Owl Rock Capital Corp (NYSE:ORCC) Q2 2020 Earnings Conference Call - Final Transcript
Aug 05, 2020 • 10:00 am ET
Craig W. Packer
continue to maintain one of the lowest leverage profiles in the space, with leverage ending at 0.6 this quarter. In June, we received shareholder approval to decrease our asset coverage requirement to 150%, which will allow us to achieve our revised leverage target of 0.9 to 1.25 debt-to-equity and operate with meaningfully more cushion to our regulatory cap.
Lastly, the third and final lockup of our stock came off on July 20. At this point, 100% of our pre-IPO shares are freely tradable. Although we don't feel the current stock price reflects the true value of the portfolio we have created, we are pleased to have moved through the lockup period with limited disruption to our stock price, which we believe continues to highlight the long-term orientation of our shareholder base. Now I'd like to provide an update on our portfolio. While the effects of the economic shutdown related to the COVID-19 pandemic, which is beginning to be felt at the end of the first quarter, the second quarter reflects a full quarter's impact. As such, our top priority has remained protecting the value of our existing investments. I spent significant time on our first quarter call detailing our enhanced portfolio management process, and we have been very pleased with the outcome of this approach. Information flow with our borrowers remained strong, and we continue to receive frequent updates from our companies.
Overall, we feel very good about the quality of our portfolio and its performance despite the economic challenges. I'd like to remind everyone why we believe our portfolio is well positioned to weather these uncertain times. We ended the second quarter with $9.2 billion of investments at fair value across 102 borrowers with an average investment size of less than 1% of the total portfolio. Our investments consist primarily of first lien term loans to upper middle-market businesses with an average EBITDA of $93 million. Since inception, we've aimed to assemble our portfolio in a defensive-minded manner by focusing on large, stable recession-resistant businesses. We are well diversified across 27 industries, with no industry representing more than 9% of the portfolio and our top 10 positions representing 24% of the total. We lend primarily to private equity-backed companies, which we find attractive because private equity firms can support their companies with financial and operational resources. In line with last quarter, our six largest sectors are software, insurance, professional services, health care providers, distribution and food and beverage, which collectively comprise approximately half of our portfolio.
We continue to believe this is a solid core group of sectors that continues to perform well even in the current economic environment as many of these businesses provide essential or nondiscretionary services. To date, our borrowers in these segments have demonstrated resilience and, by and large, continue to perform well. Looking beyond our six largest sectors, the vast majority of our borrowers continue to have reasonable performance even in this highly unusual environment. Although it's still early in the economic disruption, what