Owl Rock Capital Corp (NYSE:ORCC) Q2 2020 Earnings Conference Call - Final Transcript
Aug 05, 2020 • 10:00 am ET
Craig W. Packer
expected. As a result, sitting here today, we would expect net investment income to trail our regular dividend level upon the expiration of our fee waiver in the fourth quarter. The key factor to help us address this shortfall is ramping our portfolio to our target leverage level, which should boost our earnings power. Although getting to a fully ramped portfolio is the main driver, we also see opportunities to increase spread, including higher spreads on new investments, improving spreads on existing investments as well as gradually changing our asset mix to favor more unitranche loans. It will take some time for us to achieve our target leverage and have a fully ramped portfolio, but we expect by the second half of 2021, we will be operating in our target leverage range and able to cover our regular dividend from a net investment income even in today's rate environment.
Until then, we expect to be able to continue to pay our regular dividend of $0.31 per share as well as our previously declared special dividends. These comments are forward-looking and, therefore, inherently uncertain. We hope to achieve this goal sooner but want to be transparent as to what our current expectations are once the fee waiver expires. I'd like to spend the last few minutes discussing our perspective on current market conditions. Business conditions improved in May and June as stay-at-home restrictions eased. However, the environment remains uncertain, and we remain cautious about the economic recovery, which we believe will be slow and uneven. That said, given our significant liquidity and strong origination capabilities, we are seeing some very interesting opportunities to provide financing to companies seeking enhanced liquidity and new capital. Overall, the deal flow and pipeline are picking up compared to the more muted activity in the first and second quarter. New private equity M&A flow has increased, which should lead to greater market activity in the second half of the year.
Now that we have a better sense of the effects of the economic slowdown upon our investments, we've been able to ship some attention to selectively deploying capital. We're excited about the current opportunity set, which provides higher spreads, increased call protection and strong documentation while allowing us to continue to invest in the same types of high-quality, durable businesses we have focused on since inception. While the current environment is challenging, we believe it highlights the strength of our team, platform and balance sheet. Based on our unique capabilities, we believe we are well positioned to continue to increase our market share as private equity firms turn to us for sizable, customized direct lending solutions with certainty. More broadly, we expect direct lending will continue to take share from the syndicated market as we see banks pull back from making new commitments and increasingly large deals are being done in the private market.
In closing, we believe that our portfolio has proven so far to be resilient in the current economic environment. The certainty of