Owl Rock Capital Corp said it reported that net investment income rose to $137.9 million, or 35 cents a share, in the fourth quarter – the highest of any quarter in 2021 – capping off what Craig W Packer, chief executive officer, told Private Debt Investor was “an extraordinary year”.
The specialty finance company said net investment income in the latest quarter rose 6 percent from $130.5 million, or 33 cents a share, at the end of the third quarter. The results represented an annualised return on equity of approximately 9 percent, enabling Owl Rock to more than cover its 31-cent-per-share quarterly dividend. The dividend yield was 8.2 percent, based on net-asset value per share of $15.08 in the latest quarter, which rose from $14.95 in the third quarter and $14.74 in the 2020 fourth quarter.
“We’ve been growing the portfolio in the last six years, and the last six months shows the true potential of the portfolio in terms of earnings power, returns, and credit performance,” Packer said in the interview. “We’ve been able to invest at a very significant pace and maintain strong credit quality, and the return metrics… have been terrific.”
The business development company fully deployed its portfolio, increased its leverage to “comfortably within” its target range, maintained “very strong” credit performance and “continued to optimize” its balance sheet, Packer said in a news release. Owl Rock about doubled its new investment commitments for the full year, to $6.8 billion from $3.4 billion in the previous year.
“While origination levels were lower relative to our record-setting third quarter, [the fourth quarter] was one of our strongest quarters since inception,” Packer said during a conference call with investors. The company had “especially lucrative repayments”, which drove “healthy fee income”, he added.
Packer said during the call that trends toward large unitranche are continuing to accelerate, which he said “plays directly” to the company’s strength, given the size and scale of its platform. Indeed, he said Owl Rock Capital evaluated more than 40 deals in the quarter with facility sizes of more than $1 billion and signed or closed on about half. Although he said unitranche deals were experiencing “the most acute competition”, he still sees the strategy as very attractive.
He also said that the increase in the amount of capital being raised in private credit alongside PE sponsor dry powder being deployed “has led to some ongoing pressure on spreads generally”. Owl Rock had $12.7 billion of investments at fair value in the December quarter, increasing from $10.8 billion in the year-earlier period. Owl Rock is a division of Blue Owl, a New York-based asset manager with $94.5 billion under management.