (9.50%) |
|
6/19/2024 |
|
65,000 |
|
64,028 |
|
64,025 |
|
9.4 |
% | |||
|
Distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
ABB/Con-cise Optical Group LLC(3) |
|
Second lien senior secured loan |
|
L + 9.00% (10.00%) |
|
6/17/2024 |
|
25,000 |
|
24,282 |
|
24,750 |
|
3.6 |
% | |||
|
JM Swank, LLC(3) |
|
First lien senior secured loan |
|
L + 7.50% (8.50%) |
|
7/25/2022 |
|
84,575 |
|
82,979 |
|
84,152 |
|
12.4 |
% | |||
|
Medical Specialties Distributors, LLC(3) |
|
First lien senior secured loan |
|
L + 5.75% (6.75%) |
|
12/6/2022 |
|
80,000 |
|
79,208 |
|
79,200 |
|
11.6 |
% | |||
|
QC Supply, LLC(3) |
|
First lien senior secured loan |
|
L + 6.00% (7.00%) |
|
12/29/2022 |
|
26,500 |
|
25,840 |
|
25,838 |
|
3.8 |
% | |||
|
QC Supply, LLC(3)(6)(7)(8) |
|
First lien senior secured delayed draw term loan |
|
L + 6.00% (7.00%) |
|
12/29/2018 |
|
— |
|
(207 |
) |
(207 |
) |
— |
% | |||
|
QC Supply, LLC(3)(6) |
|
First lien senior secured revolving loan |
|
L + 6.00% (7.00%) |
|
12/29/2021 |
|
1,159 |
|
1,035 |
|
1,035 |
|
0.2 |
% | |||
|
|
|
|
|
|
|
|
|
217,234 |
|
213,137 |
|
214,768 |
|
31.6 |
% | |||
|
Food and beverage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Candy Intermediate Holding, Inc.(3) |
|
Second lien senior secured loan |
|
L + 9.00% (10.00%) |
|
12/15/2023 |
|
75,000 |
|
74,285 |
|
75,000 |
|
11.0 |
% | |||
|
GG Foods Acquisition Corporation(3)(5) |
|
Second lien senior secured loan |
|
L + 9.75% (10.75%) |
|
1/29/2024 |
|
28,500 |
|
27,814 |
|
28,215 |
|
4.1 |
% | |||
|
Recipe Acquisition Corp.(3) |
|
Second lien senior secured loan |
|
L + 9.00% (10.00%) |
|
12/1/2022 |
|
32,000 |
|
31,409 |
|
31,840 |
|
4.7 |
% | |||
|
Tall Tree Foods, Inc.(3) |
|
First lien senior secured loan |
|
L + 6.75% (7.75%) |
|
8/12/2022 |
|
60,000 |
|
59,146 |
|
59,100 |
|
8.7 |
% | |||
|
|
|
|
|
|
|
|
|
195,500 |
|
192,654 |
|
194,155 |
|
28.5 |
% | |||
|
Healthcare and pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Osmotica Pharmaceutical Corp.(3) |
|
First lien senior secured loan |
|
L + 5.00% (6.00%) |
|
2/3/2022 |
|
49,684 |
|
49,219 |
|
49,187 |
|
7.2 |
% | |||
|
Healthcare equipment and services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Beaver-Visitec International Holdings, Inc.(3) |
|
Second lien senior secured loan |
|
L + 9.00% (10.00%) |
|
8/19/2024 |
|
35,000 |
|
34,321 |
|
34,650 |
|
5.1 |
% | |||
|
Strategic Partners Acquisition Corp.(3) |
|
First lien senior secured loan |
|
L + 5.25% (6.25%) |
|
6/30/2023 |
|
24,938 |
|
24,711 |
|
24,938 |
|
3.7 |
% | |||
|
|
|
|
|
|
|
|
|
59,938 |
|
59,032 |
|
59,588 |
|
8.8 |
% | |||
Owl Rock Capital Corporation
Consolidated Schedules of Investments
As of December 31, 2016
(Amounts in thousands, except share amounts)
|
Company(1)(4) |
|
Investment |
|
Interest |
|
Maturity |
|
Principal / |
|
Amortized |
|
Fair Value |
|
Percentage |
| |||
|
Infrastructure and environmental services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
FR Arsenal Holdings II Corp.(3) |
|
First lien senior secured loan |
|
L + 7.25% (8.25%) |
|
9/8/2022 |
|
64,838 |
|
63,594 |
|
63,541 |
|
9.3 |
% | |||
|
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
CD&R TZ Purchaser, Inc.(3) |
|
First lien senior secured loan |
|
L + 6.00% (7.00%) |
|
7/21/2023 |
|
34,913 |
|
32,903 |
|
34,389 |
|
5.1 |
% | |||
|
Internet software and services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Infoblox Inc.(3) |
|
Second lien senior secured loan |
|
L + 8.75% (9.75%) |
|
11/7/2024 |
|
30,000 |
|
29,419 |
|
29,400 |
|
4.3 |
% | |||
|
Leisure and entertainment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
UFC Holdings, LLC(3) |
|
Second lien senior secured loan |
|
L + 7.50% (8.50%) |
|
8/18/2024 |
|
35,000 |
|
34,673 |
|
35,393 |
|
5.2 |
% | |||
|
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Blount International, Inc.(3) |
|
First lien senior secured loan |
|
L + 6.25% (7.25%) |
|
4/12/2023 |
|
14,963 |
|
14,546 |
|
15,037 |
|
2.2 |
% | |||
|
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Allied Universal Holdco LLC |
|
Second lien senior secured notes |
|
11.00% |
|
7/28/2023 |
|
20,000 |
|
19,616 |
|
19,600 |
|
2.9 |
% | |||
|
Pomeroy Group LLC(3) |
|
First lien senior secured loan |
|
L + 6.00% (7.64%) |
|
11/30/2021 |
|
59,698 |
|
57,470 |
|
58,206 |
|
8.6 |
% | |||
|
|
|
|
|
|
|
|
|
79,698 |
|
77,086 |
|
77,806 |
|
11.5 |
% | |||
|
Total Debt Investments |
|
|
|
|
|
|
|
978,768 |
|
959,768 |
|
967,399 |
|
142.2 |
% | |||
|
Total Investments |
|
|
|
|
|
|
|
$ |
978,768 |
|
$ |
959,768 |
|
$ |
967,399 |
|
142.2 |
% |
(1) Certain portfolio company investments are subject to contractual restrictions on sales.
(2) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.
(3) Loan contains a variable rate structure, subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR) or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement. For each such loan, the Company has provided the interest rate in effect on the date presented.
(4) Unless otherwise indicated, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company.
(5) This portfolio company is not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of total assets.
(6) Position or portion thereof is an unfunded loan commitment. See Note 7 “Commitments and Contingencies”.
(7) The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan.
(8) The date disclosed represents the commitment period of the unfunded term loan. Upon expiration of the commitment period, the funded portion of the term loan may be subject to a longer maturity date.
The accompanying notes are an integral part of these consolidated financial statements.
Owl Rock Capital Corporation
Consolidated Statements of Changes in Net Assets
(Amounts in thousands)
|
|
|
Years Ended December 31, |
| ||||
|
|
|
2017 |
|
2016 |
| ||
|
Increase (Decrease) in Net Assets Resulting from Operations |
|
|
|
|
| ||
|
Net investment income (loss) |
|
$ |
93,790 |
|
$ |
9,006 |
|
|
Net unrealized gain (loss) on investments |
|
9,211 |
|
7,631 |
| ||
|
Net realized gain (loss) on investments |
|
739 |
|
— |
| ||
|
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
103,740 |
|
16,637 |
| ||
|
Distributions |
|
|
|
|
| ||
|
Distributions declared from net investment income |
|
(100,546 |
) |
(2,100 |
) | ||
|
Net Decrease in Net Assets Resulting from Shareholders’ Distributions |
|
(100,546 |
) |
(2,100 |
) | ||
|
Capital Share Transactions |
|
|
|
|
| ||
|
Issuance of common shares |
|
749,933 |
|
665,259 |
| ||
|
Reinvestment of distributions |
|
38,927 |
|
729 |
| ||
|
Net Increase in Net Assets Resulting from Capital Share Transactions |
|
788,860 |
|
665,988 |
| ||
|
Total Increase in Net Assets |
|
792,054 |
|
680,525 |
| ||
|
Net Assets, at beginning of period |
|
680,525 |
|
— |
| ||
|
Net Assets, at end of period |
|
$ |
1,472,579 |
|
$ |
680,525 |
|
|
Undistributed Net Investment Income (Loss) Included in Net Assets at the End of the Period |
|
$ |
1,197 |
|
$ |
7,882 |
|
The accompanying notes are an integral part of these consolidated financial statements.
Owl Rock Capital Corporation
Consolidated Statements of Cash Flows
(Amounts in thousands)
|
|
|
Years Ended December 31, |
| ||||
|
|
|
2017 |
|
2016 |
| ||
|
Cash Flows from Operating Activities |
|
|
|
|
| ||
|
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
$ |
103,740 |
|
$ |
16,637 |
|
|
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: |
|
|
|
|
| ||
|
Purchases of investments, net |
|
(1,944,628 |
) |
(1,117,444 |
) | ||
|
Proceeds from investments, net |
|
542,814 |
|
158,536 |
| ||
|
Net amortization of discount on investments |
|
(7,187 |
) |
(860 |
) | ||
|
Payment-in-kind interest |
|
(3,406 |
) |
— |
| ||
|
Net change in unrealized (gain) loss on investments |
|
(9,211 |
) |
(7,631 |
) | ||
|
Net realized (gain) loss |
|
(739 |
) |
— |
| ||
|
Amortization of debt issuance costs |
|
2,616 |
|
416 |
| ||
|
Amortization of offering costs |
|
848 |
|
594 |
| ||
|
Changes in operating assets and liabilities: |
|
|
|
|
| ||
|
Receivable for investments sold |
|
(19,900 |
) |
— |
| ||
|
Interest receivable |
|
(5,635 |
) |
(3,349 |
) | ||
|
Other income receivable from a controlled affiliate |
|
(3,503 |
) |
— |
| ||
|
Prepaid expenses and other assets |
|
(132 |
) |
(320 |
) | ||
|
Management fee payable |
|
6,587 |
|
4,565 |
| ||
|
Payables to affiliate |
|
470 |
|
1,860 |
| ||
|
Accrued expenses and other liabilities |
|
2,541 |
|
1,968 |
| ||
|
Net cash used in operating activities |
|
(1,334,725 |
) |
(945,028 |
) | ||
|
Cash Flows from Financing Activities |
|
|
|
|
| ||
|
Borrowings on Credit Facilities |
|
2,508,300 |
|
749,000 |
| ||
|
Payments on Credit Facilities |
|
(2,071,300 |
) |
(254,000 |
) | ||
|
Debt issuance costs |
|
(12,090 |
) |
(3,510 |
) | ||
|
Proceeds from issuance of common shares |
|
749,933 |
|
665,259 |
| ||
|
Offering costs |
|
(1,326 |
) |
(997 |
) | ||
|
Cash distributions paid to shareholders |
|
(28,074 |
) |
(1,371 |
) | ||
|
Net cash provided by financing activities |
|
1,145,443 |
|
1,154,381 |
| ||
|
Net increase (decrease) in cash and restricted cash |
|
(189,282 |
) |
209,353 |
| ||
|
Cash and restricted cash, beginning of period |
|
209,353 |
|
— |
| ||
|
Cash and restricted cash, end of period |
|
$ |
20,071 |
|
$ |
209,353 |
|
|
|
|
|
|
|
| ||
|
Supplemental and Non-Cash Information |
|
|
|
|
| ||
|
Interest paid during the period |
|
$ |
21,266 |
|
$ |
1,704 |
|
|
Distributions declared during the period |
|
$ |
100,546 |
|
$ |
2,100 |
|
|
Reinvestment of distributions during the period |
|
$ |
38,927 |
|
$ |
729 |
|
|
Distributions payable |
|
$ |
33,545 |
|
$ |
— |
|
|
Receivable for investments sold |
|
$ |
19,900 |
|
$ |
— |
|
|
Excise taxes paid |
|
$ |
352 |
|
$ |
— |
|
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1. Organization
Owl Rock Capital Corporation (“Owl Rock” or the “Company”) is a Maryland corporation formed on October 15, 2015. The Company was formed primarily to originate and make loans to, and make debt and equity investments in, U.S. middle market companies. The Company invests in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity-related securities including warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity. The Company’s investment objective is to generate current income and to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.
The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, the Company is treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Because the Company has elected to be regulated as a BDC and qualifies as a RIC under the Code, the Company’s portfolio is subject to diversification and other requirements.
In April 2016, the Company made its first portfolio company investment. On April 27, 2016, the Company formed a wholly-owned subsidiary, OR Lending LLC, a Delaware limited liability company, which holds a California finance lenders license and a Tennessee industrial loan and thrift certificate. On August 24, 2017, the Company formed a wholly-owned subsidiary, ORCC Financing LLC, a Delaware limited liability company. On October 18, 2017, the Company formed a wholly-owned subsidiary, OR DH LLC, a Delaware limited liability company.
Owl Rock Capital Advisors LLC (the “Adviser”) serves as the Company’s investment adviser. The Adviser is registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the 1940 Act. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Adviser manages the day-to-day operations of, and provides investment advisory and management services to, the Company.
The Company conducts private offerings (each, a “Private Offering”) of its common shares to accredited investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). At the closing of each Private Offering, each investor makes a capital commitment (a “Capital Commitment”) to purchase shares of the Company’s common stock pursuant to a subscription agreement entered into with the Company. Investors are required to fund drawdowns to purchase shares of the Company’s common stock up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice to its investors. The initial closing of the Private Offering occurred on March 3, 2016 (the “Initial Closing”). If the Company has not consummated a listing of its common shares on a national securities exchange (an “Exchange Listing”) by the five-year anniversary of the Initial Closing, subject to extension for two additional one-year periods, in the sole discretion of the Board, the Board (subject to any necessary shareholder approvals and applicable requirements of the 1940 Act) will use its commercially reasonable efforts to wind down and/or liquidate and dissolve the Company in an orderly manner.
Note 2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company is an investment company and, therefore, applies the specialized accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services — Investment Companies. In the opinion of management, all adjustments considered necessary for the fair presentation of the consolidated financial statements have been included. The Company was initially capitalized on March 1, 2016 and commenced operations on March 3, 2016. The Company’s fiscal year ends on December 31.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual amounts could differ from those estimates and such differences could be material.
Cash
Cash consists of deposits held at a custodian bank and restricted cash pledged as collateral. Cash is carried at cost, which approximates fair value. The Company deposits its cash with highly-rated banking corporations and, at times, may exceed the insured limits under applicable law.
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
Investments at Fair Value
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
Investments for which market quotations are readily available are typically valued at the bid price of those market quotations. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available, as is the case for substantially all of the Company’s investments, are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Company’s audit committee and independent third-party valuation firm(s) engaged at the direction of the Board.
As part of the valuation process, the Board takes into account relevant factors in determining the fair value of the Company’s investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase or sale transaction, public offering or subsequent equity sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.
The Board undertakes a multi-step valuation process, which includes, among other procedures, the following:
· With respect to investments for which market quotations are readily available, those investments will typically be valued at the bid price of those market quotations;
· With respect to investments for which market quotations are not readily available, the valuation process begins with the independent valuation firm(s) providing a preliminary valuation of each investment to the Adviser’s valuation committee;
· Preliminary valuation conclusions are documented and discussed with the Adviser’s valuation committee. Agreed upon valuation recommendations are presented to the Audit Committee;
· The Audit Committee reviews the valuation recommendations and recommends values for each investment to the Board; and
· The Board reviews the recommended valuations and determines the fair value of each investment.
The Company conducts this valuation process on a quarterly basis.
The Company applies Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:
· Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
· Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
· Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs. In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of the inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (such as broker quotes), the Company subjects those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, the Company, or the independent valuation firm(s), reviews pricing support provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.
Financial and Derivative Instruments
Pursuant to ASC 815 Derivatives and Hedging, further clarified by the FASB’s issuance of the Accounting Standards Update (“ASU”) No. 2017-12, Derivatives and Hedging, which was adopted early by the Company, all derivative instruments entered into by the Company are designated as hedging instruments. For all derivative instruments designated as a hedge, the entire change in the fair value of the hedging instrument shall be recorded in the same line item of the Consolidated Statements of Operations as the hedged item. The Company’s derivative instruments are used to hedge the Company’s fixed rate debt, and therefore both the periodic payment and the change in fair value for the ineffective hedge, if applicable, will be recorded as components of interest expense in the Consolidated Statements of Operations.
Interest and Dividend Income Recognition
Interest income is recorded on the accrual basis and includes amortization of discounts or premiums. Discounts and premiums to par value on securities purchased are amortized into interest income over the contractual life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the amortization of discounts or premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Other Income
From time to time, the Company may receive fees for services provided to portfolio companies. These fees are generally only available to the Company as a result of closing investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Adviser provides vary by investment, but can include closing, work, diligence or other similar fees and fees for providing managerial assistance to our portfolio companies.
Organization Expenses
Costs associated with the organization of the Company are expensed as incurred. These expenses consist primarily of legal fees and other costs of organizing the Company.
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
Offering Expenses
Costs associated with the offering of common shares of the Company are capitalized as deferred offering expenses and are included in prepaid expenses and other assets in the Consolidated Statements of Assets and Liabilities and are amortized over a twelve-month period from incurrence. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the Company’s registration statement, and registration fees.
Debt Issuance Costs
The Company records origination and other expenses related to its debt obligations as deferred financing costs. These expenses are deferred and amortized over the life of the related debt instrument. Debt issuance costs are presented on the Consolidated Statements of Assets and Liabilities as a direct deduction from the debt liability. In circumstances in which there is not an associated debt liability amount recorded in the consolidated financial statements when the debt issuance costs are incurred, such debt issuance costs will be reported on the Consolidated Statements of Assets and Liabilities as an asset until the debt liability is recorded.
Reimbursement of Transaction-Related Expenses
The Company may receive reimbursement for certain transaction-related expenses in pursuing investments. Transaction-related expenses, which are generally expected to be reimbursed by the Company’s portfolio companies, are typically deferred until the transaction is consummated and are recorded in prepaid expenses and other assets on the date incurred. The costs of successfully completed investments not otherwise reimbursed are borne by the Company and are included as a component of the investment’s cost basis.
Cash advances received in respect of transaction-related expenses are recorded as cash with an offset to accrued expenses and other liabilities. Accrued expenses and other liabilities are relieved as reimbursable expenses are incurred.
Income Taxes
The Company has elected to be treated as a BDC under the 1940 Act. The Company has elected to be treated as a RIC under the Code beginning with its taxable year ending December 31, 2016. So long as the Company maintains its tax treatment as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Instead, any tax liability related to income earned and distributed by Owl Rock represents obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company.
To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses. In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. There were no material uncertain income tax positions through December 31, 2017. The 2015 and 2016 tax years remain subject to examination by U.S. federal, state and local tax authorities.
Distributions to Common Shareholders
Distributions to common shareholders are recorded on the record date. The amount to be distributed is determined by the Board and is generally based upon the earnings estimated by the Adviser. Net realized long-term capital gains, if any, would be generally distributed at least annually, although the Company may decide to retain such capital gains for investment.
The Company has adopted a dividend reinvestment plan that provides for reinvestment of any cash distributions on behalf of shareholders, unless a shareholder elects to receive cash. As a result, if the Board authorizes and declares a cash distribution, then the shareholders who have not “opted out” of the dividend reinvestment plan will have their cash distribution automatically reinvested in
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
additional shares of the Company’s common stock, rather than receiving the cash distribution. The Company expects to use newly issued shares to implement the dividend reinvestment plan.
Consolidation
As provided under Regulation S-X and ASC Topic 946 - Financial Services - Investment Companies, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company’s wholly-owned subsidiaries in its consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company does not consolidate its equity interest in Sebago Lake LLC (“Sebago Lake”). For further description of the Company’s investment in Sebago Lake, see Note 4 “Investments”.
New Accounting Pronouncements
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this ASU supersedes the revenue recognition requirements in Revenue Recognition (Topic 605). Under the updated guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No. 2014-09 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period.
In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the guidance in ASU No. 2014-09 and has the same effective date as the original standard.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, an update on identifying performance obligations and accounting for licenses of intellectual property.
In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which includes amendments for enhanced clarification of the guidance.
In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Revenue from Contracts with Customers (Topic 606), the amendments in this update are of a similar nature to the items typically addressed in the technical corrections and improvements project.
In February 2017, the FASB issued ASU No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, an update clarifying that a financial asset is within the scope of Subtopic 610-20 if it is deemed an “in-substance non-financial asset.”
The application of the aforementioned updated revenue recognition guidance is not expected to have a material impact on the Company’s consolidated financial statements.
Restricted Cash
In November 2016, the FASB issued ASU 2016-18 Statement of Cash Flows (Topic 230) - Restricted Cash which requires an entity’s reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash. ASU 2016-18 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company adopted this guidance during the year ended December 31, 2017.
Other than previously notated, management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements.
Note 3. Agreements and Related Party Transactions
Administration Agreement
On March 1, 2016, the Company entered into an Administration Agreement (the “Administration Agreement”) with the Adviser. Under the terms of the Administration Agreement, the Adviser performs, or oversees, the performance of, required
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
administrative services, which includes providing office space, equipment and office services, maintaining financial records, preparing reports to shareholders and reports filed with the SEC, and managing the payment of expenses and the performance of administrative and professional services rendered by others.
The Administration Agreement also provides that the Company reimburses the Adviser for certain organization costs incurred prior to the commencement of the Company’s operations, and for certain offering costs.
The Company reimburses the Adviser for services performed for it pursuant to the terms of the Administration Agreement. In addition, pursuant to the terms of the Administration Agreement, the Adviser may delegate its obligations under the Administration Agreement to an affiliate or to a third party and the Company will reimburse the Adviser for any services performed for it by such affiliate or third party.
On March 1, 2018, the Board approved to extend the Administration Agreement. Unless earlier terminated as described below, the Administration Agreement will remain in effect until March 1, 2019 and from year to year thereafter if approved annually by (1) the vote of the Board, or by the vote of a majority of its outstanding voting securities, and (2) the vote of a majority of the Company’s directors who are not “interested persons” of the Company, of the Adviser or of any of their respective affiliates, as defined in the 1940 Act. The Administration Agreement may be terminated at any time, without the payment of any penalty, on 60 days’ written notice, by the vote of a majority of the outstanding voting securities of the Company, or by the vote of the Board or by the Administrator.
No person who is an officer, director, or employee of the Adviser or its affiliates and who serves as a director of the Company receives any compensation from the Company for his or her services as a director. However, the Company reimburses the Adviser (or its affiliates) for an allocable portion of the compensation paid by the Adviser or its affiliates to the Company’s Chief Compliance Officer, Chief Financial Officer and their respective staffs (based on the percentage of time those individuals devote, on an estimated basis, to the business and affairs of the Company). Directors who are not affiliated with the Adviser receive compensation for their services and reimbursement of expenses incurred to attend meetings.
For the years ended December 31, 2017 and 2016, the Company incurred expenses of approximately $3.3 million and $2.8 million, respectively, for costs and expenses reimbursable to the Adviser under the terms of the Administration Agreement.
Investment Advisory Agreement
On March 1, 2016, the Company entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with the Adviser. Under the terms of the Investment Advisory Agreement, the Adviser is responsible for managing the Company’s business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring its investments, and monitoring its portfolio companies on an ongoing basis through a team of investment professionals.
The Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to the Company are not impaired.
On March 1, 2018, the Board approved to extend the Investment Advisory Agreement. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect until March 1, 2019 and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of our outstanding voting securities and, in each case, by a majority of independent directors.
The Investment Advisory Agreement will automatically terminate within the meaning of the 1940 Act and related SEC guidance and interpretations in the event of its assignment. In accordance with the 1940 Act, without payment of any penalty, the Company may terminate the Investment Advisory Agreement with the Adviser upon 60 days’ written notice. The decision to terminate the agreement may be made by a majority of the Board or the shareholders holding a majority (as defined under the 1940 Act) of the outstanding shares of the Company’s common stock or the Adviser. In addition, without payment of any penalty, the Adviser may generally terminate the Investment Advisory Agreement upon 60 days’ written notice and, in certain circumstances, the Adviser may only be able to terminate the Investment Advisory Agreement upon 120 days’ written notice.
From time to time, the Adviser may pay amounts owed by the Company to third-party providers of goods or services, including the Board, and the Company will subsequently reimburse the Adviser for such amounts paid on its behalf. Amounts payable to the Adviser are settled in the normal course of business without formal payment terms.
Under the terms of the Investment Advisory Agreement, the Company will pay the Adviser a base management fee and may also pay to it certain incentive fees. The cost of both the management fee and the incentive fee will ultimately be borne by the Company’s shareholders.
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
The management fee is payable quarterly in arrears. Prior to the future quotation or listing of the Company’s securities on a national securities exchange (an “Exchange Listing”) or the future quotation or listing of its securities on any other public trading market, the management fee is payable at an annual rate of 0.75% of the Company’s (i) average gross assets, excluding cash and cash equivalents but including assets purchased with borrowed amounts, at the end of the Company’s two most recently completed calendar quarters plus (ii) the average of any remaining unfunded Capital Commitments at the end of the two most recently completed calendar quarters. Following an Exchange Listing, the management fee is payable at an annual rate of 1.75% of the Company’s average gross assets excluding cash and cash equivalents but including assets purchased with borrowed amounts, at the end of the two most recently completed calendar quarters. The management fee for any partial month or quarter, as the case may be, will be appropriately prorated and adjusted for any share issuances or repurchases during the relevant calendar months or quarters, as the case may be.
For the years ended December 31, 2017 and 2016, management fees were $31.1 million and $9.2 million, respectively.
Pursuant to the Investment Advisory Agreement, the Adviser will not be entitled to an incentive fee prior to an Exchange Listing. Following an Exchange Listing, the incentive fee will consist of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on the Company’s pre-incentive fee net investment income and a portion is based on the Company’s capital gains. The portion of the incentive fee based on pre-incentive fee net investment income is determined and paid quarterly in arrears commencing with the first calendar quarter following an Exchange Listing, and equals 100% of the pre-incentive fee net investment income in excess of a 1.5% quarterly “hurdle rate,” until the Adviser has received 20% of the total pre-incentive fee net investment income for that calendar quarter and, for pre-incentive fee net investment income in excess of 1.875% quarterly, 20% of all remaining pre-incentive fee net investment income for that calendar quarter.
The second component of the incentive fee, the capital gains incentive fee, payable at the end of each calendar year in arrears, equals 20% of cumulative realized capital gains from the date on which the Exchange Listing becomes effective (the “Listing Date”) to the end of each calendar year, less cumulative realized capital losses and unrealized capital depreciation from the Listing Date to the end of each calendar year, less the aggregate amount of any previously paid capital gains incentive fee for prior periods. In no event will the capital gains incentive fee payable pursuant to the Investment Advisory Agreement be in excess of the amount permitted by the Advisers Act, including Section 205 thereof.
There was no incentive fee for the years ended December 31, 2017 and 2016.
Affiliated Transactions
The Company may be prohibited under the 1940 Act from conducting certain transactions with its affiliates without prior approval of the directors who are not interested persons, and in some cases, the prior approval of the SEC. The Company, the Adviser and certain of its affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by the Adviser or its affiliates, including Owl Rock Capital Corporation II, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to such exemptive relief, the Company generally is permitted to co-invest with certain of its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Board make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to the Company and its shareholders and do not involve overreaching of the Company or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of the Company’s shareholders and is consistent with its investment objective and strategies, and (3) the investment by its affiliates would not disadvantage the Company, and the Company’s participation would not be on a basis different from or less advantageous than that on which its affiliates are investing. The Adviser’s investment allocation policy incorporates the conditions of the exemptive relief. As a result of exemptive relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolio of Owl Rock Capital Corporation II and/or other funds established by the Adviser that could avail themselves of the exemptive relief.
License Agreement
The Company has entered into a license agreement (the “License Agreement”) with Owl Rock Capital Partners LP, pursuant to which Owl Rock Capital Partners LP has granted the Company a non-exclusive license to use the name “Owl Rock.” Under the License Agreement, the Company has a right to use the Owl Rock name for so long as the Adviser or one of its affiliates remains the Company’s investment adviser. Other than with respect to this limited license, the Company will have no legal right to the “Owl Rock” name or logo.
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
Note 4. Investments
Under the 1940 Act, the Company is required to separately identify non-controlled investments where it owns 5% or more of a portfolio company’s outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company as investments in “affiliated” companies. In addition, under the 1940 Act, the Company is required to separately identify investments where it owns more than 25% of a portfolio company’s outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company as investments in “controlled” companies. Under the 1940 Act, “non-affiliated investments” are defined as investments that are neither controlled investments nor affiliated investments. Detailed information with respect to the Company’s non-controlled, non-affiliated; non-controlled, affiliated; and controlled affiliated investments is contained in the accompanying consolidated financial statements, including the consolidated schedule of investments. The information in the tables below is presented on an aggregate portfolio basis, without regard to whether they are non-controlled non-affiliated, non-controlled affiliated or controlled affiliated investments.
Investments at fair value and amortized cost consisted of the following as of December 31, 2017 and 2016:
|
|
|
December 31, 2017 |
|
December 31, 2016 |
| ||||||||
|
($ in thousands) |
|
Amortized Cost |
|
Fair Value |
|
Amortized Cost |
|
Fair Value |
| ||||
|
First-lien senior secured debt investments |
|
$ |
1,640,301 |
|
$ |
1,652,021 |
|
$ |
570,806 |
|
$ |
574,776 |
|
|
Second-lien senior secured debt investments |
|
664,825 |
|
669,376 |
|
388,962 |
|
392,623 |
| ||||
|
Equity investments |
|
2,760 |
|
2,760 |
|
— |
|
— |
| ||||
|
Investment funds and vehicles(1) |
|
65,028 |
|
65,599 |
|
— |
|
— |
| ||||
|
Total Investments |
|
$ |
2,372,914 |
|
$ |
2,389,756 |
|
$ |
959,768 |
|
$ |
967,399 |
|
(1) Includes equity investment in Sebago Lake. See below, within Note 4, for more information regarding Sebago Lake.
Owl Rock Capital Corporation
Notes to Consolidated Financial Statements
The industry composition of investments based on fair value as of December 31, 2017 and 2016 was as follows:
|
|
|
December 31, 2017 |
|
December 31, 2016 |
|
|
Advertising and media |
|
3.3 |
% |
8.3 |
% |
|
Aerospace and defense |
|
2.1 |
|
5.1 |
|
|
Buildings and real estate |
|
5.2 |
|
— |
|
|
Business services |
|
8.8 |
|
6.6 |
|
|
Consumer products |
|
4.7 |
|
— |
|
|
Containers and packaging |
|
2.3 |
|
— |
|