Kroll Bond Rating Agency (KBRA) assigns a BBB rating to Owl Rock Technology Finance Corp.'s (ORTF) $375 million senior unsecured 3.75% notes due June 17, 2026.

The Outlook is Stable.

Key Rating Considerations

The rating reflects ORTF's senior management with decades of experience in leverage finance including strong risk management practices, a $2.5 billion diversified investment portfolio invested mostly in senior secured first lien loans (73.9%) to 43 upper-middle market portfolio companies with zero investments on non-accrual status. The rating also takes into account the company's moderate leverage of 0.69x on debtto-equity basis at Sept. 30, 2020 and a target leverage of 1.0x. The ratings are further supported by the Owl Rock $23.7 billion investment platform, which includes Owl Rock Capital Corp. and Owl Rock Capital Corp. II, KBRA BBB rated BDCs. The note issuance will further increase the company's percentage of unsecured funding, allowing for greater unencumbered assets. The proceeds will be used to repay existing indebtedness. ORTF's strengths are counterbalanced by the company's illiquid investments and limited operating history of approximately two years compounded by potentially lower underwriting volume and a negative credit environment due to COVID-19 crisis.

KBRA views the company's targeted leverage of 1.0x with regulatory asset coverage of 150% as prudent and appropriate for the rating. As of Sept. 30, 2020, the company's asset coverage was 240% leaving a solid cushion. The company also has approximately $1.5 billion of uncalled capital that could be used to support its portfolio companies as well as provide portfolio growth without increasing leverage as of Sept.

30, 2020. The loan portfolio is diversified by end user in the technology space with the top three sector concentrations as follows: Business services (22.2%), Data and information services (15.3%) and Healthcare technology (13.0%). With a focus on technology the portfolio has had minimal negative impact from COVID-19; however, the portfolio remains unseasoned from its initial formation in 2018.

The company was formed in July 2018 as a Maryland corporation, raising roughly $3.0 billion of mostly institutional capital, of which approximately $1.5 billion remained undrawn as of Sept. 30, 2020. ORTF is externally managed by Owl Rock Capital Advisors, LLC, an affiliate of Owl Rock Capital Partners, which was founded by Douglas Ostrover, Marc Lipschultz, and Craig Packer, all veterans of the industry. The company recently announced a potential merger with Dyal Capital Partners, a provider of capital solutions and support to alternative asset managers with $21.9 billion in total capital commitments. The company's investment team and processes would remain unchanged. ORTF is regulated as a BDC under the Investment Company Act of 1940 and has elected to be treated as an RIC for U.S. federal income-tax purposes.

The ratings are assigned using KBRA's Global Finance Company Rating Methodology, published November 28, 2017.

Rating Sensitivities

In the near future, a rating upgrade is not expected. However, over time, maintenance of stable asset quality and earnings metrics, maintenance of leverage at 1.0x debt-to-equity ratio with ample asset coverage and improved funding diversity could lead to positive rating momentum. A rating downgrade and/or outlook change to negative could be considered if there is a significant downturn in the U.S.

economy with negative impact on ORTF's earnings performance, asset quality, and leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.

PRESS RELEASE

ESG Considerations

KBRA's ratings incorporate all material credit factors including those that relate to Environmental, Social and Governance (ESG) factors. While ESG factors may influence ratings, it is important to underscore that KBRA's ratings do not incorporate value-based judgments. Throughout our analysis, KBRA captures the impact of ESG factors in the same manner as all other credit-relevant factors. More information on ESG Considerations for the Financial Institutions can be found here. There were no ESG factors that had significant impact on this rating analysis.

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Related Publication

- Owl Rock Technology Finance Corp. Rating Report

Analytical Contacts

Teri Seelig, Senior Director (Lead Analyst)

+1 (646) 731-2386

tseelig@kbra.com

Boris Alishayev, Senior Director

+1 (646) 731-2384

balishayev@kbra.com

Marjan Riggi, Senior Managing Director (Rating Committee Chair)

+1 (646) 731-2354

mriggi@kbra.com

Business Development Contact

Nish Kumar

+1 (646) 731-3372

nkumar@kbra.com

Disclosures

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.

About KBRA

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 Limited is registered with ESMA as a CRA.

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