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Owl Rock Core Income

Filed: 14 Nov 21, 7:00pm

 

Draft review and test completed. No issues found.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

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: 814-01369

 

OWL ROCK CORE INCOME CORP.

(Exact Name of Registrant as Specified in its Charter)

 

 

Maryland

 

85-1187564

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

399 Park Avenue, 38th Floor

New York, New York

 

10022

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (212) 419-3000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

None

None

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 NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

 

 

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO

As of November 12, 2021, the registrant had 29,901,352 shares of Class S common stock, 13,892,667 shares of Class D common stock, and 59,092,949 shares of Class I common stock, each with a par value per share of $0.01, outstanding.

i


 

Table of Contents

 

 

 

 

 

Page

PART I.

 

CONSOLIDATED FINANCIAL INFORMATION

 

 

Item 1.

 

Consolidated Financial Statements

 

4

 

 

Consolidated Statements of Assets and Liabilities as of September 30, 2021 (Unaudited) and December 31, 2020

 

4

 

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 (Unaudited)

 

5

 

 

Consolidated Schedules of Investments as of September 30, 2021 (Unaudited) and December 31, 2020

 

6

 

 

Consolidated Statements of Changes in Net Assets for the Three and Nine Months Ended September 30, 2021 (Unaudited)

 

17

 

 

Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2021 (Unaudited)

 

18

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

19

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

52

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

83

Item 4.

 

Controls and Procedures

 

84

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

85

Item 1A.

 

Risk Factors

 

85

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

86

Item 3.

 

Defaults Upon Senior Securities

 

87

Item 4.

 

Mine Safety Disclosures

 

87

Item 5.

 

Other Information

 

87

Item 6.

 

Exhibits

 

87

 

Signatures

 

 

 

89

 

ii


 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Owl Rock Core Income Corp. (the “Company,” “we” or “our”), our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

 

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;
an economic downturn could disproportionately impact the companies that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;
an economic downturn could also impact availability and pricing of our financing and our ability to access the debt and equity capital markets;
a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;
the impact of the novel strain of coronavirus known as “COVID-19” and related changes in base interest rates and significant market volatility on our business, our portfolio companies, our industry and the global economy;
interest rate volatility, including the decommissioning of LIBOR, could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;
currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;
our future operating results;
our business prospects and the prospects of our portfolio companies including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;
the impact of interest and inflation rates on our business prospects and the prospects of our portfolio companies;
our contractual arrangements and relationships with third parties;
the ability of our portfolio companies to achieve their objectives;
competition with other entities and our affiliates for investment opportunities;
the speculative and illiquid nature of our investments;
the use of borrowed money to finance a portion of our investments as well as any estimates regarding potential use of leverage;
the adequacy of our financing sources and working capital;
the loss of key personnel;
the timing of cash flows, if any, from the operations of our portfolio companies;
the ability of Owl Rock Capital Advisors LLC (“the Adviser” or “our Adviser”) to locate suitable investments for us and to monitor and administer our investments;
the ability of the Adviser to attract and retain highly talented professionals;
our ability to qualify for and maintain our tax treatment as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and as a business development company (“BDC”);
the effect of legal, tax and regulatory changes including the Coronavirus Aid, Relief and Economic Security Act signed into law in December 2020 and the American Rescue Plan Act of 2021, signed into law in March 2021; and
other risks, uncertainties and other factors previously identified in the reports and other documents we have filed with the Securities and Exchange Commission (“SEC”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These forward-looking statements apply only as of the date of this report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. Because we are an investment company, the forward-looking statements and projections contained in this report are excluded from the safe harbor protection provided by Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

3


 

PART I. CONSOLIDATED FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Owl Rock Core Income Corp.

Consolidated Statements of Assets and Liabilities

(Amounts in thousands, except share and per share amounts)

 

 

 

September 30, 2021 (Unaudited)

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

Investments at fair value (amortized cost of $1,438,518 and $14,378, respectively)

 

$

1,441,428

 

 

$

14,376

 

Cash

 

 

113,895

 

 

 

8,153

 

Interest receivable

 

 

5,991

 

 

 

60

 

Receivable for investments sold

 

 

110,131

 

 

 

 

Prepaid expenses and other assets

 

 

2,701

 

 

 

21

 

Total Assets

 

$

1,674,146

 

 

$

22,610

 

Liabilities

 

 

 

 

 

 

Debt (net of unamortized debt issuance costs of $13,072 and $0, respectively)

 

$

1,022,179

 

 

$

10,000

 

Distribution payable

 

 

3,354

 

 

 

 

Payable for investments purchased

 

 

7,980

 

 

 

 

Payables to affiliates

 

 

5,997

 

 

 

191

 

Tender offer payable

 

 

347

 

 

 

 

Accrued expenses and other liabilities

 

 

3,600

 

 

 

146

 

Total Liabilities

 

 

1,043,457

 

 

 

10,337

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Net Assets

 

 

 

 

 

 

Class S Common shares $0.01 par value, 1,000,000,000 shares authorized; 17,567,487 and 0 shares issued and outstanding, respectively

 

 

176

 

 

 

 

Class D Common shares $0.01 par value, 1,000,000,000 shares authorized; 7,149,027 and 0 shares issued and outstanding, respectively

 

 

71

 

 

 

 

Class I Common shares $0.01 par value, 1,000,000,000 shares authorized; 42,917,350 and 1,300,100 shares issued and outstanding, respectively

 

 

429

 

 

 

13

 

Additional paid-in-capital

 

 

627,901

 

 

 

12,420

 

Distributable earnings (losses)

 

 

2,112

 

 

 

(160

)

Total Net Assets

 

 

630,689

 

 

 

12,273

 

Total Liabilities and Net Assets

 

$

1,674,146

 

 

$

22,610

 

Net Asset Value Per Class S Share(1)

 

$

9.32

 

 

 

 

Net Asset Value Per Class D Share(1)

 

$

9.32

 

 

 

 

Net Asset Value Per Class I Share

 

$

9.33

 

 

$

9.44

 

________________

(1)
There were no Class S or Class D shares of common stock outstanding as of December 31, 2020.

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

Owl Rock Core Income Corp.

Consolidated Statement of Operations

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

 

For the Three
Months Ended
September 30, 2021

 

 

For the Nine
Months Ended
September 30, 2021

 

Investment Income

 

 

 

 

 

 

Investment income from non-controlled, non-affiliated investments:

 

 

 

 

 

 

Interest income (excluding payment-in-kind ("PIK") interest income)

 

$

13,728

 

 

$

17,462

 

PIK interest income

 

 

891

 

 

 

985

 

PIK dividend income

 

 

203

 

 

 

342

 

Other income

 

 

804

 

 

 

850

 

Total investment income from non-controlled, non-affiliated investments

 

 

15,626

 

 

 

19,639

 

Total Investment Income

 

 

15,626

 

 

 

19,639

 

Operating Expenses

 

 

 

 

 

 

Initial organization

 

 

 

 

 

273

 

Offering costs

 

 

1,524

 

 

 

1,524

 

Interest expense

 

 

3,463

 

 

 

4,966

 

Management fees

 

 

836

 

 

 

1,102

 

Performance based incentive fees

 

 

1,372

 

 

 

1,570

 

Professional fees

 

 

558

 

 

 

1,221

 

Directors' fees

 

 

257

 

 

 

788

 

Shareholder servicing fees

 

 

256

 

 

 

306

 

Other general and administrative

 

 

857

 

 

 

1,785

 

Total Operating Expenses

 

 

9,123

 

 

 

13,535

 

Management fees waived (Note 3)

 

 

 

 

 

(52

)

Expense Support (Note 3)

 

 

 

 

 

(2,578

)

Recoupment of expense support (Note 3)

 

 

465

 

 

 

465

 

Net Operating Expenses

 

 

9,588

 

 

 

11,370

 

Net Investment Income (Loss)

 

$

6,038

 

 

$

8,269

 

Net Realized and Change in Unrealized Gain (Loss)

 

 

 

 

 

 

Net change in unrealized gain (loss):

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

$

2,211

 

 

$

3,023

 

Translation of assets and liabilities in foreign currencies

 

 

(29

)

 

 

(7

)

Total Net Change in Unrealized Gain (Loss)

 

 

2,182

 

 

 

3,016

 

Net realized gain (loss):

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

917

 

 

 

924

 

Foreign currency transactions

 

 

(2

)

 

 

(2

)

Total Net Realized Gain (Loss)

 

 

915

 

 

 

922

 

Total Net Realized and Change in Unrealized Gain (Loss)

 

 

3,097

 

 

 

3,938

 

Total Net Increase (Decrease) in Net Assets Resulting from Operations

 

$

9,135

 

 

$

12,207

 

Net Increase (Decrease) in Net Assets Resulting from Operations- Class S Common Stock

 

$

1,946

 

 

$

2,290

 

Net Increase (Decrease) in Net Assets Resulting from Operations- Class D Common Stock

 

$

1,057

 

 

$

1,490

 

Net Increase (Decrease) in Net Assets Resulting from Operations- Class I Common Stock

 

$

6,132

 

 

$

8,427

 

Earnings Per Share - Basic and Diluted of Class S Common Stock

 

$

0.17

 

 

$

0.52

 

Weighted Average Shares of Class S Common Stock Outstanding - Basic
and Diluted

 

 

11,160,688

 

 

 

4,363,627

 

Earnings Per Share - Basic and Diluted of Class D Common Stock

 

$

0.19

 

 

$

0.56

 

Weighted Average Shares of Class D Common Stock Outstanding - Basic
and Diluted

 

 

5,670,041

 

 

 

2,654,462

 

Earnings Per Share - Basic and Diluted of Class I Common Stock

 

$

0.19

 

 

$

0.55

 

Weighted Average Shares of Class I Common Stock Outstanding - Basic and
Diluted

 

 

31,988,535

 

 

 

15,343,528

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


 

Owl Rock Core Income Corp.

Consolidated Schedule of Investments

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

Non-controlled/non-affiliated portfolio
company investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Investments(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising and media

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Music Rights, LLC(8)

 

First lien senior secured loan

 

 L + 5.75%

 

8/28/2028

 

$

84,375

 

 

$

82,706

 

 

$

82,688

 

 

 

13.1

 

%

Global Music Rights, LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

8/27/2027

 

 

 

 

 

(148

)

 

 

(150

)

 

 

 

%

IRI Holdings, Inc.(6)(17)

 

First lien senior secured loan

 

 L + 4.25%

 

12/1/2025

 

 

4,987

 

 

 

4,993

 

 

 

4,980

 

 

 

0.8

 

%

 

 

 

 

 

 

 

 

 

89,362

 

 

 

87,551

 

 

 

87,518

 

 

 

13.9

 

%

Aerospace and Defense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bleriot US Bidco Inc.(8)(17)

 

First lien senior secured loan

 

 L + 4.00%

 

10/30/2026

 

 

4,987

 

 

 

4,987

 

 

 

4,989

 

 

 

0.8

 

%

Peraton Corp.(6)(17)(19)

 

First lien senior secured loan

 

 L + 3.75%

 

2/1/2028

 

 

4,975

 

 

 

4,987

 

 

 

4,976

 

 

 

0.8

 

%

Peraton Corp.(6)

 

Second lien senior secured loan

 

 L + 7.75%

 

2/1/2029

 

 

5,000

 

 

 

4,930

 

 

 

4,963

 

 

 

0.8

 

%

 

 

 

 

 

 

 

 

 

14,962

 

 

 

14,904

 

 

 

14,928

 

 

 

2.4

 

%

Automotive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mavis Tire Express Services Topco Corp.(6)(17)(19)

 

First lien senior secured loan

 

 L + 4.00%

 

5/4/2028

 

 

9,975

 

 

 

9,928

 

 

 

9,993

 

 

 

1.6

 

%

 

 

 

 

 

 

 

 

 

9,975

 

 

 

9,928

 

 

 

9,993

 

 

 

1.6

 

%

Buildings and real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Associations, Inc.(8)

 

First lien senior secured loan

 

L + 6.50%
( incl. 2.50% PIK)

 

7/2/2027

 

 

57,145

 

 

 

56,603

 

 

 

56,574

 

 

 

8.9

 

%

Associations, Inc.(8)(12)(14)

 

First lien senior secured delayed draw term loan A

 

L + 6.50%
( incl. 2.50% PIK)

 

7/2/2022

 

 

257

 

 

 

241

 

 

 

240

 

 

 

 

%

Associations, Inc.(12)(13)(14)

 

First lien senior secured delayed draw term loan B

 

L + 6.50%
( incl. 2.50% PIK)

 

1/2/2023

 

 

 

 

 

(34

)

 

 

(36

)

 

 

 

%

Associations, Inc.(8)(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

7/2/2027

 

 

 

 

 

(46

)

 

 

(48

)

 

 

 

%

Associations, Inc.(8)(12)(13)(14)

 

First lien senior secured delayed draw term loan C

 

L + 6.50%
( incl. 2.50% PIK)

 

7/2/2023

 

 

 

 

 

(34

)

 

 

(36

)

 

 

 

%

Dodge Data & Analytics, LLC(8)

 

First lien senior secured loan

 

 L + 7.50%

 

4/14/2026

 

 

2,154

 

 

 

2,114

 

 

 

2,116

 

 

 

0.3

 

%

Dodge Data & Analytics, LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 7.50%

 

4/14/2026

 

 

 

 

 

(2

)

 

 

(2

)

 

 

 

%

REALPAGE, INC.(6)

 

Second lien senior secured loan

 

 L + 6.50%

 

4/23/2029

 

 

2,500

 

 

 

2,464

 

 

 

2,550

 

 

 

0.4

 

%

 

 

 

 

 

 

 

 

 

62,056

 

 

 

61,306

 

 

 

61,358

 

 

 

9.6

 

%

Business services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apex Group Treasury, LLC(8)(18)

 

Second lien senior secured loan

 

 L + 6.75%

 

7/27/2029

 

 

5,000

 

 

 

4,950

 

 

 

4,950

 

 

 

0.8

 

%

Apex Group Treasury, LLC(8)(18)

 

First lien senior secured loan

 

 L + 3.75%

 

7/27/2028

 

 

5,000

 

 

 

4,988

 

 

 

4,988

 

 

 

0.8

 

%

Apex Group Treasury, LLC(8)(12)(14)(18)

 

Second lien senior secured delayed draw term loan

 

 L + 6.75%

 

6/30/2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

%

Denali Buyerco LLC (dba Summit Companies)(8)

 

First lien senior secured loan

 

 L + 5.75%

 

9/15/2028

 

 

67,901

 

 

 

67,226

 

 

 

67,222

 

 

 

10.7

 

%

Denali Buyerco LLC (dba Summit Companies)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.75%

 

9/15/2023

 

 

-

 

 

 

(123

)

 

 

-

 

 

 

 

%

Denali Buyerco LLC (dba Summit Companies)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

9/15/2027

 

 

-

 

 

 

(74

)

 

 

(74

)

 

 

 

%

Diamondback Acquisition, Inc. (dba Sphera)(8)

 

First lien senior secured loan

 

 L + 5.50%

 

9/13/2028

 

 

47,947

 

 

 

46,994

 

 

 

46,988

 

 

 

7.5

 

%

Diamondback Acquisition, Inc. (dba Sphera)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.50%

 

9/13/2023

 

 

-

 

 

 

(95

)

 

 

(96

)

 

 

 

%

 

6


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

Hercules Borrower, LLC (dba The
Vincit Group)
(8)

 

First lien senior secured loan

 

 L + 6.50%

 

12/15/2026

 

 

818

 

 

 

807

 

 

 

818

 

 

 

0.1

 

%

Hercules Borrower, LLC (dba The
Vincit Group)
(8)

 

First lien senior secured loan

 

 L + 5.50%

 

12/15/2026

 

 

2,221

 

 

 

2,199

 

 

 

2,199

 

 

 

0.3

 

%

Hercules Borrower, LLC (dba The
Vincit Group)
(8)(12)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.50%

 

9/10/2023

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

%

Hercules Borrower LLC (dba The Vincit Group)(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

12/15/2026

 

 

 

 

 

(1

)

 

 

 

 

 

 

%

Hercules Buyer, LLC (dba The
Vincit Group)
(16)(22)

 

Unsecured notes

 

0.48% (PIK)

 

12/14/2029

 

 

24

 

 

 

24

 

 

 

24

 

 

 

 

%

Packers Holdings, LLC(8)(17)(19)

 

First lien senior secured loan

 

L + 3.25%

 

3/9/2028

 

 

4,280

 

 

 

4,260

 

 

 

4,258

 

 

 

0.7

 

%

 

 

 

 

 

 

 

 

 

133,191

 

 

 

131,155

 

 

 

131,277

 

 

 

20.9

 

%

Chemicals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aruba Investments Holdings LLC (dba Angus Chemical Company)(9)

 

Second lien senior secured loan

 

 L + 7.75%

 

11/24/2028

 

 

1,000

 

 

 

985

 

 

 

1,000

 

 

 

0.2

 

%

Gaylord Chemical Company, L.L.C(8)

 

First lien senior secured loan

 

 L + 6.00%

 

3/30/2027

 

 

9,163

 

 

 

9,078

 

 

 

9,095

 

 

 

1.4

 

%

Gaylord Chemical Company, L.L.C(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.00%

 

3/30/2026

 

 

 

 

 

(7

)

 

 

(6

)

 

 

 

%

Velocity HoldCo III Inc(8)

 

First lien senior secured loan

 

 L + 5.75%

 

4/22/2027

 

 

2,353

 

 

 

2,303

 

 

 

2,306

 

 

 

0.4

 

%

Velocity HoldCo III Inc(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

4/22/2026

 

 

 

 

 

(3

)

 

 

(3

)

 

 

 

%

 

 

 

 

 

 

 

 

 

12,516

 

 

 

12,356

 

 

 

12,392

 

 

 

2.0

 

%

Consumer products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ConAir Holdings, LLC(7)

 

Second lien senior secured loan

 

 L + 7.50%

 

5/17/2029

 

 

32,500

 

 

 

31,991

 

 

 

32,338

 

 

 

5.1

 

%

Olaplex, Inc.(6)

 

First lien senior secured loan

 

 L + 6.25%

 

1/8/2026

 

 

975

 

 

 

966

 

 

 

975

 

 

 

0.2

 

%

 

 

 

 

 

 

 

 

 

33,475

 

 

 

32,957

 

 

 

33,313

 

 

 

5.3

 

%

Containers and packaging

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ascend Buyer, LLC (dba PPC Flexible Packaging)(8)

 

First lien senior secured loan

 

 L + 5.75%

 

10/2/2028

 

 

50,206

 

 

 

49,704

 

 

 

49,704

 

 

 

7.9

 

%

Ascend Buyer, LLC (dba PPC Flexible Packaging)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

9/30/2027

 

 

 

 

 

(51

)

 

 

(51

)

 

 

 

%

Pregis Topco LLC(8)

 

Second lien senior secured loan

 

 L + 6.75%

 

8/1/2029

 

 

30,000

 

 

 

30,000

 

 

 

30,000

 

 

 

4.8

 

%

Pregis Topco LLC(8)

 

Second lien senior secured loan

 

 L + 8.00%

 

8/1/2029

 

 

2,500

 

 

 

2,500

 

 

 

2,500

 

 

 

0.4

 

%

Ring Container Technologies Group, LLC(8)(17)

 

First lien senior secured loan

 

 L + 3.75%

 

8/12/2028

 

 

5,000

 

 

 

4,988

 

 

 

5,003

 

 

 

0.8

 

%

 

 

 

 

 

 

 

 

 

87,706

 

 

 

87,141

 

 

 

87,156

 

 

 

13.9

 

%

Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dealer Tire, LLC(6)(17)

 

First lien senior secured loan

 

 L + 4.25%

 

12/12/2025

 

 

5,090

 

 

 

5,099

 

 

 

5,088

 

 

 

0.8

 

%

Individual Foodservice Holdings, LLC(9)

 

First lien senior secured loan

 

 L + 6.25%

 

11/21/2025

 

 

1,308

 

 

 

1,291

 

 

 

1,301

 

 

 

0.2

 

%

Individual Foodservice Holdings, LLC(9)(12)(14)

 

First lien senior secured delayed draw term loan

 

 L + 6.25%

 

6/30/2022

 

 

37

 

 

 

36

 

 

 

36

 

 

 

 

%

Individual Foodservice Holdings, LLC(6)(12)

 

First lien senior secured revolving loan

 

L + 6.25%

 

11/22/2024

 

 

4

 

 

 

3

 

 

 

3

 

 

 

 

%

SRS Distribution, Inc.(9)(17)

 

First lien senior secured loan

 

L + 3.75%

 

6/2/2028

 

 

5,000

 

 

 

4,964

 

 

 

4,998

 

 

 

0.8

 

%

 

 

 

 

 

 

 

 

 

11,439

 

 

 

11,393

 

 

 

11,426

 

 

 

1.8

 

%

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pluralsight, LLC(9)

 

First lien senior secured loan

 

 L + 8.00%

 

4/6/2027

 

 

6,255

 

 

 

6,196

 

 

 

6,191

 

 

 

1.0

 

%

Pluralsight, LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 8.00%

 

4/6/2027

 

 

 

 

 

(4

)

 

 

(4

)

 

 

 

%

 

 

 

 

 

 

 

 

 

6,255

 

 

 

6,192

 

 

 

6,187

 

 

 

1.0

 

%

Financial services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AxiomSL Group, Inc.(8)

 

First lien senior secured loan

 

 L + 6.00%

 

12/3/2027

 

 

1,774

 

 

 

1,750

 

 

 

1,761

 

 

 

0.3

 

%

 

7


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

AxiomSL Group, Inc.(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.00%

 

12/3/2025

 

 

 

 

 

(23

)

 

 

(18

)

 

 

 

%

AxiomSL Group, Inc.(8)

 

First lien senior secured loan

 

 L + 6.00%

 

12/3/2027

 

 

33,499

 

 

 

33,172

 

 

 

33,244

 

 

 

5.3

 

%

AxiomSL Group, Inc.(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 6.00%

 

7/21/2023

 

 

 

 

 

(10

)

 

 

 

 

 

 

%

AxiomSL Group, Inc.(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.00%

 

12/3/2025

 

 

 

 

 

(3

)

 

 

(2

)

 

 

 

%

Hg Saturn Luchaco Ltd.(18)(23)

 

Unsecured facility

 

G + 7.50% PIK

 

3/30/2026

 

 

2,104

 

 

 

2,139

 

 

 

2,083

 

 

 

0.3

 

%

Muine Gall, LLC(18)(26)

 

First lien senior secured loan

 

L + 7.00% PIK

 

9/21/2024

 

 

85,000

 

 

 

85,000

 

 

 

85,000

 

 

 

13.5

 

%

 

 

 

 

 

 

 

 

 

122,377

 

 

 

122,025

 

 

 

122,068

 

 

 

19.4

 

%

Food and beverage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balrog Acquisition, Inc. (dba BakeMark)(9)

 

First lien senior secured loan

 

 L + 4.00%

 

9/5/2028

 

 

14,000

 

 

 

13,855

 

 

 

13,965

 

 

 

2.2

 

%

Balrog Acquisition, Inc. (dba BakeMark)(9)

 

Second lien senior secured loan

 

 L + 7.00%

 

9/3/2029

 

 

6,000

 

 

 

5,950

 

 

 

5,950

 

 

 

0.9

 

%

Shearer's Foods, LLC(8)(17)

 

First lien senior secured loan

 

 L + 3.50%

 

9/23/2027

 

 

4,933

 

 

 

4,933

 

 

 

4,924

 

 

 

0.8

 

%

Sovos Brands Intermediate, Inc.(8)(17)

 

First lien senior secured loan

 

 L + 3.75%

 

6/8/2028

 

 

4,485

 

 

 

4,475

 

 

 

4,485

 

 

 

0.7

 

%

Ultimate Baked Goods Midco, LLC(8)

 

First lien senior secured loan

 

 L + 6.25%

 

8/13/2027

 

 

16,500

 

 

 

16,095

 

 

 

16,087

 

 

 

2.6

 

%

Ultimate Baked Goods Midco, LLC(9)(12)

 

First lien senior secured revolving loan

 

 L + 6.25%

 

8/13/2027

 

 

325

 

 

 

276

 

 

 

275

 

 

 

 

%

 

 

 

 

 

 

 

 

 

46,243

 

 

 

45,584

 

 

 

45,686

 

 

 

7.2

 

%

Healthcare equipment and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian Hospital Specialties Ltd.(18)(23)

 

First lien senior secured loan

 

C + 4.50%

 

4/14/2028

 

 

3,528

 

 

 

3,516

 

 

 

3,484

 

 

 

0.6

 

%

Canadian Hospital Specialties Ltd.(12)(13)(14)(18)(24)

 

First lien senior secured delayed draw term loan

 

C + 4.50%

 

4/15/2023

 

 

 

 

 

(7

)

 

 

(5

)

 

 

 

%

Canadian Hospital Specialties Ltd.(12)(13)(18)(24)

 

First lien senior secured revolving loan

 

C + 4.50%

 

4/15/2027

 

 

 

 

 

(5

)

 

 

(6

)

 

 

 

%

Packaging Coordinators Midco, Inc.(9)

 

Second lien senior secured loan

 

 L + 8.00%

 

11/30/2028

 

 

2,418

 

 

 

2,374

 

 

 

2,394

 

 

 

0.4

 

%

Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)(7)

 

First lien senior secured loan

 

 L + 6.75%

 

1/29/2028

 

 

862

 

 

 

848

 

 

 

850

 

 

 

0.1

 

%

Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.75%

 

1/29/2026

 

 

 

 

 

(2

)

 

 

(1

)

 

 

 

%

 

 

 

 

 

 

 

 

 

6,808

 

 

 

6,724

 

 

 

6,716

 

 

 

1.1

 

%

Healthcare providers and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ex Vivo Parent Inc. (dba OB Hospitalist)(8)

 

First lien senior secured loan

 

 L + 9.50%

 

9/27/2028

 

 

30,503

 

 

 

29,894

 

 

 

29,893

 

 

 

4.7

 

%

OB Hospitalist Group, Inc.(8)

 

First lien senior secured loan

 

 L + 5.50%

 

9/27/2027

 

 

61,812

 

 

 

60,577

 

 

 

60,575

 

 

 

9.6

 

%

OB Hospitalist Group, Inc.(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.50%

 

9/27/2027

 

 

 

 

 

(160

)

 

 

(160

)

 

 

 

%

Quva Pharma, Inc.(8)

 

First lien senior secured loan

 

 L + 5.50%

 

4/12/2028

 

 

4,545

 

 

 

4,416

 

 

 

4,420

 

 

 

0.7

 

%

Quva Pharma, Inc.(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.50%

 

4/10/2026

 

 

 

 

 

(12

)

 

 

(13

)

 

 

 

%

Refresh Parent Holdings, Inc.(8)

 

First lien senior secured loan

 

 L + 6.50%

 

12/9/2026

 

 

1,189

 

 

 

1,173

 

 

 

1,180

 

 

 

0.2

 

%

Refresh Parent Holdings, Inc.(8)(12)(14)

 

First lien senior secured delayed draw term loan

 

 L + 6.50%

 

6/9/2022

 

 

307

 

 

 

302

 

 

 

304

 

 

 

 

%

Refresh Parent Holdings, Inc.(8)(12)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

12/9/2026

 

 

49

 

 

 

47

 

 

 

48

 

 

 

 

%

 

 

 

 

 

 

 

 

 

98,405

 

 

 

96,237

 

 

 

96,247

 

 

 

15.2

 

%

Healthcare technology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BCPE Osprey Buyer, Inc. (dba PartsSource)(8)

 

First lien senior secured loan

 

 L + 5.75%

 

8/23/2028

 

 

54,310

 

 

 

53,455

 

 

 

53,441

 

 

 

8.5

 

%

 

8


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

BCPE Osprey Buyer, Inc. (dba PartsSource)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.75%

 

8/23/2023

 

 

 

 

 

(231

)

 

 

(147

)

 

 

 

%

BCPE Osprey Buyer, Inc. (dba PartsSource)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

8/21/2026

 

 

 

 

 

(73

)

 

 

(74

)

 

 

 

%

Intelerad Medical Systems Inc. (fka 11849573 Canada Inc.)(8)(18)

 

First lien senior secured loan

 

 L + 6.25%

 

8/21/2026

 

 

28,855

 

 

 

28,492

 

 

 

28,783

 

 

 

4.6

 

%

Intelerad Medical Systems Inc. (fka 11849573 Canada Inc.)(8)(12)(18)

 

First lien senior secured revolving loan

 

 L + 6.25%

 

8/21/2026

 

 

228

 

 

 

228

 

 

 

225

 

 

 

 

%

Project Ruby Ultimate Parent Corp. (dba
Wellsky)
(6)(17)

 

First lien senior secured loan

 

 L + 3.25%

 

3/10/2028

 

 

4,478

 

 

 

4,457

 

 

 

4,470

 

 

 

0.7

 

%

 

 

 

 

 

 

 

 

 

87,871

 

 

 

86,328

 

 

 

86,698

 

 

 

13.8

 

%

Human resource support services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IG Investments Holdings, LLC (dba Insight Global)(8)

 

First lien senior secured loan

 

 L + 6.00%

 

9/22/2028

 

 

46,387

 

 

 

45,463

 

 

 

45,460

 

 

 

7.2

 

%

IG Investments Holdings, LLC (dba Insight Global)(10)(12)(13)

 

First lien senior secured revolving loan

 

 P + 6.00%

 

9/22/2027

 

 

 

 

 

(72

)

 

 

(72

)

 

 

 

%

 

 

 

 

 

 

 

 

 

46,387

 

 

 

45,391

 

 

 

45,388

 

 

 

7.2

 

%

Household products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Walker Edison Furniture Company LLC(9)

 

First lien senior secured loan

 

 L + 5.75%

 

3/31/2027

 

 

9,950

 

 

 

9,810

 

 

 

9,353

 

 

 

1.5

 

%

 

 

 

 

 

 

 

 

 

9,950

 

 

 

9,810

 

 

 

9,353

 

 

 

1.5

 

%

Infrastructure and environmental services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aegion Corp.(6)(19)

 

First lien senior secured loan

 

 L + 4.75%

 

5/17/2028

 

 

5,000

 

 

 

4,976

 

 

 

4,974

 

 

 

0.8

 

%

USIC Holdings, Inc.(6)(17)(19)

 

First lien senior secured loan

 

 L + 3.50%

 

5/12/2028

 

 

5,000

 

 

 

4,976

 

 

 

4,994

 

 

 

0.8

 

%

USIC Holdings, Inc.(6)

 

Second lien senior secured loan

 

 L + 6.50%

 

5/14/2029

 

 

18,000

 

 

 

17,826

 

 

 

17,865

 

 

 

2.8

 

%

 

 

 

 

 

 

 

 

 

28,000

 

 

 

27,778

 

 

 

27,833

 

 

 

4.4

 

%

Insurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alera Group, Inc.(6)

 

First lien senior secured loan

 

 L + 5.50%

 

10/2/2028

 

 

81,772

 

 

 

79,934

 

 

 

79,931

 

 

 

12.7

 

%

Alera Group, Inc.(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.50%

 

10/2/2023

 

 

 

 

 

(261

)

 

 

(291

)

 

 

 

%

AssuredPartners, Inc.(17)(19)

 

First lien senior secured loan

 

 L + 3.50%

 

2/12/2027

 

 

7,980

 

 

 

7,980

 

 

 

7,966

 

 

 

1.3

 

%

Asurion, LLC(6)(17)

 

Second lien senior secured loan

 

 L + 5.25%

 

1/22/2029

 

 

48,000

 

 

 

47,529

 

 

 

47,748

 

 

 

7.6

 

%

Alliant Holdings Intermediate, LLC(6)(16)(17)(19)

 

First lien senior secured loan

 

 L + 3.75%

 

11/5/2027

 

 

3,982

 

 

 

3,961

 

 

 

3,983

 

 

 

0.6

 

%

Evolution BuyerCo, Inc.(dba SIAA)(8)

 

First lien senior secured loan

 

 L + 6.25%

 

4/28/2028

 

 

7,703

 

 

 

7,598

 

 

 

7,606

 

 

 

1.2

 

%

Evolution BuyerCo, Inc.(dba SIAA)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 6.25%

 

4/28/2023

 

 

 

 

 

(3

)

 

 

(1

)

 

 

 

%

Evolution BuyerCo, Inc.(dba SIAA)(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.25%

 

4/30/2027

 

 

 

 

 

(9

)

 

 

(8

)

 

 

 

%

KUSRP Intermediate, Inc. (dba U.S. Retirement and Benefits Partners)(8)

 

First lien senior secured loan

 

L + 9.50% PIK

 

7/24/2028

 

 

7,863

 

 

 

7,709

 

 

 

7,706

 

 

 

1.2

 

%

Peter C. Foy & Associated Insurance Services, LLC (9)

 

First lien senior secured loan

 

 L + 6.50%

 

3/31/2026

 

 

65

 

 

 

65

 

 

 

66

 

 

 

 

%

Peter C. Foy & Associated Insurance Services, LLC (9)

 

First lien senior secured delayed draw term loan C

 

 L + 6.50%

 

3/31/2026

 

 

8

 

 

 

8

 

 

 

8

 

 

 

 

%

Peter C. Foy & Associated Insurance Services, LLC (9)

 

First lien senior secured delayed draw term loan D

 

 L + 6.25%

 

3/31/2026

 

 

1,915

 

 

 

1,885

 

 

 

1,934

 

 

 

0.3

 

%

Peter C. Foy & Associated Insurance Services, LLC (9)(14)

 

First lien senior secured delayed draw term loan E

 

 L + 5.75%

 

9/12/2022

 

 

39,889

 

 

 

39,141

 

 

 

40,288

 

 

 

6.4

 

%

Peter C. Foy & Associated Insurance Services, LLC (9)(12)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

3/31/2026

 

 

 

 

 

 

 

 

 

 

 

 

%

TEMPO BUYER CORP. (dba Global Claims Services)(8)

 

First lien senior secured loan

 

 L + 5.50%

 

8/26/2028

 

 

36,524

 

 

 

35,802

 

 

 

35,793

 

 

 

5.7

 

%

 

9


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

TEMPO BUYER CORP. (dba Global Claims Services)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.50%

 

8/26/2023

 

 

 

 

 

(102

)

 

 

(103

)

 

 

 

%

TEMPO BUYER CORP. (dba Global Claims Services)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.50%

 

8/26/2027

 

 

 

 

 

(101

)

 

 

(103

)

 

 

 

%

USRP Holdings, Inc. (dba U.S. Retirement and Benefits Partners)(8)

 

First lien senior secured loan

 

 L + 5.50%

 

7/23/2027

 

 

13,354

 

 

 

13,094

 

 

 

13,087

 

 

 

2.1

 

%

USRP Holdings, Inc. (dba U.S. Retirement and Benefits Partners)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.50%

 

7/23/2021

 

 

 

 

 

(17

)

 

 

(17

)

 

 

 

%

USRP Holdings, Inc. (dba U.S. Retirement and Benefits Partners)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.50%

 

7/23/2027

 

 

 

 

 

(21

)

 

 

(22

)

 

 

 

%

 

 

 

 

 

 

 

 

 

249,055

 

 

 

244,192

 

 

 

245,571

 

 

 

39.1

 

%

Internet software and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BCTO BSI Buyer, Inc. (dba Buildertrend)(8)

 

First lien senior secured loan

 

 L + 7.00%

 

12/23/2026

 

 

893

 

 

 

885

 

 

 

888

 

 

 

0.1

 

%

BCTO BSI Buyer, Inc. (dba Buildertrend)(8)(12)

 

First lien senior secured revolving loan

 

 L + 7.00%

 

12/23/2026

 

 

60

 

 

 

59

 

 

 

60

 

 

 

 

%

BCPE Nucleon (DE) SPV, LP(9)

 

First lien senior secured loan

 

 L + 7.00%

 

9/24/2026

 

 

1,333

 

 

 

1,316

 

 

 

1,327

 

 

 

0.2

 

%

CivicPlus, LLC(8)

 

First lien senior secured loan

 

 L + 6.25%

 

8/23/2027

 

 

9,387

 

 

 

9,294

 

 

 

9,293

 

 

 

1.5

 

%

CivicPlus, LLC(12)(14)

 

First lien senior secured delayed draw term loan

 

 L + 6.25%

 

8/24/2023

 

 

 

 

 

 

 

 

 

 

 

 

%

CivicPlus, LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.25%

 

8/23/2027

 

 

 

 

 

(9

)

 

 

(9

)

 

 

 

%

GovBrands Intermediate, Inc.(8)

 

First lien senior secured loan

 

 L + 5.50%

 

8/4/2027

 

 

8,367

 

 

 

8,162

 

 

 

8,158

 

 

 

1.3

 

%

GovBrands Intermediate, Inc.(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.50%

 

8/4/2023

 

 

 

 

 

(33

)

 

 

(34

)

 

 

 

%

GovBrands Intermediate, Inc.(10)(12)

 

First lien senior secured revolving loan

 

 P + 4.50%

 

8/4/2027

 

 

294

 

 

 

272

 

 

 

272

 

 

 

 

%

Granicus, Inc.(8)

 

First lien senior secured loan

 

 L + 6.25%

 

1/29/2027

 

 

1,834

 

 

 

1,795

 

 

 

1,802

 

 

 

0.3

 

%

Granicus, Inc.(8)(12)(13)(14)

 

First lien senior secured delayed draw term loan

 

 L + 6.00%

 

1/30/2023

 

 

208

 

 

 

203

 

 

 

203

 

 

 

 

%

Granicus, Inc.(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.25%

 

1/29/2027

 

 

 

 

 

(3

)

 

 

(3

)

 

 

 

%

Help/Systems Holdings, Inc.(8)(17)

 

First lien senior secured loan

 

 L + 4.75%

 

11/19/2026

 

 

6,467

 

 

 

6,468

 

 

 

6,470

 

 

 

1.0

 

%

Hyland Software, Inc.(6)(19)

 

Second lien senior secured loan

 

 L + 6.25%

 

7/7/2025

 

 

22,500

 

 

 

22,491

 

 

 

22,698

 

 

 

3.6

 

%

MessageBird Bidco B.V.(8)(18)

 

First lien senior secured loan

 

 L + 6.75%

 

5/6/2027

 

 

5,000

 

 

 

4,895

 

 

 

4,900

 

 

 

0.8

 

%

Proofpoint, Inc.(7)

 

Second lien senior secured loan

 

 L + 6.25%

 

9/1/2029

 

 

7,500

 

 

 

7,463

 

 

 

7,463

 

 

 

1.2

 

%

Thunder Purchaser, Inc. (dba Vector Solutions)(9)

 

First lien senior secured loan

 

 L + 5.75%

 

6/30/2028

 

 

9,745

 

 

 

9,650

 

 

 

9,672

 

 

 

1.5

 

%

Thunder Purchaser, Inc. (dba Vector Solutions)(7)

 

First lien senior secured loan

 

 L + 5.75%

 

6/30/2028

 

 

2,348

 

 

 

2,324

 

 

 

2,330

 

 

 

0.4

 

%

Thunder Purchaser, Inc. (dba Vector Solutions)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

6/30/2027

 

 

 

 

 

(7

)

 

 

(5

)

 

 

 

%

Thunder Purchaser, Inc. (dba Vector Solutions)(12)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.75%

 

8/17/2023

 

 

 

 

 

 

 

 

 

 

 

 

%

Trader Interactive, LLC (fka Dominion Web Solutions, LLC)(9)

 

First lien senior secured loan

 

 L + 4.00%

 

7/28/2028

 

 

5,000

 

 

 

4,978

 

 

 

4,975

 

 

 

0.8

 

%

 

 

 

 

 

 

 

 

 

80,936

 

 

 

80,203

 

 

 

80,460

 

 

 

12.7

 

%

Leisure and entertainment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Troon Golf, L.L.C.(8)

 

First lien senior secured loan

 

 L + 6.00%

 

8/5/2027

 

 

94,595

 

 

 

94,132

 

 

 

94,122

 

 

 

14.9

 

%

Troon Golf, L.L.C.(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.00%

 

8/5/2026

 

 

 

 

 

(35

)

 

 

(36

)

 

 

 

%

 

 

 

 

 

 

 

 

 

94,595

 

 

 

94,097

 

 

 

94,086

 

 

 

14.9

 

%

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACR Group Borrower, LLC(8)

 

First lien senior secured loan

 

L + 4.25%

 

3/31/2028

 

 

4,115

 

 

 

4,057

 

 

 

4,074

 

 

 

0.6

 

%

 

10


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

ACR Group Borrower, LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 4.50%

 

3/31/2026

 

 

 

 

 

(12

)

 

 

(9

)

 

 

 

%

Engineered Machinery Holdings (dba
Duravant)
(8)(17)

 

First lien senior secured loan

 

 L + 3.75%

 

5/19/2028

 

 

5,000

 

 

 

4,975

 

 

 

4,986

 

 

 

0.8

 

%

Engineered Machinery Holdings (dba
Duravant)
(8)(19)

 

Second lien senior secured loan

 

 L + 6.50%

 

5/21/2029

 

 

21,000

 

 

 

20,903

 

 

 

21,000

 

 

 

3.3

 

%

Gloves Buyer, Inc. (dba Protective Industrial
Products)
(6)

 

Second lien senior secured loan

 

 L + 8.25%

 

12/29/2028

 

 

900

 

 

 

879

 

 

 

888

 

 

 

0.1

 

%

MHE Intermediate Holdings, LLC (dba OnPoint Group)(8)

 

First lien senior secured loan

 

 L + 5.75%

 

7/21/2027

 

 

41,071

 

 

 

40,672

 

 

 

40,661

 

 

 

6.4

 

%

MHE Intermediate Holdings, LLC (dba OnPoint Group)(8)(12)(14)

 

First lien senior secured delayed draw term loan

 

 L + 5.75%

 

7/21/2023

 

 

264

 

 

 

262

 

 

 

262

 

 

 

 

%

MHE Intermediate Holdings, LLC (dba OnPoint Group)(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.75%

 

7/21/2027

 

 

 

 

 

(35

)

 

 

(36

)

 

 

 

%

 

 

 

 

 

 

 

 

 

72,350

 

 

 

71,701

 

 

 

71,826

 

 

 

11.2

 

%

Professional Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Relativity ODA LLC(6)

 

First lien senior secured loan

 

L + 7.50% PIK

 

5/12/2027

 

 

4,484

 

 

 

4,422

 

 

 

4,428

 

 

 

0.7

 

%

Relativity ODA LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

5/12/2027

 

 

 

 

 

(6

)

 

 

(5

)

 

 

 

%

Sovos Compliance, LLC(8)(17)

 

First lien senior secured loan

 

 L + 4.50%

 

8/11/2028

 

 

6,396

 

 

 

6,380

 

 

 

6,430

 

 

 

1.0

 

%

Sovos Compliance, LLC(12)(14)(17)

 

First lien senior secured delayed draw term loan

 

 L + 4.50%

 

8/12/2023

 

 

 

 

 

 

 

 

 

 

 

 

%

 

 

 

 

 

 

 

 

 

10,880

 

 

 

10,796

 

 

 

10,853

 

 

 

1.7

 

%

Specialty retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Milan Laser Holdings LLC(8)

 

First lien senior secured loan

 

 L + 5.00%

 

4/27/2027

 

 

20,683

 

 

 

20,489

 

 

 

20,528

 

 

 

3.3

 

%

Milan Laser Holdings LLC(12)(13)

 

First lien senior secured revolving loan

 

 L + 5.00%

 

4/27/2026

 

 

 

 

 

(16

)

 

 

(13

)

 

 

 

%

 

 

 

 

 

 

 

 

 

20,683

 

 

 

20,473

 

 

 

20,515

 

 

 

3.3

 

%

Telecommunications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Park Place Technologies, LLC(6)(17)

 

First lien senior secured loan

 

 L + 5.00%

 

11/10/2027

 

 

995

 

 

 

959

 

 

 

992

 

 

 

0.2

 

%

 

 

 

 

 

 

 

 

 

995

 

 

 

959

 

 

 

992

 

 

 

0.2

 

%

Total non-controlled/non-affiliated portfolio company debt investments

 

 

 

 

 

 

 

$

1,436,472

 

 

$

1,417,181

 

 

$

1,419,840

 

 

 

225.3

 

%

Equity Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metis HoldCo, Inc. (dba Mavis Tire Express Services)(11)

 

Series A Convertible Preferred Stock

 

7.00% PIK

 

N/A

 

 

11,077

 

 

 

10,724

 

 

 

10,911

 

 

 

1.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

10,724

 

 

 

10,911

 

 

 

1.7

 

%

Buildings and real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skyline Holdco B, Inc. (dba Dodge Data & Analytics)(11)(20)

 

Series A Preferred Stock

 

N/A

 

N/A

 

 

143,963

 

 

 

216

 

 

 

216

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

216

 

 

 

216

 

 

 

 

%

Business services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denali Holding LP (dba Summit Companies)(11)(20)

 

Common Units

 

N/A

 

N/A

 

 

411,523

 

 

 

4,115

 

 

 

4,115

 

 

 

0.7

 

%

Hercules Buyer, LLC (dba The Vincit Group)(11)(16)(20)

 

Common Units

 

N/A

 

N/A

 

 

12

 

 

 

10

 

 

 

12

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

4,125

 

 

 

4,127

 

 

 

0.7

 

%

Consumer products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASP Conair Holdings LP(11)(20)

 

Class A Units

 

N/A

 

N/A

 

 

9,286

 

 

 

929

 

 

 

929

 

 

 

0.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

929

 

 

 

929

 

 

 

0.1

 

%

Healthcare equipment and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KPCI Holdings, L.P.(11)(20)

 

LP Interest

 

N/A

 

N/A

 

 

313

 

 

 

313

 

 

 

362

 

 

 

0.1

 

%

Patriot Holdings SCSp (dba Corza Health, Inc.)(11)

 

Class A Units

 

8.00% PIK

 

N/A

 

 

48

 

 

 

48

 

 

 

48

 

 

 

 

%

Patriot Holdings SCSp (dba Corza Health, Inc.)(11)(20)

 

Class B Units

 

N/A

 

N/A

 

 

629

 

 

 

 

 

 

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

361

 

 

 

410

 

 

 

0.1

 

%

 

11


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

Company(1)(2)(3)(15)(25)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(21)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

Healthcare providers and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KOBHG Holdings, L.P. (dba OB Hospitalist)(11)(20)

 

LP Interest

 

N/A

 

N/A

 

 

3,520

 

 

 

3,520

 

 

 

3,520

 

 

 

0.6

 

%

Restore OMH Intermediate Holdings, Inc.(11)

 

Senior Preferred Stock

 

13.00% PIK

 

N/A

 

 

338

 

 

 

330

 

 

 

331

 

 

 

0.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

3,850

 

 

 

3,851

 

 

 

0.7

 

%

Insurance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Evolution Parent, LP (dba SIAA) (11)(20)

 

Class A Interests

 

N/A

 

N/A

 

 

270,270

 

 

 

270

 

 

 

270

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

270

 

 

 

270

 

 

 

 

%

Internet software and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MessageBird Holding B.V.(11)(18)(20)

 

Extended Series C Warrants

 

N/A

 

N/A

 

 

798

 

 

 

49

 

 

 

49

 

 

 

 

%

Thunder Topco L.P. (dba Vector Solutions)(11)(20)

 

Common Units

 

N/A

 

N/A

 

 

680,457

 

 

 

713

 

 

 

713

 

 

 

0.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

762

 

 

 

762

 

 

 

0.1

 

%

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gloves Holding, LP (dba Protective Industrial Products)(11)(20)

 

LP Interest

 

N/A

 

N/A

 

 

100

 

 

 

100

 

 

 

112

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

112

 

 

 

 

%

Total non-controlled/non-affiliated portfolio company equity investments

 

 

 

 

 

 

 

 

 

 

$

21,337

 

 

$

21,588

 

 

 

3.4

 

%

Total Investments

 

 

 

 

 

 

 

 

 

 

$

1,438,518

 

 

$

1,441,428

 

 

 

228.7

 

%

 

 

 

 

 

 

________________

 

(1)
Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
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.
(3)
Unless otherwise indicated, all investments are considered Level 3 investments.
(4)
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.
(5)
Unless otherwise indicated, 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), British pound sterling LIBOR (“GBPLIBOR” or “G”), 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.
(6)
The interest rate on these loans is subject to 1 month LIBOR, which as of September 30, 2021 was 0.08%.
(7)
The interest rate on these loans is subject to 2 month LIBOR, which as of September 30, 2021 was 0.11%.
(8)
The interest rate on these loans is subject to 3 month LIBOR, which as of September 30, 2021 was 0.13%.
(9)
The interest rate on these loans is subject to 6 month LIBOR, which as of September 30, 2021 was 0.16%.
(10)
The interest rate on these loans is subject to Prime, which as of September 30, 2021 was 3.25%.

12


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of September 30, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

 

(11)
Security acquired in transaction exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted security” under the Securities Act. As of September 30, 2021, the aggregate fair value of these securities is $21.6 million, or 3.4% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

Portfolio Company

 

Investment

 

Acquisition Date

ASP Conair Holdings LP

 

Class A Units

 

May 17, 2021

Denali Holding LP (dba Summit Companies)

 

Class A Units

 

September 14, 2021

Evolution Parent, LP (dba SIAA)

 

Class A Interests

 

April 30, 2021

Gloves Holding, LP (dba Protective Industrial Products)

 

LP Interest

 

December 29, 2020

Hercules Buyer, LLC (dba The Vincit Group)

 

Common Units

 

December 15, 2020

KOBHG Holdings, L.P. (dba OB Hospitalist)

 

LP Interest

 

September 27, 2021

KPCI Holdings, L.P.

 

LP Interest

 

November 30, 2020

MessageBird Holding B.V.

 

Extended Series C Warrants

 

April 29, 2021

Metis HoldCo, Inc. (dba Mavis Tire Express Services)

 

Series A Convertible Preferred Stock

 

May 4, 2021

Patriot Holdings SCSp (dba Corza Health, Inc.)

 

Class A Units

 

January 29, 2021

Patriot Holdings SCSp (dba Corza Health, Inc.)

 

Class B Units

 

January 29, 2021

Restore OMH Intermediate Holdings, Inc.

 

Senior Preferred Stock

 

December 9, 2020

Skyline Holdco B, Inc. (dba Dodge Data & Analytics)

 

Series A Preferred Stock

 

April 14, 2021

Thunder Topco L.P. (dba Vector Solutions)

 

Common Units

 

June 30, 2021

(12)
Position or portion thereof is an unfunded loan or equity commitment. See Note 7 “Commitments and Contingencies”.
(13)
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.
(14)
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.
(15)
Unless otherwise indicated, all investments represent co-investment made with the Company’s affiliates in accordance with the terms of exemptive relief that the Company received from the U.S. Securities and Exchange Commission. See Note 3 “Agreements and Related Party Transactions.”
(16)
We invest in this portfolio company through underlying blocker entities Hercules Blocker 1 LLC, Hercules Blocker 2 LLC, Hercules Blocker 3 LLC, Hercules Blocker 4 LLC, and Hercules Blocker 5 LLC.
(17)
Level 2 investment.
(18)
This portfolio company is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940, as amended (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. As of September 30, 2021, non-qualifying assets represented 8.0% of total assets as calculated in accordance with the regulatory requirements.
(19)
This portfolio company was not a co-investment made with the Company’s affiliates in accordance with the terms of exemptive relief that the Company received from the U.S. Securities and Exchange Commission.
(20)
Investment is non-income producing.
(21)
As of September 30, 2021, the net estimated unrealized gain on investments for U.S. federal income tax purposes was $2.9 million based on a tax cost basis of $1.4 billion. As of September 30, 2021, the estimated aggregate gross unrealized gain for U.S. federal income tax purposes was $3.7 million and the estimated aggregate gross unrealized loss for U.S. federal income tax purposes was $ 0.8 million.
(22)
Investment does not contain a variable rate structure.
(23)
The interest rate on this loan is subject to 6 month GBPLIBOR, which as of September 30, 2021 was 0.17%.
(24)
The interest rate on this loan is subject to 6 month Canadian Dollar Offered Rate (“CDOR” or “C”), which as of September 30, 2021 was 0.45%
(25)
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 I. See Note 6 "Debt".
(26)
Investment is not pledged as collateral for the credit facilities.

 

The accompanying notes are an integral part of these consolidated financial statements.

13


 

Owl Rock Core Income Corp.

Consolidated Schedule of Investments

As of December 31, 2020

(Amounts in thousands, except share amounts)

 

Company(1)(2)(3)(14)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(5)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

Non-controlled/non-affiliated portfolio company investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Investments(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hercules Borrower, LLC(dba The Vincit Group)(9)

 

First lien senior secured loan

 

 L + 6.50%

 

12/15/2026

 

$

822

 

 

$

810

 

 

$

810

 

 

 

6.6

 

%

Hercules Borrower LLC (dba The Vincit Group)(11)(12)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

12/15/2026

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

Hercules Buyer, LLC (dba The Vincit Group)(15)

 

Unsecured notes

 

0.48% (PIK)

 

12/14/2029

 

 

22

 

 

 

22

 

 

 

22

 

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

844

 

 

 

831

 

 

 

831

 

 

 

6.7

 

%

Chemicals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aruba Investments Holdings LLC (dba Angus Chemical Company)(9)

 

Second lien senior secured loan

 

 L + 7.75%

 

11/24/2028

 

 

1,000

 

 

 

985

 

 

 

984

 

 

 

8.0

 

%

 

 

 

 

 

 

 

 

 

1,000

 

 

 

985

 

 

 

984

 

 

 

8.0

 

%

Consumer products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Olaplex, Inc.(7)

 

First lien senior secured loan

 

 L + 6.50%

 

1/8/2026

 

 

994

 

 

 

984

 

 

 

984

 

 

 

8.0

 

%

 

 

 

 

 

 

 

 

 

994

 

 

 

984

 

 

 

984

 

 

 

8.0

 

%

Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual Foodservice Holdings, LLC(9)

 

First lien senior secured loan

 

 L + 6.25%

 

11/22/2025

 

 

1,318

 

 

 

1,298

 

 

 

1,298

 

 

 

10.6

 

%

Individual Foodservice Holdings, LLC(11)(12)(13)

 

First lien senior secured delayed draw term loan

 

 L + 6.25%

 

6/30/2022

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

Individual Foodservice Holdings, LLC(9)(11)

 

First lien senior secured revolving loan

 

L + 6.25%

 

11/22/2024

 

 

19

 

 

 

17

 

 

 

17

 

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

1,337

 

 

 

1,314

 

 

 

1,314

 

 

 

10.7

 

%

Financial Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AxiomSL Group, Inc.(8)

 

First lien senior secured loan

 

 L + 6.50%

 

12/3/2027

 

 

1,788

 

 

 

1,761

 

 

 

1,761

 

 

 

14.3

 

%

AxiomSL Group, Inc.(11)(12)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

12/3/2025

 

 

 

 

 

(3

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,788

 

 

 

1,758

 

 

 

1,758

 

 

 

14.3

 

%

Healthcare equipment and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Packaging Coordinators Midco, Inc.(9)

 

Second lien senior secured loan

 

 L + 8.25%

 

11/30/2028

 

 

2,418

 

 

 

2,370

 

 

 

2,370

 

 

 

19.3

 

%

 

 

 

 

 

 

 

 

 

2,418

 

 

 

2,370

 

 

 

2,370

 

 

 

19.3

 

%

Healthcare providers and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Refresh Parent Holdings, Inc.(8)

 

First lien senior secured loan

 

 L + 6.50%

 

12/9/2026

 

 

1,198

 

 

 

1,180

 

 

 

1,180

 

 

 

9.6

 

 

Refresh Parent Holdings, Inc.(11)(12)(13)

 

First lien senior secured delayed draw term loan

 

 L + 6.50%

 

6/9/2022

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

Refresh Parent Holdings, Inc.(8)(11)

 

First lien senior secured revolving loan

 

 L + 6.50%

 

12/9/2026

 

 

41

 

 

 

39

 

 

 

39

 

 

 

0.3

 

 

 

 

 

 

 

 

 

 

 

1,239

 

 

 

1,218

 

 

 

1,218

 

 

 

9.9

 

%

 

14


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of December 31, 2020

(Amounts in thousands, except share amounts)

 

Company(1)(2)(3)(14)

 

Investment

 

Interest

 

Maturity
Date

 

Par /
Units

 

 

Amortized
Cost
(4)(5)

 

 

Fair
Value

 

 

Percentage
of Net
Assets

 

 

Internet software and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BCTO BSI Buyer, Inc. (dba Buildertrend)(8)

 

First lien senior secured loan

 

 L + 7.00%

 

12/23/2026

 

 

893

 

 

 

884

 

 

 

884

 

 

 

7.2

 

%

BCTO BSI Buyer, Inc. (dba Buildertrend)(11)(12)

 

First lien senior secured revolving loan

 

 L + 7.00%

 

12/23/2026

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

BCPE Nucleon (DE) SPV, LP(8)

 

First lien senior secured loan

 

 L + 7.00%

 

9/24/2026

 

 

1,500

 

 

 

1,478

 

 

 

1,478

 

 

 

12.0

 

 

 

 

 

 

 

 

 

 

 

2,393

 

 

 

2,361

 

 

 

2,361

 

 

 

19.2

 

%

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gloves Buyer, Inc. (dba Protective Industrial Products)(7)

 

Second lien senior secured loan

 

 L + 8.25%

 

12/28/2028

 

 

900

 

 

 

878

 

 

 

878

 

 

 

7.2

 

%

 

 

 

 

 

 

 

 

 

900

 

 

 

878

 

 

 

878

 

 

 

7.2

 

%

Telecommunications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Park Place Technologies, LLC(7)

 

First lien senior secured loan

 

 L + 5.00%

 

11/10/2027

 

 

1,000

 

 

 

960

 

 

 

960

 

 

 

7.8

 

%

 

 

 

 

 

 

 

 

 

1,000

 

 

 

960

 

 

 

960

 

 

 

7.8

 

%

Total non-controlled/non-affiliated portfolio company debt investments

 

 

 

 

 

 

 

$

13,913

 

 

$

13,659

 

 

$

13,658

 

 

 

111.1

 

%

Equity Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hercules Buyer, LLC (dba The Vincit Group)(10)(15)

 

Common Units

 

N/A

 

N/A

 

 

10,000

 

 

 

10

 

 

 

10

 

 

 

 

%

 

 

 

 

 

 

 

 

 

10,000

 

 

 

10

 

 

 

10

 

 

 

 

%

Healthcare equipment and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KPCI Holdings, L.P.(10)

 

LP Interest

 

N/A

 

N/A

 

 

313

 

 

 

313

 

 

 

313

 

 

 

2.6

 

%

 

 

 

 

 

 

 

 

 

313

 

 

 

313

 

 

 

313

 

 

 

2.6

 

%

Healthcare providers and services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restore OMH Intermediate Holdings, Inc. (10)

 

Senior Preferred Stock

 

N/A

 

N/A

 

 

30

 

 

 

296

 

 

 

295

 

 

 

2.4

 

%

 

 

 

 

 

 

 

 

 

30

 

 

 

296

 

 

 

295

 

 

 

2.4

 

%

Manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gloves Holding, LP (dba Protective Industrial Products)(10)

 

LP Interest

 

N/A

 

N/A

 

 

100

 

 

 

100

 

 

 

100

 

 

 

0.8

 

%

 

 

 

 

 

 

 

 

 

100

 

 

 

100

 

 

 

100

 

 

 

0.8

 

%

Total non-controlled/non-affiliated portfolio company equity investments

 

 

 

 

 

 

 

 

 

 

$

719

 

 

$

718

 

 

 

5.8

 

%

Total Investments

 

 

 

 

 

 

 

 

 

 

$

14,378

 

 

$

14,376

 

 

 

116.9

 

%

 

15


Owl Rock Core Income Corp.

Consolidated Schedule of Investments (Continued)

As of December 31, 2020

(Amounts in thousands, except share amounts)

 

 

 

 

________________

 

(1)
Certain portfolio company investments are subject to contractual restrictions on sales.
(2)
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.
(3)
Unless otherwise indicated, all investments are considered Level 3 investments.
(4)
As of December 31, 2020, the net estimated unrealized loss on investments for U.S. federal income tax purposes was $2 thousand based on a tax cost basis of $14.4 million. As of December 31, 2020, the estimated aggregate gross unrealized loss for U.S. federal income tax purposes was $2 thousand.
(5)
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.
(6)
Unless otherwise indicated, 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.
(7)
The interest rate on these loans is subject to 1 month LIBOR, which as of December 31, 2020 was 0.14%.
(8)
The interest rate on these loans is subject to 3 month LIBOR, which as of December 31, 2020 was 0.24%.
(9)
The interest rate on these loans is subject to 6 month LIBOR, which as of December 31, 2020 was 0.26%
(10)
Security acquired in transaction exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted security” under the Securities Act. As of December 31, 2020, the aggregate fair value of these securities is $ 0.7 million, or 5.8% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

 

Portfolio Company

 

Investment

 

Acquisition Date

Hercules Buyer LLC

 

Common Units

 

December 15, 2020

KPCI Holdings, L.P.

 

LP Interest

 

November 30, 2020

Restore OMH Intermediate Holdings, Inc.

 

Senior Preferred Stock

 

December 9, 2020

Gloves Holding, LP (dba Protective Industrial Products)

 

LP Interest

 

December 29, 2020

 

(11)
Position or portion thereof is an unfunded loan commitment. See Note 7 “Commitments and Contingencies”.
(12)
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.
(13)
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.
(14)
Represents co-investment made with the Company’s affiliates in accordance with the terms of exemptive relief that the Company received from the U.S. Securities and Exchange Commission. See Note 3 “Agreements and Related Party Transactions.”
(15)
We invest in this portfolio company through underlying blocker entities Hercules Blocker 1 LLC, Hercules Blocker 2 LLC, Hercules Blocker 3 LLC, Hercules Blocker 4 LLC, and Hercules Blocker 5 LLC.

 

The accompanying notes are an integral part of these consolidated financial statements.

16


 

Owl Rock Core Income Corp.

Consolidated Statement of Changes in Net Assets

(Unaudited)

 

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

Increase (Decrease) in Net Assets Resulting from Operations

 

 

 

 

 

 

Net investment income (loss)

 

$

6,038

 

 

$

8,269

 

Net change in unrealized gain (loss)

 

 

2,182

 

 

 

3,016

 

Net realized gain (loss) on investments

 

 

915

 

 

 

922

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

9,135

 

 

 

12,207

 

Distributions

 

 

 

 

 

 

      Class S

 

 

(1,515

)

 

 

(1,768

)

      Class D

 

 

(846

)

 

 

(1,185

)

      Class I

 

 

(4,973

)

 

 

(6,982

)

Net Decrease in Net Assets Resulting from Shareholders' Distributions

 

 

(7,334

)

 

 

(9,935

)

Capital Share Transactions

 

 

 

 

 

 

Class S:

 

 

 

 

 

 

Issuance of shares of common stock

 

 

136,218

 

 

 

162,798

 

Repurchase of common shares

 

 

 

 

 

 

Reinvestment of shareholders' distributions

 

 

410

 

 

 

480

 

Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions - Class S

 

 

136,628

 

 

 

163,278

 

Class D:

 

 

 

 

 

 

Issuance of shares of common stock

 

 

34,701

 

 

 

65,893

 

Repurchase of common shares

 

 

(55

)

 

 

(55

)

Reinvestment of shareholders' distributions

 

 

365

 

 

 

479

 

Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions - Class D

 

 

35,011

 

 

 

66,317

 

Class I:

 

 

 

 

 

 

Issuance of shares of common stock

 

 

246,709

 

 

 

385,557

 

Repurchase of common shares

 

 

(291

)

 

 

(291

)

Reinvestment of shareholders' distributions

 

 

1,044

 

 

 

1,283

 

Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions - Class I

 

 

247,462

 

 

 

386,549

 

Total Increase (Decrease) in Net Assets

 

 

420,902

 

 

 

618,416

 

Net Assets, at beginning of period

 

 

209,787

 

 

 

12,273

 

Net Assets, at end of period

 

$

630,689

 

 

$

630,689

 

 

The accompanying notes are an integral part of these consolidated financial statements.

17


 

Owl Rock Core Income Corp.

Consolidated Statement of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2021

 

Cash Flows from Operating Activities

 

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

$

12,207

 

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:

 

 

 

Purchases of investments, net

 

 

(1,841,997

)

Proceeds from investments and investment repayments, net

 

 

420,227

 

Net change in unrealized (gain) loss on investments

 

 

(3,023

)

Net change in unrealized (gain) loss on translation of assets and liabilities in foreign currencies

 

 

7

 

Net realized (gain) loss on investments

 

 

(924

)

Paid-in-kind interest

 

 

(558

)

Net amortization of discount on investments

 

 

(888

)

Amortization of debt issuance costs

 

 

627

 

Changes in operating assets and liabilities:

 

 

 

(Increase) decrease in interest receivable

 

 

(5,931

)

(Increase) decrease in receivable for investments sold

 

 

(110,131

)

(Increase) decrease in prepaid expenses and other assets

 

 

(2,680

)

Increase (decrease) in payable for investments purchased

 

 

7,980

 

Increase (decrease) in payables to affiliates

 

 

5,806

 

Increase (decrease) in tender payable

 

 

347

 

Increase (decrease) in accrued expenses and other liabilities

 

 

3,454

 

Net cash used in operating activities

 

 

(1,515,477

)

Cash Flows from Financing Activities

 

 

 

Borrowings on debt

 

 

1,993,455

 

Repayments of debt

 

 

(968,100

)

Debt issuance costs

 

 

(13,699

)

Proceeds from issuance of common shares

 

 

613,902

 

Distributions paid to shareholders

 

 

(4,339

)

Net cash provided by financing activities

 

 

1,621,219

 

Net increase (decrease) in cash

 

 

105,742

 

Cash, beginning of period

 

 

8,153

 

Cash, end of period

 

$

113,895

 

 

 

 

 

Supplemental and Non-Cash Information

 

 

 

Interest paid during the period

 

$

2,411

 

Distributions declared during the period

 

$

9,935

 

Reinvestment of distributions during the period

 

$

2,242

 

Distributions payable

 

$

3,354

 

 

The accompanying notes are an integral part of these consolidated financial statements.

18


 

Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1. Organization and Principal Business

 

Owl Rock Core Income Corp., (“Owl Rock” or the “Company”) is a Maryland corporation formed on April 22, 2020. 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’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 invests in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity and equity-related securities which include common and preferred stock, securities convertible into common stock, and warrants. The Company may on occasion invest in smaller or larger companies if an attractive opportunity presents itself, especially when there are dislocations in the capital markets, including the high yield and large syndicated loan markets, which are often referred to as “junk” investments. Once the Company raises sufficient capital, the target credit investments will typically have maturities between three and ten years and generally range in size between $10 million and $125 million, although the investment size will vary with the size of the Company’s capital base. Prior to raising sufficient capital, the Company may make a greater number of investments in syndicated loan opportunities than it otherwise would expect to make in the future.

 

The Company is an externally managed closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company has elected to be treated for federal income tax purposes, and intends to qualify annually as a regulated investment company (a “RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). Because the Company has elected to be regulated as a BDC and as a RIC under the Code, the Company’s portfolio is subject to diversification and other requirements.

 

In November 2020, the Company commenced operations and made its first portfolio company investment. On October 23, 2020, the Company formed a wholly-owned subsidiary, OR Lending IC LLC, a Delaware limited liability company, which holds a California finance lenders license. OR Lending IC LLC makes loans to borrowers headquartered in California. From time to time the Company may form wholly-owned subsidiaries to facilitate the normal course of business.

 

The Company is managed by Owl Rock Capital Advisors LLC (the “Adviser”). The Adviser is an indirect subsidiary of Blue Owl Capital, Inc. (“Blue Owl) (NYSE: OWL) and part of Owl Rock, a division of Blue Owl focused on direct lending. The Adviser is registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”). Subject to the overall supervision of the Company’s Board, the Adviser manages the day-to-day operations of, and provides investment advisory and management services to, the Company.

 

The Company has received an exemptive order that permits it to offer multiple classes of shares of common stock and to impose asset-based servicing and distribution fees and early withdrawal fees. The Company offers on a best efforts, continuous basis up to $2,500,000,000 in any combination of amount of shares of Class S, Class D, and Class I common stock. The share classes have different upfront selling commissions and ongoing servicing fees. Each class of common stock is offered through Blue Owl Securities LLC (formerly Owl Rock Capital Securities LLC) (d/b/a "Blue Owl Securities") (the “Dealer Manager”). The Dealer Manager is entitled to receive upfront selling commissions of up to 3.50% of the offering price of each Class S share sold in the offering and 1.50% of the offering price of each Class D share sold in the offering. Class I shares are not subject to upfront selling commissions. Any upfront selling commissions for the Class S shares and Class D shares sold in the offering will be deducted from the purchase price. Class S, Class D and Class I shares were offered at initial purchase prices per shares of $10.35, $10.15 and $10.00, respectively. Currently, the purchase price per share for each class of common stock varies, but will not be sold at a price below the Company’s net asset value per share of such class, as determined in accordance with the Company’s share pricing policy, plus applicable upfront selling commissions. On October 7, 2021, the Company filed a registration statement with respect to its proposed follow-on offering of up to $7,500,000,000 in any combination of shares of Class S, Class D and Class I common stock.

 

On September 30, 2020, the Adviser purchased 100 shares of the Company’s Class I common stock at $10.00 per share, which represented the initial public offering price of such shares. The Adviser will not tender these shares for repurchase as long as Owl Rock Capital Advisors LLC remains the investment adviser of Owl Rock Core Income Corp. There is no current intention for Owl Rock Capital Advisors LLC to discontinue its role. On October 15, 2020, the Company received a subscription agreement, totaling $25.0 million for the purchase of Class I common shares of its common stock from Owl Rock Feeder FIC ORCIC Equity LLC (“Feeder FIC Equity”). The shares purchased by the Adviser and Feeder FIC Equity are subject to a lock-up pursuant to FINRA Rule 5110(e)(1) for a period of 180 days from the date of commencement of sales in the offering, and the Adviser, Feeder FIC Equity, and their permitted assigns may not engage in any transaction that would result in the effective economic disposition of the Class I shares.

 

19


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

The Company commenced a continuous public offering of up to $2,500,000,000 in any combination of Class S, Class D, and Class I shares of its common stock on November 12, 2020. On November 12, 2020, the Company sold 700,000 shares pursuant to the subscription agreement with Feeder FIC Equity and met the minimum offering requirement for its continuous public offering of $2.5 million. The purchase price of these shares sold in the private placement was $10.00 per share. Since meeting the minimum offering requirement and commencing its continuous public offering through September 30, 2021, the Company has issued 17,515,705 shares of Class S common stock, 7,103,293 shares of Class D common stock and 42,810,584 shares of Class I common stock for gross proceeds of $164.9 million, $66.0 million and $398.6 million, respectively, including $1,000 of seed capital contributed by its Adviser in September 2020 and approximately $25.0 million in gross proceeds raised in the private placement from Feeder FIC Equity.

 

 

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’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. 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.

 

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.

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Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

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 (“FASB”) 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.

 

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.

 

Rule 2a-5 under the 1940 Act was recently adopted by the SEC and establishes requirements for determining fair value in good faith for purposes of the 1940 Act. We intend to comply with the new rule`s requirements on or before the compliance date in September 2022.

 

21


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Interest and Dividend Income Recognition

 

Interest income is recorded on the accrual basis and includes amortization of discounts or premiums. Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK interest and dividends represent accrued interest or dividends that are added to the principal amount or liquidation amount of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or at the occurrence of a liquidation event. For the three and nine months ended September 30, 2021, PIK interest and PIK dividend income earned was $1.1 million and $1.3 million, representing 7.0% and 6.8% of investment income for the three and nine months ended September 30, 2021, respectively. Discounts to par value on securities purchased are amortized into interest income over the contractual life of the respective security using the effective yield method. Premiums to par value on securities purchased are amortized to first call date. 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. If at any point we believe PIK interest is not expected to be realized, the investment generating PIK interest will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest income. 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. As of September 30, 2021, no investments are on non-accrual status.

 

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.

 

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 continuous public offering of its common shares, 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.

22


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

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 RIC under the Code beginning with the taxable year ended December 31, 2020 and intends to qualify as a RIC thereafter. So long as the Company obtains and maintains its tax treatment for 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 the Company 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 as of December 31, 2020. The 2020 tax year remains subject to examination by U.S. federal, state and local tax authorities.

 

Income and Expense Allocations

 

Income and realized and unrealized capital gains and losses are allocated to each class of shares of the Company on the basis of the aggregate net asset value of that class in relation to the aggregate net asset value of the Company.

 

Expenses that are common to all share classes are borne by each class of shares based on the net assets of the Company attributable to each class. Expenses that are specific to a class of shares are allocated to such class either directly or through the servicing fees paid pursuant to the Company’s distribution plan. “See Note 3. Agreements and Related Party Transactions – Shareholder Servicing Plan.”

 

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.

 

Subject to the Company’s board of directors’ discretion and applicable legal restrictions, the Company intends to authorize and declare cash distributions to the Company’s shareholders on a monthly or quarterly basis and pay such distributions on a monthly

23


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

basis. The per share amount of distributions for Class S, Class D, and Class I shares will differ because of different allocations of class-specific expenses. Specifically, because the ongoing servicing fees are calculated based on the Company’s net asset value for the Company’s Class S and Class D shares, the ongoing service fees will reduce the net asset value or, alternatively, the distributions payable, with respect to the shares of each such class, including shares issued under the Company’s distribution reinvestment plan. As a result, the distributions on Class S shares and Class D shares may be lower than the distributions on Class I shares.

 

The Company has adopted a distribution reinvestment plan pursuant to which shareholders (except for residents of Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Oklahoma, Oregon, Vermont and Washington and clients of participating broker-dealers that do not permit automatic enrollment in the distribution reinvestment plan) will have their cash distributions automatically reinvested in additional shares of the Company's same class of common stock to which the distribution relates unless they elect to receive their distributions in cash. The Company expects to use newly issued shares to implement the distribution 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.

 

New Accounting Pronouncements

 

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848),” which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. ASU No. 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates and is currently evaluating the impact of adopting ASU No. 2020-04 and 2021-01 on the consolidated financial statements.

 

Other than the aforementioned guidance, the Company’s 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

 

As of September 30, 2021, the Company had payables to affiliates of $6.0 million, primarily comprised of $2.7 million in costs and expenses reimbursable to the Adviser pursuant to the Investment Advisory Agreement, $1.5 million of accrued performance based incentive fees, $0.4 million of management fees, $0.5 million in obligations to repay expense support from the Adviser pursuant to the Investment Advisory Agreement, and costs and expenses reimbursable to the Adviser pursuant to the Administration Agreement. As of December 31, 2020, the Company had payables to affiliates of $0.2 million primarily comprised of amounts reimbursable to the Adviser pursuant to the Administration Agreement.

 

Administration Agreement

 

The Company has entered into an amended and restated Administration Agreement (the “Administration Agreement”) with the Adviser. Under the terms of the Administration Agreement, the Adviser performs, or oversees the performance of, required administrative services, which include 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.

24


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

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.

 

Unless earlier terminated as described below, the Administration Agreement, and subject to the consummation of the Transaction, the amended and restated administration agreement, will remain in effect until September 30, 2022 and from year to year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, a majority of the independent directors. The Administration Agreement may be terminated at any time, without the payment of any penalty, upon 60 days’ written notice, by the vote of a majority of the outstanding voting securities of the Company (as defined in the 1940 Act), or by the vote of a majority of the Board or by the Adviser.

 

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 three and nine months ended September 30, 2021, the Company incurred expenses of approximately $0.5 million and $1.4 million, respectively, for costs and expenses reimbursable to the Adviser under the terms of the Administration Agreement.

 

Investment Advisory Agreement

 

The Company has entered into an amended and restated 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.

 

Under the terms of the Investment Advisory Agreement, the Company pays the Adviser a base management fee and may also pay a performance based incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the Company’s shareholders.

 

Unless earlier terminated as described below, the Investment Advisory Agreement, and subject to the consummation of the Transaction, the amended and restated investment advisory agreement, will remain in effect until September 30, 2022 and from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s 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 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 of Directors 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 penalty, the Adviser may generally 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.

 

The base management fee is payable monthly in arrears. The base management fee is calculated at an annual rate of 1.25% based on the average value of the Company’s net assets at the end of the two most recently completed calendar months. All or part of the

25


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

base management fee not taken as to any month will be deferred without interest and may be taken in any such month prior to the occurrence of a liquidity event. Base management fees for any partial month are prorated based on the number of days in the month. On February 23, 2021, the Adviser agreed to waive 100% of the base management fee for the quarter ended March 31, 2021. Any portion of management fees waived shall not be subject to recoupment.

 

For the three and nine months ended September 30, 2021, management fees (gross of waivers) were $0.8 million and $1.1 million, respectively. For the nine months ended September 30, 2021, $52 thousand of management fees were waived.

 

Pursuant to the Investment Advisory Agreement, the Adviser is entitled to an incentive fee. The incentive fee consists of two parts: (i) an incentive fee on income and (ii) an incentive fee on capital gains. Each part of the incentive fee is outlined below.

 

The incentive fee on income will be calculated and payable quarterly in arrears and will be based upon the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. In the case of a liquidation of the Company or if the Investment Advisory Agreement is terminated, the fee will also become payable as of the effective date of the event.

 

The incentive fee on income for each calendar quarter will be calculated as follows:

No incentive fee on income will be payable in any calendar quarter in which the pre-incentive fee net investment income does not exceed a quarterly return to investors of 1.25% of the Company’s net asset value for that immediately preceding calendar quarter. The Company refers to this as the quarterly preferred return.

 

All of the Company’s pre-incentive fee net investment income, if any, that exceeds the quarterly preferred return, but is less than or equal to 1.43%, which the Company refers to as the upper level breakpoint, of the Company’s net asset value for that immediately preceding calendar quarter, will be payable to the Company’s Adviser. The Company refers to this portion of the incentive fee on income as the “catch-up.” It is intended to provide an incentive fee of 12.50% on all of the Company’s pre-incentive fee net investment income when the pre-incentive fee net investment income reaches 1.43% of the Company’s net asset value for that calendar quarter, measured as of the end of the immediately preceding calendar quarter. The quarterly preferred return of 1.25% and upper level breakpoint of 1.43% are also adjusted for the actual number of days each calendar quarter.

 

For any quarter in which the Company’s pre-incentive fee net investment income exceeds the upper level break point of 1.43% of the Company’s net asset value for that immediately preceding calendar quarter, the incentive fee on income will equal 12.50% of the amount of the Company’s pre-incentive fee net investment income, because the quarterly preferred return and catch up will have been achieved.

 

Pre-incentive fee net investment income is defined as investment income and any other income, accrued during the calendar quarter, minus operating expenses for the quarter, including the base management fee, expenses payable under the Investment Advisory Agreement and the Administration Agreement, any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee. Pre-incentive fee net investment income does not include any expense support payments or any reimbursement by the Company of expense support payments, or any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

 

The second component of the incentive fee, the “Capital Gains Incentive Fee,” will be determined and payable in arrears as of the end of each calendar year during which the Investment Advisory Agreement is in effect. In the case of a liquidation, or if the Investment Advisory Agreement is terminated, the fee will also become payable as of the effective date of such event. The annual fee will equal (i) 12.50% of the Company’s realized capital gains on a cumulative basis from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less (ii) the aggregate amount of any previously paid incentive fees on capital gains as calculated in accordance with U.S. GAAP. The Company will accrue but will not pay a Capital Gains Incentive Fee with respect to unrealized appreciation because a Capital Gains Incentive Fee would be owed to the Adviser if the Company was to sell the relevant investment and realize a capital gain. In no event will the incentive fee on capital gains payable pursuant hereto be in excess of the amount permitted by the Advisers Act, including Section 205 thereof.

 

For the three and nine months ended September 30, 2021, the Company incurred performance based incentive fees on net investment income of $1.0 million and $1.1 million, respectively.

 

For the three and nine months ended September 30, 2021, the Company incurred performance based incentive fees based on capital gains of $0.4 million and $0.5 million, respectively.

26


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive up to 1.5% of gross offering proceeds raised in the continuous public offering until all organization and offering costs paid by the Adviser or its affiliates have been recovered. The Company bears all other expenses of its operations and transactions including, without limitation, those relating to: expenses deemed to be “organization and offering expenses” for purposes of Conduct Rule 2310(a)(12) of Financial Industry Regulatory Authority (exclusive of commissions, the dealer manager fee, any discounts and other similar expenses paid by investors at the time of sale of the Company’s stock); the cost of corporate and organizational expenses relating to offerings of shares of common stock, subject to limitations included in the Investment Advisory Agreement; the cost of calculating the Company’s net asset value, including the cost of any third-party valuation services; the cost of effecting any sales and repurchases of the common stock and other securities; fees and expenses payable under any dealer manager agreements, if any; debt service and other costs of borrowings or other financing arrangements; costs of hedging; expenses, including travel expense, incurred by the Adviser, or members of the Investment Team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, enforcing the Company’s rights; escrow agent, transfer agent and custodial fees and expenses; fees and expenses associated with marketing efforts; federal and state registration fees, any stock exchange listing fees and fees payable to rating agencies; federal, state and local taxes; independent directors’ fees and expenses, including certain travel expenses; costs of preparing financial statements and maintaining books and records and filing reports or other documents with the SEC (or other regulatory bodies) and other reporting and compliance costs, including registration fees, listing fees and licenses, and the compensation of professionals responsible for the preparation of the foregoing; the costs of any reports, proxy statements or other notices to shareholders (including printing and mailing costs); the costs of any shareholder or director meetings and the compensation of personnel responsible for the preparation of the foregoing and related matters; commissions and other compensation payable to brokers or dealers; research and market data; fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums; direct costs and expenses of administration, including printing, mailing, long distance telephone and staff; fees and expenses associated with independent audits, outside legal and consulting costs; costs of winding up; costs incurred in connection with the formation or maintenance of entities or vehicles to hold the Company’s assets for tax or other purposes; extraordinary expenses (such as litigation or indemnification); and costs associated with reporting and compliance obligations under the Advisers Act and applicable federal and state securities laws. Notwithstanding anything to the contrary contained herein, the Company shall reimburse 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 and Chief Financial Officer and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to the business affairs of the Company). Any such reimbursements will not exceed actual expenses incurred by the Adviser and its affiliates. The Adviser is responsible for the payment of the Company’s organization and offering expenses to the extent that these expenses exceed 1.5% of the aggregate gross offering proceeds, without recourse against or reimbursement by the Company.

 

For the three and nine months ended September 30, 2021, subject to the 1.5% organization and offering cost cap, the Company accrued initial organization and offering expenses of $2.2 million and $2.5 million, respectively.

 

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.

 

Affiliated Transactions

 

The Company may be prohibited under the 1940 Act from participating in 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 relies on exemptive relief that has been granted to the Adviser to co-invest with other funds managed by the Adviser or its affiliates, in a manner consistent with the Company’s 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, (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, and (4) the proposed investment by the Company would not benefit the Adviser or its affiliates or any affiliated person of any of them (other than the parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.

 

27


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, the Company was permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in its existing portfolio companies with certain private funds managed by the Adviser or its affiliates and covered by the Company’s exemptive relief, even if such private funds have not previously invested in such existing portfolio company. Without this order, private funds would generally not be able to participate in such co-investments with the Company unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with the Company. Although the conditional exemptive order has expired, the SEC`s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extend that any BDC with an existing coinvestment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein.

 

The Adviser is affiliated with Owl Rock Technology Advisors LLC (“ORTA”), Owl Rock Capital Private Fund Advisors LLC (“ORPFA”), and Owl Rock Diversified Advisors LLC (“ORDA”). ORTA, ORPFA and the Adviser, the “Owl Rock Advisers”, are also investment advisers. The Owl Rock Advisers are indirect affiliates of Blue Owl and comprise “Owl Rock,” a division of Blue Owl focused on direct lending. The Owl Rock Advisers’ allocation policy seeks to ensure equitable allocation of investment opportunities over time between the Company, and other funds managed by the Adviser or its affiliates. As a result of exemptive relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolio of other funds managed by Owl Rock that could avail themselves of exemptive relief and that have an investment objective similar to the Company’s.

 

Dealer Manager Agreement

 

The Company has entered into a dealer manager agreement (the “Dealer Manager Agreement”) with Blue Owl Securities, an affiliate of the Adviser, and participating broker-dealer agreements with certain broker-dealers. Under the terms of the Dealer Manager Agreement and the participating broker-dealer agreements, Blue Owl Securities serves as the dealer manager, and certain participating broker-dealers solicit capital, for the Company’s public offering of shares of Class S, Class D, and Class I common stock. Blue Owl Securities will be entitled to receive upfront selling commissions of up to 3.50% of the offering price of each Class S share sold in this offering. Blue Owl Securities will be entitled to receive upfront selling commissions of up to 1.50% of the offering price of each Class D share sold in this offering. Blue Owl Securities anticipates that all or a portion of the upfront selling commissions will be retained by, or reallowed (paid) to, participating broker-dealers. Blue Owl Securities will not receive upfront selling commissions with respect to any class of shares issued pursuant to the Company’s distribution reinvestment plan or with respect to purchases of Class I shares.

 

Upfront selling commissions for sales of Class S and Class D shares may be reduced or waived in connection with volume or other discounts, other fee arrangements or for sales to certain categories of purchasers.

 

Blue Owl Securities, an affiliate of Blue Owl, is registered as a broker-dealer with the SEC and is a member of the Financial Industry Regulatory Authority.

 

Shareholder Servicing Plan

 

Subject to FINRA limitations on underwriting compensation and pursuant to a distribution plan adopted by the Company in compliance with Rules 12b-1 and 17d-3 under the 1940 Act, as if those rules applied to the Company, the Company will pay Blue Owl Securities servicing fees for ongoing services as follows:

 

with respect to the Company’s outstanding Class S shares equal to 0.85% per annum of the aggregate net asset value of the Company’s outstanding Class S shares; and

 

with respect to the Company’s outstanding Class D shares equal to 0.25% per annum of the aggregate net asset value of the Company’s outstanding Class D shares.

 

The Company will not pay an ongoing servicing fee with respect to the Company’s outstanding Class I shares.

 

For the three and nine months ended September 30, 2021, the Company paid servicing fees with respect to Class D shares of $33 thousand and $46 thousand, respectively. For the three and nine months ended September 30, 2021, the Company paid servicing fees with respect to Class S shares of $223 thousand and $260 thousand, respectively.

 

28


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

The servicing fees are paid monthly in arrears. Blue Owl Securities will reallow (pay) all or a portion of the ongoing servicing fees to participating broker-dealers and servicing broker-dealers for ongoing services performed by such broker-dealers, and will waive ongoing servicing fees to the extent a broker-dealer is not eligible to receive it for failure to provide such services. Because the ongoing servicing fees are calculated based on the Company’s net asset values for the Company’s Class S and Class D shares, they will reduce the net asset values or, alternatively, the distributions payable, with respect to the shares of each such class, including shares issued under it`s distribution reinvestment plan. The Company will cease paying ongoing servicing fees at the date at which total underwriting compensation from any source in connection with this offering equals 10% of the gross proceeds from it`s offering (excluding proceeds from issuances pursuant to it`s distribution reinvestment plan). This limitation is intended to ensure that the Company satisfies the requirements of FINRA Rule 2310, which provides that the maximum aggregate underwriting compensation from any source, including compensation paid from offering proceeds and in the form of “trail commissions,” payable to underwriters, broker-dealers, or affiliates thereof participating in an offering may not exceed 10% of gross offering proceeds, excluding proceeds received in connection with the issuance of shares through a distribution reinvestment plan.

 

Expense Support and Conditional Reimbursement Agreement

 

The Company has entered into the Expense Support and Conditional Reimbursement Agreement (the “Expense Support Agreement”) with the Adviser, the purpose of which is to ensure that no portion of the Company’s distributions to shareholders will represent a return of capital for U.S. federal income tax purposes. The Expense Support Agreement became effective as of the date that the Company met the minimum offering requirement.

 

On a quarterly basis, the Adviser reimburses the Company for “Operating Expenses” (as defined below) in an amount equal to the excess of the Company’s cumulative distributions paid to the Company’s shareholders in each quarter over “Available Operating Funds” (as defined below) received by the Company on account of its investment portfolio during such quarter. Any payments required to be made by the Adviser pursuant to the preceding sentence are referred to herein as an “Expense Payment”.

 

Pursuant to the Expense Support Agreement, “Operating Expenses” means all of the Company’s operating costs and expenses incurred, as determined in accordance with generally accepted accounting principles for investment companies. “Available Operating Funds” means the sum of (i) the Company’s estimated investment company taxable income (including realized net short-term capital gains reduced by realized net long-term capital losses), (ii) the Company’s realized net capital gains (including the excess of realized net long-term capital gains over realized net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies, if any (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

 

The Adviser’s obligation to make an Expense Payment will automatically become a liability of the Adviser and the right to such Expense Payment will be an asset of the Company’s on the last business day of the applicable quarter. The Expense Payment for any quarter will be paid by the Adviser to the Company in any combination of cash or other immediately available funds, and/or offset against amounts due from the Company to the Adviser no later than the earlier of (i) the date on which the Company closes it’s books for such quarter, or (ii) forty-five days after the end of such quarter.

 

Following any quarter in which Available Operating Funds exceed the cumulative distributions paid by the Company in respect of such quarter (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), the Company will pay such Excess Operating Funds, or a portion thereof, in accordance with the stipulations below, as applicable, to the Adviser, until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such quarter have been reimbursed. Any payments required to be made by the Company are referred to as a “Reimbursement Payment”.

 

The amount of the Reimbursement Payment for any quarter shall equal the lesser of (i) the Excess Operating Funds in respect of such quarter and (ii) the aggregate amount of all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such quarter that have not been previously reimbursed by the Company to the Adviser. The payment will be reduced to the extent that such Reimbursement Payments, together with all other Reimbursement Payments paid during the fiscal year, would cause Other Operating Expenses defined as the Company’s total Operating Expenses, excluding base management fees, incentive fees, organization and offering expenses, distribution and shareholder servicing fees, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses (on an annualized basis and net of any Expense Payments received by the Company during the fiscal year) to exceed the lesser of: (i) 1.75% of the Company’s average net assets attributable to the shares of the Company’s common stock for the fiscal year-to-date period after taking such Expense Payments into account; and (ii) the percentage of the Company’s average net assets attributable to shares of the Company’s common stock represented by Other

29


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Operating Expenses during the fiscal year in which such Expense Payment was made (provided, however, that this clause (ii) shall not apply to any Reimbursement Payment which relates to an Expense Payment made during the same fiscal year).

 

No Reimbursement Payment for any quarter will be made if: (1) the “Effective Rate of Distributions Per Share” (as defined below) declared by the Company at the time of such Reimbursement Payment is less than the Effective Rate of Distributions Per Share at the time the Expense Payment was made to which such Reimbursement Payment relates, or (2) the Company’s “Operating Expense Ratio” (as defined below) at the time of such Reimbursement Payment is greater than the Operating Expense Ratio at the time the Expense Payment was made to which such Reimbursement Payment relates. Pursuant to the Expense Support Agreement, “Effective Rate of Distributions Per Share” means the annualized rate (based on a 365 day year) of regular cash distributions per share exclusive of returns of capital, distribution rate reductions due to distribution and shareholder fees, and declared special dividends or special distributions, if any. The “Operating Expense Ratio” is calculated by dividing Operating Expenses, less organizational and offering expenses, base management and incentive fees owed to Adviser, and interest expense, by the Company’s net assets.

 

The specific amount of expenses reimbursed by the Adviser, if any, will be determined at the end of each quarter. The Company or the Adviser may terminate the Expense Support Agreement at any time, with or without notice. The Expense Support Agreement will automatically terminate in the event of (a) the termination of the Investment Advisory Agreement, or (b) a determination by the Company`s Board to dissolve or liquidate the Company. Upon termination of the Expense Support Agreement, the Company will be required to fund any Expense Payments that have not been reimbursed by the Company to the Adviser.

 

As of September 30, 2021, the amount of Expense Support Payments provided by the Adviser since inception is $2.6 million. During the three and nine months ended September 30, 2021, the Company recorded obligations to repay Expense Support from the Adviser of $0.5 million. The Company may or may not reimburse remaining expense support in the future.

 

The following table presents a summary of all expenses supported, and recouped, by the Adviser for each of the following three month periods in which the Company received Expense Support from the Adviser and the associated dates through which such expenses may be subject to reimbursement from the Company pursuant to the Expense Support Agreement:

 

For the Quarter Ended

 

Amount of
Expense
Support

 

 

Recoupment of
Expense
Support

 

 

Unreimbursed
Expense
Support

 

 

Effective
Rate of
Distribution
per Share
(1)

 

Reimbursement
Eligibility
Expiration

 

Operating
Expense
Ratio
(2)

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

$

822

 

 

$

465

 

 

$

357

 

 

6.7%

 

March 31, 2024

 

9.47%

June 30, 2021

 

 

1,756

 

 

 

-

 

 

 

1,756

 

 

6.6%

 

June 30, 2024

 

2.43%

Total

 

$

2,578

 

 

$

465

 

 

$

2,113

 

 

 

 

 

 

 

 

________________

(1)
The effective rate of distribution per share is expressed as a percentage equal to the projected annualized distribution amount as of the end of the applicable period (which is calculated by annualizing the regular monthly cash distributions per share as of such date without compounding), divided by the Company’s net asset value per share as of such date.
(2)
The operating expense ratio is calculated by dividing operating expenses, less organizational and offering expenses, base management and incentive fees owed to the Adviser, and interest expense, by the Company’s net assets.

 

License Agreement

 

On September 30, 2020, the Company entered into a license agreement (the “License Agreement”), pursuant to which an affiliate of Blue Owl 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.

 

Promissory Note

 

30


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

The Company as borrower, entered into a Loan Agreement as amended and restated through the date herof (the "Loan Agreement") with Owl Rock Feeder FIC ORCIC Debt LLC ("Feeder FIC Debt"), an affiliate of the Adviser, as lender, to enter into revolving promissory notes (the "Promissory Notes") to borrow up to an aggregate of $250 million from Feeder FIC Debt. See Note 6 “Debt”.

 

 

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 has 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 has 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 September 30, 2021 and December 31, 2020:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

($ in thousands)

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

First-lien senior secured debt investments

 

$

1,211,783

 

 

$

1,213,426

 

 

$

9,404

 

 

$

9,404

 

Second-lien senior secured debt investments

 

 

203,235

 

 

 

204,307

 

 

 

4,233

 

 

 

4,232

 

Unsecured debt investments

 

 

2,163

 

 

 

2,107

 

 

 

22

 

 

 

22

 

Preferred equity investments(1)

 

 

11,270

 

 

 

11,458

 

 

 

296

 

 

 

295

 

Common equity investments(1)

 

 

10,067

 

 

 

10,130

 

 

 

423

 

 

 

423

 

Total Investments

 

$

1,438,518

 

 

$

1,441,428

 

 

$

14,378

 

 

$

14,376

 

 

________________

(1)
As of December 31, 2020, preferred equity investments and common equity investments were reported in aggregate as equity investments.

 

31


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

The industry composition of investments based on fair value as of September 30, 2021 and December 31, 2020 was as follows:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Advertising and media

 

 

6.1

 

%

 

-

 

%

Aerospace and defense

 

 

1.0

 

 

 

-

 

 

Automotive

 

 

1.5

 

 

 

-

 

 

Buildings and real estate

 

 

4.3

 

 

 

-

 

 

Business services

 

 

9.4

 

 

 

6.0

 

 

Chemicals

 

 

0.9

 

 

 

6.8

 

 

Consumer products

 

 

2.4

 

 

 

6.8

 

 

Containers and packaging

 

 

6.0

 

 

 

-

 

 

Distribution

 

 

0.8

 

 

 

9.1

 

 

Education

 

 

0.4

 

 

 

-

 

 

Financial services

 

 

8.5

 

 

 

12.2

 

 

Food and beverage

 

 

3.2

 

 

 

-

 

 

Healthcare equipment and services

 

 

0.5

 

 

 

18.7

 

 

Healthcare providers and services

 

 

6.9

 

 

 

10.5

 

 

Healthcare technology

 

 

6.0

 

 

 

-

 

 

Household products

 

 

0.6

 

 

 

-

 

 

Human resource support services

 

 

3.1

 

 

 

-

 

 

Infrastructure and environmental services

 

 

1.9

 

 

 

-

 

 

Insurance

 

 

17.1

 

 

 

-

 

 

Internet software and services

 

 

5.6

 

 

 

16.4

 

 

Leisure and entertainment

 

 

6.5

 

 

 

-

 

 

Manufacturing

 

 

5.0

 

 

 

6.8

 

 

Professional services

 

 

0.8

 

 

 

-

 

 

Specialty retail

 

 

1.4

 

 

 

-

 

 

Telecommunications

 

 

0.1

 

 

 

6.7

 

 

Total

 

 

100.0

 

%

 

100.0

 

%

 

The geographic composition of investments based on fair value as of September 30, 2021 and December 31, 2020 was as follows:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

United States:

 

 

 

 

 

 

 

Midwest

 

 

37.2

 

%

 

19.7

 

%

Northeast

 

 

9.2

 

 

 

37.7

 

 

South

 

 

30.8

 

 

 

26.7

 

 

West

 

 

19.4

 

 

 

15.9

 

 

International

 

 

3.4

 

 

 

-

 

 

Total

 

 

100.0

 

%

 

100.0

 

%

 

 

32


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Note 5. Fair Value of Investments

 

Investments

 

The following tables present the fair value hierarchy of investments as of September 30, 2021 and December 31, 2020:

 

 

 

Fair Value Hierarchy as of September 30, 2021

 

($ in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

First-lien senior secured debt investments

 

$

 

 

$

93,985

 

 

$

1,119,441

 

 

$

1,213,426

 

Second-lien senior secured debt investments

 

 

-

 

 

 

47,748

 

 

 

156,559

 

 

 

204,307

 

Unsecured debt investments

 

 

-

 

 

 

-

 

 

 

2,107

 

 

 

2,107

 

Preferred equity investments

 

 

-

 

 

 

-

 

 

 

11,458

 

 

 

11,458

 

Common equity investments

 

 

-

 

 

 

-

 

 

 

10,130

 

 

 

10,130

 

Total Investments

 

$

 

 

$

141,733

 

 

$

1,299,695

 

 

$

1,441,428

 

 

 

 

 

Fair Value Hierarchy as of December 31, 2020

 

($ in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

First-lien senior secured debt investments

 

$

 

 

$

 

 

$

9,404

 

 

$

9,404

 

Second-lien senior secured debt investments

 

 

-

 

 

 

-

 

 

 

4,232

 

 

 

4,232

 

Unsecured debt investments

 

 

-

 

 

 

-

 

 

 

22

 

 

 

22

 

Preferred equity investments(1)

 

 

-

 

 

 

-

 

 

 

295

 

 

 

295

 

Common equity investments(1)

 

 

-

 

 

 

-

 

 

 

423

 

 

 

423

 

Total Investments

 

$

 

 

$

 

 

$

14,376

 

 

$

14,376

 

________________

(1)
As of December 31, 2020, preferred equity investments and common equity investments were reported in aggregate as equity investments.

 

The following tables present changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three and nine months ended September 30, 2021:

 

 

As of and for the Three Months Ended September 30, 2021

 

 

 

 

($ in thousands)

 

First-lien senior secured debt investments

 

 

Second-lien senior secured debt investments

 

 

Unsecured debt investments

 

 

Preferred equity investments

 

 

Common equity investments

 

 

Total

 

Fair value, beginning of period

 

$

225,777

 

 

$

105,203

 

 

$

2,112

 

 

$

11,049

 

 

$

2,461

 

 

$

346,602

 

Purchases of investments, net(2)

 

 

1,134,588

 

 

 

50,864

 

 

 

-

 

 

 

-

 

 

 

7,670

 

 

 

1,193,122

 

Payment-in-kind

 

 

99

 

 

 

-

 

 

 

80

 

 

 

196

 

 

 

1

 

 

 

376

 

Proceeds from investments, net

 

 

(226,656

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(226,656

)

Net change in unrealized gain (loss)

 

 

1,294

 

 

 

468

 

 

 

(86

)

 

 

213

 

 

 

(2

)

 

 

1,887

 

Net realized gains (losses)

 

 

519

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

519

 

Net amortization of discount on investments

 

 

694

 

 

 

24

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

719

 

Transfers into (out of) Level 3(1)

 

 

(16,874

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(16,874

)

Fair value, end of period

 

$

1,119,441

 

 

$

156,559

 

 

$

2,107

 

 

$

11,458

 

 

$

10,130

 

 

$

1,299,695

 

 

33


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

________________

(1)
Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the three months ended September 30, 2021, transfers into Level 2 from Level 3 were as a result of changes in the observability of significant inputs for certain portfolio companies.
(2)
Purchases may include payment-in-kind (“PIK”).

 

 

 

As of and for the Nine Months Ended September 30, 2021

 

 

 

 

($ in thousands)

 

First-lien senior secured debt investments

 

 

Second-lien senior secured debt investments

 

 

Unsecured debt investments

 

 

Preferred equity investments

 

 

Common equity investments

 

 

Total

 

Fair value, beginning of period

 

$

9,404

 

 

$

4,232

 

 

$

22

 

 

$

295

 

 

$

423

 

 

$

14,376

 

Purchases of investments, net(2)

 

 

1,368,661

 

 

 

151,435

 

 

 

2,054

 

 

 

10,616

 

 

 

9,642

 

 

 

1,542,408

 

Payment-in-kind

 

 

133

 

 

 

-

 

 

 

82

 

 

 

341

 

 

 

2

 

 

 

558

 

Proceeds from investments, net

 

 

(232,680

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(232,680

)

Net change in unrealized gain (loss) on investments

 

 

1,427

 

 

 

854

 

 

 

(53

)

 

 

206

 

 

 

63

 

 

 

2,497

 

Net realized gain (loss) on investments

 

 

529

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

529

 

Net amortization of discount on investments

 

 

780

 

 

 

38

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

820

 

Transfers into (out of) Level 3(1)

 

 

(28,813

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(28,813

)

Fair value, end of period

 

$

1,119,441

 

 

$

156,559

 

 

$

2,107

 

 

$

11,458

 

 

$

10,130

 

 

$

1,299,695

 

________________

(1)
Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. For the nine months ended September 30, 2021, transfers into Level 2 from Level 3 were as a result of changes in the observability of significant inputs for certain portfolio companies.
(2)
Purchases may include payment-in-kind (“PIK”).

 

The following tables present information with respect to the net change in unrealized gains (losses) on investments for which Level 3 inputs were used in determining the fair value that are still held by the Company for the three and nine months ended September 30, 2021:

($ in thousands)

 

Net change in unrealized gain (loss) for the Three Months Ended September 30, 2021 on Investments Held at September 30, 2021

 

First-lien senior secured debt investments

 

$

1,323

 

Second-lien senior secured debt investments

 

 

468

 

Unsecured debt investments

 

 

(89

)

Preferred equity investments

 

 

194

 

Common equity investments

 

 

 

Total Investments

 

$

1,896

 

 

34


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

($ in thousands)

 

Net change in unrealized gain (loss) for the Nine Months Ended September 30, 2021 on Investments Held at September 30, 2021

 

First-lien senior secured debt investments

 

$

1,456

 

Second-lien senior secured debt investments

 

 

854

 

Unsecured debt investments

 

 

(56

)

Preferred equity investments

 

 

189

 

Common equity investments

 

 

63

 

Total Investments

 

$

2,506

 

 

The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of September 30, 2021 and December 31, 2020. The weighted average range of unobservable inputs is based on fair value of investments. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair value.

 

 

As of September 30, 2021

($ in thousands)

 

Fair Value

 

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Average)

 

Impact to Valuation from an Increase in Input

First-lien senior secured debt investments

 

$

948,252

 

 

Recent Transaction

 

Transaction Price

 

97.5% - 100.0% (98.6%)

 

Increase

 

 

 

171,189

 

 

Yield Analysis

 

Market Yield

 

4.8%-10.0% (6.3%)

 

Decrease

Second-lien senior secured debt investments(1)

 

$

38,778

 

 

Recent Transaction

 

Transaction Price

 

98.5% - 99.5% (99.1%)

 

Increase

 

 

 

95,083

 

 

Yield Analysis

 

Market Yield

 

6.1%-10.5% (8.2%)

 

Decrease

Unsecured debt investments

 

$

24

 

 

Market Approach

 

EBITDA Multiple

 

14.8x

 

Increase

 

 

 

2,083

 

 

Yield Analysis

 

Market Yield

 

9.0%

 

Decrease

Preferred equity investments

 

$

216

 

 

Market Approach

 

EBITDA Multiple

 

8.9x

 

Increase

 

 

 

11,242

 

 

Yield Analysis

 

Market Yield

 

11.4%-14.4% (11.5%)

 

Decrease

Common equity investments

 

$

7,635

 

 

Recent Transaction

 

Transaction Price

 

100.0%

 

Increase

 

 

 

2,446

 

 

Market Approach

 

EBITDA Multiple

 

7.6x-25.3x (15.3x)

 

Increase

 

 

 

49

 

 

Market Approach

 

Transaction Price

 

$208.84

 

Increase

________________

(1)
Excludes Level 3 investments with a fair value of $22.7 million, which the Company valued using indicative bid prices obtained from brokers.

 

 

35


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

 

As of December 31, 2020

($ in thousands)

 

Fair Value

 

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Average)

 

Impact to Valuation from an Increase in Input

First-lien senior secured debt investments

 

$

9,404

 

 

Recent Transaction

 

Transaction Price

 

96.0% - 99.0% (98.3%)

 

Increase

Second-lien senior secured debt investments

 

$

4,232

 

 

Recent Transaction

 

Transaction Price

 

97.5%-98.5% (98.0%)

 

Increase

Unsecured debt investments

 

$

22

 

 

Recent Transaction

 

Transaction Price

 

100.0%

 

Increase

Preferred equity investments(1)

 

$

295

 

 

Recent Transaction

 

Transaction Price

 

97.0%

 

Increase

Common equity investments(1)

 

$

423

 

 

Recent Transaction

 

Transaction Price

 

100.0%

 

Increase

________________

 

(1)
As of December 31, 2020, preferred equity investments and common equity investments were reported in aggregate as equity investments.

 

The Company typically determines the fair value of its performing Level 3 debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to the expected life, portfolio company performance since close, and other terms and risks associated with an investment. Among other factors, a determinant of risk is the amount of leverage used by the portfolio company relative to its total enterprise value, and the rights and remedies of the Company’s investment within the portfolio company’s capital structure.

 

Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 debt investments primarily include current market yields, including relevant market indices, but may also include quotes from brokers, dealers, and pricing services as indicated by comparable investments. For the Company’s Level 3 equity investments, a market approach, based on comparable publicly-traded company and comparable market transaction multiples of revenues, EBITDA, or some combination thereof and comparable market transactions typically would be used.

 

Debt Not Carried at Fair Value

 

Fair value is estimated by discounting remaining payments using applicable current market rates, which take into account changes in the Company’s marketplace credit ratings, or market quotes, if available. The following table presents the carrying and fair values of the Company’s debt obligations as of September 30, 2021 and December 31, 2020.

 

 

 

September 30, 2021

 

 

December 31, 2020

 

($ in thousands)

 

Net Carrying Value

 

 

Fair Value

 

 

Net Carrying Value

 

 

Fair Value

 

Promissory Note

 

$

-

 

 

$

-

 

 

$

10,000

 

 

$

10,000

 

Revolving Credit Facility(1)

 

 

529,569

 

 

 

529,569

 

 

 

-

 

 

 

-

 

SPV Asset Facility I(2)

 

 

148,036

 

 

 

148,036

 

 

 

-

 

 

 

-

 

September 2026 Notes(3)

 

 

344,574

 

 

 

345,625

 

 

 

-

 

 

 

-

 

Total Debt

 

$

1,022,179

 

 

$

1,023,230

 

 

$

10,000

 

 

$

10,000

 

________________

(1)
The carrying value of the Company’s Revolving Credit Facility is presented net of unamortized debt issuance costs of $5.7 million.
(2)
The carrying value of the Company's SPV Asset Facility I is presented net of unamortized debt issuance costs of $2.0 million.
(3)
The carrying value of the Company's September 2026 Notes is presented net of unamortized debt issuance costs of $5.4 million.

 

36


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

The following table presents fair value measurements of the Company’s debt obligations as of September 30, 2021 and December 31, 2020:

 

($ in thousands)

 

September 30, 2021

 

 

December 31, 2020

 

Level 1

 

$

 

 

 

 

Level 2

 

 

345,625

 

 

 

 

Level 3

 

 

677,605

 

 

 

10,000

 

Total Debt

 

$

1,023,230

 

 

$

10,000

 

 

Financial Instruments Not Carried at Fair Value

 

As of September 30, 2021 and December 31, 2020, the carrying amounts of the Company’s assets and liabilities, other than investments at fair value and debt, approximate fair value due to their short maturities.

 

 

Note 6. Debt

 

In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. The Company’s asset coverage was 160% and 223% as of September 30, 2021 and December 31, 2020, respectively.

 

Debt obligations consisted of the following as of September 30, 2021 and December 31, 2020:

 

 

September 30, 2021

 

($ in thousands)

 

Aggregate Principal Committed

 

 

Outstanding Principal

 

 

Amount Available(1)

 

 

Net Carrying Value

 

Promissory Note

 

$

250,000

 

 

$

-

 

 

$

250,000

 

 

$

-

 

Revolving Credit Facility(2)

 

 

600,000

 

 

 

535,251

 

 

 

57,969

 

 

 

529,569

 

SPV Asset Facility I(3)

 

 

300,000

 

 

 

150,000

 

 

 

21,062

 

 

 

148,036

 

September 2026 Notes(4)

 

 

350,000

 

 

 

350,000

 

 

 

-

 

 

 

344,574

 

Total Debt

 

$

1,500,000

 

 

$

1,035,251

 

 

$

329,031

 

 

$

1,022,179

 

________________

(1)
The amount available reflects any limitations related to each credit facility’s borrowing base.
(2)
The carrying value of the Company’s Revolving Credit Facility is presented net of unamortized debt issuance costs of $5.7 million.
(3)
The carrying value of the Company's SPV Asset Facility I is presented net of unamortized debt issuance costs of $2.0 million.
(4)
The carrying value of the Company's September 2026 Notes is presented net of unamortized debt issuance costs of $5.4 million.

 

 

 

December 31, 2020

 

($ in thousands)

 

Aggregate Principal Committed

 

 

Outstanding Principal

 

 

Amount Available

 

 

Net Carrying Value

 

Promissory Note

 

$

50,000

 

 

$

10,000

 

 

$

40,000

 

 

$

10,000

 

Total Debt

 

$

50,000

 

 

$

10,000

 

 

$

40,000

 

 

$

10,000

 

 

For the three and nine months ended September 30, 2021, the components of interest expense were as follows:

 

37


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

($ in thousands)

 

For the Three Months Ended September 30, 2021

 

 

For the Nine Months Ended September 30, 2021

 

 

Interest expense

 

$

3,104

 

 

$

4,340

 

 

Amortization of debt issuance costs

 

 

359

 

 

 

626

 

 

Total Interest Expense

 

$

3,463

 

 

$

4,966

 

 

Average interest rate

 

 

2.7

 

%

 

3.0

 

%

Average daily borrowings

 

$

450,600

 

 

$

192,471

 

 

 

Promissory Note

 

On October 15, 2020, the Company as borrower, entered into a Loan Agreement (the "Original Loan Agreement") with Owl Rock Feeder FIC ORCIC Debt LLC ("Feeder FIC Debt"), an affiliate of the Adviser, as lender, to enter into revolving promissory notes (the "Promissory Notes") to borrow up to an aggregate of $50 million from Feeder FIC Debt.

 

On March 31, 2021, the Company entered into an amendment to the Original Loan Agreement to increase the aggregate amount that could be borrowed pursuant to the Promissory Note from $50 million to $75 million. The Original Loan Agreement was amended and restated (as amended through the date hereof, the "Loan Agreement") on May 12, 2021. On August 26, 2021, the Company entered into an amendment to the Loan Agreement to increase the aggregate amount that could be borrowed pursuant to the Promissory Note from $75 million to $100 million. On September 13, 2021, the Company entered into a second amendment to the Loan Agreement to increase the aggregate amount that could be borrowed pursuant to the Promissory Note from $100 million to $250 million and extended the maturity date to February 28, 2023. The Company may re-borrow any amount repaid; however there is no funding commitment between Feeder FIC Debt and the Company.

 

The interest rate on amounts borrowed pursuant to Promissory Notes, prior to May 12, 2021, was based on either the rate of interest for a LIBOR-Based Advance or the rate of interest for a Prime-Based Advance as defined in the Loan and Security Agreement, dated as of February 20, 2020, as amended from time to time, by and among the Owl Rock Capital Advisors LLC, as borrower, East West Bank, as Administrative Agent, Issuing Lender, Swingline Lender and a Lender and Investec Bank PLC as a Lender.

 

The interest rate on amounts borrowed pursuant to the Promissory Notes after May 12, 2021 is based on the lesser of the rate of interest for an ABR Loan or a Eurodollar Loan under the Credit Agreement dated as of April 15, 2021, as amended or supplemented from time to time, by and among the Adviser, as borrower, the several lenders from time to time party thereto, MUFG Union Bank, N.A., as Collateral Agent and MUFG Bank, Ltd., as Administrative Agent.

 

The unpaid principal balance of the Revolving Promissory Note and accrued interest thereon is payable by the Company from time to time at the discretion of the Company but immediately due and payable upon 120 days written notice by Owl Rock Feeder FIC ORCIC Debt LLC, and in any event due and payable in full no later than February 28, 2023. The Company intends to use the borrowed funds to, among other things, make investments in portfolio companies consistent with its investment strategies.

 

Revolving Credit Facility

 

On April 14, 2021, the Company entered into a Senior Secured Revolving Credit Agreement (the “Revolver”). The parties to the Facility include the Company, as Borrower, the lenders from time to time parties thereto (each a “Lender” and collectively, the “Lenders”), Sumitomo Mitsui Banking Corporation as Administrative Agent, Sumitomo Mitsui Banking Corporation and MUFG Union Bank, N.A. as Joint Lead Arrangers, Joint Book Runners and Syndication Agents, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Documentation Agents.

 

On September 29, 2021, the Company entered into an amendment to the Revolver to among other things, (i) change the rate under the Revolver for borrowings denominated in Sterling from a LIBOR-based rate to daily simple SONIA (Sterling Overnight Index Average) subject to certain adjustments specified in the Revolver and (ii) change the rate under the Revolver for borrowings denominated in Swiss Francs from a LIBOR-based rate to SARON (Swiss Average Rate Overnight) subject to certain adjustments specified in the Revolver. The other material terms of the Revolver were unchanged

 

38


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

The Revolver is guaranteed by OR Lending IC LLC, a subsidiary of the Company, and will be guaranteed by certain domestic subsidiaries of the Company that are formed or acquired by the Company in the future (collectively, the “Guarantors”). Proceeds of the Revolver may be used for general corporate purposes, including the funding of portfolio investments.

 

The maximum principal amount of the Revolver is $600,000,000, subject to availability under the borrowing base, which is based on the Company’s portfolio investments and other outstanding indebtedness. Maximum capacity under the Revolver may be increased to $1,100,000,000 through the exercise by the Borrower of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Revolver is secured by a perfected first-priority interest in substantially all of the portfolio investments held by the Company and each Guarantor, subject to certain exceptions, and includes a $50,000,000 limit for swingline loans.

 

The availability period under the Revolver will terminate on April 14, 2025 (“Commitment Termination Date”) and the Revolver will mature on April 14, 2026 (“Maturity Date”). During the period from the Commitment Termination Date to the Maturity Date, the Company will be obligated to make mandatory prepayments under the Revolver out of the proceeds of certain asset sales and other recovery events and equity and debt issuances.

 

The Company may borrow amounts in U.S. dollars or certain other permitted currencies. Amounts drawn under the Revolver, will bear interest at either LIBOR plus a margin of 2.00%, or the prime rate plus a margin of 1.00%. The Company may elect either the LIBOR or prime rate at the time of drawdown, and loans may be converted from one rate to another at any time at the Company’s option, subject to certain conditions. Further, the Revolver builds in a hardwired approach for the replacement of LIBOR loans in U.S. dollars. For LIBOR loans in other permitted currencies, the Revolver includes customary fallback mechanics for the Company and the Administrative Agent to select an alternative benchmark, subject to the negative consent of required Lenders. The Company will also pay a fee of 0.375% on undrawn amounts under the Revolver.

 

The Revolver includes customary covenants, including certain limitations on the incurrence by the Company of additional indebtedness and on the Company’s ability to make distributions to its shareholders, or redeem, repurchase or retire shares of stock, upon the occurrence of certain events and certain financial covenants related to asset coverage and liquidity and other maintenance covenants, as well as customary events of default.

 

SPV Asset Facility I

 

On September 16, 2021 (the “SPV Asset I Facility Closing Date”), Core Income Funding I LLC ("Core Income Funding I”), a Delaware limited liability company and newly formed wholly-owned subsidiary of the Company entered into a Credit Agreement (the “SPV Asset Facility I”), with Core Income Funding I, as borrower, the lenders from time to time parties thereto (the “Lenders”), Natixis, New York Branch, as Administrative Agent, State Street Bank and Trust Company as Collateral Agent and Alter Domus (US) LLC as Document Custodian.

 

From time to time, the Company expects to sell and contribute certain investments to Core Income Funding I pursuant to a Sale and Contribution Agreement by and between the Company and Core Income Funding I. No gain or loss will be recognized as a result of the contribution. Proceeds from the SPV Asset Facility I will be used to finance the origination and acquisition of eligible assets by Core Income Funding I, including the purchase of such assets from the Company. The Company retains a residual interest in assets contributed to or acquired by Core Income Funding I through its ownership of Core Income Funding I. The maximum principal amount of the Credit Facility is $300 million; the availability of this amount is subject to an overcollateralization ratio test, which is based on the value of Core Income Funding I’s assets from time to time, and satisfaction of certain conditions, including an interest coverage ratio test, certain concentration limits and collateral quality tests.

 

The SPV Asset Facility I provides for the ability to (1) draw term loans and (2) draw and redraw revolving loans under the SPV Asset Facility I for a period of up to two years after the Closing Date unless the revolving commitments are terminated or converted to term loans sooner as provided in the SPV Asset Facility I (the “Commitment Termination Date”). Unless otherwise terminated, the SPV Asset Facility I will mature on September 16, 2031 (the “Stated Maturity”). Prior to the Stated Maturity, proceeds received by Core Income Funding I from principal and interest, dividends, or fees on assets must be used to pay fees, expenses and interest on outstanding borrowings, and the excess may be returned to the Company, subject to certain conditions. On the Stated Maturity, Core Income Funding I must pay in full all outstanding fees and expenses and all principal and interest on outstanding borrowings, and the excess may be returned to the Company.

 

39


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Amounts drawn bear interest at LIBOR (or, in the case of certain lenders that are commercial paper conduits, the lower of their cost of funds and LIBOR plus 0.25%) plus an applicable margin that ranges from 1.55% to 2.15% depending on a ratio of broadly syndicated loans to middle market loans in the collateral. From the Closing Date to the Commitment Termination Date, there is a commitment fee that steps up during the year after the Closing Date from 0.00% to 0.625% per annum on the undrawn amount, if any, of the revolving commitments in the SPV Asset Facility I. The SPV Asset Facility I contains customary covenants, including certain financial maintenance covenants, limitations on the activities of Core Income Funding I, including limitations on incurrence of incremental indebtedness, and customary events of default. The SPV Asset Facility I is secured by a perfected first priority security interest in the assets of Core Income Funding I and on any payments received by Core Income Funding I in respect of those assets. Assets pledged to the Lenders will not be available to pay the debts of the Company.

 

Unsecured Notes

 

September 2026 Notes

 

On September 23, 2021, the Company issued $350 million aggregate principal amount of 3.125% notes due 2026 (the “September 2026 Notes”) in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and for initial resale to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act. The September 2026 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

 

The September 2026 Notes were issued pursuant to an Indenture dated as of September 23, 2021 (the “Base Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”), and a First Supplemental Indenture, dated as of September 23, 2021 (the “First Supplemental Indenture” and together with the Base Indenture, the “September 2026 Indenture”), between the Company and the Trustee. The September 2026 Notes will mature on September 23, 2026 and may be redeemed in whole or in part at our option at any time or from time to time at the redemption prices set forth in the September 2026 Indenture. The September 2026 Notes initially bear interest at a rate of 3.125% per year payable semi-annually on March 23 and September 23 of each year, commencing on March 23, 2022. Concurrent with the issuance of the September 2026 Notes, the Company entered into a Registration Rights Agreement for the benefit of the purchasers of the September 2026 Notes. Pursuant to the Registration Rights Agreement, the Company is obligated to file a registration statement with the SEC with respect to an offer to exchange the September 2026 Notes for a new issue of debt securities registered under the Securities Act with terms substantially identical to those of the September 2026 Notes (except for provisions relating to transfer restrictions and payment of additional interest) and to use its commercially reasonable efforts to consummate such exchange offer on the earliest practicable date after the registration statement has been declared effective but in no event later than 365 days after the initial issuance of the September 2026 Notes. If the Company fails to satisfy its registration obligations under the Registration Rights Agreement, it will be required to pay additional interest to the holders of the September 2026 Notes. The September 2026 Notes will be our direct, general unsecured obligations and will rank senior in right of payment to all of our future indebtedness or other obligations that are expressly subordinated, or junior, in right of payment to the September 2026 Notes. The September 2026 Notes will rank pari passu, or equal, in right of payment with all of the Company’s existing and future indebtedness or other obligations that are not so subordinated, or junior. The September 2026 Notes will rank effectively subordinated, or junior, to any of the Company’s future secured indebtedness or other obligations (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The September 2026 Notes will rank structurally subordinated, or junior, to all existing and future indebtedness and other obligations (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

The September 2026 Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the September 2026 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the September 2026 Indenture.

 

In addition, if a change of control repurchase event, as defined in the September 2026 Indenture, occurs prior to maturity, holders of the September 2026 Notes will have the right, at their option, to require the Company to repurchase for cash some or all of the September 2026 Notes at a repurchase price equal to 100% of the aggregate principal amount of the September 2026 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

 

 

40


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Note 7. Commitments and Contingencies

 

Portfolio Company Commitments

 

From time to time, the Company may enter into commitments to fund investments. As of September 30, 2021 and December 31, 2020, the Company had the following outstanding commitments to fund investments in current portfolio companies:

 

Portfolio Company

 

Investment

 

September 30,
2021

 

 

December 31,
2020

 

($ in thousands)

 

 

 

 

 

 

 

 

ACR Group Borrower, LLC

 

First lien senior secured revolving loan

 

$

875

 

 

$

 

Alera Group, Inc.

 

First lien senior secured delayed draw term loan

 

 

23,231

 

 

 

 

Ascend Buyer, LLC (dba PPC Flexible Packaging)

 

First lien senior secured revolving loan

 

 

5,106

 

 

 

 

Apex Group Treasury, LLC

 

Second lien senior secured delayed draw term loan

 

 

6,618

 

 

 

 

Associations, Inc.

 

First lien senior secured delayed draw term loan A

 

 

1,459

 

 

 

 

Associations, Inc.

 

First lien senior secured delayed draw term loan B

 

 

3,575

 

 

 

 

Associations, Inc.

 

First lien senior secured revolving loan

 

 

4,829

 

 

 

 

Associations, Inc.

 

First lien senior secured delayed draw term loan C

 

 

3,575

 

 

 

 

AxiomSL Group, Inc.

 

First lien senior secured revolving loan

 

 

212

 

 

 

212

 

AxiomSL Group, Inc.

 

First lien senior secured revolving loan

 

 

2,379

 

 

 

 

AxiomSL Group, Inc.

 

First lien senior secured delayed draw term loan

 

 

2,145

 

 

 

 

BCPE Osprey Buyer, Inc. (dba PartsSource)

 

First lien senior secured delayed draw term loan

 

 

31,034

 

 

 

 

BCPE Osprey Buyer, Inc. (dba PartsSource)

 

First lien senior secured revolving loan

 

 

4,655

 

 

 

 

BCTO BSI Buyer, Inc. (dba Buildertrend)

 

First lien senior secured revolving loan

 

 

47

 

 

 

107

 

Canadian Hospital Specialties Ltd.

 

First lien senior secured delayed draw term loan

 

 

937

 

 

 

 

Canadian Hospital Specialties Ltd.

 

First lien senior secured revolving loan

 

 

468

 

 

 

 

CivicPlus, LLC

 

First lien senior secured delayed draw term loan

 

 

4,400

 

 

 

 

CivicPlus, LLC

 

First lien senior secured revolving loan

 

 

880

 

 

 

 

Denali BuyerCo, LLC (dba Summit Companies)

 

First lien senior secured delayed draw term loan

 

 

24,691

 

 

 

 

Denali BuyerCo, LLC (dba Summit Companies)

 

First lien senior secured revolving loan

 

 

7,407

 

 

 

 

Diamondback Acquisition, Inc. (dba Sphera)

 

First lien senior secured delayed draw term loan

 

 

9,553

 

 

 

 

Dodge Data & Analytics LLC

 

First lien senior secured revolving loan

 

 

125

 

 

 

 

Evolution BuyerCo, Inc. (dba SIAA)

 

First lien senior secured delayed draw term loan

 

 

1,351

 

 

 

 

 

41


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Portfolio Company

 

Investment

 

September 30,
2021

 

 

December 31,
2020

 

($ in thousands)

 

 

 

 

 

 

 

 

Evolution BuyerCo, Inc. (dba SIAA)

 

First lien senior secured revolving loan

 

 

676

 

 

 

 

Gaylord Chemical Company, L.L.C.

 

First lien senior secured revolving loan

 

 

791

 

 

 

 

Global Music Rights, LLC

 

First lien senior secured revolving loan

 

 

7,500

 

 

 

 

GovBrands Intermediate, Inc.

 

First lien senior secured delayed draw term loan

 

 

2,752

 

 

 

 

GovBrands Intermediate, Inc.

 

First lien senior secured revolving loan

 

 

587

 

 

 

 

Granicus, Inc.

 

First lien senior secured delayed draw term loan

 

 

136

 

 

 

 

Granicus, Inc.

 

First lien senior secured revolving loan

 

 

161

 

 

 

 

Hercules Borrower, LLC (dba The Vincit Group)

 

First lien senior secured revolving loan

 

 

96

 

 

 

96

 

Hercules Borrower, LLC (dba The Vincit Group)

 

First lien senior secured delayed draw term loan

 

 

20,239

 

 

 

 

IG Investments Holdings, LLC (dba Insight Global)

 

First lien senior secured revolving loan

 

 

3,613

 

 

 

 

Individual Foodservice Holdings, LLC

 

First lien senior secured delayed draw term loan

 

 

62

 

 

 

99

 

Individual Foodservice Holdings, LLC

 

First lien senior secured revolving loan

 

 

80

 

 

 

65

 

Intelerad Medical Systems Inc. (fka 11849573 Canada Inc.)

 

First lien senior secured revolving loan

 

 

917

 

 

 

 

MHE Intermediate Holdings, LLC (dba OnPoint Group)

 

First lien senior secured delayed draw term loan

 

 

5,093

 

 

 

 

MHE Intermediate Holdings, LLC (dba OnPoint Group)

 

First lien senior secured revolving loan

 

 

3,571

 

 

 

 

Milan Laser Holdings LLC

 

First lien senior secured revolving loan

 

 

1,765

 

 

 

 

OB Hospitalist Group, Inc.

 

First lien senior secured revolving loan

 

 

7,993

 

 

 

 

Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)

 

First lien senior secured revolving loan

 

 

88

 

 

 

 

Peter C. Foy & Associated Insurance Services, LLC

 

First lien senior secured delayed draw term loan E

 

 

17,072

 

 

 

 

Peter C. Foy & Associated Insurance Services, LLC

 

First lien senior secured revolving loan

 

 

6

 

 

 

 

Pluralsight, LLC

 

First lien senior secured revolving loan

 

 

392

 

 

 

 

Quva Pharma, Inc.

 

First lien senior secured revolving loan

 

 

455

 

 

 

 

Refresh Parent Holdings, Inc.

 

First lien senior secured delayed draw term loan

 

 

84

 

 

 

393

 

Refresh Parent Holdings, Inc.

 

First lien senior secured revolving loan

 

 

95

 

 

 

103

 

Relativity ODA LLC

 

First lien senior secured revolving loan

 

 

435

 

 

 

 

Sovos Compliance, LLC

 

First lien senior secured delayed draw term loan

 

 

1,104

 

 

 

 

 

42


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Portfolio Company

 

Investment

 

September 30,
2021

 

 

December 31,
2020

 

($ in thousands)

 

 

 

 

 

 

 

 

Thunder Purchaser, Inc. (dba Vector Solutions)

 

First lien senior secured revolving loan

 

 

714

 

 

 

 

Thunder Purchaser, Inc. (dba Vector Solutions)

 

First lien senior secured delayed draw term loan

 

 

2,041

 

 

 

 

Troon Golf, L.L.C.

 

First lien senior secured revolving loan

 

 

7,207

 

 

 

 

TEMPO BUYER CORP. (dba Global Claims Services)

 

First lien senior secured delayed draw term loan

 

 

10,317

 

 

 

 

TEMPO BUYER CORP. (dba Global Claims Services)

 

First lien senior secured revolving loan

 

 

5,159

 

 

 

 

Ultimate Baked Goods Midco, LLC

 

First lien senior secured revolving loan

 

 

1,675

 

 

 

 

USRP Holdings, Inc. (dba U.S. Retirement and Benefits Partners)

 

First lien senior secured delayed draw term loan

 

 

1,734

 

 

 

 

USRP Holdings, Inc. (dba U.S. Retirement and Benefits Partners)

 

First lien senior secured revolving loan

 

 

1,096

 

 

 

 

Velocity HoldCo III Inc. (dba VelocityEHS)

 

First lien senior secured revolving loan

 

 

142

 

 

 

 

Total Unfunded Portfolio Company Commitments

 

 

 

$

245,400

 

 

$

1,075

 

 

As of September 30, 2021, the Company believed it had adequate financial resources to satisfy the unfunded portfolio company commitments.

 

Other Commitments and Contingencies

 

The Company raised $25.0 million in total Capital Commitments from investors, of which $25.0 million is from Feeder FIC Equity, an affiliate of the Adviser. As of March 1, 2021, all outstanding Capital Commitments had been drawn.

 

Organizational and Offering Costs

 

The Adviser has incurred organization and offering costs on behalf of the Company in the amount of $2.7 million for the period from April 22, 2020 (Inception) to September 30, 2021, of which $2.7 million has been charged to the Company pursuant to the Investment Advisory Agreement. Under the Investment Advisory Agreement and Administration Agreement, the Adviser is entitled to receive up to 1.5% of gross offering proceeds raised in the Company’s continuous public offering until all organization and offering costs paid by the Adviser have been recovered. The Adviser is responsible for the payment of the Company’s organization and offering expenses to the extent that these expenses exceed 1.5% of the aggregate gross offering proceeds, without recourse against or reimbursement by the Company.

 

The Adviser has incurred organization and offering costs on behalf of the Company in the amount of $2.3 million for the period from April 22, 2020 (Inception) to December 31, 2020, of which $0.2 million has been charged to the Company pursuant to the Investment Advisory Agreement. See Note 3. Agreements and Related Party Transactions – Investment Advisory Agreement.

 

Other Commitments and Contingencies

 

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of September 30, 2021, management was not aware of any pending or threatened litigation.

 

 

Note 8. Net Assets

 

Authorized Capital and Share Class Description

 

43


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

In connection with its formation, the Company has the authority to issue the following shares:

 

Classification

 

Number of Shares
(in thousands)

 

 

Par Value

 

Class S Shares

 

 

1,000,000

 

 

$

0.01

 

Class D Shares

 

 

1,000,000

 

 

$

0.01

 

Class I Shares

 

 

1,000,000

 

 

$

0.01

 

     Total

 

 

3,000,000

 

 

 

 

 

The Company’s Class S shares are subject to upfront selling commissions of up to 3.50% of the offering price. Pursuant to a distribution plan adopted by the Company in compliance with Rules 12b-1 and 17d-3 under the 1940 Act, as if those rules applied to the Company, the Company’s Class S shares are subject to annual ongoing services fees of 0.85% of the current net asset value of such shares, as determined in accordance with FINRA rules.

 

The Company’s Class D shares are subject to upfront selling commissions of up to 1.50% of the offering price. Pursuant to a distribution plan adopted by the Company in compliance with Rules 12b-1 and 17d-3 under the 1940 act, as if those rules applied to the Company, the Company’s Class D shares are subject to annual ongoing services fees of 0.25% of the current net asset value of such shares, as determined in accordance with FINRA rules.

 

The Company’s Class I shares are not subject to upfront selling commissions. The Company’s Class I shares are not subject to annual ongoing servicing fees.

 

Share Issuances

 

On September 30, 2020, the Company issued 100 Class I common shares for $1,000 to the Adviser.

 

On November 12, 2020, the Company issued 700,000 Class I common shares for $7.0 million to Feeder FIC Equity, an entity affiliated with the Adviser, and met the minimum offering requirement for the Company`s continuous public offering of $2.5 million.

 

The following table summarizes transactions with respect to shares of the Company’s common stock during the three and nine months ended September 30, 2021:

 

44


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

 

For the Three Months Ended September 30, 2021

 

 

 

Class S

 

 

Class D

 

 

Class I

 

 

Total

 

($ in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

Shares/gross proceeds from the continuous
   public offering

 

 

14,647,167

 

 

$

137,884

 

 

 

3,735,226

 

 

$

34,766

 

 

 

26,527,911

 

 

$

246,709

 

 

 

44,910,304

 

 

$

419,359

 

Reinvestment of distributions

 

 

44,239

 

 

 

410

 

 

 

39,323

 

 

 

365

 

 

 

112,188

 

 

 

1,044

 

 

 

195,750

 

 

 

1,819

 

Repurchased shares

 

 

-

 

 

 

-

 

 

 

(5,933

)

 

 

(55

)

 

 

(31,254

)

 

 

(291

)

 

 

(37,187

)

 

 

(346

)

Total shares/gross proceeds

 

 

14,691,406

 

 

 

138,294

 

 

 

3,768,616

 

 

 

35,076

 

 

 

26,608,845

 

 

 

247,462

 

 

 

45,068,867

 

 

 

420,832

 

Sales load

 

 

-

 

 

 

(1,666

)

 

 

-

 

 

 

(65

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,731

)

Total shares/net proceeds

 

 

14,691,406

 

 

$

136,628

 

 

 

3,768,616

 

 

$

35,011

 

 

 

26,608,845

 

 

$

247,462

 

 

 

45,068,867

 

 

$

419,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2021

 

 

 

Class S

 

 

Class D

 

 

Class I

 

 

Total

 

($ in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

Shares/gross proceeds from the continuous
   public offering

 

 

17,515,705

 

 

$

164,931

 

 

 

7,103,293

 

 

$

65,958

 

 

 

41,510,484

 

 

$

385,557

 

 

 

66,129,482

 

 

$

616,446

 

Reinvestment of distributions

 

 

51,782

 

 

 

480

 

 

 

51,667

 

 

 

479

 

 

 

138,020

 

 

 

1,283

 

 

 

241,469

 

 

 

2,242

 

Repurchased shares

 

 

-

 

 

 

-

 

 

 

(5,933

)

 

 

(55

)

 

 

(31,254

)

 

 

(291

)

 

 

(37,187

)

 

 

(346

)

Total shares/gross proceeds

 

 

17,567,487

 

 

 

165,411

 

 

 

7,149,027

 

 

 

66,382

 

 

 

41,617,250

 

 

 

386,549

 

 

 

66,333,764

 

 

 

618,342

 

Sales load

 

 

-

 

 

 

(2,133

)

 

 

-

 

 

 

(65

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,198

)

Total shares/net proceeds

 

 

17,567,487

 

 

$

163,278

 

 

 

7,149,027

 

 

$

66,317

 

 

 

41,617,250

 

 

$

386,549

 

 

 

66,333,764

 

 

$

616,144

 

 

In accordance with the Company’s share pricing policy, the Company will modify its public offering prices to the extent necessary to comply with the requirements of the 1940 Act, including the requirement that it not sell shares at a net offering price below the net asset value per share unless the Company obtains the requisite approval from its shareholders.

 

The changes to the Company’s offering price per share since the commencement of the Company’s initial continuous public offering and associated effective dates of such changes were as follows:

 

45


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Class S

 

Effective Date

 

Net Offering Price (per share)

 

 

Maximum Upfront Sales Load (per share)

 

 

Maximum Offering Price (per share)

 

March 1, 2021

 

$

9.26

 

 

$

0.32

 

 

$

9.58

 

April 1, 2021

 

$

9.26

 

 

$

0.32

 

 

$

9.58

 

May 1, 2021

 

$

9.26

 

 

$

0.32

 

 

$

9.58

 

June 1, 2021

 

$

9.28

 

 

$

0.32

 

 

$

9.60

 

July 1, 2021

 

$

9.30

 

 

$

0.33

 

 

$

9.63

 

August 1, 2021

 

$

9.30

 

 

$

0.33

 

 

$

9.63

 

September 1, 2021

 

$

9.30

 

 

$

0.33

 

 

$

9.63

 

 

 

 

 

 

 

 

 

 

 

Class D

 

Effective Date

 

Net Offering Price (per share)

 

 

Maximum Upfront Sales Load (per share)

 

 

Maximum Offering Price (per share)

 

March 1, 2021

 

$

9.26

 

 

$

0.14

 

 

$

9.40

 

April 1, 2021

 

$

9.26

 

 

$

0.14

 

 

$

9.40

 

May 1, 2021

 

$

9.25

 

 

$

0.14

 

 

$

9.39

 

June 1, 2021

 

$

9.27

 

 

$

0.14

 

 

$

9.41

 

July 1, 2021

 

$

9.29

 

 

$

0.14

 

 

$

9.43

 

August 1, 2021

 

$

9.29

 

 

$

0.14

 

 

$

9.43

 

September 1, 2021

 

$

9.29

 

 

$

0.14

 

 

$

9.43

 

 

 

 

 

 

 

 

 

 

 

Class I

 

Effective Date

 

Net Offering Price (per share)

 

 

Maximum Upfront Sales Load (per share)

 

 

Maximum Offering Price (per share)

 

Initial offering price

 

$

10.00

 

 

$

 

 

$

10.00

 

March 1, 2021

 

$

9.26

 

 

$

 

 

$

9.26

 

April 1, 2021

 

$

9.26

 

 

$

 

 

$

9.26

 

May 1, 2021

 

$

9.26

 

 

$

 

 

$

9.26

 

June 1, 2021

 

$

9.28

 

 

$

 

 

$

9.28

 

July 1, 2021

 

$

9.30

 

 

$

 

 

$

9.30

 

August 1, 2021

 

$

9.30

 

 

$

 

 

$

9.30

 

September 1, 2021

 

$

9.30

 

 

$

 

 

$

9.30

 

 

Distributions

 

The Board authorizes and declares monthly distribution amounts per share of common stock, payable monthly in arrears. The following table presents cash distributions per share that were declared during the nine months ended September 30, 2021:

 

 

 

Class S common stock distributions

 

 

Class D common stock distributions

 

 

Class I common stock distributions

 

($ in thousands)

 

Per Share(1)

 

 

Amount

 

 

Per Share(1)

 

 

Amount

 

 

Per Share(1)

 

 

Amount

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

$

 

 

$

 

 

$

0.05

 

 

$

16

 

 

$

0.05

 

 

$

194

 

April 30, 2021

 

 

0.05

 

 

 

33

 

 

 

0.05

 

 

 

54

 

 

 

0.05

 

 

 

418

 

May 31, 2021

 

 

0.05

 

 

 

91

 

 

 

0.05

 

 

 

101

 

 

 

0.05

 

 

 

558

 

June 30, 2021

 

 

0.05

 

 

 

129

 

 

 

0.05

 

 

 

168

 

 

 

0.05

 

 

 

839

 

July 31, 2021

 

 

0.05

 

 

 

294

 

 

 

0.05

 

 

 

222

 

 

 

0.05

 

 

 

1,116

 

August 31, 2021

 

 

0.05

 

 

 

432

 

 

 

0.05

 

 

 

270

 

 

 

0.05

 

 

 

1,648

 

September 30, 2021

 

 

0.05

 

 

 

789

 

 

 

0.05

 

 

 

354

 

 

 

0.05

 

 

 

2,209

 

Total

 

$

0.30

 

 

$

1,768

 

 

$

0.35

 

 

$

1,185

 

 

$

0.35

 

 

$

6,982

 

________________

(1)
Distributions per share are gross of shareholder servicing fees.

 

 

46


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

On February 23, 2021 the Company’s Board declared regular monthly distributions for March 2021 through June 2021. The regular monthly cash distributions, each in the gross amount of $0.05145833 per share, are payable on April 28, 2021, May 28, 2021, June 28, 2021 and July 29, 2021 to shareholders of records as of March 31, 2021, April 30, 2021, May 31, 2021 and June 30, 2021, respectively.


On May 5, 2021, the Company’s Board declared regular monthly distributions for July 2021 through September 2021. The regular monthly cash distributions, each in the gross amount of $0.05145833 per share, are payable on August 27, 2021, September 28, 2021, and October 28, 2021 to shareholders of records as of July 31, 2021, August 31, 2021, and September 30, 2021, respectively.

 

On August 3, 2021, the Company’s Board declared regular monthly distributions for October 2021 through December 2021. The regular monthly cash distributions, each in the gross amount of $0.05145833 per share, are payable on November 30, 2021, December 31, 2021, and January 31, 2022 to shareholders of records as of October 31, 2021, November 30, 2021, and December 31, 2021, respectively.

 

On September 13, 2021, the Company’s Board declared special monthly distributions for October 2021 through December 2021. The special monthly cash distributions, each in the gross amount of $0.00144722, $0.00289444, and $0.00434166 per share, are payable on November 30, 2021, December 29, 2021, and January 31, 2022 to shareholders of records as of October 31, 2021, November 30, 2021, and December 31, 2021, respectively.

 

The Company has adopted a distribution reinvestment plan pursuant to which shareholders (except for residents of Alabama, Arkansas, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Jersey, Oklahoma, Oregon, Vermont and Washington and clients of participating broker-dealers that do not permit automatic enrollment in the distribution reinvestment plan) will have their cash distributions automatically reinvested in additional shares of the Company’s same class of common stock to which the distribution relates unless they elect to receive their distributions in cash. The Company expects to use newly issued shares to implement the distribution reinvestment plan.

 

The Company may fund its cash distributions to shareholders from any source of funds available to the Company, including but not limited to offering proceeds, net investment income from operations, capital gains proceeds from the sale of assets, dividends or other distributions paid to it on account of preferred and common equity investments in portfolio companies and expense support from the Adviser, which is subject to recoupment. In no event, however, will funds be advanced or borrowed for the purpose of distributions, if the amount of such distributions would exceed the Company’s accrued and received revenues for the previous four quarters, less paid and accrued operating expenses with respect to such revenues and costs.

 

Through September 30, 2021, a portion of the Company’s distributions resulted from expense support from the Adviser, and future distributions may result from expense support from the Adviser, each of which is subject to repayment by the Company within three years from the date of payment. The purpose of this arrangement is to avoid distributions being characterized as a return of capital for U.S. federal income tax purposes. Shareholders should understand that any such distribution is not based on the Company’s investment performance, and can only be sustained if the Company achieves positive investment performance in future periods and/or the Adviser continues to provide expense support. Shareholders should also understand that the Company’s future repayments of expense support will reduce the distributions that they would otherwise receive. There can be no assurance that the Company will achieve the performance necessary to sustain these distributions, or be able to pay distributions at all.

 

Sources of distributions, other than net investment income and realized gains on a U.S. GAAP basis, include required adjustments to U.S. GAAP net investment income in the current period to determine taxable income available for distributions. The following table reflects the sources of cash distributions on a U.S. GAAP basis that the Company has declared on its shares of common stock during the nine months ended September 30, 2021:

 

 

Nine Months Ended September 30, 2021

 

 

Source of Distribution(2)

 

Per Share(1)

 

 

Amount

 

 

Percentage

 

 

($ in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

0.28

 

 

$

8,269

 

 

 

83.2

 

%

Net realized gain (loss) on investments

 

 

0.03

 

 

 

922

 

 

 

9.3

 

 

Distributions in excess of net investment income

 

 

0.03

 

 

 

744

 

 

 

7.5

 

 

Total

 

$

0.34

 

 

$

9,935

 

 

 

100.0

 

%

 

47


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

________________

(1)
Distributions per share are gross of shareholder servicing fees.
(2)
Data in this table is presented on a consolidated basis. Refer to Note 11 "Financial Highlights" for amounts by share class.

 

Share Repurchases

 

The Board has complete discretion to determine whether the Company will engage in any share repurchase, and if so, the terms of such repurchase. At the discretion of the Board, the Company may use cash on hand, cash available from borrowings, and cash from the sale of its investments as of the end of the applicable period to repurchase shares.

 

The Company has commenced a share repurchase program pursuant to which the Company intends to conduct quarterly repurchase offers to allow its shareholders to tender their shares at a price equal to the net offering price per share for the applicable class of shares on each date of repurchase.

 

All shares purchased by the Company pursuant to the terms of each offer to repurchase will be retired and thereafter will be authorized and unissued shares.

 

The Company intends to limit the number of shares to be repurchased in each quarter to no more than 5.00% of its’ outstanding shares of common stock.

 

Any periodic repurchase offers are subject in part to the Company’s available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While the Company intends to continue to conduct quarterly tender offers as described above, the Company is not required to do so and may suspend or terminate the share repurchase program at any time.

 

Offer Date

 

Class

 

Tender Offer Expiration

 

Tender Offer

 

 

Purchase Price per Share

 

 

Shares Repurchased

 

August 25, 2021

 

D

 

September 30, 2021

 

$

55

 

 

$

9.31

 

 

 

5,933

 

August 25, 2021

 

I

 

September 30, 2021

 

$

291

 

 

$

9.32

 

 

 

31,254

 

 

Note 9. Earnings Per Share

 

The following table sets forth the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2021:

 

 

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

($ in thousands, except per share
   amounts)

 

Class S common stock

 

 

Class D common stock

 

 

Class I common stock

 

 

Class S common stock

 

 

Class D common stock

 

 

Class I common stock

 

Increase (decrease) in net assets
   resulting from operations

 

$

1,946

 

 

$

1,057

 

 

$

6,132

 

 

$

2,290

 

 

$

1,490

 

 

$

8,427

 

Weighted average shares of
   common stock outstanding
   —basic and diluted

 

 

11,160,688

 

 

 

5,670,041

 

 

 

31,988,535

 

 

 

4,363,627

 

 

 

2,654,462

 

 

 

15,343,528

 

Earnings (loss) per common share—
   basic and diluted

 

$

0.17

 

 

$

0.19

 

 

$

0.19

 

 

$

0.52

 

 

$

0.56

 

 

$

0.55

 

 

 

Note 10. Income Taxes

 

The Company has elected to be treated as a RIC under Subchapter M of the Code, and intends to operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC thereafter, the Company must, among other things, distribute to its shareholders in each taxable year generally at least 90% of the Company’s investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. To maintain tax treatment as a RIC, the Company,

48


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

among other things, intends to make the requisite distributions to its shareholders, which generally relieves the Company from corporate-level U.S. federal income taxes.

 

Depending on the level of taxable income earned in a tax year, the Company can be expected to carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, the Company will accrue excise tax on estimated excess taxable income.

 

For the three and nine months ended September 30, 2021, the Company did not record an expense for U.S. federal excise tax.

 

 

Note 11. Financial Highlights

 

The following are the financial highlights for a common share outstanding during the nine months ended September 30, 2021:

 

 

For the Nine Months Ended September 30, 2021

 

 

 

($ in thousands, except share and per share amounts)

 

Class S common stock(7)

 

 

Class D common stock(7)

 

 

Class I common stock

 

 

 

Per share data:

 

 

 

 

 

 

 

 

 

 

 

Net asset value, at beginning of period

 

$

9.26

 

 

$

9.26

 

 

$

9.44

 

 

 

Results of operations:

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)(1)

 

 

0.34

 

 

 

0.37

 

 

 

0.38

 

 

 

Net realized and unrealized gain (loss)(2)

 

 

0.02

 

 

 

0.04

 

 

 

(0.14

)

 

 

Net increase (decrease) in net assets resulting from operations

 

$

0.36

 

 

$

0.41

 

 

$

0.24

 

 

 

Shareholder distributions:

 

 

 

 

 

 

 

 

 

 

 

Distributions from net investment income(3)

 

 

(0.25

)

 

 

(0.29

)

 

 

(0.29

)

 

 

Distributions from net realized gains(3)

 

 

(0.03

)

 

 

(0.04

)

 

 

(0.03

)

 

 

Distributions in excess of net investment income(3)

 

 

(0.02

)

 

 

(0.02

)

 

 

(0.03

)

 

 

Net decrease in net assets from shareholders' distributions

 

$

(0.30

)

 

$

(0.35

)

 

$

(0.35

)

 

 

Total increase (decrease) in net assets

 

 

0.06

 

 

 

0.06

 

 

 

(0.11

)

 

 

Net asset value, at end of period

 

$

9.32

 

 

$

9.32

 

 

$

9.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return(4)

 

 

3.5

 

%

 

4.4

 

%

 

2.6

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

Ratio of net expenses to average net assets(5)(6)

 

 

7.3

 

%

 

7.1

 

%

 

6.3

 

%

 

Ratio of net investment income to average net assets(6)

 

 

5.1

 

%

 

5.3

 

%

 

5.5

 

%

 

Portfolio turnover rate

 

 

87.6

 

%

 

87.6

 

%

 

87.6

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

4,363,627

 

 

 

2,654,462

 

 

 

15,343,528

 

 

 

Shares outstanding, end of period

 

 

17,567,487

 

 

 

7,149,027

 

 

 

42,917,350

 

 

 

Net assets, end of period

 

$

163,800

 

 

$

66,622

 

 

$

400,267

 

 

 

________________

(1)
The per share data was derived using the weighted average shares outstanding during the period.
(2)
The amount shown at this caption is the balancing amount derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in portfolio securities for the period because of the timing of sales of the Company’s shares in relation to fluctuating market values for the portfolio.
(3)
The per share data was derived using actual shares outstanding at the date of the relevant transaction.
(4)
Total return is not annualized. An investment in the Company is subject to maximum upfront sales load of 3.5% and 1.5% for Class S and Class D common stock, respectively, of the offering price, which will reduce the amount of capital available for investment. Class I common stock is not subject to upfront sales load. Total return displayed is net of all fees, including all operating expenses such as management fees, incentive fees, general and administrative expenses, organization and

49


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

amortized offering expenses, and interest expenses. Total return is calculated as the change in net asset value (“NAV”) per share (assuming dividends and distributions, if any, are reinvested in accordance with the Company’s dividend reinvestment plan), if any, divided by the beginning NAV per share (which for the purposes of this calculation is equal to the net offering price in effect at that time).
(5)
Operating expenses may vary in the future based on the amount of capital raised, the Adviser’s election to continue expense support, and other unpredictable variables. For the nine months ended September 30, 2021, the total operating expenses to average net assets were 7.4%, 8.0% and 8.0%, for Class S, Class D, and Class I common stock, respectively, prior to management fee waivers, expense support provided by the Adviser, and expense recoupment paid to the Adviser, if any. Past performance is not a guarantee of future results.
(6)
The ratio reflects an annualized amount, except in the case of non-recurring expenses (e.g., initial organization expenses) and offering expenses.
(7)
Class S common stock shares were first issued on April 1, 2021. Class D common stock shares were first issued on March 1, 2021.

 

 

Note 12. Subsequent Events

 

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date of issuance. There are no subsequent events to disclose except for the following:

On November 2, 2021, the Company’s Board declared regular monthly distributions for January 2022 through March 2022. The regular monthly cash distributions, each in the gross amount of $0.05580000 per share, are payable on February 28, 2022, March 31, 2022, and April 29, 2022 to shareholders of records as of 9 PM EST on January 31, 2022, February 28, 2022, and March 31, 2022, respectively.

As of November 12, 2021, the Company has issued 29,818,604 shares of its Class S common stock, 13,828,329 shares of its Class D common stock, and 58,919,835 shares of its Class I common stock and has raised total gross proceeds of $280.3 million, $128.6 million, and $548.7 million, respectively, including seed capital of $1,000 contributed by its Adviser in September 2020 and approximately $25.0 million in gross proceeds raised from Feeder FIC Equity. In addition, as of November 12, 2021, the Company has received $281 million in subscription payments which the Company accepted on November 1, 2021 and which is pending the Company’s determination of the net asset value per share applicable to such purchase.

On October 5, 2021, Core Income Funding II LLC (“Core Income Funding II”), a Delaware limited liability company and the Company's newly formed subsidiary entered into a loan and financing and servicing agreement (the “SPV Asset Facility II”), with Core Income Funding II, as borrower, the Company, as equityholder and service provider, the lenders from time to time parties thereto, Deutsche Bank AG, New York Branch, as Facility Agent, State Street Bank and Trust Company, as collateral agent, and Alter Domus (US) LLC as collateral custodian.

From time to time, the Company expects to sell and contribute certain loan assets to Core Income Funding II pursuant to a Sale and Contribution Agreement by and between the Company and Core Income Funding II. No gain or loss will be recognized as a result of the contribution. Proceeds from the SPV Asset Facility II will be used to finance the origination and acquisition of eligible assets by Core Income Funding II, including the purchase of such assets from the Company. The Company retains a residual interest in assets contributed to or acquired by Core Income Funding II through the Company's ownership of Core Income Funding II. The maximum principal amount of the SPV Asset Facility II is $500 million; the availability of this amount is subject to the borrowing base, which is determined on the basis of the value and types of Core Income Funding II’s assets from time to time, and satisfaction of certain conditions, including interest spread and weighted average coupon tests, certain concentration limits and collateral quality tests.

The SPV Asset Facility II provides for the ability to borrow, reborrow, repay and prepay advances under the SPV Asset Facility II for a period of up to three years after the Closing Date unless such period is extended or accelerated under the terms of the SPV Asset Facility II (the “Revolving Period”). Unless otherwise extended, accelerated or terminated under the terms of the SPV Asset Facility II, the SPV Asset Facility II will mature on the date that is two years after the last day of the Revolving Period (the “Facility Termination Date”). Prior to the Facility Termination Date, proceeds received by Core Income Funding II from principal and interest, dividends, or fees on assets must be used to pay fees, expenses and interest on outstanding advances, and the excess may be returned to the Company, subject to certain conditions. On the Facility Termination Date, Core Income Funding II must pay in full all outstanding fees and expenses and all principal and interest on outstanding advances, and the excess may be returned to the Company.

Amounts drawn under the SPV Asset Facility II bear interest at LIBOR (or, in the case of certain Lenders that are commercial paper conduits, the lower of (a) their cost of funds and (b) LIBOR, such LIBOR not to be lower than zero) plus a spread equal to 2.00% per annum, which spread will increase (a) on and after the end of the Revolving Period by 0.15% per annum if no event of

50


Owl Rock Core Income Corp.

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

default has occurred and (b) by 2.00% per annum upon the occurrence of an event of default (such spread, the “Applicable Margin”). LIBOR may be replaced as a base rate under certain circumstances. During the Revolving Period, Core Income Funding II will pay an undrawn fee ranging from 0.00% to 0.25% per annum on the undrawn amount, if any, of the revolving commitments in the SPV Asset Facility. During the Revolving Period, if the undrawn commitments are in excess of a certain portion (initially 12.5% and increasing in stages to 25%, 50% and 75%) of the total commitments under the SPV Asset Facility II, Core Income Funding II will also pay a make-whole fee equal to the Applicable Margin multiplied by such excess undrawn commitment amount, reduced by the undrawn fee payable on such excess. Core Income Funding II will also pay Deutsche Bank AG, New York Branch, certain fees (and reimburse certain expenses) in connection with its role as facility agent. The SPV Asset Facility II contains customary covenants, including certain financial maintenance covenants, limitations on the activities of Core Income Funding II, including limitations on incurrence of incremental indebtedness, and customary events of default. The SPV Asset Facility II is secured by a perfected first priority security interest in the assets of Core Income Funding II and on any payments received by Core Income Funding II in respect of those assets. Assets pledged to the Lenders will not be available to pay the Company's debts.

Borrowings of Core Income Funding II are considered the Company's borrowings for purposes of complying with the asset coverage requirements under the Investment Company Act of 1940, as amended.

 

51


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The information contained in this section should be read in conjunction with “ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS”. This discussion contains forward-looking statements, which relate to future events or the future performance or financial condition of Owl Rock Core Income Corp. and involves numerous risks and uncertainties, including, but not limited to, those described in our Form 10-K for the fiscal year ended December 31, 2020 and in “ITEM 1A. RISK FACTORS”. This discussion also should be read in conjunction with the “Cautionary Statement Regarding Forward Looking Statements” set forth on page 3 of this Quarterly Report on Form 10-Q. Actual results could differ materially from those implied or expressed in any forward-looking statements.

 

Overview

 

Owl Rock Core Income Corp. (the “Company”, “we”, “us”, or “our”) is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the 1940 Act. Formed as a Maryland corporation on April 22, 2020, we are externally managed by Owl Rock Capital Advisors LLC (the “Adviser”) which is responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments and monitoring our portfolio on an ongoing basis. The Adviser is registered as an investment adviser with the Securities and Exchange Commission (“SEC”). We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to qualify for the tax treatment applicable to RICs. On October 23, 2020, we formed a wholly-owned subsidiary, OR Lending IC LLC, a Delaware limited liability company, which holds a California finance lenders license. OR Lending IC LLC makes loans to borrowers headquartered in California. From time to time we may form wholly-owned subsidiaries to facilitate the normal course of business.

 

We are managed by our Adviser. Our Adviser is an indirect subsidiary of Blue Owl Capital, Inc. (“Blue Owl”) (NYSE: OWL) and part of Owl Rock, a division of Blue Owl focused on direct lending. Our Adviser is registered with the U.S. Securities and Exchange Commission (the “SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Subject to the overall supervision of our Board, our Adviser manages the day-to-day operations of, and provides investment advisory and management services, to us. The Adviser or its affiliates may engage in certain organizational activities and receive attendant arrangement, structuring or similar fees. Our Adviser is responsible for managing our business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring our portfolio companies on an ongoing basis through a team of management professionals. Our Board consists of six directors, five of whom are independent.

 

We have received an exemptive order that permits us to offer multiple classes of shares of common stock and to impose asset-based servicing and distribution fees and early withdrawal fees. We are offering on a best efforts, continuous basis up to $2,500,000,000 in any combination of amount of shares of Class S, Class D and Class I common stock. The share classes have different upfront selling commissions and ongoing servicing fees. Each class of common stock will be offered through Blue Owl Securities LLC (d/b/a Blue Owl Securities) (the “Dealer Manager”). The Dealer Manager is entitled to receive upfront selling commissions of up to 3.50% of the offering price of each Class S share sold in the offering and 1.50% of the offering price of each Class D share sold. Class I shares are not subject to upfront selling commissions. Any upfront selling commissions for the Class S shares and Class D shares sold in the offering will be deducted from the purchase price. Class S, Class D and Class I shares were offered at initial purchase prices per shares of $10.35, $10.15 and $10.00, respectively. Currently, the purchase price per share for each class of common stock varies, but will not be sold at a price below the Company’s net asset value per share of such class, as determined in accordance with the Company’s share pricing policy, plus applicable upfront selling commissions.

 

On September 30, 2020, the Advisor purchased 100 shares of our Class I common stock at $10.00 per share, which represents the initial public offering price. The Adviser will not tender these shares for repurchase as long as Owl Rock Capital Advisors LLC remains the investment adviser of Owl Rock Core Income Corp. There is no current intention for Owl Rock Capital Advisors LLC to discontinue its role. On October 15, 2020, we received a subscription agreement, totaling $25.0 million for the purchase of Class I common shares of our common stock from Feeder Owl Rock Feeder FIC ORCIC Equity LLC (“Feeder FIC Equity”), an entity affiliated with the Adviser. As of September 30, 2021, the Company had called all of the $25.0 million commitment from Feeder FIC Equity.

 

We commenced our continuous public offering of up to $2,500,000,000 in any combination of amount of shares of Class S, Class D, and Class I common stock on November 12, 2020. On November 12, 2020, we sold 700,000 shares pursuant to the subscription agreement with Feeder FIC Equity and met the minimum offering requirement for our continuous public offering of $2.5 million. The purchase price of these shares sold in the private placement was $10.00 per share. Since meeting the minimum offering requirement and commencing our continuous public offering through September 30, 2021, the Company has issued 17,515,705 shares of Class S common stock, 7,103,293 shares of Class D common stock, and 42,810,584 shares of Class I common stock for gross proceeds of

52


 

$164.9 million, $66.0 million, and $398.6 million, respectively, including $1,000 of seed capital contributed by our Adviser in September 2020 and approximately $25.0 million in gross proceeds raised in the private placement from Feeder FIC Equity. The shares purchased by the Adviser and Feeder FIC Equity are subject to a lock-up pursuant to FINRA Rule 5110(e)(1) for a period of 180 days from the date of commencement of sales in the offering, and the Adviser, Feeder FIC Equity, and their permitted assignees may not engage in any transaction that would result in the effective economic disposition of the Class I shares. On October 7, 2021, we filed a registration statement with respect to our proposed follow-on offering of up to $7,500,000,000 in any combination Class S, Class D and Class I common shares.

 

Our Adviser also serves as investment adviser to Owl Rock Capital Corporation and Owl Rock Capital Corporation II.

 

Blue Owl consists of two divisions: Owl Rock, which focuses on direct lending and Dyal, which focuses on providing capital to institution alternative asset managers. Owl Rock is comprised of the Adviser, Owl Rock Technology Advisors LLC (“ORTA”), Owl Rock Capital Private Fund Advisors LLC (“ORPFA”) and Owl Rock Diversified Advisors LLC (“ORDA”). The Adviser, ORTA, ORPFA and ORDA, the “Owl Rock Advisers” are investment advisers.

 

In addition, we and the Adviser have entered into a dealer manager agreement with Blue Owl Securities and certain participating broker dealers to solicit capital.

 

We may be prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, the prior approval of the SEC. We rely on exemptive relief that has been granted to our Adviser and its affiliates, have been granted exemptive relief by the SEC to permit us to co-invest with other funds managed by our Adviser or certain of its affiliates, the Owl Rock Clients 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, we generally are permitted to co-invest with certain of our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching by us or our shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of our shareholders and is consistent with our investment objective and strategies, (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing, and (4) the proposed investment by us would not benefit our Adviser or its affiliates or any affiliated person of any of them (other than the parties to the transaction), except to the extent permitted by the exemptive relief and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act. In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, we were permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in our existing portfolio companies with certain private funds managed by the Adviser or its affiliates and covered by our exemptive relief, even if such other funds had not previously invested in such existing portfolio company. Without this order, private funds would not be able to participate in such follow-on investments with us unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with us. Although the conditional exemptive order has expired, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extent that any BDC with an existing coinvestment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein. The Owl Rock Advisers` investment allocation policy seeks to ensure equitable allocation of investment opportunities between us and/or other funds managed by our Adviser or its affiliates. As a result of the exemptive relief, there could be significant overlap in our investment

53


 

portfolio and the investment portfolio of other funds managed by Owl Rock that could avail themselves of exemptive relief and that have an investment objective similar to ours.

 

We have elected to be regulated as a BDC under the 1940 Act and intend to elect to be taxed as a regulated investment company (“RIC”) for tax purposes under the Code. As a result, we are required to comply with various statutory and regulatory requirements, such as:

 

the requirement to invest at least 70% of our assets in “qualifying assets”, as such term is defined in the 1940 Act;
source of income limitations;
asset diversification requirements; and
the requirement to distribute (or be treated as distributing) in each taxable year at least 90% of our investment company taxable income and tax-exempt interest for that taxable year.

 

COVID-19 Developments

 

In March 2020, the outbreak of COVID -19 was recognized as a pandemic by the World Health Organization. In response to the outbreak, our Adviser instituted a work from home policy and began monitoring the ability of its employees to safely return to the office. In October 2021, the Adviser began a return to in-office work plan across all of its offices.

 

We have and continue to assess the impact of COVID-19 on our portfolio companies. We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide, the effectiveness of governmental responses designed to mitigate strain to businesses and the economy and the magnitude of the economic impact of the outbreak. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns and cancellations of events and travel. In addition, while economic activity remains healthy and well improved from the beginning of the COVID-19 pandemic, we continue to observe supply chain interruptions, labor difficulties, commodity inflation and elements of economic and financial market instability both globally and in the United States.

 

We have built out our portfolio management team to include workout experts and continue to closely monitor our portfolio companies; however, we are unable to predict the duration of any business and supply-chain disruptions or labor difficulties, whether COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition.

 

Our Investment Framework

 

We are a Maryland corporation organized primarily to originate and make loans to, and make debt and equity investments in, U.S. middle market companies. Our investment objective is to generate current income, and to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Since our Adviser and its affiliates began investment activities in April 2016 through September 30, 2021, our Adviser and its affiliates have originated $43.6 billion aggregate principal amount of investments, of which $40.9 billion aggregate principal amount of investments prior to any subsequent exits or repayments, was retained by either us or a corporation or fund advised by our Adviser or its affiliates. We seek to generate current income primarily in U.S. upper middle market companies through direct originations of senior secured loans or originations of unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, investments in equity-related securities including warrants, preferred stock and similar forms of senior equity.

 

We define “middle market companies” generally to mean companies with earnings before interest expense, income tax expense, depreciation and amortization, or “EBITDA,” between $10 million and $250 million annually and/or annual revenue of $50 million to $2.5 billion at the time of investment, although we may on occasion invest in smaller or larger companies if an opportunity presents itself.

 

We expect that generally our portfolio composition will be majority debt or income producing securities, which may include “covenant-lite” loans (as defined below), with a lesser allocation to equity or equity-linked opportunities, including publicly traded debt instruments, which we may hold directly or through special purposes vehicles. These investments may include high-yield bonds, which are often referred to as “junk bonds”, and broadly syndicated loans. In addition, we may invest a portion of our portfolio in opportunistic investments, such as in large U.S. companies or foreign companies, which will not be our primary focus, but will be intended to enhance returns to our Shareholders. Our portfolio composition may fluctuate from time to time based on market conditions and interest rates. We generally intend to investment in companies with low loan-to-value ratios, which we consider to be 50% or lower.

 

54


 

Covenants are contractual restrictions that lenders place on companies to limit the corporate actions a company may pursue. Generally, the loans in which we expect to invest will have financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance. However, to a lesser extent, we may invest in “covenant-lite” loans. We use the term “covenant-lite” to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.

 

As of September 30, 2021, our average investment size in each of our portfolio companies was approximately $19.7 million based on fair value. As of September 30, 2021, excluding certain investments that fall outside our typical borrower profile, our portfolio companies representing 87.9% of our total debt portfolio based on fair value, had weighted average annual revenue of $632 million and weighted average annual EBITDA of $140 million.

 

The companies in which we invest use our capital to support their growth, acquisitions, market or product expansion, refinancings and/or recapitalizations. The debt in which we invest typically is not rated by any rating agency, but if these instruments were rated, they would likely receive a rating of below investment grade (that is, below BBB- or Baa3), which is often referred to as “junk”.

 

Key Components of Our Results of Operations

 

Investments

 

We focus primarily on the direct origination of loans to middle market companies domiciled in the United States.

 

Our level of investment activity (both the number of investments and the size of each investment) can and will vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make.

 

In addition, as part of our risk strategy on investments, we may reduce the levels of certain investments through partial sales or syndication to additional lenders.

 

Revenues

 

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of three to ten years. As of September 30, 2021, greater than 99.9% of our debt investments based on fair value bear interest at a floating rate, subject to interest rate floors in certain cases. Interest on our debt investments is generally payable either monthly or quarterly.

 

Our investment portfolio consists of floating rate loans, and our credit facility bears interest at a floating rate. Macro trends in base interest rates like London Interbank Offered Rate (“LIBOR”) and any alternative reference rates may affect our net investment income over the long term. However, because we generally originate loans to a small number of portfolio companies each quarter, and those investments vary in size, our results in any given period, including the interest rate on investments that were sold or repaid in a period compared to the interest rate of new investments made during that period, often are idiosyncratic, and reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macro trends.

 

Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts under U.S. generally accepted accounting principles (“U.S. GAAP”) as interest income using the effective yield method for term instruments and the straight-line method for revolving or delayed draw instruments. Repayments of our debt investments can reduce interest income from period to period. The frequency or volume of these repayments may fluctuate significantly. We record

55


 

prepayment premiums on loans as interest income. We may also generate revenue in the form of commitment, loan origination, structuring, or due diligence fees, fees for providing managerial assistance to our portfolio companies and possibly consulting fees.

 

Dividend income on equity investments is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded companies.

 

Our portfolio activity also reflects the proceeds from sales of investments. We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized gains (losses) on investments in the Consolidated Statements of Operations.

 

Expenses

 

Our primary operating expenses include the payment of the management fee, performance based incentive fee, expenses reimbursable under the Administration Agreement and Investment Advisory Agreement, legal and professional fees, interest and other debt expenses and other operating expenses. The management fee and performance based incentive fee compensate our Adviser for work in identifying, evaluating, negotiating, closing, monitoring and realizing our investments.

 

Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory and management services to us, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, are provided and paid for by the Adviser. We bear our allocable portion of the compensation paid by the Adviser (or its affiliates) to our Chief Compliance Officer and Chief Financial Officer and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs). We bear all other costs and expenses of our operations, administration and transactions, including, but not limited to (i) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Investment Advisory Agreement; (ii) our allocable portion of overhead and other expenses incurred by the Adviser in performing its administrative obligations under the Administration Agreement; and (iii) all other expenses of our operations and transactions including, without limitation, those relating to:

 

expenses deemed to be “organization and offering expenses” for purposes of Conduct Rule 2310(a)(12) of Financial Industry Regulatory Authority (exclusive of commissions, the dealer manager fee, any discounts and other similar expenses paid by investors at the time of sale of our stock);
the cost of corporate and organizational expenses relating to offerings of shares of our common stock;
the cost of calculating our net asset value, including the cost of any third-party valuation services;
the cost of effecting any sales and repurchases of our common stock and other securities;
fees and expenses payable under any dealer manager agreements, if any;
debt service and other costs of borrowings or other financing arrangements;
costs of hedging;
expenses, including travel expense, incurred by the Adviser, or members of the investment team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, enforcing our rights;
escrow agent, transfer agent and custodial fees and expenses;
fees and expenses associated with marketing efforts;
federal and state registration fees, any stock exchange listing fees and fees payable to rating agencies;
federal, state and local taxes;
independent directors’ fees and expenses, including certain travel expenses;
costs of preparing financial statements and maintaining books and records and filing reports or other documents with the SEC (or other regulatory bodies) and other reporting and compliance costs, including registration fees, listing fees and licenses, and the compensation of professionals responsible for the preparation of the foregoing;
the costs of any reports, proxy statements or other notices to our shareholders (including printing and mailing costs);
the costs of any shareholder or director meetings and the compensation of personnel responsible for the preparation of the foregoing and related matters;
commissions and other compensation payable to brokers or dealers;
research and market data;
fidelity bond, directors’ and officers’ errors and omissions liability insurance and other insurance premiums;
direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;
fees and expenses associated with independent audits, outside legal and consulting costs;
costs of winding up;
costs incurred in connection with the formation or maintenance of entities or vehicles to hold our assets for tax or other purposes;

56


 

extraordinary expenses (such as litigation or indemnification); and
costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws.

 

We expect, but cannot assure, that our general and administrative expenses will increase in dollar terms during periods of asset growth, but will decline as a percentage of total assets during such periods.

 

Expense Support and Conditional Reimbursement Agreement

 

We have entered into an Expense Support and Conditional Reimbursement Agreement (the “Expense Support Agreement”) with the Adviser, the purpose of which is to ensure that no portion of our distributions to shareholders will represent a return of capital for tax purposes. The Expense Support Agreement became effective as of November 12, 2020, the date that the Company met the minimum offering requirement.

 

On a quarterly basis, the Adviser shall reimburse us for “Operating Expenses” (as defined below) in an amount equal to the excess of our cumulative distributions paid to our shareholders in each quarter over “Available Operating Funds” (as defined below) received by us on account of our investment portfolio during such quarter. Any payments required to be made by the Adviser pursuant to the preceding sentence are referred to herein as an “Expense Payment”.

 

Pursuant to the Expense Support Agreement, “Operating Expenses” means all of our operating costs and expenses incurred, as determined in accordance with generally accepted accounting principles for investment companies. “Available Operating Funds” means the sum of (i) our estimated investment company taxable income (including realized net short-term capital gains reduced by realized net long-term capital losses), (ii) our realized net capital gains (including the excess of realized net long-term capital gains over realized net short-term capital losses) and (iii) dividends and other distributions paid to us on account of preferred and common equity investments in portfolio companies, if any (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

 

The Adviser’s obligation to make an Expense Payment shall automatically become a liability of the Adviser and the right to such Expense Payment will be an asset of ours on the last business day of the applicable quarter. The Expense Payment for any quarter will be paid by the Adviser to us in any combination of cash or other immediately available funds, and/or offset against amounts due from us to the Adviser no later than the earlier of (i) the date on which we close our books for such quarter, or (ii) forty-five days after the end of such quarter.

 

Following any quarter in which Available Operating Funds exceed the cumulative distributions paid by us in respect of such quarter (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), we will pay such Excess Operating Funds, or a portion thereof, in accordance with the stipulations below, as applicable, to the Adviser, until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such quarter have been reimbursed. Any payments required to be made by us are referred to as a “Reimbursement Payment”.

 

The amount of the Reimbursement Payment for any quarter shall equal the lesser of (i) the Excess Operating Funds in respect of such quarter and (ii) the aggregate amount of all Expense Payments made by the Adviser to us within three years prior to the last business day of such quarter that have not been previously reimbursed by us to the Adviser. The payment will be reduced to the extent that such Reimbursement Payments, together with all other Reimbursement Payments paid during the fiscal year, would cause Other Operating Expenses defined as our total Operating Expenses, excluding base management fees, incentive fees, organization and offering expenses, distribution and shareholder servicing fees, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses on an annualized basis and net of any Expense Payments received by us during the fiscal year to exceed the lesser of: (i) 1.75% of our average net assets attributable to the shares of our common stock for the fiscal year-to-date period after taking such Expense Payments into account; and (ii) the percentage of our average net assets attributable to shares of our common stock represented by Other Operating Expenses during the fiscal year in which such Expense Payment was made (provided, however, that this clause (ii) shall not apply to any Reimbursement Payment which relates to an Expense Payment made during the same fiscal year).

 

No Reimbursement Payment for any quarter will be made if: (1) the “Effective Rate of Distributions Per Share” (as defined below) declared by us at the time of such Reimbursement Payment is less than the Effective Rate of Distributions Per Share at the time the Expense Payment was made to which such Reimbursement Payment relates, or (2) our “Operating Expense Ratio” (as defined below) at the time of such Reimbursement Payment is greater than the Operating Expense Ratio at the time the Expense Payment was made to which such Reimbursement Payment relates. Pursuant to the Expense Support Agreement, “Effective Rate of

57


 

Distributions Per Share” means the annualized rate (based on a 365 day year) of regular cash distributions per share exclusive of returns of capital, distribution rate reductions due to distribution and shareholder fees, and declared special dividends or special distributions, if any. The “Operating Expense Ratio” is calculated by dividing Operating Expenses, less organizational and offering expenses, base management and incentive fees owed to Adviser, and interest expense, by our net assets.

 

The specific amount of expenses reimbursed by the Adviser, if any, will be determined at the end of each quarter. We or the Adviser will be able to terminate the Expense Support Agreement at any time, with or without notice. The Expense Support Agreement will automatically terminate in the event of (a) the termination of the Investment Advisory Agreement, or (b) a determination by our Board to dissolve or liquidate the Company. Upon termination of the Expense Support Agreement, we will be required to fund any Expense Payments that have not been reimbursed by us to the Adviser. As of September 30, 2021, the amount of Expense Support payments provided by our Adviser since inception is $2.6 million.

 

Fee Waivers

 

On September 30, 2020, the Adviser agreed to waive 100% of the base management fee for the quarter ended December 31, 2020. Any portion of the base management fee waived will not be subject to recoupment.

 

On February 23, 2021, the Adviser agreed to waive 100% of the base management fee for the quarter ended March 31, 2021. Any portion of the base management fee waived will not be subject to recoupment.

 

Reimbursement of Administrative Services

 

We will reimburse our Adviser for the administrative expenses necessary for its performance of services to us. However, such reimbursement will be made at an amount equal to the lower of our Adviser’s actual costs or the amount that we would be required to pay for comparable administrative services in the same geographic location. Also, such costs will be reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We will not reimburse our Adviser for any services for which it receives a separate fee, for example rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of our Adviser.

 

Leverage

 

The amount of leverage we use in any period depends on a variety of factors, including cash available for investing, the cost of financing and general economic and market conditions. We have received approvals that allow us to reduce our asset coverage ratio to 150%. and in connection with their subscription agreements, our investors are required to acknowledge our ability to operate with an asset coverage ratio that may be as low as 150%. As a result, we generally will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to the common stock if our asset coverage, as defined in the 1940 Act, would at least be equal to 150% immediately after each such issuance. This reduced asset coverage ratio permits us to double the amount of leverage we can incur. For example, under a 150% asset coverage ratio we may borrow $2 for investment purposes of every $1 of investor equity whereas under a 200% asset coverage ratio we may only borrow $1 for investment purposes for every $1 of investor equity.

 

In any period, our interest expense will depend largely on the extent of our borrowing and we expect interest expense will increase as we increase our leverage over time subject to the limits of the 1940 Act. In addition, we may dedicate assets to financing facilities.

 

Market Trends

 

We believe the middle-market lending environment provides opportunities for us to meet our goal of making investments that generate attractive risk-adjusted returns based on a combination of the following factors,

 

Limited Availability of Capital for Middle-Market Companies. We believe that regulatory and structural changes in the market have reduced the amount of capital available to U.S. middle-market companies. In particular, we believe there are currently fewer providers of capital to middle market companies. We believe that many commercial and investment banks have, in recent years, de-emphasized their service and product offerings to middle-market businesses in favor of lending to large corporate clients and managing capital markets transactions. In addition, these lenders may be constrained in their ability to underwrite and hold bank loans and high yield securities for middle-market issuers as they seek to meet existing and future regulatory capital requirements. We also believe that there are a lack of market participants that are willing to hold meaningful amounts of certain middle-market loans. As a result, we believe our ability to minimize syndication risk for a company seeking financing by being able to hold its loans without

58


 

having to syndicate them, coupled with reduced capacity of traditional lenders to serve the middle-market, present an attractive opportunity to invest in middle-market companies.

 

Capital Markets Have Been Unable to Fill the Void in U.S. Middle Market Finance Left by Banks. While underwritten bond and syndicated loan markets have been robust in recent years, middle market companies are less able to access these markets for reasons including the following:

 

High Yield Market – Middle market companies generally do not issue debt in amounts large enough to be attractively sized bonds. High yield bonds are generally purchased by institutional investors who, among other things, are focused on the liquidity characteristics of the bond being issued. For example, mutual funds and exchange traded funds (“ETFs”) are significant buyers of underwritten bonds. However, mutual funds and ETFs generally require the ability to liquidate their investments quickly in order to fund investor redemptions and/or comply with regulatory requirements. Accordingly, the existence of an active secondary market for bonds is an important consideration in these entities’ initial investment decision. Because there typically is little or no active secondary market for the debt of U.S. middle market companies, mutual funds and ETFs generally do not provide debt capital to U.S. middle market companies. We believe this is likely to be a persistent problem and creates an advantage for those like us who have a more stable capital base and have the ability to invest in illiquid assets.

 

Syndicated Loan Market – While the syndicated loan market demand is modestly more accommodating to middle market issuers, as with bonds, loan issue size and liquidity are key drivers of institutional and, correspondingly, underwriters’ willingness to underwrite the loans. Loans arranged through a bank are done either on a “best efforts” basis or are underwritten with terms plus provisions that permit the underwriters to change certain terms, including pricing, structure, yield and tenor, otherwise known as “flex”, to successfully syndicate the loan, in the event the terms initially marketed are insufficiently attractive to investors. Furthermore, banks are generally reluctant to underwrite middle market loans because the arrangement fees they may earn on the placement of the debt generally are not sufficient to meet the banks’ return hurdles. Loans provided by companies such as ours provide certainty to issuers in that we can commit to a given amount of debt on specific terms, at stated coupons and with agreed upon fees. As we are the ultimate holder of the loans, we do not require market “flex” or other arrangements that banks may require when acting on an agency basis.

 

Robust Demand for Debt Capital. We believe U.S. middle market companies will continue to require access to debt capital to refinance existing debt, support growth and finance acquisitions. In addition, we believe the large amount of uninvested capital held by funds of private equity firms, estimated by Preqin Ltd., an alternative assets industry data and research company, to be $1.5 trillion as of October 2020, will continue to drive deal activity. We expect that private equity sponsors will continue to pursue acquisitions and leverage their equity investments with secured loans provided by companies such as us.

 

The Middle Market is a Large Addressable Market. According to GE Capital’s National Center for the Middle Market 2nd quarter 2020 Middle Market Indicator, there are approximately 200,000 U.S. middle market companies, which have approximately 48 million aggregate employees. Moreover, the U.S. middle market accounts for one-third of private sector gross domestic product (“GDP”). GE defines U.S. middle market companies as those between $10 million and $1 billion in annual revenue, which we believe has significant overlap with our definition of U.S. middle market companies.

 

Attractive Investment Dynamics. An imbalance between the supply of, and demand for, middle market debt capital creates attractive pricing dynamics. We believe the directly negotiated nature of middle market financings also generally provides more favorable terms to the lender, including stronger covenant and reporting packages, better call protection, and lender-protective change of control provisions. Additionally, we believe BDC managers’ expertise in credit selection and ability to manage through credit cycles has generally resulted in BDCs experiencing lower loss rates than U.S. commercial banks through credit cycles. Further, we believe that historical middle market default rates have been lower, and recovery rates have been higher, as compared to the larger market capitalization, broadly distributed market, leading to lower cumulative losses.

 

Conservative Capital Structures. Following the credit crisis, which we define broadly as occurring between mid-2007 and mid-2009, lenders have generally required borrowers to maintain more equity as a percentage of their total capitalization, specifically to protect lenders during economic downturns. With more conservative capital structures, U.S. middle market companies have exhibited higher levels of cash flows available to service their debt. In addition, U.S. middle market companies often are characterized by simpler capital structures than larger borrowers, which facilitates a streamlined underwriting process and, when necessary, restructuring process.

 

Attractive Opportunities in Investments in Loans. We invest in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity and equity-related securities. We believe that opportunities in senior secured loans are significant because of the floating rate structure of most senior secured debt issuances and because of the strong defensive characteristics of these types of investments. Given the current low interest rate environment, we believe that debt issues with floating

59


 

interest rates offer a superior return profile as compared with fixed-rate investments, since floating rate structures are generally less susceptible to declines in value experienced by fixed-rate securities in a rising interest rate environment. Senior secured debt also provides strong defensive characteristics. Senior secured debt has priority in payment among an issuer’s security holders whereby holders are due to receive payment before junior creditors and equity holders. Further, these investments are secured by the issuer’s assets, which may provide protection in the event of a default.

 

Portfolio and Investment Activity

 

As of September 30, 2021, based on fair value, our portfolio consisted of 84.2% first lien senior secured debt investments (of which we consider 65% to be unitranche debt investments (including “last-out” portions of such loans)), 14.2% second-lien senior secured debt investments, 0.1% unsecured debt investments, 0.8% preferred equity investments, and 0.7% common equity investments.

 

As of September 30, 2021, our weighted average total yield of the portfolio at fair value and amortized cost was 7.0% and 7.0%, respectively, and our weighted average yield of debt and income producing securities at fair value and amortized cost was 7.0% and 7.0%, respectively.

 

As of September 30, 2021 we had investments in 73 portfolio companies with an aggregate fair value of $1,441.4 million. As of September 30, 2021, we had net leverage of 1.46x debt-to-equity.

 

Based on current market conditions, the pace of our investment activities, including originations and repayments, may vary. Currently, the strength of the financing and merger and acquisitions markets, and the current low interest rate environment, has led to increased originations, an active pipeline of investment opportunities and an increased demand for unitranche debt investments.

 

 

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Our investment activity for the three months ended September 30, 2021 is presented below (information presented herein is at par value unless otherwise indicated).

 

 

 

 

($ in thousands)

 

For the Three Months Ended September 30, 2021

 

New investment commitments

 

 

 

Gross originations

 

$

1,709,692

 

Less: Sell downs

 

 

(67,187

)

Total new investment commitments

 

$

1,642,505

 

Principal amount of investments funded:

 

 

 

First-lien senior secured debt investments

 

$

1,204,233

 

Second-lien senior secured debt investments

 

 

151,000

 

Unsecured debt investments

 

 

 

Preferred equity investments

 

 

 

Common equity investments

 

 

7,667

 

Total principal amount of investments funded

 

$

1,362,900

 

Principal amount of investments sold or repaid:

 

 

 

First-lien senior secured debt investments

 

$

(322,851

)

Second-lien senior secured debt investments

 

 

(52,000

)

Total principal amount of investments sold or repaid

 

$

(374,851

)

Number of new investment commitments in new portfolio companies(1)

 

 

32

 

Average new investment commitment amount

 

$

46,600

 

Weighted average term for new investment commitments
   (in years)

 

 

5.8

 

Percentage of new debt investment commitments at
   floating rates

 

 

100.0

%

Percentage of new debt investment commitments at
   fixed rates

 

 

 

Weighted average interest rate of new debt investment
   commitments
(2)

 

 

6.3

%

Weighted average spread over LIBOR of new floating rate debt
   investment commitments

 

 

5.6

%

________________

(1)
Number of new investment commitments represents commitments to a particular portfolio company.
(2)
Assumes each floating rate commitment is subject to the greater of the interest rate floor (if applicable) or 3-month LIBOR, which was 0.13% as of September 30, 2021.

 

Investments at fair value and amortized cost consisted of the following as of September 30, 2021 and December 31, 2020:

 

 

September 30, 2021

 

 

December 31, 2020

 

 

($ in thousands)

 

Amortized
Cost

 

 

Fair Value

 

 

Amortized
Cost

 

 

Fair Value

 

 

First-lien senior secured debt investments

 

$

1,211,783

 

 

$

1,213,426

 

(1)

$

9,404

 

 

$

9,404

 

(2)

Second-lien senior secured debt investments

 

 

203,235

 

 

 

204,307

 

 

 

4,233

 

 

 

4,232

 

 

Unsecured debt investments

 

 

2,163

 

 

 

2,107

 

 

 

22

 

 

 

22

 

 

Preferred equity investments(3)

 

 

11,270

 

 

 

11,458

 

 

 

296

 

 

 

295

 

 

Common equity investments(3)

 

 

10,067

 

 

 

10,130

 

 

 

423

 

 

 

423

 

 

Total Investments

 

$

1,438,518

 

 

$

1,441,428

 

 

$

14,378

 

 

$

14,376

 

 

________________

(1)
65% of which we consider unitranche loans.
(2)
51% of which we consider unitranche loans.
(3)
As of December 31, 2020, preferred equity investments and common equity investments were reported in aggregate as equity investments.

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The table below describes investments by industry composition based on fair value as of September 30, 2021 and December 31, 2020:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Advertising and media

 

 

6.1

 

%

 

-

 

%

Aerospace and defense

 

 

1.0

 

 

 

-

 

 

Automotive

 

 

1.5

 

 

 

-

 

 

Buildings and real estate

 

 

4.3

 

 

 

-

 

 

Business services

 

 

9.4

 

 

 

6.0

 

 

Chemicals

 

 

0.9

 

 

 

6.8

 

 

Consumer products

 

 

2.4

 

 

 

6.8

 

 

Containers and packaging

 

 

6.0

 

 

 

-

 

 

Distribution

 

 

0.8

 

 

 

9.1

 

 

Education

 

 

0.4

 

 

 

-

 

 

Financial services

 

 

8.5

 

 

 

12.2

 

 

Food and beverage

 

 

3.2

 

 

 

-

 

 

Healthcare equipment and services

 

 

0.5

 

 

 

18.7

 

 

Healthcare providers and services

 

 

6.9

 

 

 

10.5

 

 

Healthcare technology

 

 

6.0

 

 

 

-

 

 

Household products

 

 

0.6

 

 

 

-

 

 

Human resource support services

 

 

3.1

 

 

 

-

 

 

Infrastructure and environmental services

 

 

1.9

 

 

 

-

 

 

Insurance

 

 

17.1

 

 

 

-

 

 

Internet software and services

 

 

5.6

 

 

 

16.4

 

 

Leisure and entertainment

 

 

6.5

 

 

 

-

 

 

Manufacturing

 

 

5.0

 

 

 

6.8

 

 

Professional services

 

 

0.8

 

 

 

-

 

 

Specialty retail

 

 

1.4

 

 

 

-

 

 

Telecommunications

 

 

0.1

 

 

 

6.7

 

 

Total

 

 

100.0

 

%

 

100.0

 

%

 

The table below describes investments by geographic composition based on fair value as of September 30, 2021 and December 31, 2020:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

United States:

 

 

 

 

 

 

 

Midwest

 

 

37.2

 

%

 

19.7

 

%

Northeast

 

 

9.2

 

 

 

37.7

 

 

South

 

 

30.8

 

 

 

26.7

 

 

West

 

 

19.4

 

 

 

15.9

 

 

International

 

 

3.4

 

 

 

-

 

 

Total

 

 

100.0

 

%

 

100.0

 

%

 

The weighted average yields and interest rates of our investments at fair value as of September 30, 2021 and December 31, 2020 were as follows:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Weighted average total yield of portfolio

 

 

7.0

 

%

 

8.0

 

%

Weighted average total yield of debt and income producing
   securities

 

 

7.0

 

%

 

8.4

 

%

Weighted average interest rate of debt securities

 

 

6.7

 

%

 

7.9

 

%

Weighted average spread over LIBOR of all floating rate investments

 

 

5.9

 

%

 

7.0

 

%

 

The weighted average yield of our debt and income producing securities is not the same as a return on investment for our shareholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our and our subsidiaries’ fees and expenses. The weighted average yield was computed using the effective interest rates as of each respective date,

62


 

including accretion of original issue discount and loan origination fees, but excluding investments on non-accrual status, if any. There can be no assurance that the weighted average yield will remain at its current level.

 

Our Adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action with respect to each portfolio company. Our Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

 

assessment of success of the portfolio company in adhering to its business plan and compliance with covenants;
periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;
comparisons to other companies in the portfolio company’s industry; and
review of monthly or quarterly financial statements and financial projections for portfolio companies.

 

As part of the monitoring process, our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser rates the credit risk of all investments on a scale of 1 to 5. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The rating system is as follows:

 

Investment Rating

 

Description

1

 

Investments rated 1 involve the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since origination or acquisition are generally favorable;

 

2

 

Investments rated 2 involve an acceptable level of risk that is similar to the risk at the time of origination or acquisition. The borrower is generally performing as expected and the risk factors are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2;

 

3

 

Investments rated 3 involve a borrower performing below expectations and indicates that the loan’s risk has increased somewhat since origination or acquisition;

 

4

 

Investments rated 4 involve a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due); and

 

5

 

Investments rated 5 involve a borrower performing substantially below expectations and indicates that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

 

Our Adviser rates the investments in our portfolio at least quarterly and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments rated 3, 4 or 5, our Adviser enhances its level of scrutiny over the monitoring of such portfolio company.

 

The following table shows the composition of our portfolio on the 1 to 5 rating scale as of September 30, 2021 and December 31, 2020:

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Investment Rating

 

Fair Value

 

 

Percentage

 

 

Fair Value

 

 

Percentage

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

$

1,923

 

 

 

0.1

 

%

$

 

 

 

 

%

2

 

 

1,430,152

 

 

 

99.3

 

 

 

14,376

 

 

 

100.0

 

 

3

 

 

9,353

 

 

 

0.6

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,441,428

 

 

 

100.0

 

%

$

14,376

 

 

 

100.0

 

%

 

63


 

 

The following table shows the amortized cost of our performing and non-accrual debt investments as of September 30, 2021 and December 31, 2020:

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

($ in thousands)

 

Amortized
Cost

 

 

Percentage

 

 

Amortized
Cost

 

 

Percentage

 

 

Performing

 

$

1,417,181

 

 

 

100.0

 

%

$

13,659

 

 

 

100.0

 

%

Non-accrual

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,417,181

 

 

 

100.0

 

%

$

13,659

 

 

 

100.0

 

%

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.

 

Results of Operations

 

The following table represents the operating results for the three and nine months ended September 30, 2021:

 

($ in thousands)

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

Total Investment Income

 

$

15,626

 

 

$

19,639

 

Less: Net Operating Expenses

 

 

9,588

 

 

 

11,370

 

Net Investment Income (Loss)

 

 

6,038

 

 

 

8,269

 

Net realized gain (loss)

 

 

915

 

 

 

922

 

Net change in unrealized gain (loss)

 

 

2,182

 

 

 

3,016

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

$

9,135

 

 

$

12,207

 

 

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses and changes in unrealized appreciation and deprecation on the investment portfolio. Additionally, we were initially capitalized on September 30, 2020 and commenced investing activities on November 10, 2020. As a result, comparisons may not be meaningful.

 

Investment Income

 

Investment income for the three and nine months ended September 30, 2021 was as follows:

 

 

 

 

 

 

 

($ in thousands)

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

Interest income (excluding payment-in-kind ("PIK") interest income)

 

$

13,728

 

 

$

17,462

 

PIK interest income

 

 

891

 

 

 

985

 

PIK dividend income

 

 

203

 

 

 

342

 

Other income

 

 

804

 

 

 

850

 

Total investment income

 

$

15,626

 

 

$

19,639

 

 

64


 

 

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interest obtained in connection with originated loans, such as options, warrants or conversion rights. Included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns. For the three and nine months ended September 30, 2021, PIK interest and dividends earned was $1.1 million and $1.3 million, representing approximately 7.0% and 6.8% of investment income, respectively. Additionally, we were initially capitalized on September 30, 2020 and commenced investing activities on November 10, 2020. As a result, comparisons may not be meaningful.

 

Expenses

 

Expenses for the three and nine months ended September 30, 2021 were as follows:

($ in thousands)

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

Initial organization

 

$

 

 

$

273

 

Offering costs

 

 

1,524

 

 

 

1,524

 

Interest expense

 

 

3,463

 

 

 

4,966

 

Management fees

 

 

836

 

 

 

1,102

 

Performance based incentive fees

 

 

1,372

 

 

 

1,570

 

Professional fees

 

 

558

 

 

 

1,221

 

Directors' fees

 

 

257

 

 

 

788

 

Shareholder servicing fees

 

 

256

 

 

 

306

 

Other general and administrative

 

 

857

 

 

 

1,785

 

Total operating expenses

 

$

9,123

 

 

$

13,535

 

Management fees waived

 

 

 

 

 

(52

)

Expense Support

 

 

 

 

 

(2,578

)

Recoupment of Expense Support

 

 

465

 

 

 

465

 

Net operating expenses

 

$

9,588

 

 

$

11,370

 

 

We were initially capitalized on September 30, 2020 and commenced investing activities on November 10, 2020. As a result, comparisons may not be meaningful.

 

Under the terms of the Administration Agreement, we reimburse the Adviser for services performed for us. 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 we reimburse the Adviser for any services performed for us by such affiliate or third party.

 

Net Change in Unrealized Gain (Loss)

 

We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. During the three and nine months ended September 30, 2021, net unrealized gains (losses) on our investment portfolio were comprised of the following:

 

 

 

 

 

 

 

($ in thousands)

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

Net change in unrealized gain (loss) on investments

 

$

2,211

 

 

 

3,023

 

Net change in translation of assets and liabilities in foreign currencies

 

 

(29

)

 

 

(7

)

Net change in unrealized gain (loss)

 

$

2,182

 

 

$

3,016

 

 

65


 

 

We were initially capitalized on September 30, 2020 and commenced investing activities on November 10, 2020. As a result, comparisons may not be meaningful.

 

Net Realized Gains (Losses) on Investments

 

The realized gains and losses on fully exited and partially exited portfolio companies during the three and nine months ended September 30, 2021 were comprised of the following:

 

($ in thousands)

 

Three Months Ended September 30, 2021

 

 

Nine Months Ended September 30, 2021

 

Net realized gain (loss) on investments

 

$

917

 

 

$

924

 

Net realized gain (loss) on foreign currency transactions

 

 

(2

)

 

 

(2

)

Net realized gain (loss)

 

$

915

 

 

$

922

 

 

 

 

 

 

 

 

 

We were initially capitalized on September 30, 2020 and commenced investing activities on November 10, 2020. As a result, comparisons may not be meaningful.

 

Financial Condition, Liquidity and Capital Resources

 

Our liquidity and capital resources are generated primarily from the net proceeds of any offering of our common stock and from cash flows from interest, dividends and fees earned from our investments and principal repayments and proceeds from sales of our investments. The primary uses of our cash are for (i) investments in portfolio companies and other investments and to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying or reimbursing our Adviser), (iii) debt service, repayment and other financing costs of any borrowings and (iv) cash distributions to the holders of our shares.

 

We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities or issue debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue deb