NEW YORK–(BUSINESS WIRE)–On May 18, 2020 and June 10, 2020 Kroll Bond Rating Agency (KBRA) assigned a BBB issuer and a senior unsecured debt rating, respectively with a Stable Outlook for Owl Rock Technology Finance Corp. (NASDAQ: “ORTF” or “the company”), a business development company (BDC).
Formed in July 2018, ORTF is a private BDC that focuses on originating and investing in primarily in senior secured first lien loans of private U.S. middle-market companies in the technology sector. Owl Rock Technology Finance Corp. is externally managed by Owl Rock Technology Advisors LLC, an indirect subsidiary of Owl Rock Capital Partners LP (Owl Rock), which together with its subsidiaries is a $17 billion, New York-based direct lending investment platform.
The issuer and senior unsecured debt ratings reflect ORTF’s senior management with decades of experience in leverage finance with strong risk management practices, a $1.8 billion investment portfolio invested mostly in senior secured first lien loans to upper-middle market portfolio companies with no non-accruals, and appropriate leverage with a 1.04x debt-to-equity ratio at March 31, 2020 with the intention of maintaining leverage of around 1.0x. The rating is further supported by Owl Rock’s $17 billion investment platform, which includes Owl Rock Capital Corp. and Owl Rock Capital Corp. II which are both rated BBB by KBRA. ORTF’s strengths are counterbalanced by the company’s illiquid investments, mostly secured funding profile and limited operating history compounded by a negative credit environment due to COVID-19 crisis.
KBRA views the company’s targeted leverage of 1x with regulatory asset coverage of 150% as prudent. As of March 31, 2020, the company’s asset coverage was 192% leaving a 42% cushion. Additionally, a key rating driver is the fact that the company had approximately $1.8 billion of uncalled capital that could be used to support its portfolio companies as well as provide portfolio growth without increasing leverage as of March 31, 2020.
KBRA expects that the COVID-19 pandemic will have wide-ranging effects on BDCs and the middle market lending space, which may challenge ORTF’s profitability and asset quality metrics. However, KBRA believes that ORTF is well-positioned from a capitalization, asset coverage and liquidity standpoint to withstand near-term impact of the economic fallout from COVID-19 at the current rating level.
The ratings are assigned using KBRA’s Global Finance Company Rating Methodology, published November 28, 2017.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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