Mitchel Penn, CFA 410-583-5976 mpenn@janney.

com

BDCs August 29, 2019

Price: $15.98 Owl Rock Capital Corp. (ORCC) - NEUTRAL

Fair Value Estimate: $16.00
52-Week Range:
Market Cap (MM):
$15.02 - $16.45
$6,132
ORCC: Initiating Coverage at Neutral
Shr.O/S-Diluted (mm): 383.7
 
Average Daily Volume: 300,358
Book Value: $15.28 PORTFOLIO MANAGER BRIEF
Dividend: $1.24 We are initiating coverage of Owl Rock Capital Corp. (ORCC) with a Neutral rating
Yield: 7.8%
and a fair value of $16.00. Owl Rock is a regulated investment company/business
development company (RIC/BDC) with a focus on middle market debt and to a lesser
FYE: Dec 2019E 2020E 2021E extent related equity investments. We believe Owl Rock can generate a 9.0% ROE
EPS: $1.67E $1.64E $1.36E
Prior EPS: NC NC NC
with a cost of capital of 8.5%, resulting in a fair value estimate of $16/sh or 105% of
P/E Ratio: 9.6x 9.7x 11.8x NAV.

Quarterly EPS:  
Q1 $0.49A $0.40E $0.33E ANALYST NOTES
Q2 $0.44A $0.44E $0.34E ● Owl Rock has earned a 9.7% ROE on average since 2Q16. We believe Owl Rock
Q3 $0.36E $0.46E $0.35E
Q4 $0.38E $0.34E $0.34E
over-earned as it only charged a 75 bps fee during this time period. As a public
company Owl Rock will charge a 150 bps base management fee and a 17.50%
Quarterly NII: incentive fee. Management has agreed to waive all but 75 bps in fees for the first
Q1 $0.41A $0.40E $0.33E 15 months, after which investors will pay the full fee. We estimate that this will
Q2 $0.42A $0.44E $0.34E save investors roughly $0.47/sh annually (4% of NAV). However, at full fees, we
Q3 $0.36E $0.46E $0.35E estimate a normalized ROE of 8.5% to 9%, down 300 bps from our estimated
Q4 $0.38E $0.34E $0.34E peek ROE of 12% in 3Q20.
Year: $1.57E $1.64E $1.36E ● Credit quality is strong with no loans on non-accrual. Since the first quarter of
2016, ORCC has averaged a net unrealized/realized gain of 10 bps (per quarter)
of average total assets. Only 9.9% (fair value basis) of its portfolio is performing
below management's expectations. Based on conversations we have had with
management, ORCC focuses on higher quality first lien loans. ORCC’s 82%
st
allocation to 1 lien loans and its weighted average yield of 9.4% would support
management’s claim that it focuses on higher quality loans.
● As of 6/30/19, ORCC’s portfolio was comprised of investments in 90 portfolio
companies in 27 different industries with debt and equity investments with a
fair value of $7.2 billion, carried at approximately 100% of cost. The largest
industries in the portfolio, based on fair value as of June 30, 2019, were internet
software and services, professional services, healthcare providers and services,
distribution, and food & beverage, which represented 10.0%, 10.0%, 9.0%,
9.0%, and 7.0%, respectively, as a percentage of our portfolio at fair value.
● As of June 30, 2019, its portfolio on a fair value basis was comprised of 98.0%
secured debt investments (81% in first lien term loans and 17% in second lien
debt), 2% in unsecured debt, equity, and investment vehicles.
● Owl Rock has a 10b5-1 (share repurchase) program that allows it to repurchase
th
up to $150M of common stock over an 18 month period. We believe Owl Rock
will repurchase shares if the stock trades below NAV.

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Source: Company Reports

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 IMPORTANT DISCLOSURES
Research Analyst Certification
I, Mitchel Penn, the Primarily Responsible Analyst for this research report, hereby certify that all of the views expressed in this research
report accurately reflect my personal views about any and all of the subject securities or issuers. No part of my compensation was, is, or will
be, directly or indirectly, related to the specific recommendations or views I expressed in this research report.
Janney Montgomery Scott LLC ("Janney") Equity Research Disclosure Legend
Owl Rock Capital Corp. currently is, or during the past 12 months was, a Janney Montgomery Scott LLC client. Janney Montgomery Scott LLC,
provided investment banking related services.
Janney Montgomery Scott LLC managed or co-managed a public offering of securities for Owl Rock Capital Corp. in the past 12 months.
Janney Montgomery Scott LLC received compensation for investment banking services from Owl Rock Capital Corp. in the past 12 months.
Janney Montgomery Scott LLC intends to seek or expects to receive compensation for investment banking services from Owl Rock Capital
Corp. in the next three months.
The research analyst is compensated based on, in part, Janney Montgomery Scott's profitability, which includes its investment banking revenues.
Definition of Ratings
BUY: Janney expects that the subject company will appreciate in value. Additionally, we expect that the subject company will outperform
comparable companies within its sector.
NEUTRAL: Janney believes that the subject company is fairly valued and will perform in line with comparable companies within its sector.
Investors may add to current positions on short-term weakness and sell on strength as the valuations or fundamentals become more or less
attractive.
SELL: Janney expects that the subject company will likely decline in value and will underperform comparable companies within its sector.
Price Charts
Rating and Price Target History for: Owl Rock Capital Corp. (ORCC) as of 08-28-2019
16.20

16.00

15.80

15.60

15.40

15.20
Q2 Q3 2017 Q1 Q2 Q3 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3

Created by: BlueMatrix

Janney Montgomery Scott Ratings Distribution as of 06/30/2019

IB Serv./Past 12 Mos.*

Rating Count Percent Count Percent

BUY [B] 179 55.59 40 22.35

NEUTRAL [N] 142 44.10 14 9.86

SELL [S] 1 0.31 0 0.00

*Percentages of each rating category where Janney has performed Investment Banking services over the past 12 months.
Other Disclosures

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This report is for your information only and is not an offer to sell or a solicitation of an offer to buy the securities or instruments named or
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