DBRS Morningstar Assigns Long-Term Ratings of BBB (low) to Owl Rock Core Income Corp. with a Stable Trend.
ENPNewswire-September 28, 2021--DBRS Morningstar Assigns Long-Term Ratings of BBB (low) to Owl Rock Core Income Corp. with a Stable Trend
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Release date- 27092021 - DBRS, Inc. (DBRS Morningstar) has assigned a Long-Term Issuer Rating of BBB (low) and a Long-Term Senior Debt Rating of BBB (low) to Owl Rock Core Income Corp. (ORCIC or the Company).
The trend on the ratings is Stable. The Company's Intrinsic Assessment (IA) is BBB (low), while its Support Assessment is SA3, resulting in the Company's final rating being equalized with its IA.
KEY RATING CONSIDERATIONS
The ratings are supported by the broader franchise strength of ORCIC's investment advisor, Owl Rock Capital Advisors (the Advisor), an indirect subsidiary of Blue Owl and part of Owl Rock, the division of Blue Owl that focuses on direct lending. Blue Owl manages $62.4 billion of capital, split evenly between Dyal Capital, which provides capital solutions to institutional private equity and hedge fund managers through minority investments and long-term financing, and Owl Rock, which was founded in 2015 and provides private credit and financing offerings for sponsor-backed middle and upper middle market companies. While ORCIC is a new business development company (BDC) formed in 4Q20, its management team is well respected with an extended track record of investing in the private credit space, managing multiple other public and private BDCs, as well as other investment vehicles focused on direct lending. Though Owl Rock does not explicitly guarantee obligations of ORCIC, we view implicit support underpinning the ratings, given the strategic importance of the direct lending platform to Blue Owl.
ORCIC's limited earnings power constrains the ratings, as the investment portfolio is currently overweighted in lower yielding broadly syndicated loans (BSLs) as it ramps up and rotates into higher yielding private credit assets over time. We expect BSLs to comprise approximately 10% to 20% of the overall investment portfolio once fully ramped to provide liquidity for potential share repurchases. Concentration and credit risk in ORCIC's portfolio is managed by risk management and underwriting of Owl Rock's platform. We note that credit performance within its other managed vehicles has been sound, including through the Coronavirus Disease (COVID-19) pandemic. The Company's funding profile is fairly narrow, based on its reliance on secured forms of wholesale funding, though the benefits of the Owl Rock banking relationships are clear given its sizeable revolving credit facility. As the unsecured debt mix of its funding profile increases, we would view this as positive to the ratings. ORCIC's leverage target of 0.90-1.25x debt to equity is appropriate given the nature of its underlying assets and is supportive of the ratings.
The Stable trend considers the strength of the Owl Rock franchise...
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