Blue Owl Capital Corporation

Good morning and welcome to the Owl Rock Capital Corporation second quarter 2021 earnings call. I would like to remind our listeners that remarks made during the call may contain forward-looking statements. Forward-looking statements are not guarantees of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Owl Rock Capital Corporation's filings to the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. As a reminder, this call is being recorded for replay purposes. Yesterday, the company issued its earnings press release and posted an earnings presentation for the second quarter ended June 30th, 2021. This presentation should be reviewed in conjunction with the company's form 10Q filed on August 4th with the SEC. The company will refer to the earnings presentation throughout the call today. So please have the presentation available to you. As a reminder, the earnings presentation is available on the company's website. I will now turn the call over to Mr. Craig Packer, Chief Executive Officer of Owl Rock Capital Corporation.

Thank you, operator. Good morning, everyone, and thank you for joining us today for our second quarter earnings call. This is Craig Packer, and I'm CEO of Owl Rock Capital Corporation and a co-founder of Blue Owl. Joining me today is Alan Kirschenbaum, our CFO and COO, Jonathan Lamm, a recent addition to our senior management team, and Dana Stefani, our head of investor relations. I'll start today's call by briefly discussing our financial results for the second quarter before providing an update on the portfolio and the quarter's deal activity. Afterwards, Alan and Jonathan will cover our financial results in more detail, and then I will discuss our outlook and make some closing remarks. Turning to our second quarter financial highlights, net investment income for the quarter was $0.30, up from $0.26 per share in the first quarter. We made substantial progress towards covering our $0.31 quarterly dividend and remain on track to cover it in the second half of the year. This was driven by a significant increase in both originations and repayments and continued strong credit performance. Our board has approved a third quarter dividend of $0.31 per share. We ended the second quarter with net asset value per share of $14.90, up $0.08 from the first quarter. Credit quality remains strong with an average fair value of $0.98, consistent with prior quarters. We are very pleased with the origination activity we saw this quarter, which represents our third largest quarter since inception. As a result of this activity, our net leverage increased to 1.0 times, approaching the midpoint of our target range of 0.9 to 1.25 times. We also saw our pace of sales repayments accelerate to $743 million, with repayment levels now approaching fully ramped levels. Finally, I would like to take the opportunity to formally introduce Jonathan Lamm, who many of you already know. Jonathan will become the CFO and COO of ORCC effective September 1st. Jonathan brings a wealth of knowledge and more than 20 years of experience, most recently as the CFO of Goldman Sachs' BDC. We're excited to have him on board, and he will be discussing our second quarter financial results in greater depth shortly. Turning to originations, we were extremely pleased with our activity this quarter, both in terms of volume and quality. Originations were up significantly from last quarter and exceeded Q4, driven by the strong performance of our investment team and a pickup in M&A activity as a result of the continued strong economic backdrop. Gross originations for the quarter were $1.6 billion, with $1.4 billion of funded activity and net funded originations of $663 million. Our average spread on new commitments was approximately 670 basis points, up from 640 basis points last quarter. Our overall spread increased as a result of our ability to originate some higher spread unit tranches, particularly in the software sector, as well as an increase in second lien investments and a new preferred investment. We are pleased with our success at increasing the average spread on our investments over the last year, which is now roughly 20 basis points higher than it was a year ago. We believe this reflects the strength of our origination capabilities and relationships and the continued attractiveness of our direct lending solutions. Along those same lines, we have talked in prior quarters about how we have not yet reached a normalized pace of repayments. The payment volume was up meaningfully this quarter, and we are quickly progressing towards our expected fully ramped pace of repayments, which will positively impact earnings. We finished the quarter with an investment portfolio of $11.9 billion across 129 portfolio companies, and we are pleased with our strong credit performance. The overwhelming majority of the portfolio continues to perform very well, with 93% of debt investments marked above 95% of par. Most of our borrowers have returned to normalized operating levels, and many experienced strong performance in Q2. While we are closely monitoring COVID developments, we have a positive outlook for the overall economy in the second half of the year as consumer demand further rebounds. We believe this will continue to drive good results for our borrowers. We continue to see sequential improvement in names in our lowest rating category, those names rated 4 or 5. These have decreased from 1.9% to 0.5% of the portfolio quarter over quarter. While we continue to have a small number of challenge credits, our non-accruals remain extremely low, with only two investments on non-accrual status at the end of the quarter, representing less than 0.5% of the portfolio based on fair value, one of the lowest levels in the BDC sector. Before I turn it over to Jonathan to discuss our financial results, I would like to take a moment to discuss two recent announcements we made. A few weeks ago, we announced an increase in capital commitments to our joint venture loan fund, Sebago Lakes. The fund has generated an attractive average quarterly ROE over the past three years of approximately 10%. ORCC increased its commitment to $325 million and, in addition, increased its economic ownership to 87.5% from 50%. We are also excited to bring in Nationwide Life Insurance as a new partner in the JV. Nationwide has been a meaningful ORCC shareholder since inception and purchased the remaining 12.5% economic interest from UC Regents effective June 30th. Regents remains a very significant ORCC shareholder and a valued long-term partner across the broader Blue Owl platform. In conjunction with these changes, the joint venture will be referred to as ORCC Senior Loan Fund going forward in our disclosures. I also want to touch on the CFO transition we announced this week. Effective September 1st, Jonathan will become the CFO and COO of ORCC. Alan will remain an officer of the company as an executive vice president and serves as the CFO of Blue Owl, the parent of ORCC's advisor. Jonathan comes to us with tremendous experience as a BDC CFO, and I'm excited to work closely with him going forward. I would also like to thank Alan for his extraordinary contributions to ORCC since inception. Alan has played a critical role in the great success we've enjoyed to date by building a best-in-class operational and financial infrastructure for ORCC, which we believe to be one of our key competitive advantages. Alan will now say a few words before turning it over to Jonathan.

Thank you, Craig. Good morning, everyone. To begin, I echo your comments, Craig. We are thrilled to have Jonathan on board with us and know that his deep experience and wealth of knowledge will serve ORCC very well. Before I turn it over to Jonathan to go through the results, I'd like to briefly reflect on how we strategically approached the construction of ORCC's balance sheet. ORCC now benefits from what we believe is one of the strongest funding profiles in the industry. Given ORCC's scale since inception, we knew it was critical to have a diversified financing landscape and we embarked on building a balance sheet that would provide financial flexibility and ample liquidity for multiple financing sources. In addition to developing a large, diverse bank group that provides us with a billion and a half of revolving credit capacity, we have also issued almost $4 billion across eight unsecured bond deals and over $1.5 billion across six CLOs to efficiently finance our balance sheet. We have been able to meaningfully improve pricing since our first issuances in both cases. I am confident with Jonathan as CFO and COO, ORCC will continue to optimize its financing profile and deliver strong risk-adjusted results for our shareholders. With that, I'll turn it over to Jonathan.