Owl Rock Capital Corporation and the Regents of the University of California have created a $200 million joint venture that will invest in senior secured mid-market loans or broadly syndicated loans.
The New York-based business development company and Oakland-based governing body of the UC university system will each contribute $100 million to the partnership, which will be called Sebago Lake, according to a regulatory filing submitted to the US Securities and Exchange Commission. UC is a large shareholder of Owl Rock, according to additional SEC documents, holding 20.7 percent of the BDC’s common stock as of 9 June.
The JV agreement does not lay out a specific definition of mid-market companies. However, Owl Rock considers a business to be mid-market if its EBITDA is between $50 million and $250 million or it has annual revenue of $50 million to $2.5 billion at the time of investment.
The partnership will not invest in tobacco companies, Sudanese businesses, firearm manufacturers, private prison operators, and coal mining or oil sands companies, as the UC Regents are barred by California state law from doing so.
Neither Owl Rock nor UC Regents could be reached for comment.
This is not the first time the UC Regents have partnered with a BDC to invest in mid-market loans. In July 2014, UC Regents joined forces with Goldman Sachs BDC to form the Senior Credit Fund, which also started with a $100 million commitment from each party, according to an October 2014 regulatory filing. Those investments were expected to be between $5 million and $50 million and last three to 10 years.
The Senior Credit Fund portfolio stood at $534.44 million with 38 portfolio companies as of 31 March, according to GSBD’s latest quarterly report. The largest loan was a $24.27 million investment in Liquidnet, which runs a trading network that connects asset managers with each other. The fund’s loans carried an average interest rate of 6.6 percent. GSBD could not be reached for comment.
UC Regents also has a UC Ventures Programme, which seeks to invest $25 million across three separate investment strategies, according to the UC Office of the President’s website.
The strategies would include deploying capital into investment funds that are being raised across the UC campuses and must invest 70 percent of its capital on seed and early-stage investments coming out of the universities’ campuses; being an anchor investor in a fund that invests in UC-related ventures; and collaborating with venture capital funds UC Regents has already invested in.
As of 30 June 2016, the most recent figures available, the UC Ventures Programme had committed $13.9 million, according to Regents’ investment listings.
The UC Regents investment office managed $107.2 billion in assets as of 31 March, comprising $10.4 billion of endowment assets, $59.7 billion of pension assets, $14.5 billion in working capital assets, $21.7 billion in retirement savings programme assets and $900,000 in fiat lux assets, according to its first-quarter investment report. Owl Rock, which lends to mid-market companies, listed $1.4 billion of investments in its first-quarter report filed with the SEC.