Item 1.01 Entry into a Material Definitive Agreement
On May 28, 2020 (the "Closing Date"), Owl Rock Capital Corporation (the
"Company") completed a $438.9 million term debt securitization transaction (the
"CLO Transaction"), also known as a collateralized loan obligation transaction,
which is a form of secured financing incurred by the Company. The secured notes
and preferred shares issued in the CLO Transaction were issued by the Company's
consolidated subsidiaries Owl Rock CLO IV, Ltd., an exempted company
incorporated in the Cayman Islands with limited liability (the "Issuer"), and
Owl Rock CLO IV, LLC, a Delaware limited liability company (the "Co-Issuer" and
together with the Issuer, the "Issuers") and are backed by a portfolio of
collateral obligations consisting of middle market loans and participation
interests in middle market loans as well as by other assets of the Issuer.
The CLO Transaction was executed by the issuance of the following classes of
notes and preferred shares pursuant to an indenture and security agreement dated
as of the Closing Date (the "Indenture"), by and among the Issuers and State
Street Bank and Trust Company: (i) $236.5 million of AAA(sf) Class A-1 Notes,
which bear interest at three-month LIBOR plus 2.62% and (ii) $15.5 million of
AAA(sf) Class A-2 Notes, which bear interest at three-month LIBOR plus 3.40%
(together, the "Secured Notes"). The Secured Notes are secured by the middle
market loans, participation interests in middle market loans and other assets of
the Issuer. The Secured Notes are scheduled to mature on May 20, 2029. The
Secured Notes were privately placed by Natixis Securities Americas LLC. Upon the
occurrence of certain triggering events relating to the end of LIBOR, a
different benchmark rate will replace LIBOR as the reference rate for interest
accruing on the Secured Notes.
Concurrently with the issuance of the Secured Notes, the Issuer issued
approximately $186.9 million of subordinated securities in the form of 186,900
preferred shares at an issue price of U.S.$1,000 per share (the "Preferred
Shares"). The Preferred Shares were issued by the Issuer as part of its issued
share capital and are not secured by the collateral securing the Secured Notes.
The Company purchased all of the Preferred Shares. The Company acts as retention
holder in connection with the CLO Transaction for the purposes of satisfying
certain U.S. and European Union regulations requiring sponsors of securitization
transactions to retain exposure to the performance of the securitized assets and
as such is required to retain a portion of the Preferred Shares.
As part of the CLO Transaction, the Company entered into a loan sale agreement
with the Issuer dated as of the Closing Date, which provided for the sale and
contribution of approximately $275.07 million par amount of middle market loans
from the Company to the Issuer on the Closing Date and for future sales from the
Company to the Issuer on an ongoing basis. Such loans constituted part of the
initial portfolio of assets securing the Secured Notes. The remainder of the
initial portfolio assets securing the Secured Notes consisted of approximately
$174.92 million par amount of middle market loans purchased by the Issuer from
ORCC Financing II LLC, a wholly-owned subsidiary of the Company, under an
additional loan sale agreement executed on the Closing Date between the Issuer
and ORCC Financing II LLC. The Company and ORCC Financing II LLC each made
customary representations, warranties, and covenants to the Issuer under the
applicable loan sale agreement.
Through November 20, 2021, a portion of the proceeds received by the Issuer from
the loans securing the Secured Notes may be used by the Issuer to purchase
additional middle market loans under the direction of Owl Rock Capital Advisors
LLC ("ORCA"), the Company's investment advisor, in its capacity as collateral
manager for the Issuer and in accordance with the Company's investing strategy
and ability to originate eligible middle market loans.
The Secured Notes are the secured obligation of the Issuers, and the Indenture
includes customary covenants and events of default. The Secured Notes have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities (e.g., "blue sky") laws, and may not be offered
or sold in the United States absent registration with the Securities and
Exchange Commission or pursuant to an applicable exemption from such
registration.
ORCA will serve as collateral manager for the Issuer under a collateral
management agreement dated as of the Closing Date. ORCA is entitled to receive
fees for providing these services. ORCA has waived its right to receive such
fees but may rescind such waiver at any time.
ORCC expects to use the proceeds of the issuance and incurrence of the Secured
Notes, net of certain fees and expenses, to repay revolving loans borrowed by
ORCC and its subsidiaries under existing credit facilities.
The above description of the documentation related to the CLO Transaction and
other arrangements entered into on the Closing Date contained in this Current
Report on Form 8-K do not purpose to be complete and are qualified in their
entirety by reference to the underlying agreements, which will be attached as
exhibits to ORCC's Quarterly Report on Form 10-Q for the quarter ended June 30,
2020.
Item 2.03 - Creation of a Direct Financial Obligation
The information set forth under Item 1.01 above is incorporated by reference
into this Item 2.03.
© Edgar Online, source Glimpses