Owl Rock Capital Corp (NYSE:ORCC) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 10:00 am ET

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Owl Rock Capital Corp (NYSE:ORCC) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Chris York with JMP Securities.

Analyst
Chris York

Hey guys, good morning and thanks for taking my questions. Craig, certainly appreciate the forward-looking comments on earnings and the core dividend with respect to the expiration of the fee waiver. Now the manager has been very supportive of the vehicle historically. So could you just update us on the manager's appetite to temporarily waive fees to bridge the dividend shortfall until you grow the portfolio to potentially offset any book value declines?

Executive
Craig W. Packer

Thanks, Chris. Look, we as you say, we've been extraordinarily supportive. You should not expect that we're going to have additional fee waivers. We haven't charged any fees since the inception of ORCC. And our shareholders have benefited from that, from substantial special dividends. And so Alan made in his comment, Alan made the comment, and I'll reiterate, you should not expect additional fee waivers. We do, however, think that there are a number of levers in our portfolio that will allow us to earn the dividend. I'm happy to go through those. But by getting primarily getting to our target leverage, even today's interest rate environment, we expect to be able to cover the dividend. We also see opportunities to improve spread in the portfolio. At some point, our repayments will pick up. And so those factors, we think should be sufficient to cover the dividend on an ongoing basis. And if there were to be any shortfall, we think it would be very modest and very short lived. But I want to be clear and not to be repetitive, you shouldn't expect us to extend the fee waiver.

Analyst
Chris York

Very well, and I apologize for missing Alan's prepared remarks about that. So moving on, you talked a little bit about the validation of your portfolio and a little bit on the business model. So does the resiliency and strong enterprise value growth in tech companies during this time and validation, in my view, it supports the buyout of tech companies via growth funding does it cause you to reconsider your allocation policy of 20% and potentially increase that higher going forward?

Executive
Craig W. Packer

Look, you are right. Our software businesses, we're extremely pleased with their performance. They have continued to grow even during the pandemic. They may not be growing as fast as they were previously, but they continue to grow. They really benefit from some of the trends, stay-at-home work, remote work. Many of our businesses are benefiting in the software space. So it's our largest sector, not by accident, we really like those deals. They have the most attractive economic features, lowest loan-to-value, best covenant packages. We very much value the diversification of the portfolio. And so I don't have a I don't want to signal a change to that approach. I think we're going to remain very focused on diversification. I think that there's still we have a capacity for additional software buyouts. We obviously did one this quarter. But I