JMP Securities - ORCC - Initiation - Initiating Coverage of Industry - 50 Pages

Commercial & Specialty Finance | Initiating Coverage
July 9, 2020
Owl Rock Capital Corporation (ORCC) MARKET OUTPERFORM

Price: $12.27
Initiating Coverage of Industry-Leading Direct Lender and Flagship BDC at Market Outperform Price Target: $14.50
Christopher York
INVESTMENT HIGHLIGHTS cyork@jmpsecurities.com
(415) 835-8965
• We initiate coverage of Owl Rock Capital Corporation with a Market MARKET DATA
Outperform rating and a Street-high $14.50 price target, implying a total
Price $12.27
return expectation of ~30.0% over the next twelve months, including both
52-Week Range: $8.09 - $19.19
core and special dividends. If our dividend and price target projections are
Shares Out. (M): 383.8
achieved, we expect shares to outperform equity market benchmarks (e.g., Wells Market Cap ($M): $4,709.2
Fargo BDC Index, KBW Regional Bank Index, and/or Russell 2000). While the Average Daily Vol. (000): 9,399.0
stock may experience some near-term volatility around the company's third and Book Value/Share: $14.09
final lock-up expiration from its July 2019 IPO at $15.30/share on July 20, 2020, Debt/Equity: 0.66x
Dividend: $1.24
ORCC is one of our favorite BDC ideas today and presents one of the largest total
Dividend Yield: 10.11%
return opportunities in our coverage universe. Our favorable view is also in contrast
Float (M): 376.8
to Street recommendations that skew to a market perform weighting. Source: Thomson Reuters and JMP Securities LLC
• JMP’s commercial & specialty finance equity research coverage now includes
19 business development companies and 3 specialty banks; our coverage FY DEC 2019A 2020E 2021E
continues to reflect the origination of commercial loans to United States middle
NII (M) 1Q $96.0 $146.3A $124.6
market companies by both non-banks and banks. JMP’s BDC recommendation
2Q $119.6 $142.4 $123.4
distribution now reflects 10 BDCs rated Market Outperform, 8 BDCs rated Market
3Q $137.9 $147.5 $125.7
Perform, and 1 BDC rated Market Underperform. While we think we are in the early
4Q $145.4 $118.6 $128.2
innings of a prolonged default cycle for below investment grade U.S. corporate FY $498.9 $554.8 $501.8
credit, we note this is the first time in more than three years that JMP has had NII/Share 1Q $0.41 $0.37A $0.32
a rating recommendation skew overweight to Market Outperform-rated BDCs and 2Q $0.42 $0.37 $0.31
Owl Rock is the first BDC rated at Market Outperform since the emergence of 3Q $0.36 $0.38 $0.31
the COVID-19 virus as we believe the investment portfolio and balance sheet is 4Q $0.37 $0.31 $0.32
FY $1.54 $1.42 $1.26
positioned well to outperform peers.
Source: Company reports and JMP Securities LLC
• All investments were accruing in 1Q20, and we expect the company should
achieve superior credit performance and recovery outcomes versus peers, a view
STOCK PRICE PERFORMANCE
that we think the market is not reflecting, and for 2Q20 book value to be up ~3.0%
Volume (mil.) Price (USD)
sequentially to $14.50. We think the market is overlooking the company’s relatively 1,000 $20.00
$18.00
low leverage of ~0.66x as of March 31, 2020 vs. the peer group average of ~1.2x 800
$16.00
and an investment portfolio mix of 80% in first lien loans to upper middle-market 600 $14.00
companies with a WA EBITDA of ~$83mln that are often sponsored by leading 400
$12.00
private equity firms of recent vintage funds at low loan-to-value ratios of ~50%. 200
$10.00
$8.00
From 2008 through 2010 (three-year period), cumulative realized losses for listed 0 $6.00
BDCs were 10.2%. While the BDC industry's historical data was very wide and is
May-20
Aug-19
Sep-19
Nov-19
Dec-19
Feb-20
Mar-20
Jan-20
Jun-20
Apr-20
Oct-19
Jul-20
not entirely representative of the modern BDC industry, it does provide a reference
point to the market’s implied expected realized loss rate of more than 13.0% for
Owl Rock today and a 2020/2021 cumulative base case default rate of 15% for U.S.
speculative grade corporate loans and bonds by an NRSRO that would translate
into an ~7.5% loss rate at a 50% loss given default. With ~$2.0bln in cash and
undrawn capacity on revolvers, Owl Rock has ample liquidity to support portfolio
companies in the event a company needs it over the next couple months and is
FOR DISCLOSURE AND FOOTNOTE INFORMATION, REFER TO JMP FACTS AND DISCLOSURES SECTION.
This report should be read in conjunction with important disclosure information, including an attestation under Regulation Analyst certification.
Owl Rock Capital Corporation (ORCC)
one of a couple BDCs positioned favorably to opportunistically grow the investment

portfolio with new deal activity at higher spreads.
• Founded in 2016 and operating as an externally-managed business

development company (BDC), we think Owl Rock Capital Corporation is the
flagship fund of Owl Rock Capital Partners, which is a leading alternative
investment platform that is exclusively focused on direct lending. Owl Rock Capital
Corp. had total assets of $9.4bln as of March 31, 2020, representing ~54.3% of total
AUM at Owl Rock Capital Partners and placing the company as the second-largest,
publicly-traded BDC by total assets behind long-time industry stalwart, Ares Capital
Corp. (ARCC, Market Outperform, and $15.50 PT). We think Owl Rock’s assets
under management places the alternative asset manager as a top-20 U.S. private
debt investment platform and a top-10 U.S. direct lending investment platform. It
is this singular focus on direct lending, along with a successful investment track
record, scaled commercial finance value propositions via leading direct-lending
AUM, strong institutional reputation, and deep borrower relationships that we find
differentiated to many alternative investment management peers.
• We establish 2020/2021 NII per share estimates of $1.42/$1.26 for Owl Rock,
which imply an NTM payout ratio of 90.5% on the core dividend of $0.31/share (cost
of equity of 8.8%) and a 2021 payout ratio of 97.0%, including the expiration of ~
$40.0mln ($0.10/share) in quarterly incentive fee fee-waivers in 4Q20. Our 2021
NII ROE expectation is for 8.9%. We expect the total return opportunity and liquidity
of an ~$5.0bln market capitalization stock should be attractive to a confluence
of institutional investors, including traditional yield-seeking, value, and financial
investors, as well as investors seeking a dedicated allocation to alternatives in lieu
of either private equity or traditional credit allocations. Our $14.50 price target is a
function of a required yield of 8.5% on our NTM core dividend estimate of $1.24/
share, which is a risk premium of 830bps over the 3-year Treasury yield.
July 9, 2020 2
OWL ROCK CAPITAL CORPORATION (ORCC) REPORT OUTLINE
 Investment Recommendation, Performance, and Valuation
 Investment Highlights
o A conservatively positioned balance sheet and ample liquidity to support portfolio

companies and grow the portfolio.
o Dividend yield premium and/or stock price reflect attractive loss assumptions; we
expect the company to achieve lower credit losses than peers.
o Expecting a sustained top-quartile track record.
o Direct lending continues to increasingly be a preferred execution to the syndicated

credit markets.
o Lending niche to technology companies is attractive, differentiated, and is a long-term

growth area.
 Owl Rock Capital Corporation
o Company History
o Senior Management, Corporate Governance, and Alignment of Interest
o Investment Management Structure
o Investment Portfolio Overview
 Investment Risks
o Credit Risk
o Interest Rate Risk
o Leverage
o Conflict of Interest
 Earnings Model and Estimates
July 9, 2020 3
INVESTMENT RECOMMENDATION, PERFORMANCE, AND VALUATION
We initiate coverage of Owl Rock Capital Corporation (NYSE:ORCC) with a Market Outperform rating
and a Street-high $14.50 price target, implying a total return expectation of ~30.0%, including both core
and special dividends. If our dividend and price target expectations are achieved, we expect shares to
outperform equity market benchmarks (e.g., Wells Fargo BDC Index, KBW Regional Banking Index,
and/or Russell 2000). The stock may experience some near-term volatility around the third and final
lock-up expiration from the company's July 2019 IPO on July 20, 2020, but Owl Rock is one of our
favorite BDC ideas today, and presents one of the highest total return opportunities in our coverage.
Our favorable view is also in contrast to Street recommendations that skew to a market weighting.
JMP’s commercial & specialty finance equity research coverage now includes 19 business development
companies and 3 specialty banks; our coverage continues to focus on the origination of commercial
loans to the middle market by both non-banks and banks. JMP’s BDC recommendation distribution now
reflects 10 BDCs rated Market Outperform, 8 BDCs rated Market Perform, and 1 BDC rated Market
Underperform. While we think we are in the early innings of a prolonged default cycle for below
investment grade corporate credit, we note this is the first time in more than three years that JMP has
had a rating recommendation skew overweight to Market Outperform-rated BDCs and Owl Rock is the
first BDC to be rated Market Outperform since the emergence of the COVID-19 virus.
We think investors are overlooking the company’s relatively low leverage of ~0.66x as of March 31,
2020 vs. the peer group average at ~1.24x, and an investment portfolio mix of 80% in first lien loans to
upper middle market companies with a WA EBITDA of ~$83mln that are often sponsored by leading
private equity firms of recent vintage funds at low loan-to-value ratios of ~50%. All investments were
accruing in 1Q20, and we expect the company to achieve superior credit performance and recovery
outcomes versus peers and 2Q20 book value to be up ~3.0% sequentially. From 2008 through 2010 (a
three-year period), the cumulative realized losses for listed BDCs were 10.2%. While the BDC industry
historical data was very wide and is not entirely representative of the modern BDC industry, it does
provide a reference point to the market’s implied expected realized loss rate of more than 13.0% for Owl
Rock today and a 2020/2021 cumulative base case default rate of 15% for U.S. speculative grade
corporate loans and bonds by an NRSRO that would translate into a ~7.5% loss rate at 50% loss given
default.
With ~$2.0bln in cash and undrawn capacity on revolvers, Owl Rock has ample liquidity to support
portfolio companies in the event a company needs it over the next couple months and is positioned
favorably to opportunistically grow the investment portfolio with new deal activity at higher spread
returns. We establish 2020/2021 NII per share estimates of $1.42/$1.26 for Owl Rock, which imply a
NTM payout ratio of 90.5% on the core dividend of $0.31/share (cost of equity of 8.8%) and a 2021
payout ratio of 98.3%, including the expiration of ~$40.0mln ($0.10/share) in quarterly incentive fee
waivers in 4Q20. Our 2021 NII ROE expectation is 8.9%. We expect the total return opportunity and
liquidity of a ~$5.0bln capitalization stock should be attractive to a confluence of institutional investors,
including traditional yield-seeking investors, pensions, and value investors, as well as investors seeking
a dedicated allocation to alternatives in lieu of either private equity or traditional credit allocations.
July 9, 2020 4
Founded in 2016 and operating as an externally-managed business development company (BDC), we

think Owl Rock Capital Corporation is the flagship fund of Owl Rock Capital Partners, which is a leading
alternative investment platform that is exclusively focused on direct lending. It is this singular focus on
direct lending, along with a successful investment track record, scaled commercial finance value
proposition via direct lending assets under management, a strong institutional reputation, and deep
borrower relationships that is different from other alternative investment management peers. Owl Rock
Capital Partners was founded in 2016 by leverage finance veterans Douglas Ostrover, Marc Lipschultz,
and Craig Packer, who all voluntarily left very senior positions at GSO, KKR, and Goldman Sachs,
respectively, to build a premier direct lending platform.
As of March 31, 2020, Owl Rock Capital Partners had assets under management (AUM) of ~$17.3bln
and is even bigger today as a result of continued fundraising and the establishment of new investment
products and vehicles. We think Owl Rock’s assets under management place the alternative asset
manager as a top-20 U.S. private debt investment platform and a top-10 U.S. direct lending investment
platform. Owl Rock Capital Corp. had total assets of $9.4bln as of March 31, 2020, representing ~54.3%
of total AUM at Owl Rock Capital Partners and placing the company as the second largest publicly-
traded BDC by total assets behind long-time industry stalwart, Ares Capital Corp. We think Ares Capital
is Owl Rock’s closest BDC competitor. In our view, the growth of both the company and the investment
platform over the last five years has been remarkable, as well as the envy of many in the industry,
ultimately culminating to the valuation of the manager at ~$2.5bln via Dyal Capital’s $500mln (or 20%)
minority equity stake in Owl Rock Capital Partners in November 2019. In our view, the timely investment
by Dyal allowed Owl Rock to invest in the platform’s workout and restructuring personnel, which we
expect to help contribute to better default recovery outcomes than peers arising from issues related to
COVID-19.
We think Owl Rock Capital Corporation quickly established itself as a leading BDC to both private equity
and venture-capital sponsors via a differentiated commercial finance value proposition and long-term
relationships of the founders. From March 2016-March 2018, ORCC raised $5.5bln in capital
commitments via private offerings to numerous institutional investors and high net worth individuals,
calling essentially all of this equity capital before the company’s 11.5 million share IPO in July 2019 at
$15.30/share for total gross proceeds of $165.4mln. Many of these “seed investors” were new to BDCs,
including Nationwide Insurance, Brown University, MSD Capital, and ICONIQ Capital. Receiving co-
investment relief by the SEC in February 2017, Owl Rock Capital Corp. was able to amplify the
fundraising at ORCC I from simultaneous fundraising at complementary direct lending vehicles &
strategies at Owl Rock Capital Partners in the company’s formative years via the formation of: 1) Owl
Rock Capital Corporation II— a non-traded, retail-distributed BDC via LPL Financial, Ameriprise, and
Merrill Lynch— in October 2015; 2) Owl Rock First Lien Fund, which is organized as a limited
partnership, in July 2018; and 3) Owl Rock Technology Finance Corporation— a private BDC— in July
2018. Owl Rock Technology Finance could seek a public listing, but we do not expect that to potentially
occur until 2022.
July 9, 2020 5
Consequently, Owl Rock is able to provide a full suite of scaled direct lending solutions to upper middle
market companies in the United States via: 1) the cash flow finance of first lien, second lien, UniTranche
loans, and 2) asset-based finance of accounts receivable and inventory from the ownership of the
company’s wholly-owned commercial finance company Wingspire Capital. We estimate Owl Rock is
one of only four publicly-traded BDCs (e.g., ARCC, GBDC (NC), and FSK) with the investment capacity
to underwrite and hold a direct-lending commitment in excess of $300mln; although, the platform is
capable of leading deals up to $600mln. With the ability to write these large and customized checks,
Owl Rock has effectively built a business model and value proposition that can compete with the
broadly syndicated loan or high-yield markets. By offering borrowers: 1) no flex or syndication risk, 2) a
greater certainty of and speed to close, 3) confidentiality to effect highly-sensitive acquisition strategies
like take-privates, 4) a visibility to follow-on capital, and 5) a partnership with lenders that do not trade
the debt, we think direct solutions can be the preferred execution longer term by companies. This value
proposition is likely more in demand today as a result of the COVID-19 pandemic and the slow recovery
in the syndicated markets.
We also believe that both borrowers and ORCC shareholders should benefit from AUM and enterprise
growth at Wingspire via the company’s controlled equity investment in the portfolio company. Wingspire
was seeded in November 2019 by Owl Rock, is headquartered in Atlanta, GA and focuses on upper-tier
senior secured asset based loans, providing senior secured revolving credit lines and term loans
ranging from $20mln-$200million. We think Wingspire is a comp to Solar Capital’s (SLRC, Market
Outperform, $18.50 PT) Crystal Financial and to Midcap Financial, which is a portfolio company of
Apollo Global (APO, Market Perform, Ryan), although AINV investors do not benefit from Midcap’s
enterprise value growth.
Deploying debt capital to private equity sponsors to invest in middle market businesses is only part of Owl Rock’s three-year
Owl Rock’s business model because we believe Owl Rock recognizes the ultimate customer is its economic return (defined
investor base. Investors have likely been pleased with Owl Rock’s performance thus far, which should as change in book value
plus total dividends) of
create demand for future product offerings at the manager. Shares are still considered to be a new 23.0% is above a peer
issue, in our view, and 125mln (~33% of S/O) are still subject to lock-up agreements that expire on July group average of 8.2%.
20, 2020. Incurring the previous lock-ups, the stock has nonetheless outperformed peers since the IPO
with a total return of -10.3% vs. -25.0% for publicly-traded BDCs, as measured by the Wells Fargo BDC
Index. Many institutional investors had a view that BDC IPOs do not trade well and often break deal
price. It was our expectation, however, that Owl Rock’s IPO would be different. This view proved to be
accurate as ORCC was one of the best performing IPOs in the industry’s history. The 1-day, 1-month,
and 3-month trading history of the new issue was 1.2%, 2.5%, and 13.0%, which compares to the
average of -1.7%, 0.3%, and 6.1%, respectively, for a peer group of BDCs.
Stock returns can often disjoint from fundamentals, but in Owl Rock’s case the outperformance in the
stock price has been consistent with the outperformance at the company. Since the company began
investing, Owl Rock has exited 38 investments that have generated an average realized unlevered IRR
of 11.3% with 81% of exited investments greater than 10.0%. Owl Rock’s three-year economic return
(defined as change in book value plus total dividends) of 23.0% is above a peer group average of 8.2%;
although, we concede this return has been impacted by the company’s pre-IPO fee structure of 75bps
on assets and no incentive fee. Figure 1 illustrates Owl Rock’s three-year economic return vs. a peer
group of BDCs. In terms of credit quality, the company has not had any defaults or non-accrual
investments since inception.
July 9, 2020 6
FIGURE 1. ORCC and Peer Group Three-year Economic Return
Source: Company filings
Shares were trading at an average daily premium to book value of 1.09x prior to the markets’
recognition of the risks from the outbreak of COVID-19 on March 1. We believe shares deserve to trade
at a premium and the pullback in shares since the COVID-19 pandemic has created a relatively
attractive margin of safety to compensate investors with the credit risks in the portfolio. Consequently,
we view the risk-reward in shares favorably and expect shares to outperform.
July 9, 2020 7
Stock Performance
Electing to be treated as registered investment companies (RICs), BDCs are required to distribute
essentially all taxable income (>90%) to shareholders in the form of dividends. A BDC’s total return to
shareholders is, therefore, largely a function of dividends as retained earnings (i.e., book value growth)
have historically been limited.
We believe the distribution of core dividends should be supported by annual net investment income;
Owl Rock distributes a
whereas, special or supplemental dividends should be dictated by net realized gains and/or excess core dividend of
recurring non-core income from one-time items (e.g., prepayment fees and/or origination fees). Owl $0.31/share per quarter
Rock distributes a core dividend of $0.31/share per quarter and will distribute three special dividends of and will distribute three
special dividends of
$0.08/share in 2Q20, 3Q20, and 4Q20 and could be in a position to distribute additional special $0.08/share in 2Q20,
dividends in 2021. The perceived safety and sustainability of a BDC’s core dividend by the market is 3Q20, and 4Q20.
one of the primary drivers of total return. In our opinion, long-only institutional investors tend to invest in
BDCs that have demonstrated a history of distributing stable and recurring core dividends, which are
supported by recurring and predictable net investment income, a differentiated origination platform with
scale and a cohesive management team with strong investment track records and alignment of
interests. We expect Owl Rock’s $0.31/share core quarterly dividend to be sustainable over the next
seven quarters. Owl Rock’s trailing twelve-month core payout ratio of net investment income is 88.8%;
whereas, our 2021 NII/share estimates result in a payout ratio of 97.0%.
On July 16, 2019, Owl Rock Capital Corporation completed an initial public offering via the issuance of
11.5mln shares at $15.30, raising $165.4mln in gross proceeds or only ~3.0% of the pro-forma equity
capitalization. We think the ORCC IPO was the most highly anticipated and best performing IPO in the
industry’s history. The 1-day, 1-month, and 3-month performance was +1.2%, +2.5%, and +13.0%,
respectively. Figure 2 illustrates the total return of ORCC relative the comparable performance of peer
BDCs. This performance was the best in the industry’s history, and the institutional interest was the best
ORCC’s IPO performance
in the industry’s history with 100% of base shares going to institutions and the deal 3.0x was the best in the
oversubscribed. JMP served as a joint bookrunner on Owl Rock’s IPO—see below for a list of related industry’s history.
disclosures. ORCC has provided a total loss of 10.3% since completing its IPO, compared to a loss of
25.0% for the Wells Fargo BDC Index, a loss of 2.1% for the Invesco Senior Loan ETF (BKLN), a loss
of 28.9% for the KBW Regional Banking Index (KRX), and, a loss of 6.6% for the Russell 2000.
July 9, 2020 8
FIGURE 2. BDC IPO Performance
*Peer group: ARCC, FSK, GBDC, TSLX, NMFC, SLRC, AINV, GSBD, TCPC, BCSF, CGBD
Source: Bloomberg
Prior to Owl Rock Capital Corporation’s public offering in July 2019, Owl Rock raised $5.5bln in limited
partner commitments over the course of two years predominately through the fundraise of large and Over the course of three
years, the company
accredited institutional investors (e.g., University of California Regents, State of New Jersey, Soros judiciously deployed the
Partners, State of Ohio Teachers, etc.) on the premise that Owl Rock could marry a superior and scaled equity capital,
value proposition to private equity companies in the upper middle market via a 8 - 9% current yield. thoughtfully leveraged it
with debt capital, and
Over the course of three years the company judiciously deployed the equity capital, thoughtfully achieved a three-year
leveraged it with debt capital, and achieved a three-year economic return of 23.0%, which puts the economic return of 23.0%,
company in a top-quartile of BDC performance. In addition to the stronger-than-peer economic return, which puts the company
in a top-quartile of BDC
shares of Owl Rock have slightly outperformed the peer group year-to-date with a total return of -27.1% performance.
vs. an average peer return of -27.6%, and outperformed despite the expiration of lock-up agreements in
January and April from the company’s July 2019 IPO.
July 9, 2020 9
FIGURE 3. ORCC Total Shareholder Return Since IPO vs. Comparable
Source: Bloomberg
July 9, 2020 10
Valuation
When we ascribe value to the shares of a BDC, we use multiple quantitative data points and inputs for
consideration but tend to place a higher significance on the current core yield distributed from the net
investment income of the portfolio as a valuation metric. The yield provides for more comparability to
other asset classes and to relative value, in our view. We also believe it is necessary to consider a
BDC’s 1) price-to-book value ratio, which tends to be the most simple valuation measure communicated
by investors; 2) price-to-earnings given that not all earnings are distributed to shareholders and this
metric provides comparability to traditional finance companies like banks; and 3) a qualitative
component for the quality and integrity of management. We provide some guideposts to better
understand the valuation of ORCC on an absolute and relative basis for yield and P/BV below.
 On a price-to-book value basis, ORCC was trading at 0.87x March 31, 2020 book value per
share of $14.09 as of market close on July 8, 2020. On a relative basis, ORCC shares were
trading at a premium to 0.72x for a sample of publicly traded BDCs. Reference Figure 34 at the
end of the report for a review of peer valuation. Since the company completed its IPO, ORCC
has traded at an average price-to-book ratio of 1.00x and a range of 0.54x-1.26x.
 On a yield basis, ORCC shares provide an annualized current core yield of 10.1%, below the
median average of 11.5% for middle market BDCs with a market cap above $500 million.
Again, we recommend a reference to Figure 34 for a review of peer valuations. Since the
company completed its IPO, ORCC shares have provided an average annualized current daily
core yield of 8.5%. The board has also already declared three special dividends of $0.08/share
in 2Q20, 3Q20, and 4Q20. Including the special dividends, the annualized current yield on
shares is 12.7% today, which we find very attractive and think investors are overlooking this
additional return.
In valuing a BDC, we also broaden our assessment of relativity outside publicly traded BDCs by
comparing BDC dividend yields to other fixed income investment classes given that BDC investors can
have a multi-strategy mandate. In this analysis, one can look to appraise BDCs using the build-up
method by a core dividend yield to: 1) three-year Treasuries as the risk-free rate given the duration of
assets is about three years, although the equity is permanent; 2) to other corporate fixed-income
investments like a high-yield index or levered loan index; and 3) to comparable high-yielding equity
investments (MLPs, equity REITs, mortgage REITs, etc.). Figure 4 illustrates a comparison to other
yielding equity alternatives that are often considered by traditional equity portfolio managers of dividend
strategies.
July 9, 2020 11
FIGURE 4. Yielding Equity Security Comparison to ORCC
Source: Bloomberg
A BDC’s core dividend yield or risk premium is what usually attracts investor to a BDC, but that
perception of “value” does encompass numerous risks. To measure return per unit of risk, we think Owl Rock’s WA total yield
on debt and income
investors should look at the assets of a BDC. We have historically argued throughout our research that investments was 8.40% as
we believe the risk-adjusted returns of middle market, directly originated loans (i.e., the asset yield) of March 31, 2020, which
measured by either a Sharpe ratio or spread per unit of leverage at the portfolio company have been is ~500bps the YTM over
first-lien loans in the
empirically superior to fixed-income alternatives due to direct lending’s illiquidity premiums, senior LTSA index and 818bps
security, covenant protections, and recoveries in LGD from permanent capital commercial lenders. We over the three-year
think there can be as much as 150-200bps of yield premium from moving from the liquid broadly Treasury.
syndicated loans to senior-secured upper middle market loans. Owl Rock’s WA total yield on debt and
income investments was 8.40% as of March 31, 2020, which is ~500bps in YTM over first-lien loans in
the LTSA Index and 818bps over the three-year Treasury of 22bps.
In terms of below-investment-grade corporate credit losses, we have looked at numerous historical

credit loss data sets to try to get a perspective on the credit risks of direct debt given its relative
nascence as an asset class and limited data from the origination of private lenders. The general
conclusion has been 1) bank or leveraged loan recoveries are double those of high-yield or junk bonds,
2) first lien recovers about 50% more at 75% than second lien at 52% and covenant lite debt recovers
halfway between first and second lien recoveries, and 3) middle market loans have had higher
recoveries than leveraged loans primarily as a result of a more efficient and focused workout process.
According to one Nationally Recognized Statistical Rating Organization (NRSRO), the average annual
middle-market default rate in the U.S. has been 1.9%, while the broadly syndicated loan annual default
rate has been 2.8% from 2007-2016, whereas another NRSRO stated that the average discounted
recovery after bankruptcy for middle-market issuers is 52% vs. 48% for large corporate deals.
July 9, 2020 12
In terms of BDC losses, because BDCs mark their assets to fair value each quarter, the changes in
unrealized loss can be viewed akin to a loan loss reserve to future realized losses. As we describe
further in the report, BDCs took a net realized and unrealized loss of 6.5% in 1Q20. To put this loss in
From 2008 through 2010
context from 2008 through 2010 (a three-year period) the cumulative realized losses for listed BDCs (a three-year period) the
were 10.2%. While the historical industry data on losses were wide and may not be representative to cumulative realized
losses for listed BDCs
the modern BDC industry for various reasons, we illustrate the quarterly losses on assets in Figure 5.
were 10.2%.
Losses peaked in 2H08 and gains started to occur (i.e., loan recoveries) in 2H09; 2) the average annual
historical realized and unrealized loss rate on assets is ~1.4% for the BDC industry since 2004; and 3)
there were generally material restructuring and recovery gains throughout 2010-2011, so the peak
period of credit losses was 2Q08-1Q10. Overall, we think the outlook for direct-lending losses remains
uncertain today and losses should be wide across the BDC industry, but for reasons we describe below
we think Owl Rock’s credit losses will be less than peers.
FIGURE 5. Quarterly Historical BDC Realized and Unrealized Loss Rate
July 9, 2020 13
INVESTMENT HIGHLIGHTS
Owl Rock has a conservatively positioned balance sheet and ample liquidity to support portfolio
companies and to attractively grow the investment portfolio. Given the highly uncertain future As of March 31, 2020, Owl
economic backdrop resulting from the unexpected emergence of the COVID-19 virus, we believe BDC Rock’s debt-to-equity
ratio was 0.66x vs. a peer
investors should first begin assessing a company’s balance sheet and liquidity before considering group of 1.24x.
making an investment. In the case of Owl Rock Capital, we believe the balance sheet has been
thoughtfully constructed with staggered long-term maturities, an attractive mix of unsecured debt, and
low leverage. The company’s next maturity is in December 2022.
We believe one of the most simple and best measures of risk in evaluating a BDC is through leverage—
defined as GAAP debt-to-equity. As of March 31, 2020, Owl Rock’s debt-to-equity ratio was 0.66x vs. a
peer group of 1.24x. Investors granted the BDC approval to increase leverage to 2.0x on June 9, 2020,
and management now targets optimal leverage of 0.90–1.25x. Consequently, we think Owl Rock’s
equity is therefore much less sensitive to both future unrealized and realized losses going forward.
Figure 6 illustrates Owl Rock’s GAAP debt-to-equity in comparison to our peer group of BDCs.
FIGURE 6. GAAP Leverage at Peer BDCs
Owl Rock’s $3.6bln in debt capital, representing 38.6% of total assets, is composed of multiple revolving
credit facilities, unsecured debt, and on-balance sheet CLOs. Owl Rock currently has been assigned Unsecured debt
represents ~40 % of
four investment-grade ratings — by Fitch and S&P (BBB-/Stable), Moody’s (Baaa3/Stable), and Kroll funded debt capital.
(BBB/Stable). Unsecured debt represents ~40% of funded debt capital, which is well above the 30%
unsecured mix that a NSRSO prefers investment-grade BDCs to possess. The company’s investment
grade ratings have contributed to one of the lowest stated WA costs of debt capital in the industry at
July 9, 2020 14
~4.20% in 1Q20, which we expect to continue to decline and is actually lower on an effective basis We expect Owl Rock is
because the company uses some interest rate swaps on unsecured notes. We believe Owl Rock’s cost one of only a couple of
of debt advantage is important today because as the company deploys its investment capacity toward BDCs to be capable of
experiencing NIM
target leverage of 0.90–1.25x, the marginal cost of debt capital should be low, especially with the Fed expansion today.
on hold through 2021, and accretive to earnings. With an average LIBOR floor of 86bps, we expect Owl
Rock is one of only a couple of BDCs that is capable of experiencing NIM expansion today.
As of March 31, 2020, Owl Rock had ~$2.0bln in cash and undrawn capacity on revolvers. This
investment capacity is significantly above the $591 million in unfunded commitments outstanding, which
includes about $400 million in delayed draw term loans that is tied to acquisition financing.
Consequently, we think Owl Rock has ample liquidity on its balance sheet to support portfolio
companies in the event a portfolio company needs it over the next couple of months and is positioned
favorably to opportunistically grow the investment portfolio when new deal activity returns at higher
spreads of as much as 100–200bps. One other benefit of the company that is also providing some
benefit today is the choice to swap out some unsecured fixed-rate debt with floating rate debt. Only
TPG Specialty Lending has elected to manage interest rate risk this way.
This sizable available capital at Owl Rock Capital of $1.4–$3.2bln at target leverage is only part of the
significant available capital at the external manager that we estimate to be more than $4.0bln and could
be used for cross-fund investment. We think this number grows quarterly with new fundraising and
product expansion. With the company’s co-investment exemption and the SEC’s regulatory relief that
allows the BDC has access to additional pools of capital at the manager to work with Owl Rock Capital’s
portfolio companies for shareholders’ interest. Overall, we think Owl Rock is one of a handful of BDCs
to take share during the market dislocation and will come out of the pandemic in a better competitive
position than peers.
Stock price reflects too dire of loss assumptions relative to future losses, and we expect the
company to achieve lower credit losses than peers. With the stock trading at ~0.87x book value, we We think Owl Rock’s 2Q20
book value is closer to
estimate the market is expecting Owl Rock to incur additional realized losses of ~$699mln ($1.82/share) $14.50.
relative to the company’s March 31, 2020 book value. This amounts to a loss expectation of ~7.8% on
Owl Rock’s investment portfolio of ~$8.9bln or ~2.6% per year on an assumed three-year average life.
Management has stated an expectation for a long-term annual loss assumption in its strategy of 50–
75bps, which is about half the annual historical loss of publicly traded BDCs. The market’s loss
assumption for ORCC is 1) in addition to losses already implied by the fair value discount of loans
marked below par in 1Q20, 2) does not include the accretive impact from $100mln in buybacks in 2Q20,
3) and does not reflect the likely unrealized gains from positive mark-to-market impacts quarter-to-date.
We think Owl Rock’s 2Q20 book value is closer to $14.50. Simply put, we think today’s valuation of Owl
Rock’s stock to book value and its dividend premium is attractive relative to the default risk in the
portfolio.
July 9, 2020 15
Given that Owl Rock’s inception was in 2015, the portfolio and company had not faced a serious test
until 1Q20 as benign credit conditions predominantly existed outside of oil & gas and retail investments.
We think COVID-19, however, undoubtedly presents the first very serious test in terms of the severity
and duration of an economic downturn to Owl Rock’s direct lending portfolio of ~$9.0bln in assets but
we believe the company’s portfolio exposure to 1) 81% of first-lien loans; 2) upper middle-market
borrowers with a WA EBITDA of $86mln at loan-to-values of ~50%; 3) more-insulated sectors like
software, business services, and health care; and 4) a primarily sponsored back portfolio that is heavily
incentivized to provide short-term liquidity to portfolio companies to prevent situations of default. These
reasons, along with lower-than-peer losses, lead us to conclude that Owl Rock’s credit costs should
outperform peers through the economic recovery and beyond. Figure 7 illustrates ORCC’s portfolio
company metrics, including WA EBITDA, leverage of portfolio companies, and WA LIBOR floor relative
to a BDC peer group.
FIGURE 7. BDC Portfolio Company Metrics
Source: Company documents
Figure 8 illustrates Owl Rock’s investment portfolio mix vs. a BDC peer group composite, which we find
more attractive than the peer group. We also take some comfort in the following additional credit stats
in our outlook for Owl Rock’s future credit costs.
 Secured corporate term loans have usually recovered 2.0x bond recoveries, first-lien loan
recoveries of 75% have been ~52% more than second-lien loan recoveries of 50%, and
middle-market loan recoveries have exceeded large corporate recoveries over the last 30
years, according to an NRSRO’s corporate credit recovery stats.
 Debt with more than 50% of cushioning (i.e., LTV <50%) has an average discounted recovery
of 85% vs. 50% average recovery for debt with debt of LTV >50%.
 Law firm Proskauer implemented a Private Credit Default Index in 1Q20. The index includes
defaults among 576 active loans for which the law firm has closed credit documents. In 1Q20,
defaults totaled 5.9% but in terms of size, companies with less than $25 million of EBITDA
defaulted 7% vs. 5.2% for companies with $25-$50 million of EBITDA vs. 4.4% for companies
that generated over $50 million of EBITDA.
July 9, 2020 16
FIGURE 8. First-Lien Portfolio Mix – as of March 31, 2020
*Peer group: ARCC, FSKR, FSK, GBDC, TSLX, NMFC, SLRC, AINV, GSBD, OCSL, TCPC, BCSF, CGBD, BBDC, and CCAP
Source: Company documents and JMP Securities LLC
We think BDC portfolios that are sponsor-backed are more attractive today than non-sponsor-backed
investments to support portfolio companies given: 1) the amount of undrawn capital available to private
equity companies to invest and 2) the human capital and professional services resources available to
private equity companies. Preqin estimates the undrawn capital held by North American funds of private
equity firms to be ~$800bln and PE fundraising in North America and Europe was an annual record in
2019, totaling more than $350bln. Figure 9 illustrates the growth in undrawn capital commitments at
North American private equity funds over the past 12 years.
July 9, 2020 17
FIGURE 9. North American Private Equity Dry Powder
Source: Preqin
Owl Rock management recently stated that ~2/3 of the company’s sponsor-backed portfolio companies
are owned by private equity funds with either permanent capital or relatively recent vintages, which ~85% of all buyout
industry dry powder is
generally includes funds that have closed in the last four years. Given these portfolio companies are earmarked for funds
owned in funds that are early in their lives, these investments tend to benefit from the dry powder raised from 2017–2019,
available in these funds, meaning that sponsors have both the motivation and the ability to continue to which bodes well for Owl
Rock portfolio companies
provide financial support to these portfolio companies. Cambridge Associates provided data to support relative to other BDC
this view, stating that ~85% of all buyout industry dry powder is earmarked for funds raised from 2017– portfolios.
2019. We think this trend could bode well for private equity sponsors to make cross-fund investments or
recycle to support Owl Rock portfolio companies in the event they run into trouble.
In the event that a portfolio company does run into trouble, Owl Rock has hired a team to restructure,
workout, and recover invested capital. The company has been investing in building this group over the
last two years, recently hiring Brian Finkelstein in April as a managing director and head of workout and
expanding the manager’s opportunistic strategy. The strategy of working out troubled loans is
somewhat differentiated relative to peers, although we think other platforms such as Oaktree Specialty
Lending (OCSL, MO, $5.25 PT), Sixth Street Specialty Lending (TSLX, MO, $18 PT), Ares Capital
(ARCC, MO, $15.50 PT), Apollo Investment Corp. (AINV, MP), and BlackRock TCP Capital (TCPC,
MO, $10.50 PT) have greater portfolio management and restructuring resources than Owl Rock does
today.
July 9, 2020 18
Expecting a top-quartile track record. BDC track records can be measured in multiple ways. We
touched on some metrics in the performance section above, but believe Owl Rock’s three-year
economic return (defined as change in book value plus total dividends) of 23.0%, above a peer group
average of 8.2%, and Owl Rock’s total shareholder loss of 11.0% vs. a peer group loss of 24.3% since
IPO are the most relevant historical metrics to describe alpha or outperformance. Figure 10 shows a
scatter plot relationship between a BDC price-to-book value per share and a three-year economic
return. We think Owl Rock’s performance is top quartile, along with TSLX and ARCC, among peers. In
terms of realized investment track record, ORCC’s exited investments have generated an average
realized unlevered IRR of 11.5% based on total capital of $2.4bln since inception. Comparable realized
investment return metrics are not available, but we believe this track record would also be top-quartile.
In terms of credit quality, the company has not had any defaults or non-accrual investments since
inception. By any measure of performance, we believe Owl Rock has historically outperformed peers
and we expect performance in terms of economic returns to continue from lower losses, which should
lead to outperformance in shares.
FIGURE 10. Price/Book Value vs. Three-year Economic Return Scatter Plot
We think Owl Rock’s

performance is top
quartile along with TSLX
and ARCC.
Source: JMP Securities LLC, Company reports
Investors are conditioned to know that historical performance is not necessarily indicative of future
performance, but we expect Owl Rock’s historical track record to continue. We think Owl Rock’s marks
taken in 1Q20 indicate that realized credit losses should be less than peers. Changes in traded broadly
syndicated loan markets are directionally consistent and highly correlated with loan price changes at
BDCs. On March 19, we expressed an opinion in our note, What to Expect to When You are Expecting
[Unrealized Losses], that the equity markets had priced in expected credit losses for BDC stocks
significantly in excess of those seen during the Credit Crisis and potentially on par with a depression. In
this report, we also shared an expectation for a 6.5% unrealized loss on first-lien loans for the BDC
industry in 1Q20 as a base case; first liens represent the largest mix of BDC investment portfolios. The
average FV mark on all publicly-traded BDC portfolios, according to Refinitiv, as a percentage of par
declined from 96% to 91% sequentially in 1Q20; and, we calculated a median net realized and
unrealized loss as a percentage of beginning portfolio of 6.5% in 1Q20 for a peer group. Figure 11
illustrates total realized and unrealized losses as a percentage of the beginning investment portfolio as
well as the sequential decline in book value per share in 1Q20 for Owl Rock’s peer group.
July 9, 2020 19
FIGURE 11. BDC Net Realized & Unrealized Losses in 1Q20 ($000s)
Source: Company filings and JMP Securities LLC
Owl Rock recognized $458.8mln ($1.17/share) in net realized and unrealized losses, representing 5.2%
of the beginning investment portfolio or about 130bps better than median sequential decline. Given the A $115mln first lien loan
to 2U, Inc. was repaid at
company’s lower unrealized losses and lower balance sheet leverage, Owl Rock’s sequential decline in par in April 2020 but
book value per share of 7.5% was significantly better than the industry median of 13.2%. We estimate valued at $111mln at
that ~75% of the 1Q20 loss was a function of mark-to-market, identifying other-than-temporary March 31 from mark-to-
market impacts.
impairment on investments in 1) Aviation Solutions Midco, 2) H-Food Holdings, and 3) Geodigm
Corporation. Generally, we think credits that were marked around 98 as of December 31, 2019 and are
now marked below 85 to have moderate sensitivity to COVID-19 and present risk to future credit costs
(e.g., realized/unrealized losses and non-accrual income). For context, most of Owl Rock’s investments
are fair valued at 98 at inception because of two points of OID, which are accrued over the life of the
loan. We identify a $58.4mln second-lien investment to CIBT, a $122.6mln first-lien loan to Geodigm,
and a $111.5mln senior secured investment to Feradyne Outdoors as investments with the greatest risk
today and are investments we are monitoring.
July 9, 2020 20
As non-COVID-19 impacted investments repay, we would expect the unrealized mark-to-market losses
will be recovered as these assets repay at par. We are already aware of two intra-quarter examples as
a result of 1) the prepayment of the Owl Rock’s $115mln first-lien loan to 2U, Inc. from the portfolio
company’s issuance of convertible bonds in April—the loan was marked at $110.7mln as of March 31,
2020 which implies a $4.3mln realized gain and/or accelerated OID in 2Q20—and 2) the upcoming IPO
of Norvax, LLC (doing business as GoHealth), which was announced in early June via the filing of a S-1
that should increase the subordination of Owl Rock’s investment and narrow Owl Rock’s $3.2mln
discount on the $196mln first-lien loan. Norvax is a top-4 portfolio company and Owl Rock also has
$8.2mln equity in the company, which could be a source of unrealized/realized gains on exit. Apollo
Investment is also a club lender in the first-lien loan to Norvax but does not own equity. Owl Rock’s valuation of
clubbed loans with other
As of March 31, 2020, all of Owl Rock’s investments were accruing interest vs. the average non-accrual publicly-traded BDCs was
rate of 5.5% of investment portfolio cost values, according to Refinitiv. Moreover, Owl Rock had one of ~ 1.0-2.0% less than
peers, implying more
the lowest portfolios with credit marked below 85%, with ~4.0% of the investment portfolio marked conservatism, in our view.
below vs. an average of 12% for the industry, according to Refinitiv data. Figure 12 illustrates the
percentage of loans marked below 85% for BDCs as of March 31, 2020.
FIGURE 12. Percentage of Loans Marked Below 85% of Cost – March 31, 2020
Source: Refinitiv
While some investors may have doubts about the accuracy of the valuation of non-traded private assets
like direct loans, we have confidence in the valuation framework at Owl Rock for various reasons. First, Duff & Phelps
independently values
we think the correlation coefficient of 0.97 over the last three years of the company’s first-lien loans and every portfolio company
the LTSA Leveraged Loan index to be statistically significant. We note this correlation is the highest every quarter.
among publicly traded BDCs, which does make conceptual sense given that the WA size of Owl Rock’s
obligor is closer than most BDCs to the average size obligor in the LTSA Index. Secondly, Duff &
Phelps independently values every portfolio company every quarter, which is an independent
investment valuation process more extensive than most BDC policies. Lastly, in comparing Owl Rock’s
valuation of loans as of March 31, 2020 to other publicly-traded BDCs, we find that Owl Rock’s average
valuation is about 1.0-2.0% lower than peers, implying more conservatism, in our view.
July 9, 2020 21
We expect Owl Rock’s book value to be up in 2Q20. As shown in Figure 13, Owl Rock I’s book value
per share is significantly correlated to ORCC II book value per share with a strong correlation coefficient
of 0.978. This is relevant because ORCC often provides weekly NAV/share information as a result of
fundraising at retail wire houses. As of June 17, ORCC II issued a Form 8-K, disclosing that book value
had increased 3.7% over March 31, 2020 book value per share to $8.60. Applying the historical
correlation coefficient to the percentage increase, among other considerations, we think it is reasonable As of June 17, ORCC II
to estimate ORCC’s book value per share will be about $14.40 as of June 30, 2020. issued a Form 8-K,
disclosing the book value
had increased 3.7% since
FIGURE 13. ORCC I & ORCC II Quarterly Book Value Per Share Correlation March 31, 2020 book
value per share to $8.60.
Owl Rock’s large direct lending solutions can fill gaps in the upper middle market that have
We estimate the U.S.
traditionally been served by the syndicated market. Simply put, over the last decade leveraged
direct lending market to
loans have been taking share from the high yield market, and direct lending has been taking share from be +$200bln in annual
the syndicated leveraged loan market. The growth in direct lending has been due to a confluence of issuance and +$1.0trln in
outstanding loans.
supply and demand factors, including a retrenchment of commercial banks from arranging leveraged
loans, growth in private equity, and demand for high yield investments by institutional investors as a
result of a low interest rate environment and ~ 7.0% actuarial rate of return. We think direct lending is
now a mature business model and has a permanent place in the demand for debt capital by both
sponsors and non-sponsored middle-market companies. Owl Rock’s value proposition is likely more in
demand today as a result of the COVID-19 pandemic and slow recovery in the syndicated markets. We
estimate the U.S. direct lending market to be +$200bln in annual issuance and +$1.0trln in outstanding
loans. Institutional and retail investors have access to this private market through a couple of products,
including private commingled funds, separately managed accounts, and/or pooled vehicles like
privately-held and publicly-traded business development companies. Publicly-traded BDCs with assets
under management of +$110mln represent a significant subset of the direct lending assets under
management.
July 9, 2020 22
We think Owl Rock’s business model, available capital, and liquidity of a publicly-traded BDC fits at the
center of direct lending trends and is uniquely positioned to continue to be a preferred debt capital We think Owl Rock is a
provider to upper middle-market companies that could pursue syndicated structures. Many of Owl top-20 U.S. private debt
investment platform and a
Rock’s borrowers could choose to access the high-yield markets when open, but prefer direct lending top-10 U.S. direct lending
solutions. With ~$18bln in direct lending assets under management, we think Owl Rock is a top-10 U.S. investment platform.
direct lending investment platform that has the potential to have $25bln in AUM if all leverage was used
at various funds. Direct lending assets under management are often not broken out by alternative asset
managers, which make it hard to identify direct lending AUM. That said, we think direct lending AUM is
often included in the disclosed assets under management within a credit strategy and that Ares
Management is the leading U.S. direct lending manager with $49.3bln in AUM, which is a number
disclosed in company filings. Private Debt Investor also publishes a PDI 50, which ranks the amount of
private debt investment capital raised over the last five years. While 1) private debt includes strategies
other than direct lending, such as real estate or infrastructure; and 2) BDCs are not included in PDIs
calculation, we think Owl Rock’s ~$12bln of equity raised in direct lending strategies places it as a top-
20 fundraiser in private debt. Figure 14 illustrates the 2019 PDI top-20 alternative investment managers
by capital raised from January 1, 2014-June 1, 2019.
FIGURE 14. 2019 PDI 10 – Private Debt Capital Raised
Source: PDI
July 9, 2020 23
As a result of Owl Rock’s fundraising success and size, the company is able to provide a full suite of
scaled direct lending solutions to upper middle-market companies in the United States via 1) the cash
flow finance of first lien, second lien, and UniTranche loans; and 2) asset-based financing of accounts
receivable and inventory from the company’s wholly-owned commercial finance company of Wingspire
Capital. The direct origination abilities, coupled with scale of assets under management, allow the
company to drive loan structuring and documentation terms, while remaining highly selective to pick the
right credits. We think Owl Rock serves as lead, agent, or largest lender in 92% of deals. Owl Rock can
underwrite and agent a loan up to $600mln in size. Size matters as deals continue to go the way of
direct lending as sponsors do not want to worry about price flex and/or syndication risk. According to
LCD, leveraged loans less than $350mln comprised 18% of overall U.S. syndicated loan volume in
2010; whereas, deals of this size comprised only 4% of volume in 2019. These larger deals have
tended to skew toward large UniTranche transactions. Figure 15 illustrates the growth in UniTranche
volume over the last five years.
FIGURE 15. Quarterly UniTranche Volume ($bln)
$20.0
$17.5
$18.0
$16.0
$14.0
$11.5
$12.0 $10.7
$10.0 $8.9 $9.2
$8.2
$7.3 $7.5 $7.8
$8.0 $7.0
$5.6
$6.0 $5.1
$4.0 $3.0 $3.2 $3.0 $3.1

$2.7 $2.6
$2.1 $2.0
$2.0 $1.0
$0.0
Source: Refintiv
As of March 31, 2020, Owl Rock’s largest single investment was to expert networking company Gerson
Over the last couple
Lehrman Group (GLG) with a first lien investment of $317mln that we believe was at a loan to value years, we think Owl Rock
ratio below 45%. For perspective, Ares Capital’s largest investment is to AthenaHealth with a total has been agent or club in
many of the largest U.S.
investment, including equity, of $360mln. With this size we think Owl Rock is disintermediating the
private credit deals.
broadly-syndicated market by offering directly-negotiated, private debt finance solutions to upper
middle-market, sponsor-backed companies. Only a couple other direct lenders have the origination
capacity to speak for such a size, which is a big competitive advantage as it offers a certainty of close to
the borrower and scarcity from a supplier of debt capital.
July 9, 2020 24
Over the last couple years, we think Owl Rock has been agent or club in many of the largest US. private
credit deals, including a €1.875bln financing commitment to Ardonagh Group, a $1.6bln financing
commitment to Risk Strategies, a $1.0bln financing commitment to Airbnb, a $945mln financing
commitment to Integrity Marketing, and an $800mln financing commitment to Instructure. A couple of
additional examples of large transactions include the agented financing provided to GLG and Dealer
Tire prior to 2019. These opportunities occurred in 4Q18 when the liquid credit markets dried up and the
demand for debt capital by direct lenders like Owl Rock became very attractive. Figure 16 lists the
largest direct lending deals reported by LCD since 2019.
FIGURE 16. Largest Direct Lending Deals since 2019
Source: LCD
Sponsors can seek competitive pricing and terms from a group of 5-10 potential lenders. We think Owl
Rock is one of the first calls. Owl Rock has been shown deals by 400+ different private equity sponsors
and has held the line on documentation (EBITDA add-backs, covenants, and subsidiary carve-out
provisions), in our view, while also getting some prepayment protection and syndication fees. Overall,
we view the portfolio as diversified among sponsors, but think that five of the company’s strongest
private equity sponsor relationships are to: 1) Vista Equity, 2) Thoma Bravo, 3) Charles Bank, 4)
Platinum Equity, 5) Kohlberg & Company. With deep and wide sponsor relationships and familiarity by
large corporations, we think Owl Rock has the advantage of scale in its deal flow, which allows the
company to be disciplined and selective with its underwriting. Many BDCs claim to be disciplined in
underwriting, but Owl Rock was the only BDC to provide ample support of this via the disclosure of
significant data and underwriting assumptions in won/lost deal flow with equity research analysts at the
company’s 2019 investor day. This disclosure gave us a greater degree of confidence in management
and the company’s underwriting.
Lastly, we believe Owl Rock has a strong reputation as a reliable partner to private equity sponsors.
Direct lending is relationship-heavy business and it is important for entrepreneurs and sponsors to know
who is in the lending group. We think the company’s certainty of execution was recently tested and
validated in the company’s commitment to finance the acquisition of Forescout by Advent. Advent has
backed out of its interest in the acquisition, but Owl Rock did not try to pull its support for a ~$450mln
financing of the take-private transaction when signs of COVID-19 began to ripple through the markets.
July 9, 2020 25
Owl Rock’s lending niche to high-growth companies has been attractive, differentiated, and is a
strategy that we think has most recently been validated. We think Owl Rock is one of the best-
positioned BDCs to provide large debt capital solutions to support the growing trend of private equity
sponsor buyouts of late-stage, venture capital-backed companies.
According to PitchBook, North America and Europe-based tech focused PE firms have raised ~$70bln
across 34 funds in 2019, which is the most capital ever raised in this strategy in the last twenty years.
Thoma Bravo and Vista Equity each raised funds of ~$10bln in 2019, providing debt financing runway
over the next couple years. Figure 17 illustrates fundraising in tech-focused PE firms over the last 20
years. In the U.S., tech as a proportion of overall PE deal count has nearly approached 20% in 2019, up
from the mid-single digits in 2010 and low-single digits in 2000.
FIGURE 17. Tech-focused PE Fundraising
Source: PitchBook
The reasons for this growth are vast (e.g., rapid growth, capital light, strong unit economics,
deleveraging/scale, high recurring revenue, etc.), but some of the fundraising growth is simply a product
of performance. According to PitchBook, over the past 10 years, tech-focused PE funds have produced
IRRs that are ~ 5.0% percentage points higher than those of non-tech buyouts and nearly twice those of
non-tech growth funds. We think Owl Rock has an early entrant to tech-focused private equity firms, a
leading market share in this lending niche, and we expect private equity market tailwinds to provide a
runway for the demand of Owl Rock’s direct lending solutions.
Owl Rock invests in companies that are in technology-related industries including information
technology, applicator or infrastructure software, financial services, data & analytics, security, cloud
computing, communications, life sciences, healthcare, media, consumer electronics, semi-conductor,
internet commerce & advertising, environmental, aerospace & defense. We think the collective direct
origination and co-investment capacity at Owl Rock across a technology-related company’s capital
structure provides Owl Rock differentiation and competitive advantages to a large and growing lending
niche. We think traditional lenders do not have the debt capital flexibility or ability to hold loans to tech-
related companies and also view Owl Rock’s independence as an advantage to lend to private equity
borrowers as tech PE firms like Vista, Thoma Bravo, Francisco Partners, and Silver Lake look to grow
their tech lending
July 9, 2020 26
businesses. We think Owl Rock Capital Corporation seeks to have a portfolio exposure of no more than
25% to technology-related companies; whereas, Owl Rock Technology Finance (ORTF) has a policy to
invest at least 80% of assets in technology-related companies. As of March 31, 2020, ~19.0% of Owl
Rock’s portfolio was in tech-related industries (e.g., internet software, healthcare tech, and some
business services).
FIGURE 18. Owl Rock’s Tech-Related Portfolio – March 31, 2020
We think another recent private equity trend within technology-related companies that has proliferated
in the last four years augurs well for continued direct debt financing opportunities at Owl Rock is the
growth of private equity buyouts of venture capital companies, which is funded by growth capital.
According to PitchBook, the number of VC-to-PE buyouts grew at a CAGR of 18.1% vs. 9.5% of total
buyouts from 2000-2019. We think growth capital or tech lending supports secondary sponsor
transactions from traditional venture capital to a growth equity firm, financing late-stage software and
tech company buyouts by offering a flexible direct lending solution based on MRR (monthly recurring
revenue) or ARR (annual recurring revenue) and/or other applicable metrics for SAAS companies. We
believe founders and shareholders of venture capital-backed companies recognize the growing value
proposition private-equity sponsors can provide via an exit in today’s equity capital market environment.
PitchBook reports that 19.2% of U.S. venture capital exits in 2019 occurring via buyout, which compares
to less than 5.0% in the early 2000s. Figure 19 illustrates the trend of buyouts as a proportion of venture
capital exits.
July 9, 2020 27
FIGURE 19. Buyouts as a Proposition of VC Exits
Source: PitchBook
PE firms specializing in software buyouts often act like strategic acquirers and increasingly outbid them
for high-growth, VC-backed companies. Owl Rock already has strong relationships with many of these
sponsors and is uniquely positioned to take advantage of this growing demand for growth capital and
has recently increased its exposure to this form of growth capital. Figure 20 lists the top tech buyout
firms and the amount of capital raised for tech-focused PE strategies. Growth capital, according to Owl
Rock, typically means an investment in an established, but rapidly growing business that is owned by or
received an equity investment from, one or more growth equity or venture capital firms, and is
underwritten on the basis of something other than a multiple of EBITDA (e.g., a multiple of recurring
revenue).While Owl Rock Capital Corp does not differentiate between this type of financing in its
portfolio, Owl Rock Technology Finance recently started voluntarily classifying debt investments as
traditional finance vs. growth capital in public filings. Owl Rock Technology Finance states ~$350 million
(27%) of the total debt portfolio was in growth capital loans and the underlying portfolio companies had
WA annual revenue of $257 million and WA enterprise value of $1.3 billion. We would not expect Owl
Rock Capital’s portfolio to have as much growth capital in the portfolio, but we do think it is likely an
occasional allocation to the investment portfolio could manifest.
July 9, 2020 28
FIGURE 20. Leading Tech-focused Private Equity Managers
Source: PitchBook
Some investors were skeptical of Owl Rock’s focus on lending to tech companies, but we think the
dislocation in the capital markets in March and April validated Owl Rock’s thesis of providing direct
lending solutions to the upper middle market and to sponsor-backed technology companies. Not only
did the shutdown in the capital markets provide opportunities for Owl Rock to offer new debt capital
solutions to finance the acquisitions of growing tech companies, but technology companies have been
some of the biggest beneficiaries of the work-from-home trend.
In March 2020, Owl Rock provided one of the first post pandemic deals by extending a $300mln
UniTranche credit facility to support the $1.15bln buyout of software security provider Checkmarx from
Insight Partners by Hellman & Friedman. We think the resiliency and perceived safety of tech-based
business models from COVID-19 should shed light on many misconceptions of lending to tech
companies. With a portfolio overweight to tech companies, we expect Owl Rock’s portfolio to perform
well throughout this environment, including the aforementioned prepaid investment from 2U, Inc. and
Go Health that we expect to result in gains.
July 9, 2020 29
OWL ROCK CAPITAL CORPORATION
Company history
Headquartered in New York, New York, and with regional offices in Silicon Valley, Owl Rock Capital
Corporation is an externally managed specialty finance company that is organized as a closed-end
investment company and has elected to be regulated as a business development company (BDC)
under the Investment Company Act of 1940.
The company was founded in 2015 and is externally managed by Owl Rock Capital Advisors LLC, an
-
SEC-registered investment advisor that is an affiliate of Owl Rock Capital Partners. As the second
largest publicly traded BDC, Owl Rock is a leading provider of direct lending solutions to U.S. middle
market companies, with a focus on originating and investing in senior secured loans and the ability to
opportunistically invest across the capital structure to support the growth of their borrowers as a long-
term investor.
Owl Rock typically invests in upper middle-market companies with significant operating history and
familiarity operating with leverage. The company targets portfolio companies with EBITDA of $10 million
- $250 million and/or annual revenue of $50 million-$2.5 billion at the time of investment. As one of the
largest direct lenders in the industry, Owl Rock has the ability to lead or anchor debt financings of $200-
$600 million across its platform. Owl Rock invests in senior secured or unsecured loans, subordinated
loans or mezzanine loans, and to a lesser extent, equity and equity-related securities including
warrants, and preferred stock.
Owl Rock Capital Partners, together with its subsidiaries, is a New York-based direct lending platform
with approximately $16.4 billion of assets under management as of March 31, 2020. Established in
2015, Owl Rock Capital Partners and its subsidiaries collectively form a comprehensive direct lending
platform that seeks to address the needs of U.S. middle market companies across a variety of
industries. We think Owl Rock Capital Partners has ~150 full time employees, with over 60 investment
professionals across offices in San Francisco and New York. Figure 21 illustrates an overview of the
Owl Rock platform as of March 31, 2020.
The company completed an initial public offering in July 2019. On July 18, 2019, shares of ORCC
began trading on the NYSE with a public offering price of $15.30 per share. The Regent of the The Regent of the
University of California
University of California is the company’s largest shareholder with 11.2% of shares outstanding and the
and the New Jersey
New Jersey Division of Investment is the company’s second largest shareholder with 7.5% of shares Division of Investment
outstanding. We estimate that institutional investors own ~35% of shares outstanding, which compares Management are the top
two shareholders.
to an average of ~25% for the BDC industry, and that The Regent of the University of California is the
largest limited partner invested across the Owl Rock platform.
July 9, 2020 30
FIGURE 21. Owl Rock Platform Breakdown
Source: Company documents
July 9, 2020 31
Senior management, corporate governance, and alignment of interests

We tend to frame a quantitative allocation (e.g. 25%) to BDC investment decision making should come
down to a qualitative input for the trust or confidence in management and corporate governance. In the
case of Owl Rock, we tend to think of the management team as leveraged finance veterans and direct
lending pioneers and think the Owl Rock management team has considerable investment experience,
institutional investment processes and systems, and deep sponsor relationships. Co-founders Douglas
Ostrover, Marc Lipschultz, and Craig Packer all voluntarily left very senior positions at GSO, KKR, and
Goldman Sachs, respectively, to build a premier direct lending platform. While Owl Rock Capital
Partners was founded in 2015 by Mr. Ostrover, Mr. Lipschultz, and Mr. Packer, we think Mr.
Kirshenbaum was Mr. Ostrover’s first hire and also instrumental to the growth of the platform. In our
view, we think Mr. Ostrover knew the importance in developing operational systems, compliance, and
cyber security given that these internal controls are very important to LPs as he set out to fundraise. We
consider Mr. Kirshenbaum to be one of the best CFOs in the BDC industry and think institutional
investors also hold him in high regard given their familiarity with him as an operator at Sixth Street
Specialty Lending.
ORCC’s board has 7 directors and 4 independent directors. It is staggered with three classes of
directors. While we think the board structure is adequate, we think it could be improved. We prefer the
company’s independent directors to not be associated with director roles at other Owl Rock funds,
which can create conflicts of interest and result in group think and/or an anchoring bias. We note all the
independent directors serve as directors at both Owl Rock Capital Corp II and Owl Rock Technology
Finance. We also think the ORCC board structure should be improved through diversity, which is
increasingly important to institutional investors and ESG strategies, and include at least one more
independent director. Figure 22 illustrates Owl Rock Capital Corp. board of director’s structure;
whereas, Figure 23 illustrates the investment committee. Owl Rock’s investment committee decisions
require a unanimous approval. The backgrounds of Owl Rock’s key management team members are
below:
• Craig W. Packer – Chief Executive Officer of Owl Rock Capital Corporation, Co-Founder. Mr.
Packer is a Co-Founder of Owl Rock Capital Partners, serves as Co-Chief Investment Officer of
Own Rock Capital Advisors and has served on the board of Owl Rock Capital Corp since 2016.
Prior to co-founding Owl Rock, Mr. Packer was Co-head of Leveraged Finance in the Americas
at Goldman Sachs & Co. (NYSE: GS) Mr. Packer joined Goldman Sachs as a Managing
Director and Head of High Yield Capital Markets in 2006 and was named partner in 2008. Prior to
joining Goldman Sachs, Mr. Packer was the Global Head of High Yield Capital Markets at Credit
Suisse First Boston.
• Alan Kirshenbaum – Chief Operating Officer, Chief Financial Officer. Mr. Kirshenbaum also
serves as the Chief Operating Officer and Chief Financial Officer of Owl Rock Capital Partners
and Owl Rock Capital Advisors, and has also served on the board of Owl Rock Capital Corp
since 2015. Prior to Owl Rock, Mr. Kirshenbaum was Chief Financial Officer of TPG Specialty
Lending, Inc. (NYSE: TSLX). Mr. Kirshenbaum was responsible for building and overseeing
TSLX’s finance, treasury, accounting and operations functions from 2011 to 2015, including
during its initial public offering in 2014. From 2011 to 2015 Mr. Kirshenbaum was also Chief
Financial Officer of TPG Special Situations Partners. From 2007 to 2011, Mr. Kirshenbaum was
the Chief Financial Officer of Natsource, a private investment firm and prior to that, Managing
Director, Chief Operating Officer and Chief Financial Officer of MainStay Investments. Mr.
Kirshenbaum joined Bear Stearns Asset Management (“BSAM”) in 1999 and was BSAM’s Chief
Financial Officer from 2003 to 2006.
July 9, 2020 32
• Douglas I. Ostrover – Chief Executive Officer of Owl Rock Capital Advisors, Co-Founder.
Mr. Ostrover is a co-founder of Owl Rock Capital Partners LP and also serves as Chief Executive
Officer and Co-Chief Investment Officer of Owl Rock Capital Advisors LLC and is a member of
the Investment Committee of Owl Rock Capital Corp. In addition, Mr. Ostrover has served on the
boards of Owl Rock Capital Corp. since 2016. Prior to co-founding Owl Rock, Mr. Ostrover was
one of the founders of GSO Capital Partners (GSO), Blackstone’s alternative credit platform and
was a Senior Managing Director at Blackstone until 2015. Prior to co-founding GSO in 2005, Mr.
Ostrover was a Managing Director and Chairman of the Leveraged Finance Group of Credit
Suisse First Boston (CSFB). Prior to his role as Chairman, Mr. Ostrover was Global Co-Head of
CSFB’s Leveraged Finance Group, during which time he was responsible for all of CSFB’s
origination, distribution and trading activities relating to high yield securities, leveraged loans,
high yield credit derivatives and distressed securities. Mr. Ostrover joined CSFB in November
2000 when CSFB acquired Donaldson, Lufkin & Jenrette (“DLJ”), where he was a Managing
Director in charge of High Yield and Distressed Sales, Trading and Research.
• Marc S. Lipschultz – President, Co-Founder. Mr. Lipschultz is a co-founder and the President of
Owl Rock Capital Partners and Co-Chief Investment Officer of Owl Rock Capital Advisors. Prior
to founding Owl Rock, Mr. Lipschultz spent more than two decades at KKR, where he served on
the firm’s Management Committee and as the Global head of Energy and Infrastructure. Mr.
Lipschultz has a wide range of experience in alternative investments, including leadership roles
in private equity, infrastructure and direct-asset investing. Prior to joining KKR, Mr. Lipschultz
was with Goldman, Sachs & Co. focused on mergers and acquisitions and principal investment
activities.
FIGURE 22. Board of Directors
FIGURE 23. Investment Committee
July 9, 2020 33
One of the biggest risks to an investment in an externally-managed BDC is conflict of interest, which
can be mitigated by strong insider alignment with principals via dollars invested. The fact that the Mr. Packer recently
purchased 75.8k shares at
investment advisor exclusively focuses on direct lending mitigates the conflict of interest that arises from a WA price of $13.17 on
other alternative investment managers that have fund strategies in addition to direct lending strategies 5/07/20.
that invest in other parts of a portfolio company’s capital stack. In terms of specific insider alignment, we
think the company has one of the best alignments of interest with shareholders. Since going public, the
company waived $73.4mln of fees, which the company has been passing on to our shareholders in the
form of special dividends. These special dividends may be overlooked since they are not recurring, but
in today’s investment environment, we think yield enhancement should be one contributor to
outperformance. Per public filings, Mr. Ostrover owns 6.7mln shares and is the sixth largest holder with
ownership of 1.75%, Mr. Packer owns 207k shares, which includes the recent purchase of 75.8k shares
at a WA price of $13.17 on 5/07/2020, and Mr. Lipschultz owns no shares.
Investment management structure
As an externally managed BDC, Owl Rock Capital Advisors LLC manages day-to-day operations by
providing investment advisory and management services. The adviser is responsible for sourcing,
negotiating, underwriting, closing, and monitoring all investments at Owl Rock Capital Corp. We think
Owl Rock Capital Corporation is the flagship fund of Owl Rock Capital Partners, which is a leading
alternative investment platform that is exclusively focused on direct lending. In exchange for these
services, the manager receives compensation from the company though 1) a base management fee,
and a 2) performance-based incentive fee which has two components. In 2019, gross management fees
represented 18.8% of total investment income. Figure 24 illustrates the total economics of the
investment portfolio distributed in total gross management fees in 2019. The following bullets describe
characteristics of Owl Rock’s fee structure, including voluntary fee waivers.
• Owl Rock’s base management fee is payable at an annual rate of 1.5% of average gross
assets at the end of the two most recently completed quarters, excluding cash. Upon
receipt of shareholder approval for leverage of 2.0x, the advisor lowered the base
management fee to 1.0% on assets financed above 1.0x.
• The first component of the incentive fee is driven by annualized return of pre-incentive fee
net investment income, which includes the sum of interest income, dividend income, and
other income (including commitment, origination, structuring, diligence, consulting fees, or
other fees received from portfolio companies) minus operating expenses on shareholder’s
equity. The manager must achieve a pre-incentive fee return on equity above 6% (i.e., the
hurdle rate) to receive this fee. Furthermore, if pre-incentive net investment income
exceeds this hurdle rate, but is less than 7.27%, Owl Rock Capital pays 100% of this
income to the manager (i.e., catch-up provision). The manager also receives 17.5% of
pre-incentive net investment income that generates a return above 7.27%. We think a
guideline hurdle rate is ~2% below the expected return for a direct lending fund.
• The second component of the incentive fee is driven by realized capital gains, which are
paid annually. If cumulative realized capital gains exceed realized capital losses plus
unrealized depreciation, the manager receives 17.5% of realized gains less the previously
distributed capital gain incentive fee. If the cumulative realized capital gain is negative, the
manager is not compensated nor penalized.
• For a fifteen-month period after the July 18, 2019 exchange listing, the adviser agreed to
waive fees from 1) any portion of the management fee in excess of 0.75% of ORCC’s
gross assets, excluding cash; and 2) the entire incentive fee. This fee waiver expires in
4Q20.
July 9, 2020 34
Overall, we view the management fee structure as favorable relative to other publicly-traded BDC fee
structures despite the absence of a total return and look-back feature, which is preferred by investors.
We believe the fee structure is appropriate as the manager has consistently generated attractive
historical economic returns in its relatively short operating history. There are a number of ways investors
can measure the operational efficiency or operational leverage at a business development company.
One of the most relevant metrics for business development companies given they are regulated as
investment companies under the Investment Company Act of 1940 is the expense ratio. The expense
ratio, which is defined as total annualized operating expenses as a percentage of average assets or
investment portfolio—is most commonly used in the 15(3) process by boards of directors to review the
investment management contracts of external investment advisors annually. Owl Rock’s gross expense
ratio has averaged 2.9% in the three quarters since it went public, which is in line with the average
expense ratio for a peer group of externally managed BDCs.
Another commonly used metric to assess operational efficiency is the efficiency ratio, which is defined
as total operating expenses/total investment income. Over the last three quarters, Owl Rock’s gross
efficiency ratio has averaged 30.2%, which has been ~240bps higher than average for a peer group of
externally managed BDCs. We note that Owl Rock operates at significantly lower leverage of 0.66x than
their externally managed peers at 1.24x, and expect Owl Rock’s efficiency ratio to fall in line with peers
as they approach their target debt to equity range of 0.90x to 1.25x.
FIGURE 24. Gross Mgmt. Fees in 2019 as a Percentage of Total Investment Income
July 9, 2020 35
Investment Portfolio Overview

ORCC’s investment objective is to generate current income and capital appreciation through direct
originations of secured debt, strategic joint ventures, equity investments and corporate bonds. The
company primarily focuses on directly originating senior loans to middle-market, sponsor-backed
companies with $10-$250mln of EBITDA. Owl Rock targets an ROE of 8.0-10.0% through a cycle at
~1.0x debt/equity and assumes 60-75bps in annual losses.
As of March 31, 2020, Owl Rock had an investment portfolio fair value of $8.9bln, which represents
94.9% of total assets. Total assets have grown at a compound annual growth rate (CAGR) of 93.5%
over the last three years, which is a testament to the founder’s reputation within the industry and Mr.
Ostrover’s ability to fundraise and the company’s thoughtful approach to leverage. Figure 25 illustrates
investment portfolio growth since inception.
FIGURE 25. Investment Portfolio Growth - Fair Value ($bln)
Since inception, Owl Rock’s investment strategy has been focused on investing in substantially all
senior secured, mainly first lien term loans of high-quality, sponsor-backed, upper middle market Of the first lien debt, we
think ~40% is UniTranche,
companies in sectors that are more recession-resistant. As of March 31, 2020, the investment portfolio ~30% is stretch first lien
at fair value consisted of 80.0% first lien loans, 17.6% second lien loans, 1.0% in the Sebago Lake joint and ~30% is true first lien.
venture, and 1.3% equity investments. Since investment activity commenced in 2Q16, the mix of senior
secured debt in the portfolio has remained largely constant, ranging from 97-100% of the total
investment portfolio. Management said it is comfortable with second lien debt representing as high as
40% of the investment portfolio at times. We think the company is one of only a handful of direct lenders
capable and willing to make sizable second lien investments to large upper middle market companies,
including Ares Capital Crescent Capital, and KKR. We note that over the past few years, Owl Rock has
more defensively positioned its debt portfolio as it transitioned to a first lien heavy structure as seen in
Figure 26, which shows the mix of the investment portfolio at fair value since inception. Of the first lien
debt we think ~40% is UniTranche, 30% is stretch first lien and 30% is true first lien. Based on fair
value, 100% of debt investments bear interest at a floating rate and the WA LIBOR floor was 86bps.
July 9, 2020 36
FIGURE 26. Investment Portfolio Mix
Owl Rock’s investment portfolio fair value of $8.9bln was marked at 94.8% of amortized cost, which
compares to an average bid of 82.9% for the S&P/LSTA Loan Index at March 31, 2020. This compares
to a December 31, 2019 portfolio and index mark of 99.7% and 98.1%, respectively, prior to the impact
of the COVID-19 pandemic. By asset mix, first lien loans were marked at 95.2% of amortized cost,
second lien loans were marked at 93.6%, joint venture investments were marked at 85.4% and equity
investments were marked at 93.6% as of March 31, 2020.
Moving to yield, the reported weighted average yield on debt and income-producing investments was
8.4% at the end of the first quarter in 2020, down 30bps sequentially and down 100bps from the prior-
year period. Yield compression in the portfolio has largely been driven by decreases in LIBOR, as the
weighted average spread over LIBOR for all floating rate investments has stayed relatively constant at L
+6.30% in the most recent quarter, compared to L +6.30% sequentially and L +6.10% in the prior-year
period, as shown in Figure 27. We believe the stability in Owl Rock’s yield is attributed to management’s
ability to source, perform thorough due diligence, and selectively underwrite deals. Owl Rock often
receives 1) two points in original issue discount fee that is amortized over the life of the loan, and 2)
102/101 call protection in years 1 & 2, which collectively can enhance the effective yield on the portfolio
about the credit spread. Owl Rock typically does not receive equity or warrants associated with a senior
secured debt investment in a company, but it does have a couple equity co-investments in the portfolio,
including equity in Go Health that can occasionally be sources of gains. Enterprise growth at Wingspire
could be a driver of book value growth long term.
July 9, 2020 37
FIGURE 27. Historical Portfolio Yield and Spread Over LIBOR
At the end of the first quarter, Owl Rock’s investment portfolio consisted of 101 portfolio companies with
an average investment size of $88.5 million, which represents 1.0% of the investment portfolio value.
The average investment size is the largest within the BDC industry, yet due to the size of the portfolio,
the investment concentration falls well below the median publicly-traded BDC that has an average hold
size of 1.4%. Figure 28 shows the average investment hold size for a peer group of BDCs, as of March
31, 2020. We think the company’s ample fundraising allowed it to initially invest in larger transactions;
whereas, growth at Ares Capital, along with acquisitions over time, have provided Owl Rock an
opportunity to invest in larger companies.
July 9, 2020 38
FIGURE 28. Average Investment Hold Size ($mln)
We believe the portfolio is well diversified in regard to individual portfolio company concentration risk.
Lastly, in terms of portfolio statistics, Owl Rock Capital Corp. has a borrower weighted average
debt/EBITDA of 5.4x, below the industry average of 5.5x. Figure 29 illustrates the top-ten investments,
which comprise 22.5% of the investment portfolio at fair value as of March 31, 2020. The company
targets 1-2% position sizes and for its top-10 investments to represent ~20% of the investment portfolio.
FIGURE 29. Top-Ten Investments - March 31, 2020
July 9, 2020 39
1. Gerson Lehrman Group, Inc (GLG) is an industry-leading, membership-based platform that

offers independent ad hoc consulting and expert network services with a network of 700,000+
experts across a wide range of fields. The sponsor is SFW Capital Partners. GLG clients include
half of the Fortune 100, 700+ private equity, venture capital, and hedge funds, and the vast
majority (80-90%) of the top firms within technology, pharmaceuticals, law, and banking. GLG is
Owl Rock’s largest investment via 1) a first lien term loan at a total par value of $306.0 million
that has an amortized cost of $303.6mln and a fair value of $292.3mln, and 2) a first lien revolver
at a total par value of $13.5mln that has an amortized cost of $13.3mln, a fair value of $12.5mln
and unfunded commitments of $8.1mln. Total investments to GLG represent 3.4% of the total
investment portfolio and total contractual income from GLG represents 1.8% of Owl Rock’s total
investment income. The term loans yield L + 4.25%, while the revolver yields Prime +3.25%. The
loans were made in 2018 and mature in 2024.
2. Associations, Inc. provides management for homeowner associations, condominiums, and

communities, including lifestyle programs, maintenance services, insurance and emergency
services, and information systems. The investment is one of Owl Rock’s few non-sponsored
deals. As a leading property management company for community associations, it serves more
than five million homeowners. Associations, Inc is Owl Rock’s second largest investment via 1) a
first lien term loan at a total par value of $261.3mln that has an amortized cost of $258.9mln and
a fair value of $252.8mln; and 2) a first lien, delayed draw term loan at a total par value of
$42.2mln that has an amortized cost of $41.7 million, a fair value of $40.2mln, and unfunded
commitments of $16.7mln; and 3) a first lien revolver at a total par value of $11.5mln that has an
amortized cost of $11.4mln, a fair value of $11.1mln, and no unfunded commitments. Total
investments to Associations, Inc. represent 3.4% of the total investment portfolio and total
contractual income from Associations represents 1.7% of Owl Rock’s top line. Both the first lien
term loan and the delayed draw loan yield L +4.00% (3.00% PIK), while the revolver yields Prime
+5.00%. The loans were made in 2019 and the delayed draw loan matures in 2021, while the first
lien term loan and revolver mature in 2024.
3. Integrity Marketing is the nation’s leading independent distributor of life and health insurance
products focused on serving the senior citizen market. Integrity develops products with insurance
carrier partners and markets these products through its distribution network with over 225,000
independent agents, and serves over one million clients a year. The sponsor is Harvest Partners.
Integrity Marketing is Owl Rock’s third largest investment via: 1) a first lien term loan at a total par
value of $222.8mln that has an amortized cost of $219.2mln and a fair value of $210.0mln, and
2) a first lien revolver at a total par value of $14.8mln that has an amortized cost of $14.6mln, a
fair value of $14.0mln and no unfunded commitments. Investments to Integrity Marketing
represent 2.5% of the total investment portfolio and total contractual income from Integrity
represents 1.8% of Owl Rock’s top line. Both the first lien term loan and the revolver yield L
+5.75%. The loans were made in 2019 and mature in 2025.
July 9, 2020 40
In terms of industry exposure, Owl Rock has a well-diversified portfolio—investing across 27 industries
as of March 31, 2020. The largest industries in the portfolio were internet software and services,
professional services, and insurance, which represented 8.6%, 8.1%, and 7.9% of the portfolio value,
respectively. Owl Rock does not limit its portfolio to any specific industry, but does have higher
exposure to more stable, non-cyclical industries and has limited exposure to historically more volatile,
cyclical industries. Despite co-founder Marc Lipschultz’s experience in the energy sector, the company
has limited exposure to the oil and gas industry. Figure 30 illustrates the industry composition of the
portfolio as of March 31, 2020.
FIGURE 30. ORCC Portfolio Composition by Industry – March 21, 2020
Source: Company documents and JMP Securities
July 9, 2020 41
JMP credit watch list and non-accrual investments

Owl Rock has historically managed credit costs well, realizing a cumulative loss rate of 365bps (annual
rate of 91bps) on more than $13.3 billion invested since 2016, which compares to an annual BDC We identify a $58.4mln
average loss of 1.45% prior to COVID-19. We highlight that 95% of Owl Rock’s cumulative unrealized second lien investment to
losses came in 1Q20 due to the impact of COVID-19, and that the cumulative loss rate prior to 1Q20 CIBT, a $122.6mln first
lien loan to Geodigm, and
was a mere 22bps since inception (annual rate of 6bps). While the company has an impressive track a $111.5mln senior
record of managing credit, we note that the mark-to-market impact of COVID-19 has led to Owl Rock’s secured investment to
portfolio seeing broad, albeit marginal, markdowns as reflected on our credit watch list and non-accrual Feradyne Outdoors as
investments with the
investments. greatest risk today.
As of March 31, 2020, $3.0 billion (34.1%) of portfolio company investments fair value were marked
95% below their respective amortized cost. This level of valuation warrants an investment to be placed
on the JMP credit watch list. Owl Rock’s investments on our credit watch list were marked at 91.6% of
amortized cost. Only a couple investments are marked at levels that indicated notable credit risk. We
identify a $58.4mln second-lien investment to CIBT, a $122.6mln first-lien loan to Geodigm, and a
$111.5mln senior secured investment to Feradyne Outdoors as investments with the greatest risk
today; we are monitoring these investments closely. As a basis of comparison, only 1.8% of portfolio
company investments were marked 85% below their respective amortized cost, which we believe
indicates that mark-to-market movements are, by and large, the cause of write-downs as compared to
fundamental credit risk.
Additionally, Owl Rock continued to have zero investments on non-accrual. Management had stated an
expectation for an annual default rate of ~2.0% and a ~70% recovery rate for Owl Rock investments
over a cycle, which amounts to annual losses of 60-75bps. Figure 31 lists the investments on the JMP
credit watch list and non-accrual investments over the last four quarters. While Owl Rock has not had
one investment recognized as non-accrual since inception, we think it is likely that Owl Rock’s portfolio
will experience some non-accrual income going forward. We believe investments on the JMP credit
watch list are the most likely source of future credit costs.
July 9, 2020 42
July 9, 2020

FIGURE 31. JMP Credit Watch List & Non-accruing Investments
March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019
Issuer Name Security
Industry Cost Fair Value FV/Cost Cost Fair Value FV/Cost Cost Fair Value FV/Cost Cost Fair Value FV/Cost Cost Fair Value FV/Cost
Give and Go Prepared Foods Corp. Senior Secured Food & Beverage Recovery in Valuation $41,704 $38,430 92.1% $41,689 $38,010 91.2% $41,670 $37,170 $41,661 $37,170 89.2%
Mavis Tire Express Services Corp. 2nd Lien Sr. Sec. Delayed Draw Term Loan Automotive Rolled into 2L TL? $1,218 $884 72.6% Recovery in Valuation $1,190 $1,090 91.6%
Feradyne Outdoors, LLC Senior Secured Consumer Products $111,530 $95,475 85.6% $111,761 $99,099 88.7% $111,993 $102,740 91.7% $112,226 $101,305 90.3% $112,460 $101,563 90.3%
Aramsco, Inc. Senior Secured Revolver Distribution $4,315 $3,966 91.9% Recovery in Valuation $90 $70 77.8%
CM7 Restaurant Holdings, LLC 1st Lien Sr. Sec. Delayed Draw Term Loan Food & Beverage Matured $844 $768 91.0%
KSLB Holdings, LLC Senior Secured Revolver Food & Beverage Recovery in Valuation
Capital Sports Holdings Inc. Senior Secured Leisure & Entertainment Recovery in Valuation
AmSpec Services Inc. Senior Secured Revolver Professional Services Recovery in Valuation
Hometown Food Company Senior Secured Revolver Food & Beverage Repaid (Revolver) $137 $127 92.7%
Accela, Inc. Senior Secured Revolver Internet software and services $1,829 $1,677 91.7% Recovery in Valuation $3,816 $3,526 92.4% $3,810 $3,466 91.0% $3,504 $3,118 89.0%
Ultimate Baked Goods Midco, LLC Senior Secured Revolver Food & Beverage Recovery in Valuation $218 $191 87.6%
Accela, Inc. 1st Lien Senior Secured Loan Internet software and services Recovery in Valuation $52,189 $49,145 94.2%
ABB/Con-cise Optical Group LLC 1st Lien Senior Secured Loan Distribution $75,486 $70,116 92.9% Recovery in Valuation $60,368 $57,334 95.0% $58,898 $55,557 94.3%
Douglas Products and Packaging Company LLC First lien senior secured revolving loan Chemicals Recovery in Valuation $1,167 $1,075 92.1% $861 $772 89.7%
Nelipak Holding Company First lien senior secured revolving loan Healthcare providers and services $2,777 $2,543 91.6% Recovery in Valuation $301 $269 89.4%
AmSpec Services Inc First lien senior secured revolving loan Professional services $13,993 $13,160 94.0% Recovery in Valuation $884 $795 89.9%
Innovative Water Care Global Corporation 1st Lien Senior Secured Loan Chemicals $139,320 $123,255 88.5% $139,368 $131,010 94.0%
Swipe Acquisition Corporation First lien senior secured loan Advertising and media $155,264 $141,927 91.4%
Aviation Solutions Midco, LLC First lien senior secured loan Aerospace and defense $192,097 $171,605 89.3%
Valence Surface Technologies LLC First lien senior secured loan Aerospace and defense $98,162 $90,048 91.7%
Valence Surface Technologies LLC First lien senior secured DD term loan Aerospace and defense $23,642 $21,150 89.5%
Valence Surface Technologies LLC First lien senior secured revolving loan Aerospace and defense $9,820 $9,001 91.7%
Mavis Tire Express Services Corp. Second lien senior secured loan Automotive $176,839 $164,613 93.1%
Imperial Parking Canada First lien senior secured loan Buildings and real estate $26,649 $23,601 88.6%
Reef Global, Inc. First lien senior secured revolving loan Buildings and real estate $10,835 $10,087 93.1%
Access CIG, LLC Second lien senior secured loan Business services $58,202 $55,234 94.9%
CIBT Global, Inc. Second lien senior secured loan Business services $58,393 $49,236 84.3%
Entertainment Benefits Group, LLC First lien senior secured loan Business services $80,452 $73,839 91.8%
Entertainment Benefits Group, LLC First lien senior secured revolving loan Business services $10,198 $9,220 90.4%
Pregis Topco LLC Second lien senior secured loan Containers and packaging $182,819 $172,824 94.5%
ABB/Con-cise Optical Group LLC Second lien senior secured loan Distribution $24,528 $22,500 91.7%
Endries Acquisition, Inc. First lien senior secured DD term loan Distribution $20,540 $17,837 86.8%
Individual Foodservice Holdings, LLC First lien senior secured DD term loan Distribution $8,370 $6,872 82.1%
Individual Foodservice Holdings, LLC First lien senior secured revolving loan Distribution $6,706 $5,801 86.5%
Offen, Inc. First lien senior secured loan Distribution $14,447 $13,304 92.1%
QC Supply, LLC First lien senior secured loan Distribution $34,050 $31,727 93.2%
QC Supply, LLC First lien senior secured revolving loan Distribution $4,925 $4,571 92.8%
Severin Acquisition, LLC Second lien senior secured loan Education $111,180 $102,760 92.4%
TSB Purchaser, Inc. First lien senior secured revolving loan Education $1,157 $1,081 93.4%
Blackhawk Network Holdings, Inc. Second lien senior secured loan Financial services $105,562 $98,154 93.0%
CM7 Restaurant Holdings, LLC First lien senior secured loan Food and beverage $36,771 $33,974 92.4%
H-Food Holdings, LLC Second lien senior secured loan Food and beverage $119,257 $103,835 87.1%
H-Food Holdings, LLC First lien senior secured loan Food and beverage $14,792 $12,887 87.1%
Manna Development Group, LLC First lien senior secured loan Food and beverage $55,995 $51,990 92.8%
Manna Development Group, LLC First lien senior secured revolving loan Food and beverage $3,283 $3,035 92.4%
Recipe Acquisition Corp. Second lien senior secured loan Food and beverage $31,691 $29,680 93.7%
Sara Lee Frozen Bakery, LLC First lien senior secured revolving loan Food and beverage $2,985 $2,625 87.9%
Tall Tree Foods, Inc. First lien senior secured loan Food and beverage $45,091 $41,768 92.6%
Geodigm Corporation First lien senior secured loan Healthcare providers and services $122,563 $103,134 84.1%
Nelipak Holding Company Second lien senior secured loan Healthcare providers and services $66,309 $61,000 92.0%
Interoperability Bidco, Inc. First lien senior secured loan Healthcare technology $75,746 $70,683 93.3%
Interoperability Bidco, Inc. First lien senior secured revolving loan Healthcare technology $3,958 $3,690 93.2%
Hayward Industries, Inc. Second lien senior secured loan Household products $51,367 $47,977 93.4%
HGH Purchaser, Inc. First lien senior secured loan Household products $76,468 $71,748 93.8%
HGH Purchaser, Inc. First lien senior secured revolving loan Household products $6,668 $6,075 91.1%
LineStar Integrity Services LLC First lien senior secured loan Infra and environmental services $88,209 $81,026 91.9%
Asurion, LLC Second lien senior secured loan Insurance $57,942 $53,789 92.8%
KWOR Acquisition, Inc. First lien senior secured revolving loan Insurance $942 $676 71.8%
KWOR Acquisition, Inc. Second lien senior secured loan Insurance $48,915 $46,128 94.3%
THG Acquisition, LLC First lien senior secured DD term loan Insurance $2,711 $1,942 71.6%
THG Acquisition, LLC First lien senior secured revolving loan Insurance $3,685 $3,424 92.9%
3ES Innovation Inc. First lien senior secured loan Internet software and services $39,590 $37,229 94.0%
IQN Holding Corp. First lien senior secured revolving loan Internet software and services $6,909 $6,119 88.6%
MINDBODY, Inc. First lien senior secured loan Internet software and services $57,189 $52,343 91.5%
MINDBODY, Inc. First lien senior secured revolving loan Internet software and services $6,022 $5,510 91.5%
Trader Interactive, LLC First lien senior secured revolving loan Internet software and services $2,502 $2,267 90.6%
Ideal Tridon Holdings, Inc. First lien senior secured DD term loan Manufacturing $511 $482 94.3%
Ideal Tridon Holdings, Inc. First lien senior secured revolving loan Manufacturing $3,786 $3,559 94.0%
MHE Intermediate Holdings, LLC First lien senior secured loan Manufacturing $23,688 $22,269 94.0%
Professional Plumbing Group, Inc. First lien senior secured revolving loan Manufacturing $10,991 $10,389 94.5%
Safety Products/JHC Acquisition Corp. First lien senior secured loan Manufacturing $13,325 $12,606 94.6%
Safety Products/JHC Acquisition Corp. First lien senior secured DD term loan Manufacturing $712 $624 87.6%
Black Mountain Sand Eagle Ford LLC First lien senior secured loan Oil and gas $76,750 $72,254 94.1%
Project Power Buyer, LLC First lien senior secured loan Oil and gas $32,322 $30,566 94.6%
AmSpec Services Inc. First lien senior secured loan Professional services $110,680 $104,400 94.3%
GC Agile Holdings Limited First lien senior secured revolving loan Professional services $4,980 $4,648 93.3%
Gerson Lehrman Group, Inc. First lien senior secured revolving loan Professional services $13,308 $12,507 94.0%
BIG Buyer, LLC First lien senior secured loan Specialty retail $49,416 $46,935 95.0%
BIG Buyer, LLC First lien senior secured revolving loan Specialty retail $1,163 $997 85.7%
EW Holdco, LLC First lien senior secured loan Specialty retail $71,264 $66,809 93.7%
Galls, LLC First lien senior secured loan Specialty retail $100,134 $94,537 94.4%
Galls, LLC First lien senior secured revolving loan Specialty retail $19,899 $18,747 94.2%
Total Watch List $3,324,576 $3,044,067 91.6% $295,218 $270,498 92% $219,912 $203,446 93% $268,793 $246,643 92% $160,104 $144,097 90%
As a % Investment Portfolio 35.3% 34.1% 3.3% 3.1% 2.7% 2.5% 93% 3.7% 3.4% 2.3% 2.1%
Total Non-Accrual Investments $0 $0 NA $0 $0 NA $0 $0 NA $0 $0 NA $0 $0 NA

As a % Investment Portfolio

43
INVESTMENT RISKS
Credit risk. Although investing in the middle market provides higher expected returns, higher credit risk
is also embedded due to issues associated with cyclicality. Adverse global economic, financial, and
legal uncertainties could have a negative impact on ORCC’s portfolio companies. Middle market
companies are generally less capitalized and their ability to repay debt may be reduced during a
distressed market, such as the current COVID-19 global pandemic. The middle market is more cyclical
than the broader economy, and the ability for companies to make interest and principal payments may
be reduced during an economic downturn or a broad shutdown of the economy.
Interest rate risk. Interest rate risk is an inherent risk for Owl Rock as changes in the interest rate can
adversely impact net income. 100% of Owl Rock’s debt investments in its portfolio are indexed to
floating rates and have a weighted average LIBOR floor of 86bps. On the liability side, a significant
portion of Owl Rock’s liabilities are fixed-rate, with ~40% of overall borrowings in fixed-rate unsecured
notes. As a result, a decline in interest rates could lead to a material decline in net income. Due to the
asset-liability structure, an increase in rates could lead to expansion in net interest margins, positively
impacting Owl Rock’s performance.
Leverage. Owl Rock currently operates with one of the lowest GAAP leverage profiles in the BDC
industry at 0.66x, vs a peer group average of 1.24x. Management has stated that its target debt to
equity range is 0.90x to 1.25x. While we observe that Owl Rock has been thoughtful in its use of
leverage and will continue to be prudent in fully levering the portfolio, it is worth noting that the use of
leverage amplifies the positive and negative results in generating income, and introduces higher
volatility in asset performance, particularly in the current economic environment.
Conflict of Interest. As an externally managed BDC, conflicts of interest can arise between the
external manager and the interests of shareholders. The fee structure, investment selection process,
portfolio valuation process, and share repurchase program are all elements of the externally managed
BDC structure where the interests of the manager might not align with shareholders. We highlight that
the membership of the board of directors is identical for ORCC, ORCC II, and ORTF. While there are
clear advantages for the Owl Rock platform and various strategies, including ORCC, in having a board
that is familiar with the assets and inner workings of each structure, this also introduces a potential lack
of independent oversight in co-investment and optimal decision-making that translate to ORCC
shareholders’ best interests.
July 9, 2020 44
EARNINGS MODEL AND ESTIMATES
We expect Owl Rock to report NII/share of $0.37 in 2Q20, $1.42 in 2020, and $1.26 in 2021. Our
estimates reflect the NII ROE contracting from 9.9% in 2020 to 8.9% in 2021 as a result of the
expiration of fee waivers in 4Q20 and compare to the SNL consensus of $0.37/share, $1.41/share, and
$1.23/share, respectively. Our estimates imply a NTM payout ratio of 90.5% on the core dividend of
$0.31/share (cost of equity of 8.8%) and a 2021 payout ratio of 98.3%. The one key assumption in our
model is that the company slowly grows (and levers) the balance sheets over the next seven quarters.
We expect ORCC to end 2020/2021 with leverage of 0.88x and 1.08x. Our estimates also project the
investment portfolio yield to decline 3bps in 2021, from a portfolio yield of 8.98% in 2020. We anticipate
the company will maintain the core quarterly dividend distribution of $0.31 throughout 2021. Figure 32
illustrates the historical NII/share, core dividend/share, and payout ratio, as well as JMP estimates.
Please refer to Figure 33 for a review of our earnings model and assumptions.
FIGURE 32. NII/share and Core Dividend Actuals and JMP Estimates
July 9, 2020 45
July 9, 2020

FIGURE 33. Earnings Model
Owl Rock Capital Corporation Model Summary ($ in millions)
2017 2018 1Q19 2Q19 3Q19 4Q19 2019 1Q20 2Q20E 3Q20E 4Q20E 2020E 2021E
I. Income Statement
Net Investment Income per Share $1.40 $1.68 $0.41 $0.42 $0.36 $0.37 $1.54 $0.37 $0.37 $0.38 $0.31 $1.42 $1.26
GAAP Net Income per Share $1.55 $1.38 $0.49 $0.44 $0.31 $0.36 $1.53 ($0.79) $0.37 $0.38 $0.31 $0.25 $1.26
Core Dividends per Share $1.16 $1.42 $0.33 $0.42 $0.31 $0.31 $1.37 $0.31 $0.31 $0.31 $0.31 $1.24 $1.24
Special Dividends per Share $0.00 $0.00 $0.00 $0.00 $0.02 $0.04 $0.06 $0.08 $0.08 $0.08 $0.08 $0.32 $0.00
Variable Dividends per Share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Total Dividends per Share $1.16 $1.42 $0.33 $0.42 $0.33 $0.35 $1.43 $0.39 $0.39 $0.39 $0.39 $1.56 $1.24
Interest and Fee Income $151.2 $366.9 $146.4 $171.4 $180.9 $193.1 $691.9 $198.4 $196.8 $200.4 $215.4 $811.0 $947.2
Dividend Income 0.1 8.4 2.7 2.6 2.3 2.5 10.0 2.2 2.4 2.6 3.0 10.2 13.3
Other Income 8.5 13.6 2.3 2.2 4.9 6.7 16.1 4.2 1.5 2.8 4.5 0.0 0.0
Total Investment Income 159.9 388.9 151.5 176.1 188.2 202.3 718.0 204.7 200.7 205.8 222.9 834.2 977.6
Interest Expense 24.6 76.8 34.7 36.9 29.4 35.4 136.4 34.0 34.2 33.8 37.6 139.6 176.8
Base Management Fee 31.1 52.1 15.2 15.5 26.8 32.5 89.9 33.8 34.2 35.0 37.2 140.1 162.8
Incentive Fee 0.0 0.0 0.0 0.0 19.7 25.4 45.1 25.6 22.3 23.1 25.1 93.5 108.2
Professional Fees 5.4 7.8 2.1 2.3 2.9 2.7 10.0 3.2 3.0 3.0 3.0 12.2 12.0
Directors Fees 0.4 0.5 0.1 0.1 0.2 0.2 0.6 0.2 0.2 0.2 0.2 0.7 0.6
Other G&A Expenses 4.5 5.0 1.6 1.9 2.7 2.1 8.4 2.2 1.8 1.8 1.8 7.4 7.0
Total Expenses $65.9 $142.2 $53.8 $56.7 $49.9 $56.7 $217.1 $56.4 $56.2 $56.2 $102.2 $271.0 $467.4
Management Fee Waiver 0.0 0.0 0.0 0.0 (31.7) (41.7) (73.4) (42.5) (39.4) (40.6) (2.5) (125.0) 0.0
Net Investment Income (NII) $93.8 $245.5 $96.0 $119.6 $137.9 $145.4 $498.9 $146.3 $142.4 $147.5 $118.6 $554.8 $501.8
Realized Gains / (Losses) $0.7 $0.2 ($0.0) ($0.2) $1.3 $1.5 $2.6 $0.3 $0.0 $0.0 $0.0 $0.0 $0.0
Unrealized Gains / (Losses) $9.2 ($43.6) $18.5 $5.1 ($20.7) ($6.6) ($3.8) ($459.1) $0.0 $0.0 $0.0 ($459.1) $0.0
Net Income $103.7 $202.2 $114.5 $124.7 $118.7 $140.2 $498.0 ($312.6) $142.4 $147.5 $118.6 $95.9 $501.8
II. Balance Sheet

Total Investment Portfolio - fair value $2,389.8 $5,784.1 $6,831.7 $7,240.8 $8,270.3 $8,799.2 $8,799.2 $8,938.3 $9,088.3 $9,388.3 $10,238.3 $10,682.9 $11,782.9
Total Borrowings $932.0 $2,591.6 $2,790.9 $1,594.0 $2,481.4 $3,071.1 $2,811.1 $3,662.1 $3,826.6 $4,084.6 $4,889.6 $4,889.6 $5,989.6
Total Stockholders' Equity $1,472.6 $3,264.8 $4,080.3 $5,709.9 $5,924.6 $5,977.3 $5,977.3 $5,507.3 $5,442.7 $5,484.7 $5,529.7 $5,529.7 $5,737.7
Total Common Shares Outstanding 97,959 216,205 267,307 373,693 389,156 392,130 392,130 390,856 385,693 388,693 391,693 391,693 404,693
NAV/share $15.03 $15.10 $15.26 $15.28 $15.22 $15.24 $15.24 $14.09 $14.11 $14.11 $14.12 $14.12 $14.18
III. Key Metrics

Gross Originations, including equity in JV $1,944.6 $4,722.9 $1,111.0 $936.4 $1,450.0 $973.1 $4,470.5 $1,046.8 $400.0 $600.0 $1,500.0 $3,546.8 $3,800.0
Exits/Repayments $542.8 $1,311.8 $89.9 $550.1 $409.6 $455.6 $1,505.2 $463.1 $250.0 $300.0 $650.0 $1,663.1 $2,700.0
Net Originations $1,401.8 $3,411.1 $1,021.1 $386.3 $1,040.4 $517.5 $2,965.3 $583.7 $150.0 $300.0 $850.0 $1,883.7 $1,100.0
Investment Portfolio Yield, calculated 9.4% 10.0% 9.6% 10.0% 9.7% 9.5% 9.7% 9.2% 8.9% 8.9% 9.1% 9.0% 9.0%
Total Cost of Borrowings, calculated 3.4% 4.7% 5.2% 6.7% 5.8% 5.3% 4.7% 4.0% 3.7% 3.4% 3.4% 3.5% 2.9%
GAAP Leverage 0.62x 0.79x 0.68x 0.28x 0.42x 0.51x 0.51x 0.66x 0.70x 0.74x 0.88x 0.88x 1.04x
GAAP Leverage excluding Cash 0.61x 0.75x 0.65x 0.23x 0.38x 0.46x 0.46x 0.59x 0.64x 0.68x 0.82x 0.82x 0.95x
NII ROA 5.18% 6.13% 5.94% 6.59% 6.85% 6.54% 6.52% 6.28% 6.01% 6.09% 4.62% 5.70% 4.42%
NII ROE 8.96% 10.88% 10.46% 9.77% 9.48% 9.77% 10.00% 10.19% 10.41% 10.80% 8.61% 9.93% 8.91%
GAAP ROE 9.91% 8.96% 12.47% 10.19% 8.16% 9.42% 9.98% -21.77% 10.41% 10.80% 8.61% 1.72% 8.91%

46
July 9, 2020

FIGURE 34. BDC Valuation Table
Core Price-to- 2019 ROEs Liquidity: 50-Day Average Short % ∆ From 52-Week Price to Earnings Multiple*
JMP Closing Price Market Cap ^Book Value/ % YTD
Business Development Companies Ticker Dividend Book D/E1 5-Y Beta Interest
Rating Price Target ($mln) Share Shares in Return
Yield2 Ratio NII NI $ in thds (S/O%) Low High 2018 2019 2020E 2021E
thds
Ares Capital Corporation ARCC MO $14.31 $15.50 11.18% $5,904 $15.58 0.92x 1.26x 10.98% 10.77% 2,766.4 $39,587 0.72x (20.97) 1.66 81.1% -26.0% 8.80x 7.53x 9.04x 8.48x
Owl Rock Capital Corp. ORCC MO $12.27 $14.50 10.11% $4,709 $14.09 0.87x 0.66x 10.60% 9.80% 1,111.8 $13,642 1.31x (26.72) 0.65 53.7% -35.2% 16.23x 8.13x - 9.96x
FS KKR Capital Corp. II FSKR - $12.82 - 0.00% $2,195 $24.68 0.52x 0.87x - 3.22% - - - (8.46) - 0.0% 0.0% - - - -
Main Street Capital Corporation MAIN - $30.00 - 8.20% $1,946 $20.73 1.45x 0.82x 10.45% 8.54% 520.4 $15,613 1.25x (26.93) 4.84 112.6% -33.5% 12.06x 12.00x 15.16x 13.96x
Prospect Capital Corporation PSEC - $4.86 - 14.81% $1,773 $7.98 0.61x 0.74x 9.32% 4.31% 2,411.9 $11,722 0.72x (20.09) 6.27 32.2% -28.1% 5.69x 5.69x 6.70x 7.50x
FS KKR Capital Corp. FSK - $14.00 - 17.14% $1,733 $24.36 0.57x 1.40x 10.21% 6.05% 888.0 $12,431 0.72x (36.96) 2.31 84.2% -45.1% 2.22x 4.43x 5.26x 5.45x
Golub Capital BDC, Inc. GBDC - $11.51 - 10.08% $1,544 $14.62 0.79x 1.20x 5.39% -1.65% 993.5 $11,435 0.72x (33.39) 1.73 29.5% -38.1% 9.81x 8.48x 9.60x 10.74x
Sixth Street Specialty Lending, Inc. TSLX MO $15.85 $18.00 10.35% $1,063 $15.07 1.05x 0.95x 11.76% 14.13% 403.0 $6,387 0.72x (17.10) 2.59 45.3% -30.7% 7.28x 8.16x 8.51x 8.39x
Hercules Capital HTGC MO $10.35 $12.50 12.37% $1,145 $9.92 1.04x 1.16x 13.72% 16.44% 1,090.9 $11,291 0.72x (22.73) 2.11 91.0% -36.5% 9.67x 7.34x 7.70x 7.70x
New Mountain Finance Corporation NMFC - $9.15 - 13.11% $886 $11.14 0.82x 1.80x 10.23% 9.75% 755.2 $6,910 0.72x (29.66) 2.57 98.1% -36.7% 8.67x 7.85x 7.75x 7.94x
Solar Capital Ltd. SLRC MO $15.95 $18.50 10.28% $671 $19.24 0.83x 0.62x 7.94% 6.07% 174.5 $2,783 0.72x (16.79) 0.39 115.0% -24.9% 9.00x 9.30x 10.74x 9.61x
Apollo Investment Corporation AINV MP $9.37 NA 19.21% $600 $15.70 0.60x 1.75x 10.93% 5.29% 708.0 $6,634 1.31x (41.87) 4.72 80.2% -48.9% 4.93x 5.18x 5.37x 5.62x
Goldman Sachs BDC, Inc. GSBD - $15.27 - 11.79% $617 $14.72 1.04x 1.53x 11.50% 5.23% 240.1 $3,667 1.25x (23.64) 2.62 90.9% -32.1% 7.43x 7.72x 8.32x 8.34x
Oaktree Specialty Lending Corporation OCSL MO $4.40 $5.25 8.64% $616 $5.34 0.82x 0.93x 7.59% 13.87% 595.4 $2,620 0.72x (16.26) 1.22 88.8% -22.1% 10.27x 9.13x 10.12x 8.92x
BlackRock TCP Capital Corporation TCPC MO $9.03 $10.50 15.95% $513 $11.76 0.77x 1.42x 11.81% 3.78% 390.2 $3,523 1.31x (31.31) 1.13 124.6% -38.8% 5.68x 5.59x 6.90x 6.88x
Bain Capital Specialty Finance BCSF MP $10.42 NA 13.05% $538 $17.29 0.60x 1.85x 8.40% 9.64% 338.6 $3,528 1.31x (41.25) 2.45 49.4% -47.8% 9.80x 6.34x 7.08x 7.51x
TCG BDC, Inc. CGBD - $8.15 - 18.16% $461 $14.18 0.57x 1.58x 10.66% 6.02% 425.3 $3,466 1.25x (31.81) 0.41 89.5% -46.6% 4.52x 4.56x 5.59x 5.79x
Barings BDC BBDC MP $7.65 NA 8.37% $367 $9.23 0.83x 1.41x 5.39% 10.05% 202.0 $1,546 1.31x (23.11) 0.28 63.8% -27.8% - 12.57x 12.47x 11.04x
Gladstone Investment Corporation GAIN - $9.71 - 8.65% $322 $11.17 0.87x 0.50x 1.94% 20.83% 242.5 $2,355 0.72x (22.53) 3.11 52.2% -36.2% 42.32x 42.24x 13.31x 12.38x
Newtek Business Services NEWT MP $17.96 NA 9.80% $376 $15.00 1.20x 1.45x -1.84% 13.83% 168.3 $3,023 1.25x (17.55) 1.86 136.6% -25.1% 9.26x - 9.15x 7.88x
Crescent Capital BDC Inc CCAP - $12.40 - 13.23% $364 $16.52 0.75x 0.91x 9.51% 8.85% 33.7 $417 0.72x (15.25) 0.23 99.7% -31.1% 18.59x 6.79x 6.74x 6.63x
PennantPark Floating Rate Capital Ltd. PFLT MO $8.39 $10.50 13.59% $321 $12.12 0.69x 1.57x 8.75% 2.21% 270.0 $2,265 0.72x (26.97) 0.76 151.2% -33.8% 10.51x 7.16x 7.29x 7.45x
TriplePoint Venture Growth BDC Corp. TPVG MO $9.98 $12.00 14.43% $307 $12.85 0.78x 1.01x 11.47% 9.23% 324.0 $3,234 1.31x (23.08) 0.59 256.4% -41.9% 7.09x 6.48x 6.74x 6.73x
Capital Southwest Corporation CSWC MO $12.84 $17.00 12.77% $234 $15.13 0.85x 1.12x 7.93% 10.58% 134.5 $1,727 1.31x (31.80) 0.64 75.0% -40.8% 9.75x 9.06x 8.34x 7.61x
Fidus Investment Corporation FDUS - $8.52 - 14.08% $210 $15.37 0.55x 0.97x 7.84% 12.01% 180.8 $1,540 0.72x (37.48) 1.39 91.5% -48.0% 6.00x 6.52x 6.76x 6.67x
PennantPark Investment Corporation PNNT MP $3.15 NA 15.24% $211 $7.71 0.41x 1.64x 7.37% 2.66% 444.8 $1,401 0.72x (46.76) 0.54 79.0% -54.1% 4.00x 4.78x 5.09x 5.58x
Gladstone Capital Corporation GLAD - $7.02 - 11.11% $218 $6.99 1.00x 0.85x 8.38% 8.28% 222.8 $1,564 0.72x (25.72) 3.26 73.8% -34.3% 8.90x 8.36x 8.67x 8.75x
WhiteHorse Finance, Inc. WHF - $10.18 - 13.95% $210 $13.86 0.73x 1.02x 7.96% 9.79% 144.1 $1,467 0.72x (19.84) 0.66 84.8% -29.6% 7.98x 8.37x 8.93x 8.43x
Solar Senior Capital Ltd. SUNS - $12.41 - 9.67% $197 $14.59 0.85x 0.73x 8.65% 8.75% 51.5 $639 0.72x (26.42) 0.31 97.0% -32.1% 8.80x 8.80x 9.93x 10.30x
Blackrock Capital Investment Corp. BKCC - $2.57 - 15.56% $182 $5.35 0.48x 0.85x 9.08% -1.47% 533.5 $1,371 0.72x (43.23) 0.87 80.0% -57.1% 3.84x 4.22x 5.45x 5.34x
Horizon Technology Finance Corporation HRZN - $11.17 - 10.74% $185 $11.48 0.97x 0.93x 12.86% 12.19% 179.6 $2,006 0.72x (9.02) 2.40 147.7% -18.5% 10.86x 7.35x 9.71x 8.96x
Oaktree Strategic Income Corporation OCSI - $6.21 - 8.05% $184 $7.17 0.87x 1.55x 7.29% 2.43% 88.0 $546 1.31x (20.55) 0.36 45.1% -26.9% 9.26x 8.66x 10.99x 12.06x
Saratoga Investment Corporation SAR - $15.60 - 0.00% $175 $27.13 0.58x 0.67x 7.54% 11.34% 112.2 $1,750 1.31x (38.32) 0.82 162.6% -45.6% 7.94x 6.01x - 5.03x
Oxford Square Capital Corp. OXSQ - $2.92 - 15.07% $143 $3.32 0.88x 0.65x 13.68% -11.33% 474.4 $1,385 0.72x (40.37) 0.73 43.1% -56.8% 4.16x 3.62x 6.21x -
Monroe Capital Corporation MRCC MP $6.61 NA 15.13% $135 $10.04 0.66x 1.99x 11.43% 7.52% 190.6 $1,260 1.25x (34.46) 1.35 85.7% -45.3% 4.24x 4.65x 5.63x 5.95x
Stellus Capital Investment Corporation SCM - $8.11 - 12.33% $158 $11.55 0.70x 1.84x 9.06% 10.21% 151.1 $1,226 0.72x (42.59) 0.55 97.8% -46.1% 6.55x 6.61x 7.67x 7.53x
MVC Capital, Inc. MVC MP $6.31 NA 10.78% $112 $12.94 0.49x 0.50x 5.09% 7.23% 33.6 $212 0.72x (26.73) 0.29 110.3% -39.6% 27.43x 9.69x 11.07x 11.53x
THL Credit, Inc. TCRD - $3.28 - 12.20% $115 $5.22 0.63x 1.23x 10.42% -9.18% 126.8 $416 0.72x (42.07) 0.28 110.3% -53.4% 2.95x 3.75x 8.31x 8.02x
SuRo Capital Corp. SSSS - $9.66 - NA $156 $10.22 0.95x 0.23x 0.82% 11.45% 194.6 $1,880 1.31x 46.11 NULL 168.3% -5.6% 137.73x 123.10x - -
OFS Capital Corporation OFS - $4.65 - 14.62% $63 $9.71 0.48x 2.60x 10.76% 5.56% 109.8 $510 0.72x (52.73) 0.23 37.2% -62.1% 3.38x 3.38x 5.13x 5.68x
Garrison Capital, Inc. GARS - $3.37 - 17.83% $53 $6.59 0.51x 2.77x 10.60% -11.93% 150.7 $507 1.31x (36.22) 0.54 223.6% -53.3% 3.34x 3.34x 5.60x 6.90x
Portman Ridge Finance Corp. PTMN MP $1.08 NA 22.33% $49 $2.69 0.40x 1.09x 6.45% -8.76% 201.7 $217 0.72x (44.40) 0.09 43.3% -57.0% 4.04x 4.01x 5.49x 5.89x
Investcorp Credit Management BDC Inc. ICMB - $3.74 - 26.74% $48 $8.15 0.46x 1.62x 8.58% -9.16% 38.1 $142 0.72x (41.57) 0.18 173.0% -51.1% 3.78x 3.78x 3.78x 4.35x
Capitala Finance Corporation CPTA MU $2.29 $2.25 0.00% $37 $6.27 0.37x 2.68x 7.69% -16.71% 227.1 $520 0.72x (72.80) 1.39 5.0% -77.1% 2.30x 2.83x 51.89x 16.79x
Great Elm Capital Corporation GECC - $4.14 - 24.06% $45 $5.05 0.82x 2.36x 15.57% -7.72% 118.7 $492 0.72x (38.76) 0.77 97.2% -50.0% 2.97x 2.88x 4.37x -
Medley Capital Corporation MCC - $0.70 - 0.00% $38 $2.60 0.27x 1.21x -7.76% -35.09% 292.5 $205 0.72x (67.28) 0.26 99.8% -75.2% 3.07x - - -
Rand Capital Corporation RAND - $10.50 - 0.00% $28 $33.21 0.32x 0.20x - -6.89% 19.4 $204 1.31x (21.32) 0.01 4.0% -50.1% - - - -
Harvest Capital Credit Corporation HCAP - $4.04 - 0.00% $24 $10.37 0.39x 1.17x 8.24% -1.67% 32.4 $131 0.72x (51.71) 0.52 51.9% -61.5% 4.13x 4.33x 7.05x 6.49x
First Hand Technology Value Fund SVVC - $4.80 - 0.00% $33 $11.58 0.41x 0.00x -0.28% -39.26% 109.2 $524 0.72x (24.57) NULL 76.5% -49.1% - - - -
Equus Total Return EQS - $1.20 - 0.00% $16 $2.88 0.42x 0.67x - 4.62% 16.4 $20 0.72x (30.96) NULL 61.3% -36.5% - - - -
Median / Total Publicly-Traded BDCs (50) 12.20% $32,230 0.72x 1.14x 8.75% 6.06% 0.72x -28.3% 0.76% 85.2% -39.2% 7.4x 6.7x 7.7x 7.7x
Median / Total Internally-Managed (5) 11.08% $3,857 1.04x 1.12x 7.93% 11.45% 1.25x -26.93% 1.99% 112.6% -33.5% 9.7x 10.5x 8.7x 7.8x
Median / Total Venture Capital Related (6) 0.00% $624 0.40x 1.09x 7.80% 0.49% 0.72x -38.86% 0.53% 70.1% -52.1% 4.1x 4.8x 6.7x 6.5x
Sources: Market Data: Refinitiv and Financial Data: SNL Financial #
*Dividend and EPS estimates for non-covered companies are sourced from First Call
^Book value per share is sourced from most recent quarter or pro-forma for intra-quarter follow-on offering for covered companies
1 GAAP Debt-to-equity ratio - MRQ
2 Core Dividend Yield excludes special and variable dividends
Green font reflects BDCs trading above book value per share, indicating some deal risk as raising equity is possible overnight
Source: JMP Securities LLC and Refinitiv

47
JMP FACTS AND DISCLOSURES
Analyst Certification:
The research analyst(s) who prepared this report does/do hereby certify that the views presented in this report are in accordance with my/our
personal views on the securities and issuers discussed in this report. As mandated by SEC Regulation AC no part of my/our compensation
was, is or will be directly or indirectly related to the specific views or recommendations expressed herein. This certification is made under
the obligations set forth in SEC Regulation AC. Any other person or entity may not use it for any other purpose. This certification is made
based on my/our analysis on the date of this report’s publication. I/We assume no obligation to update this certification to reflect any facts,
circumstances, or events that may subsequently come to my/our attention. Signed Christopher York
JMP Securities Disclosures:
JMP Securities currently makes a market in the securities of Apollo Investment Corporation, Apollo Global Management, Inc., Ares Capital
Corporation, Oaktree Specialty Lending Corp., Solar Capital Ltd., BlackRock TCP Capital Corp. and Sixth Street Specialty Lending, Inc.
JMP Securities was manager or co-manager of a public offering of securities for Owl Rock Capital Corporation, Ares Capital Corporation,
Oaktree Specialty Lending Corp. and Sixth Street Specialty Lending, Inc. (ORCC, ARCC, OCSL and TSLX) in the past 12 months, and
received compensation for doing so.
JMP Securities expects to receive OR intends to seek compensation for investment banking services from Owl Rock Capital Corporation,
Apollo Investment Corporation, Ares Capital Corporation, Oaktree Specialty Lending Corp., Solar Capital Ltd., BlackRock TCP Capital Corp.
and Sixth Street Specialty Lending, Inc. in the next 3 months.
For disclaimer details, please click on link.
JMP Disclaimer
For applicable disclosures on companies mentioned in this report, please refer to the JMP Facts and Disclosures page in the report link above.
JMP Securities Investment Opinion Definitions:

Market Outperform (MO): JMP Securities expects the stock price to outperform relevant market indices over the next 12 months.
Market Perform (MP): JMP Securities expects the stock price to perform in line with relevant market indices over the next 12 months.
Market Underperform (MU): JMP Securities expects the stock price to underperform relevant market indices over the next 12 months.
JMP Securities Research Ratings and Investment Banking Services: (as of July 9, 2020)
# Co's
Receiving
IB
# Co's % # Co's % Services in % of Co's
Regulatory Under of Regulatory Under of Past 12 With This
JMP Rating Equivalent Coverage Total Equivalent Coverage Total Months Rating
MARKET OUTPERFORM Buy 235 62.50% Buy 235 62.50% 71 30.21%

MARKET PERFORM Hold 103 27.39% Hold 103 27.39% 16 15.53%
MARKET UNDERPERFORM Sell 2 0.53% Sell 2 0.53% 0 0%
COVERAGE IN TRANSITION 35 9.31% 35 9.31% 3 8.57%
RATING SUSPENDED 0 0.00% 0 0.00% 0 0%
TOTAL: 376 100% 376 100% 91 24.20%

Stock Price Chart of Rating and Target Price Changes:
Note: First annotation denotes initiation of coverage or 3 years, whichever is shorter. If no target price is listed, then the target price is N/A. In
accordance with FINRA Rule 2241, the chart(s) below reflect(s) price range and any changes to the rating or price target as of the end of the
most recent calendar quarter. The action reflected in this note is not annotated in the stock price chart. Source: JMP Securities.
In order to obtain these (6 or more) stock price charts or additional applicable disclosures and information concerning JMP's recommendations
of companies under coverage mentioned in this report, please contact JMP Securities at (877) 263-1333 or visit www.jmpsecurities.com
July 9, 2020 48
JMP Disclaimer:
JMP Securities LLC (the “Firm”) compensates research analysts, like other Firm employees, based on the Firm’s profitability, which includes
revenues from the Firm’s institutional sales, trading, and investment banking departments as well as on the quality of the services and activities
performed that are intended to benefit the Firm’s institutional clients. These data have been prepared by JMP Securities LLC for informational
purposes only and are based on information available to the public from sources that we believe to be reliable, but we do not guarantee
their accuracy or completeness. Any opinions and projections expressed herein reflect our judgment at this date and are subject to change
without notice. These data are neither intended nor should be considered as an offer to sell or a solicitation or a basis for any contract for
the purchase of any security or other financial product. JMP Securities LLC, its affiliates, JMP Group LLC, Harvest Capital Strategies LLC,
and their respective partners, directors, officers, and associates may have a long or short position in, may act as a market maker for, or may
purchase or sell a position in the securities mentioned herein. JMP Securities LLC or its affiliates may be performing, have performed, or seek
to perform investment banking, advisory, or other services and may have acted as manager or co-manager for a public offering of securities
for any company mentioned herein. The reader should assume that JMP Securities LLC will solicit business from the company covered in
this report. Members of our Sales and Trading Department provide oral and/or written market opinions and trading strategies to our clients
that reflect their personal opinions about stocks that are the subject of the firm's research reports. Our research analysts discuss trading
strategies with clients that sometimes reflect short-term expectations for the price of the securities that are the subject of research reports.
These trading strategies are distinct from the analysts' fundamental rating for the stock, which is based upon the analysts' view compared
to other stocks under coverage for the relevant time period. © Copyright 2020. All rights reserved by JMP Securities LLC. JMP Securities
LLC is a member of FINRA, NASDAQ, and SIPC.
July 9, 2020 49
Jeffrey H. Spurr
Director of Research
(415) 835-3903
RESEARCH PROFESSIONALS
FINANCIAL SERVICES REAL ESTATE
Alternative Asset Managers Housing & Land Development

Devin Ryan (212) 906-3578 Aaron Hecht (415) 835-3963
Brian McKenna (212) 906-3545 Matthew Hurwit, CFA (415) 835-3964
Commercial & Specialty Finance REITs

Christopher York (415) 835-8965 Aaron Hecht (415) 835-3963
Kevin Fultz, CFA (415) 835-8962 Matthew Hurwit, CFA (415) 835-3964
Consumer Finance/Financial Technology R.E. Services & Tech

David M. Scharf (415) 835-8942 Aaron Hecht (415) 835-3963
Jeff Zhang, CFA (415) 835-8948 Matthew Hurwit, CFA (415) 835-3964
Insurance TECHNOLOGY
Matthew J. Carletti (312) 768-1784
Karol Chmiel (312) 768-1786 Energy Technology & Services
Industrial Technology
Investment Banks & Brokers Joseph Osha, CFA (415) 835-8998
Devin Ryan (212) 906-3578 Hilary Cauley, CFA (415) 835-8996
Brian McKenna (212) 906-3545
Cybersecurity & IT Infrastructure
Mortgage Finance Erik Suppiger (415) 835-3918
REITs: Agency, Hybrid, & Commercial Mortgage Rustam Kanga (415) 835-3914
Steven C. DeLaney (212) 906-3517
Chris Muller (212) 906-3559 Internet & Digital Media
Trevor Cranston, CFA (415) 869-4431 Ronald V. Josey III (212) 906-3528
Mikhail Goberman (212) 906-3543 Andrew Boone (415) 835-3902
Nick Hyndman (415) 835-8916
HEALTHCARE David Yueh (415) 835-3957
Biotechnology & Biopharma Software

Reni J. Benjamin, PhD (212) 906-3529 Patrick Walravens (415) 835-8943
Justin H. Walsh, PhD (212) 906-3561 Joe Goodwin (415) 869-4477
Jialiang Liang (212) 906-3503 Mark Chen (415) 835-8930
Jason N. Butler, PhD (212) 906-3505 Joey Marincek (415) 869-4418
Roy Buchanan (212) 906-3509
Jonathan Wolleben (312) 768-1788
Neil Panchal, MD (312) 768-1795
Medical Devices & Supplies

David Turkaly (212) 906-3563
Daniel W. Stauder (212) 906-3535
ADDITIONAL CONTACTS
Thomas R. Wright Charles Sweeney 600 Montgomery Street, Suite 1100

Director of Equities Director of Sales & Trading San Francisco, CA 94111
(212) 906-3599 (212) 906-3573 www.jmpsecurities.com

JMP Securities - ORCC - Initiation - Initiating Coverage of Industry - 50 Pages

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

JMP Securities - ORCC - Initiation - Initiating Coverage of Industry - 50 Pages

Uploaded by

Copyright:

Available Formats

Commercial & Specialty Finance | Initiating Coverage

Owl Rock Capital Corporation (ORCC) MARKET OUTPERFORM

one of a couple BDCs positioned favorably to opportunistically grow the investment

• Founded in 2016 and operating as an externally-managed business

OWL ROCK CAPITAL CORPORATION (ORCC) REPORT OUTLINE

 Investment Recommendation, Performance, and Valuation

o A conservatively positioned balance sheet and ample liquidity to support portfolio

o Expecting a sustained top-quartile track record.

o Direct lending continues to increasingly be a preferred execution to the syndicated

o Lending niche to technology companies is attractive, differentiated, and is a long-term

 Owl Rock Capital Corporation

o Senior Management, Corporate Governance, and Alignment of Interest

o Investment Management Structure

o Investment Portfolio Overview

o Interest Rate Risk

 Earnings Model and Estimates

INVESTMENT RECOMMENDATION, PERFORMANCE, AND VALUATION

Founded in 2016 and operating as an externally-managed business development company (BDC), we

FIGURE 1. ORCC and Peer Group Three-year Economic Return

Source: Company filings

FIGURE 2. BDC IPO Performance

FIGURE 3. ORCC Total Shareholder Return Since IPO vs. Comparable

FIGURE 4. Yielding Equity Security Comparison to ORCC

In terms of below-investment-grade corporate credit losses, we have looked at numerous historical

FIGURE 5. Quarterly Historical BDC Realized and Unrealized Loss Rate

Source: Company filings

FIGURE 6. GAAP Leverage at Peer BDCs

Source: Company filings

FIGURE 7. BDC Portfolio Company Metrics

Source: Company documents

FIGURE 8. First-Lien Portfolio Mix – as of March 31, 2020

FIGURE 9. North American Private Equity Dry Powder

We think Owl Rock’s

Source: JMP Securities LLC, Company reports

Source: Company filings and JMP Securities LLC

Source: Company filings

FIGURE 14. 2019 PDI 10 – Private Debt Capital Raised

FIGURE 15. Quarterly UniTranche Volume ($bln)

$4.0 $3.0 $3.2 $3.0 $3.1

FIGURE 16. Largest Direct Lending Deals since 2019

FIGURE 17. Tech-focused PE Fundraising

FIGURE 18. Owl Rock’s Tech-Related Portfolio – March 31, 2020

Source: Company filings

FIGURE 19. Buyouts as a Proposition of VC Exits

FIGURE 20. Leading Tech-focused Private Equity Managers

OWL ROCK CAPITAL CORPORATION

FIGURE 21. Owl Rock Platform Breakdown

Source: Company documents

Senior management, corporate governance, and alignment of interests

FIGURE 22. Board of Directors

Source: Company documents and JMP Securities LLC

FIGURE 23. Investment Committee

Source: Company documents and JMP Securities LLC

Source: Company filings and JMP Securities LLC

Investment Portfolio Overview

FIGURE 25. Investment Portfolio Growth - Fair Value ($bln)

Source: Company filings

FIGURE 26. Investment Portfolio Mix

Source: Company documents and JMP Securities LLC

FIGURE 27. Historical Portfolio Yield and Spread Over LIBOR

Source: Company documents and JMP Securities LLC

FIGURE 28. Average Investment Hold Size ($mln)

Source: Company filings