Owl Rock to target tech, life science companies with new BDC

The firm’s flagship mid-market lending vehicle currently has around 5% of its investments in technology.

Owl Rock Capital Partners will be putting an emphasis on technology by launching a new business development company focused on the sector, according to documents filed on Friday with the Securities and Exchange Commission.

The new vehicle, Owl Rock Technology Finance Corporation (TFC), is set to lend to high-growth technology and life science-related companies that are backed either by private equity or venture capital firms. The firm will invest in senior and mezzanine debt as well as equity.

New York-based Owl Rock’s TFC will target companies that have an enterprise value of at least $50 million and will commit $20 million-$500 million per transaction. Each investment position will generally make up 1-2 percent of the portfolio, and none will be larger than 5 percent.

No fundraising target for the vehicle was disclosed, and a representative for the company could not be reached for comment.

Owl Rock’s flagship BDC, Owl Rock Capital Corporation (ORCC), has 5.19 percent of its book – or $180.92 million – in technology companies, according to Thomson Reuters BDC Collateral. It has first lien loan positions in Accela and Trader Interactive and a second lien debt investment in Infoblox.

Before any public listing, TFC will charge a 10 percent incentive fee over a 6 percent hurdle rate. In addition, a management fee of 0.9 percent will be charged on gross assets up to a 1:1 debt-to-equity ratio, and no fee will be levied on gross assets above that figure.

After becoming a publicly listed vehicle, Owl Rock would charge a 17.5 percent incentive fee over a 6 percent hurdle. The management fee would be bumped up to 1.5 percent on gross assets up to a 1:1 debt-to-equity ratio and a 1 percent management fee on gross assets above that figure.

That management fee structure is similar to those adopted by other BDCs following the enactment of the Small Business Credit Availability Act, which lets the mid-market lending vehicles lever up to a 2:1 ratio.

Owl Rock was founded in early 2016 by Doug Ostrover, one of the co-founders of Blackstone credit arm GSO Capital Partners; Marc Lipschultz, the former global head of infrastructure and energy at KKR; and Craig Packer, previously the head of leveraged finance in the Americas at Goldman Sachs. Owl Rock is also in the market with a private fund, Owl Rock First Lien Fund, which is seeking up to $1 billion. ORCC has raised $5.5 billion and drawn $2 billion.