Item 1.01 |
Entry into a Material Definitive Agreement |
On July 26, 2022 (the Closing Date), Owl Rock Capital Corporation (the Company) completed a $350.47 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 and the secured loan borrowed in the CLO Transaction were issued and incurred, as applicable, by the Companys consolidated subsidiary Owl Rock CLO VII, LLC, a limited liability organized under the laws of the State of Delaware (the
Issuer) 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 (A) 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 Issuer and State Street Bank and Trust Company: (i) $48 million of AAA(sf) Class A-1 Notes, which bear interest at
three-month term SOFR plus 2.10%, (ii) $24 million of AAA(sf) Class A-2 Notes, which bear interest at 5.00%, (iii) $6 million of AA(sf) Class B-1
Notes, which bear interest at three-month term SOFR plus 2.85% and (iv) $26.15 million of AA(sf) Class B-2 Notes, which bear interest at 5.71% and (v) $10 million of A(sf) Class C Notes,
which bear interest at 6.86% (together, the Secured Notes) and (B) the borrowing by the Issuer of $75 million under floating rate Class A-L1 loans (the
Class A-L1 Loans) and $50 million under floating rate Class A-L2 loans (the Class A-L2
Loans and together with the Class A-L1 Loans and the Secured Notes, the Debt). The Class A-L1 Loans and the
Class A-L2 Loans bear interest at three-month term SOFR plus 2.10%. The Class A-L1 Loans were borrowed under a credit agreement (the A-L1 Credit Agreement), dated as of the Closing Date, by and among the Issuer, as borrower, various financial institutions, as lenders, and State Street Bank and Trust Company, as collateral trustee and
loan agent and the Class A-L2 Loans were borrowed under a credit agreement (the A-L2 Credit Agreement), dated as of the Closing Date, by and among the
Issuer, as borrower, various financial institutions, as lenders, and State Street Bank and Trust Company, as collateral trustee and loan agent. The Debt is secured by middle market loans, participation interests in middle market loans and other
assets of the Issuer. The Debt is scheduled to mature on July 20, 2033. The Secured Notes were privately placed by SG Americas Securities, LLC as Initial Purchaser.
Concurrently with the issuance of the Secured Notes and the borrowing under the Class A-L1 Loans and Class A-L2 Loans, the Issuer issued approximately $111.32 million of subordinated securities in the form of 111,320 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 Debt. 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 $255.548 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 Debt. The remainder of the initial portfolio assets securing the Debt consisted of approximately $93.313 million par amount of middle market loans
purchased by the Issuer from ORCC Financing IV 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 IV LLC. The Company and ORCC Financing IV LLC
each made customary representations, warranties, and covenants to the Issuer under the applicable loan sale agreement.
Through July 20, 2025, a
portion of the proceeds received by the Issuer from the loans securing the Debt may be used by the Issuer to purchase additional middle market loans under the direction of Owl Rock Capital Advisors LLC (ORCA), the Companys
investment advisor, in its capacity as collateral manager for the Issuer and in accordance with the Companys investing strategy and ability to originate eligible middle market loans.
The Debt is the secured obligation of the Issuer, and the Indenture, the A-L1 Credit Agreement and the A-L2 Credit Agreement each include 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; provided, however, that if the Adviser rescinds such waiver, the management fee payable to the Adviser pursuant to the Amended and
Restated Investment Advisory Agreement, dated March 31, 2022, between the Adviser and the Company will be offset by the amount of the collateral management fee attributable to the CLO VII Issuers equity or notes owned by the Company.