Owl Rock Capital Corporation
Q1 2021 Earnings Call Transcript

Published: 6 May 2021

[Operator:]

Good morning and welcome to Owl Rock Capital Corporation's First Quarter 2021 Earnings Call. I would like to remind our listeners that remarks made during the call may contain forward-looking statements. Forward-looking statements are not guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time-to-time in Owl Rock Capital Corporation's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. As a reminder this call is being recorded for replay purposes.

[Craig Packer:]

Thank you, operator. Good morning, everyone, and thank you for joining us today for our first quarter earnings call. This is Craig Packer, and I'm CEO of Owl Rock Capital Corporation and a co-founder of Owl Rock Capital Partners. Joining me today is Alan Kirshenbaum, our CFO and COO; and Dana Sclafani, our Head of Investor Relations. Welcome to everyone who is joining us on the call today. I will start today's call by briefly discussing our financial highlights for the first quarter before providing an update on our portfolio and deal activity in the quarter. Then, after Alan covers our financial results, I will discuss our view on the current market and make some closing remarks. Getting into the first quarter financial highlights, net investment income per share was $0.26 as we had expected NII was down this quarter and Alan will provide more detail on this later in the call. I will also discuss our future earnings outlook in my closing remarks. We ended the quarter with net asset value per share of $14.82 up $0.08 from the fourth quarter. The average fair value mark on our portfolio is 98% of par back to where it was before COVID. We believe that the full recovery of the value of our assets over the course of the year reflects the strong credit quality of our portfolio and investment process. Looking forward for the second quarter of 2021. Our board has declared a regular dividend of $0.31 per share the same amount we have paid each quarter since our IPO. We are pleased with our origination activity this quarter, although as we expected volumes across the market were lower than the fourth quarter. Given the pull forward of deals at the end of last year. We ended the quarter with net leverage of 0.92 times, which is up from 0.87 times last quarter and up from 0.6 times year-over-a year. We've made steady progress to get to the low end of our targeted range of 0.9 to 1 in a quarter and expect to modestly increase our leverage within that range in the coming quarters. In addition, our balance sheet remains strong with $2.5 billion of liquidity available today and we continue to lower our overall cost of financing.

[Alan Kirshenbaum:]

Thank you, Craig. Good morning, everyone. To start-off on Slide 7 of our earnings presentation. You can see that we ended the first quarter with total portfolio investments of $11.2 billion outstanding debt of $5.5 billion and total net assets of $5.8 billion. Our net asset value per share increased to $14.82 as of March 31 compared to $14.74 as of December 31. We ended the quarter with net leverage of 0.92 times debt to equity and $2.5 billion in liquidity pro forma for post quarter end financings. Our dividend for the first quarter was $0.31 per share, and our net investment income was $0.26 per share. As you recall from our remarks last quarter, we had $0.04 per share in one-time items that benefited us, including $0.02 per share from the National Dentex paydown and $0.02 per share from the partial quarter fee waiver. As a result, the fourth quarter without the benefit of these one-time items would have been $0.25 per share. So as compared to that we grew NII by an additional penny per share to $0.26 this quarter. This reflects the full quarter benefit of Q4 originations plus the net benefit of new originations and sales and repayments in the first quarter. Then, please note that while we had approximately $500 million of sales and repayments roughly half of that was from sales, which do not provide the same NII benefit as we see from repayments, since sales do not generate accelerated amortization of OID or prepayment fees. As a result, fees from repayments continue to lag our expectations. As Craig and I have been discussing over the past year or so, we do expect repayments to pick up later this year based on the continued seasoning of our portfolio. I would also note that we had some higher yielding repayments early on in the quarter. As Craig also noted our originations were largely first lien investments, which once again were weighted toward the end of the quarter and as a result, the net one penny per share of growth in NII is not reflective of the full benefit of Q1 originations. In addition, dividend income was lower this quarter, which also impacted NII by approximately one penny per share. The contribution from one portfolio company declined by $4 million from last quarter. However, while the company continues to have strong performance, its dividend is variable and may fluctuate based on operating results and seasonality. Thinking ahead to the rest of this year, we expect interest income to continue to increase each quarter over the coming quarters, as we modestly increase our leverage within our target range. And as we optimize the left side of our balance sheet as Craig just noted.

[Craig Packer:]

Thanks, Alan. To close, I wanted to share our thoughts on the current market to provide some perspective on how we're thinking about our earnings trajectory over the course of this year. As we have anticipated market conditions in the first quarter were constructive, but overall market activity was down relative to the very active levels seen in the fourth quarter. While the market is competitive, we continue to find attractive investments with appropriate risk adjusted returns. We're pleased with both the level of deal activity and the quality of the deals we're seeing. Overall, the credit quality, leverage levels and covenant packages we see in our pipeline have not changed. Although we are seeing some spread compression given strong market conditions and the continued strength in the syndicated market. We continue to prefer sectors which have been either less COVID impacted or which have rebounded quickly from the economic impact. Lastly, we are pleased that we continue to be successful in winning the deals that we want to win. In names in situations where we have high conviction around the asset and the sponsor are able to demonstrate the value of our platform and often take a sole or lead position in these deals. As a great example of this, it was recently announced that Owl Rock is leaving the $2.3 billion unitranche loan to finance Thoma Bravo’s acquisition of Calypso, which is expected to close later this year. We believe this will be the largest unitranche facility ever we done in the U.S. and is a reflection of our ability to provide attractive sizeable financing commitments for top tier investment opportunities. It also highlights our expertise in the software space.

[Operator:]

Your first question comes from the line of Devin Ryan from JP Morgan Securities -- JPM securities.

[Devin Ryan:]

Hi, thanks Devin from JMP. Thanks for taking the questions, I guess, first one here in the somewhat hard to predict but just comment on the expectation for the higher level in second quarter. And I know that's factored into the outlook. If you think about kind of the back half of the year, current conditions continued the expectations that were just kind of in a higher repayment environment that's kind of just par for the quarter . And that's or how are you guys thinking about that more broadly, just with very kind of constructed conditions?

[Craig Packer:]

Sure. Well, let me try to break that into two pieces. I made the comments a couple of minutes ago that we expect to see higher repayments in the second quarter. I just call your attention to something that Alan said in his remarks. But I think, it's important for us about half of our repayments if you will this first quarter half of those were sales they weren't repayments, which we sold the position. So we only had about $250 million of actual repayments. And we expect that number to go up materially in the second quarter. That obviously is very impactful for earnings. Because as we get through repayments, we are able to recognize the OID that remains on those investments and oftentimes, pre-payment penalties. So we're calling attention to that because it generates earnings. And we actually repayments were light in the first quarter. But the broader point to your broader question of how are things looking. The two biggest drivers of repayments are when one of our portfolio company gets sold and the new buyer comes in and re-does the capital structure and or a refinancing, I would say it's more tilted to the first one. And so it's more driven by M&A in our experience than it is a strong market where we're getting refinanced out. We certainly get refinanced out from time-to-time because we wind up or no marking companies that have access to the syndicated markets. But I would say more often it's companies getting sold. The environment that we're in is a very constructive one on M&A. M&A volumes are very high, particularly given the economic outlook. And it's also one where there's a strong syndicated market. So we expect re-paint sales of our companies and re-financings to pick up. In our case, in particular, we've just had very low repayments, which is somewhat a function out the vintage of our portfolio, as well as COVID, I think pushed out some of the repayment activity. So relative to what we've been experiencing last couple of years in our case, specifically, we think repayments will pick up to a normal level, not to an excessive level. And that's very healthy for earnings and something that I think will be good in terms of dividend coverage. So I think it's going to be one that all the managers will experience, meaningful and robust levels of repayments given the trends I'm citing.

[Devin Ryan:]

Okay, great color there. Thank you. And then just you're on kind of industry focus is obviously you've done a great job navigating the pandemic and leaned into the right sectors and areas like technology and healthcare have been active. I'm curious with the backdrop kind of evolving here in potentially a strong economic recovery in a vaccine available other industries or maybe pockets that are emerging, it is maybe more attractive risk reward securities that maybe weren't as interested in over the last 12 months, but maybe you're or kind of hopping on the radar in areas that are more attractive and maybe a little bit less accurate from an opportunity perspective?

[Craig Packer:]

So we -- to state the obvious when we make a loan, it's five six seven years. And so -- and we're -- we hold it to maturity. And so we're really consider ourselves long-term in our orientation and fundamental credit investors. We're not traders, we're not trying to pick a moment in the market. And because we know economic conditions over the life of our loans are going to go up and down. And we've got to pick credits that are going to withstand that. So we think we've been well served throughout inception, sticking to businesses that are going to endure regardless of the business cycle. And regardless of where we are going in and growing out, it's not to say, of course, that we don't pay attention to where we are on the cycle, and on the margin that can influence us on the margin. But I would say I don't -- we're not -- you shouldn't expect to see us after five years of really avoiding cyclicals to try to bet on cyclicals now because the economy's going to really, really potentially be very strong here. Those companies might do well, for a year or two. But, we would be concerned what happens after that. As I said, in my remarks, the sector, we have found the most attractive, and we're -- it is our largest sector, when we have really differentiated expertise is software and technology generally, but software in particular and that we continue to find that sector particularly interesting and we have our resource . Certainly, there are sectors that were impacted by COVID that have now recovered very quickly. And so I would say those are sectors the pockets of healthcare that were really kind of shut during COVID that now open back up and I think we would be very open minded about doing those where we might not have been six months ago. So we'll certainly adjust the there, but I for Owl Rock we shouldn't expect to see us really make any significant changes in the sectors do I you know, other managers may do it differently, and there may be good value to making a better on the cycle, but it's just not really how we run the portfolio.

[Devin Ryan:]

I appreciate that. Thanks for the color.

[Craig Packer:]

Great. Thanks, Devin.

[Alan Kirshenbaum:]

Thanks, Devin.

[Operator:]

Your next question comes from the line of Robert Dodd from Raymond James.

[Robert Dodd:]

Hi, guys thanks for taking question. A question on the pre-pay and obviously there's the -- you talked about elevated pre-payments prepayment -- is it does generate fees, there's two components to it. So obviously accelerated OID and then pre-payment fee? Should you – has with COVID kind of ageing the portfolio somewhat have aged out of the call protection part for a chunk of assets? We should expect the OID or you still going to collect the accelerated OID and call protection on the repayments? So do we have that kind of reset the cycle for the call protection component within the portfolio that's starting to be paid? Hopefully that makes sense.

[Craig Packer:]

Yes, it's a great question, Robert. I'll do my best to answer it. But I don't have a precise answer to you mathematically but I'll try to give you the themes. I calculated this or we calculated this, but just this is information that's publicly disclosed. We've got about $170 million of OID on the books today, just OID. So if every loan repaid tomorrow, which obviously isn't going to happen, that would be $0.44 a share of NII. Now that's going to get spread over the next few years. I'm not in any way suggesting that's going to happen this year. But I'm just giving you a specific number for part of your question. That's very material. If those loans got repaid on average over the next three years, that would equate to $0.03 of NII per quarter just from the amortization of OID any pre-payments will come on top of that we will get we will -- excuse me on call premiums we will come on top of that. I don't have it at my fingertips, what that would amount to but just the OID alone is just quite substantial? To the thrust of your question, have we quote aged out of it? We -- one of the attractive elements of the loans we offer is they don't have tremendous amounts of call protection. It's usually a year or two. And maybe it's pre-payable at 102 or 101 oftentimes what happens is some of the highest quality companies or some of the best performers, they repay quickly, because they-- the business does really well, you're to later they will pre-pay. So I don't think it's going to go to zero. And I don't -- but I think it'll be more weighted to the amortization of OID. So I don't think that there's some impediment for us getting the kind of income pickup that we're expecting.

[Robert Dodd:]

But I really appreciate that granularity there. Just one more if I can, on the dividend from the proposed drop $4 million this quarter, is it variable. And this may be more obviously, you don't control the dividend per se, but would you expect that this level is the low end of the variable range or is it the middle of the range, we should expect going forward or any color on that'd be helpful?

[Craig Packer:]

Sure. The investment we're referring to is more which is spending gets goes shows up on our schedule investments is window holding, it's been a terrific investment, it's very different type of investments than our normal investment. It's an equity investment. But it's in a company with no debt on it. So they -- we're a shareholder and they pay-out portion of their income in the form of dividends and we enjoy those dividends. If you went back and looked at it, you would see, it's been an extraordinarily profitable investment, we originally invested with over million and we've already received million of those dividends. So that's really extraordinary. The -- it's variable, it's going to move up and down based on the performance of the business. And the timing of when they choose to pay dividends. I think it's reasonable to assume this first quarter is a good go forward to project out but it is a variable and it is variable. And it's a business that's just driven by their underlying activity level. And so if you tweak that lower than that, I wouldn't be upset about that either. But there's going to be quarters where it does really well like the fourth quarter and I -- it's just not going to be as predictable and as a data investment because it's just inherently variable dividend.

[Robert Dodd:]

Okay, got it. Thank you.

[Craig Packer:]

All right. Thanks, Robert.

[Alan Kirshenbaum:]

Thanks, Robert.

[Operator:]

Next question comes from the line of Mickey Schleien from Ladenburg.

[Mickey Schleien:]

Good morning, Craig and Alan. Craig, I found your comment about the record size. Unitranche deal very interesting. And I'm curious with that in mind how do you manage the structuring of those deals, given the size of the company, the size of the loan, vis-à-vis the fogginess in the broader market, where I imagine this company may be able to go if they choose and obviously the broader markets pricing is very tight and deal terms are very loose when we think of covenants. So essentially, I'm asking how do you attack that market without taking on the risk of the broader market?

[Craig Packer:]

Well, let me -- not sure. You might have to re-ask the question, I'll give you an answer. I'll see if I get close enough. The Calypso deal is an example of a trend that we've seen over the last few years. I mean, frankly, since the inception of Owl Rock, we're certainly not the driver of it, but we're certainly one of the leaders in it, which is with bigger pools of capital, we can offer bigger solutions for direct lending for the private equity firms. And, we -- there are many reasons why a private equity firm picks a direct lending solution, it's not just the rate, it's not just what the covenant packages, they like the privacy, they like the certainty, they like to know who their lenders are, and know the lenders will be there. When there are opportunities and challenges. We are seeing greater and greater receptivity to direct lending solutions and it's penetrating deeper and deeper into the leveraged finance markets. And we've been a beneficiary of it. And we've seen the $1 billion unitranche and now we're seeing a $2 billion unitranche. So I think that trend is in our favor. And I would say, just to be slightly pointed about it. This is a moment in time where the syndicated markets are on fire. And yet it's still trending in that direction. And if you think there'll be a moment in the next couple years where the syndicated market gets choppy, then that trend will accelerate in my opinion. So it's a positive for our business. It's very much at the core of why we started Owl Rock to provide those kinds of solutions. They're certainly very spirited discussions with the private equity firms about what rate we charge and the covenants and all that. But we continue to feel really good. We get maintenance covenants, we get the spreads that you can see that we're continuing to get spreads in excess of the market. And also just remind you in terms of our economics we get a premium to the syndicated market, but we're also able to capture the fees that would otherwise go to pay to the banks to distribute the deal. So that's economics that are not incremental to the sponsor, but benefit our investors. And so that's part of the economic proposition for direct lending. Well, so I'm not sure I answered your question, but hopefully, you're welcome to ask something I didn't quite get it.

[Mickey Schleien:]

No, no, that was very much my question. And I appreciate that description. A couple of simpler questions. What is the outlook for a dividend if any from Wingspire which is actually now larger than Sebago?

[Craig Packer:]

Good question. We're really pleased with the -- what we're building a Wingspire. We've continued to put more capital in there and they're building their portfolio out, we're being very thoughtful and the team that run Wingspire are very thoughtful about a constructed portfolio. We really want to make sure that, we build for the long-term there. And I'm optimistic over the next year few quarters we'll be able to report some progress on a dividend out of Wingspire. I don't want to be too precise about it, but it's trending in the right direction and that'll obviously, help our earnings. as well.

[Mickey Schleien:]

Could you give us perhaps a range of ROE you’re expecting on the Wingspire?

[Craig Packer:]

We wouldn't have done we Wingspire if we didn't think we could get ROE at or above the ROE in our overall portfolio. And I hope it's an excess. But if you want to just take something in, you can take the average ROE for Owl Rock and use that as a proxy. I'm really enthusiastic about Wingspire, but we also try to under promise and over deliver, so I -- when we have the results to report, we'll go into it in a lot of detail. But over the next few quarters, being getting to a run rate consistent with Owl Rock ROE would probably be a reasonable assumption to make.

[Mickey Schleien:]

Okay, appreciate that. And I'm not sure if Alan already mentioned it. What is the amount of undistributed taxable income per share that you have?

[Alan Kirshenbaum:]

We don't make -- we don't have undistributed distributions.

[Mickey Schleien:]

Okay, so you did accrue some excise tax right, Alan?

[Alan Kirshenbaum:]

I believe we did.

[Mickey Schleien:]

Okay, I follow up with you on that later then, that’s it those are all may questions. I appreciate you taking my questions. Thank you.

[Craig Packer:]

Thanks, Mickey.

[Operator:]

Next question comes from the line of Paul Jackson from KBW.

[Paul Jackson:]

Hey, good morning, guys. I'll be brief. I -- most of my questions have been asked, but I -- one of my questions was just around your, debt stack. I -- you guys have obviously built a pretty attractive low cost liability structure. But I'm kind of curious going forward what your appetite would be for additional on secured debt, just obviously, given the extremely low costs sort of available to issue at today, if you'd be comfortable issuing more and potentially replacing some of your securitized financing or have you sort of kind of reached a balance that you're trying to maintain and maybe not looking to get too aggressive with more unsecured debt?

[Craig Packer:]

Thanks, Paul. And it's a good -- it's a good question. Look we're always keeping our eye on the markets you saw, we just did a nice size deal a couple of weeks ago. In terms of unsecured taking out secured, we'll continue to look at that. We also do the CLO issuances, which is a really efficient way to finance our balance sheet. The most recent one I mentioned was just 149 basis points over LIBOR so that is, is really efficient. And we continue to focus on optimizing the right side of the balance sheet. So you should expect over time to continue to see us doing CLO issuances as a great way to finance our portfolio and continue to keep an eye on the unsecured markets to see repricing continues to go there.

[Paul Jackson:]

Sure. Okay. Understand. And lastly, just kind of bigger picture. I'm just curious, you guys’ talks on the tax proposal out there being floated by the President with Congress? Do you think that any part of that proposals, obviously more specifically around carried interest would that have any effect on possibly accelerating M&A PE deals in the near-term? Or do you still kind of -- or do you look at this more of like a non-event just kind of given the sheer amount of capital that's been raised in that sector?

[Alan Kirshenbaum:]

Well, it's a fair question. I think that there's certainly -- we saw in the fourth quarter that the possibility of tax changes drove a good amount of activity getting done by the end of the year. Now that there are some specifics around the state taxes and cap gains, it certainly stands to reason that that could cause sellers to want to sell prior to those types of changes. So I think, it could be a propellant for M&A activity, which is already very robust. I don't think that it's going to alter the trajectory of private equity in general, because the trajectory of private equity in general is quite strong. There's a trillion dollars of dry powder sitting in private equity firms, and I'm not going to get invested regardless of what tax regime we live in, and if anything private equity continues to be raising lots of capital. So there's nothing particular in the tax proposed tax changes that -- we've got our eye on the market, markets tend to adjust these things and we expect continued robust activity as we've been talking about.

[Paul Jackson:]

Okay. Thanks for that. Appreciate that. Those are all my questions. Thank you.

[Alan Kirshenbaum:]

Thank you.

[Craig Packer:]

Thank Paul.

[Operator:]

Your next question comes from the line of Kenneth Lee from RBC Capital.

[Kenneth Lee:]

Hi, thanks for taking my question. Just one on the expectation of seeing meaningful improvement in NII in the second quarter, just want to get a better understanding of some of the key drivers there. And how much of this could be driven by new investments that will complete in the first quarter and then ultimately generating interest income for full quarter and the second quarter? Thanks.

[Craig Packer:]

Sure, I'm not going to be super granular, but certainly part of it is the investments in the first quarter that were done towards the tail end of the quarter that will now we'll get the full benefit of. But I would say, that's only a modest part of it. I mean, we're -- we have high visibility on a very robust originations pipeline, that as I said is more in line with the fourth quarter than the first quarter. We wouldn't say that if we weren't highly confident in it, some of the deals have already closed and others are expected to close imminently. So that's the biggest driver. And then we also have high visibility on actual repayments as well. So borrowing something unforeseen, we expect to make material progress on NII during the quarter based on what we're seeing right now, which we have further visibility on.

[Kenneth Lee:]

Great, that's very helpful. And just one follow up if I may, you mentioned that you didn't close on any second lien loans in the quarter, I just want to get a little bit more color, what you saw in some of the potential investments and what made the first lien and the unitranche is more attractive at this point in time versus second lien? Thanks.

[Craig Packer:]

Sure. We've talked about this over the last few years. We -- for the right situations, we like second liens, we -- but we're so picky about those situations. So we only -- we only want to really like to do second lien to businesses that are very stable, substantial equity commitments and tend to be bigger companies on average than the first lien portfolio companies. Our average EBITDA is $100 million across the portfolio, the average EBITDA for the second liens are $175 million, or give or take. So we tend to do it in bigger companies that have lots of were with all and so we feel like we're getting a premium spread we get for doing second lien, but get the same equity cushion and just high quality businesses. So we just didn't see any of those in the first quarter that are parameters but I'm also signalling that we will be more second liens, and we're at a pretty thin amount of second lien. And, I just when we do a few, I hope -- I felt hope so remember this quarter so we did not take it in the overall context, which is we're really selective. I could easily see our second lien percentage going up, and we're going to remain very disciplined about it. But one quarter is track one quarters deal activity doesn't really make a trend. It's a small opportunity set. But since inception our bar per second liens have been very high. And I think that served us quite well.

[Kenneth Lee:]

Great. That's very helpful. Thanks.

[Craig Packer:]

Thanks.

[Alan Kirshenbaum:]

Thank you.

[Operator:]

Your next question comes from the line of Casey Alexander from Compass Point.

[Casey Alexander:]

Hi, just got my attention spans not that great. When does Calypso closed and on a deal like that how would you kind of size the position to the ARCC portfolio and the closing what type of fees does a deal like that generate?

[Craig Packer:]

Well, Casey, we -- I send you . I'll give you a mulligan on the ARCC versus the ORCC.

[Casey Alexander:]

No problem.

[Craig Packer:]

No problem. We haven't said when it's going to close. Frankly, it's not our business to say, Thoma Bravo joining the company will defer to them on it. We wanted to call attention to it because, it's extremely large. We one of the benefits of our platform is we have other funds that we manage and so, when there's an opportunity like a Calypso, we can take a very sizable position and or just position it -- in a deal like that, and we can have a very healthy investment through ORCC and put it in our other vehicles as folks -- many folks know, we manage Owl Rock Technology Finance Corp, which is a dedicated tech BDC as well. So it'll be one of the largest investments across our entire platform. As the deal gets closer, we'll figure out the exact size based on where we sit at that moment in time. So I can't be more specific, but it's a large deal. And that's a great opportunity for us in high quality company to have a sizable investment and a really terrific business.

[Casey Alexander:]

Okay, thanks for that. Would you -- but the guidance that you still believe that you can cover the dividend within NII by the second half, I mean, by the fourth quarter, that would kind of be the core run rate not including unusual deals such as a Calypso, is that correct?

[Craig Packer:]

Yes, I want to -- yes thanks -- thanks for reminding me, I meant to cover that. When we close on a deal, we -- the OID that we take in that deal. We amortize over the life of the loan. So we don't take unusual amounts of income in when we close on deals, other managers to do that. And I'm not going to comment on that. But I -- we don't just because we're closing on a big deal unto itself isn't going to drive earnings in that quarter for us. Now, occasionally on a larger deal, we might sell down some that can generate some income. But we're not systematically -- our earnings are not systematically driven by originations in the way that a manager that takes all the way upfront would be. So I wouldn't get too focused on when Calypso is going to close. I mean, I should say this just for the sake of clarity, I'm assuming it's obvious, but we're clearly not holding all the $2.3 billion alone. And we didn't commit to the entire $2.3 billion . So other lenders in it with us and there'll be other lenders, they are committed and other lenders to close with us. And we'll have very appropriate size for the Owl Rock funds.

[Casey Alexander:]

Perfect. Thank you very much. That's very helpful.

[Craig Packer:]

Thanks Casey.

[Alan Kirshenbaum:]

Thank you.

[Operator:]

And your final question comes from Finian O'Shea from Wells Fargo Securities.

[Finian O'Shea:]

Hi, everyone, good morning.

[Craig Packer:]

Hi, Finian.

[Finian O'Shea:]

Hi. So the origination outlook is pretty strong. It sounds like can you touch on the yields or the yield impact you will expect obviously some more activity will help. But the pipeline look flat better or worse in terms of new yields.

[Craig Packer:]

So the spread in our -- in the first quarter was down from the fourth quarter. So the quarter we just put up, I would say our visibility and that reflects -- I alluded to in my remarks, there has been a bit of spread compression as the markets have been strong. The visibility we have on second quarter sitting here right now, I would expect spreads to be a bit wider than we'd gotten the first quarter. So it'll move around a bit. But I think we're continuing to find investments that have a spread consistent with today's weighted average spread in our portfolio, in some cases, higher, some cases slightly lower. But our visibility in the second quarter I would say it's modestly higher. But I think that -- if the market condition stays strong, we're probably going to stay in this kind of a range.

[Finian O'Shea:]

Okay, that's helpful. And then -- would be the adviser has a couple of press releases attached to Owl Rock, it looks like this. It's in its final stages with the BDC. Should we expect that the management team yourself, Alan so forth, mostly remain in place or will there be any shuffling around?

[Alan Kirshenbaum:]

Look, we're super committed to our strategy and our team and maintaining the success that we've had going forward. Obviously it's a bigger platform and we'll continue to be thoughtful about resources but if anything, we're going to have more resources to be able to dedicate to ORCC. So nothing to report on any changes. So excited to get the transaction closed on here shortly and done it we will continue to do the best for our shareholders.

[Finian O'Shea:]

Okay, very well. That's all for me. Thank you.

[Craig Packer:]

Thanks Fin.

[Alan Kirshenbaum:]

Thanks Fin.

[Operator:]

And I’d now like to turn the call back over to Mr. Packer for closing remarks.

[Craig Packer:]

All right, perfect. Thank you all for the questions. Really appreciate the interest for generally accessible. So we didn't get a chance to take your question. Just reach out. We're happy to talk offline and appreciate everyone's support. And we'll see you next quarter.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.