Owl Rock Capital reports solid third-quarter earnings

The firm's new investment commitments increased to $2.79bn, up from $1.57bn last quarter.

Owl Rock Capital, the business development company of alternative asset manager Blue Owl Capital, reported robust third-quarter earnings, driven by a strong environment for direct lending in the middle market

In the third quarter, Owl Rock grew its net investment to $130.5 million, or $0.33 per share, from $119.1 million, or $0.30 per share at the end of the second quarter. In the third quarter of 2020, its net investment income per share was also $0.33.

The mid-market lender’s net income fell to $142.9 million during the quarter, or $0.36 per share, from $150.1 million, or $0.38 per share at the end of the second quarter. In the third quarter of 2020, its net income per share was $0.56. The decline in Owl Rock’s net income is associated with realised and unrealised gains in the portfolio from recovery that came out of the pandemic, according to a source familiar with the matter.

The New York-based Owl Rock’s dividend per share this quarter is $0.31, with a dividend yield of 8.3 percent, based on net asset value per share. Its reported net asset value per share ended the third quarter at $14.95, up from $14.90 at the end of the second quarter.

“Upper-middle-market activity continues to be very robust and ORCC is a key player the space,” said Ryan Lynch, managing director of equity research at Keefe, Bruyette & Woods, in an analyst report on Owl Rock. “ORCC portfolio size/leverage is at the point where they are fully earning the dividend and now are looking to improve the overall yield.”

Owl Rock’s new investment commitments and deployments ended the third quarter at $2.79 billion and $2.29 billion, respectively, up from $1.57 billion and $1.4 billion at the end of the second quarter. Commitments this quarter were allocated across 40 investments in 34 portfolio companies, of which 21 were new.

“We’re benefiting from a terrific environment for direct lending,” said Craig Packer, chief executive officer of Owl Rock, in an earnings call this week. “We are also witnessing the continued penetration of direct lending into the overall leveraged finance space taking share from the broadly syndicated markets.”

“With larger pools of capital available for direct lending solutions, private equity firms are using these solutions more frequently and for larger transactions,” Packer added. “In particular we continue to see growing demand for large privately placed unitranche loans.”

Packer explained that Owl Rock has evaluated more than 30 loans of more than $1 billion in size. And in the third quarter alone, it closed on five loans, each $1 billion, most of which were structured as unitranches.

Owl Rock focuses on lending to middle market companies. The specialty finance company is listed on the New York Stock Exchange under the ticker “ORCC” and is the third largest publicly traded BDC, according to S&P Market Intelligence as of 2 November, 2021. It has $31.2 billion of assets under management as of 30 June, 2021.