KBRA Releases Surveillance Report for Owl Rock Technology Income Corporation
5 Jun 2023 | New York
On May 11, 2023, KBRA affirmed the issuer and unsecured debt ratings of BBB for Owl Rock Technology Income Corporation. The rating Outlook is Stable.
The ratings reflect the company’s ties to the sizeable $71.6 billion Blue Owl direct lending platform, the derived benefits from ORTIC’s SEC exemptive relief to co-invest with other funds managed by the advisor and its affiliates, and its diversified $2.1 billion investment portfolio that provides financing to technology-focused upper-middle market companies. Senior secured debt comprised 89% of total investments with 78% in first lien senior secured debt. The company’s investments classified as traditional financing comprised 84% of the debt portfolio while those classified as growth capital comprised 11% as of March 31, 2023. Investments classified as traditional financing had a weighted average EBITDA and enterprise value of $241.5 million and $5.9 billion, respectively, whereas, investments classified as growth capital had a weighted average enterprise value of $14.5 billion. The ratings also reflect the company’s solid management team, which has a long track record of working within the private debt markets with each member of the Investment Committee having an average of over 25 years of experience in the industry. Additionally, the company has a team of approximately 30+ tech-dedicated investment professionals and maintains an office in Menlo Park, CA to support origination and risk management.
The ratings also reflect the company’s appropriate gross leverage of 0.82x. Regulatory asset coverage was 219%, allowing for solid 46% asset coverage cushion, which KBRA believes should help ORTIC absorb increased market volatility with higher interest rates and inflation in less favorable markets. The company did not have any non-accruals as of March 31, 2023, partially due to the generally short period of operations starting less than two years ago. The strengths are counterbalanced by the potential risk related to the company’s illiquid investments as a BDC, its short operating history offset by the broader technology lending that has been a core part of the Owl Rock platform, fully secured funding profile, as well as retained earnings constraints as a Regulated Investment Company (RIC). To further diversify its funding sources and increase financial flexibility, ORTIC plans to issue unsecured senior debt as market conditions allow. The company has $1.75 billion of committed debt facilities with approximately $317 million available. The company continues to raise capital quarterly with $173.6 million raised in 1Q23 and only tendered $36.1 million.
Owl Rock Technology Income Corporation is a private perpetual non-traded, externally managed, non-diversified closed-end management investment company that has elected to be treated as a Business Development Company (BDC) under the 1940 Act and to be treated as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s investment company taxable income. The company was formed in June 2021 as a Maryland Corporation and commenced operations in May 2022. The company is managed by Owl Rock Technology Advisors II LLC, an indirect subsidiary of Blue Owl Capital, Inc. (NYSE: OWL), a global alternative asset manager with approximately $144.4 billion of AUM as of March 31, 2023. The company’s investment strategy coincides with the strategies of Owl Rock Technology Finance Corporation (KBRA Issuer/ Senior Unsecured Debt ratings of BBB/ Stable Outlook), and Owl Rock Technology Finance Corporation II (KBRA Issuer/ Senior Unsecured Debt ratings of BBB/ Stable Outlook). Blue Owl’s technology lending products had approximately $17.2 billion of AUM as of March 31, 2023.
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