Owl Rock Capital Corp
F:1D6
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Owl Rock Capital Corp
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Good morning, and welcome to Owl Rock Capital Corporation's Fourth Quarter and Year-Ended 2020 Earnings Call.
I would like to remind our listeners that past performance is not indicative of future results and remarks made during the call may contain forward-looking statements. Forward-looking statements are not guarantees of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Owl Rock Capital Corporation's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements.
As a reminder, this call is being recorded for replay purposes. Yesterday, the company issued its earnings press release and posted an earnings presentation for the fourth quarter and year-ended December 31, 2020. The presentation should be reviewed in conjunction with the company's Form 10-K filed on February 23 with the SEC. The company will refer to the earnings presentation throughout the call today. So please have that presentation available to you. As a reminder, the earnings presentation is available on the company's website.
I will now turn the call over to Craig Packer, Chief Executive Officer of Owl Rock Capital Corporation.
Thank you, operator. Good morning, everyone, and thank you for joining us today for our fourth quarter earnings call. This is Craig Packer, and I'm CEO of Owl Rock Capital Corporation and a co-founder of Owl Rock Capital Partners. Joining me today is Alan Kirshenbaum, our CFO and COO; and Dana Sclafani, our Head of Investor Relations. Welcome to everyone who is joining us on the call today. We hope you and your families remain safe and well.
I will start today's call by briefly discussing our financial highlights for the fourth quarter before providing an update on our portfolio and deal activity in the quarter. Then after Alan covers our financial results, I will discuss our outlook and make some closing remarks.
Getting into the fourth quarter financial highlights. Net investment income per share was $0.29. I would note that the fee waiver, which was put in place in conjunction with our IPO expired on October 18, 2020, and culminated in total fee waivers of over $200 million that were passed on to shareholders via special dividends. As a result, the fourth quarter NII reflects the impact of our full fee structure for almost the entire quarter.
We ended the year with net asset value per share of $14.74, up $0.07 from the third quarter or $0.15 excluding the payment of the final special dividend distribution. This reflects our third consecutive quarterly NAV increase since the COVID crisis hit in the first quarter of 2020, which is a result of both the improved market conditions and demonstrated resilience of our borrowers. As a result, our current NAV is only -- down only 3% versus the end of 2019.
Looking forward, for the first quarter of 2021, our Board has declared a regular dividend of $0.31 per share, the same amount we have paid each quarter since our IPO. As a reminder, in addition to our regular dividend for the fourth quarter, we also paid the final of our 6 previously declared special dividends of $0.08 per share for shareholders of record as of December 31.
We saw a very strong origination activity this quarter, a topic I will spend more time on shortly, and this provided for solid portfolio growth and an increase in leverage. We ended the quarter with leverage of 0.87x, which is up from 0.46x at year-end 2019. We continue to be pleased with the progress we have made towards our targeted range of 0.9x to 1.25x. We are optimistic about the current market opportunity set and believe our favorable market position will allow us to continue to invest in attractive opportunities as we work to grow the portfolio, which, when fully deployed, we expect will be approximately $11.5 billion.
Regarding our balance sheet, we remain very well capitalized with $2.1 billion of liquidity. I would highlight that on December 8, we issued $1 billion of unsecured notes at our most attractive pricing level to date. We believe having a significant portion of our financing liabilities, as unsecured, provides us with optimal financial flexibility and allows us to prudently manage our capital structure. In addition, we are pleased with the continued progress we've made on lowering our cost of financing.
We'd also like to welcome Melissa Weiler, who has joined ORCC's Board of Directors as an Independent Director. Melissa brings a great deal of experience in the credit space, including most recently at Crescent Capital, where she served on the Management Committee and oversaw several credit businesses, and we look forward to working with her as we continue to pursue our objectives for our shareholders.
Lastly, on December 23, Owl Rock Capital Group, which is the parent of ORCC's investment adviser, Dyal Capital Partners, announced that they are merging to form Blue Owl Capital. Blue Owl will enter the public market via business combination with Altimar Acquisition Corp., a special purpose acquisition company.
As noted in our definitive proxy statement filed on January 27, this triggers a change of control in the advisory agreement. A special meeting has been scheduled for March 17 for shareholders to vote whether to approve the proposals outlined in the proxy. We are pleased to note that we recently received word that the independent proxy advisory firms, ISS and Glass Lewis, both recommended that ORCC shareholders vote for the proposals. We also note that there are no expected changes to ORCC's investment strategy, team or process as a result of the transaction. While there remain many steps prior to the closing of the merger, we're certainly excited about the opportunities that this expanded platform may provide for ORCC.
Turning to the portfolio, we continue to be proud of the strength of our credit performance over the course of a very challenging year. We are pleased that the core thesis of our investment strategy has borne such strong results and that our focus on credit selection and downside protection have served us well.
Looking at our internal credit ratings, our portfolio remains quite stable, with overall results largely consistent with last quarter. Names in our 1 or 2 rating categories, which are names performing in line with or exceeding our expectations at the time of underwriting, comprise approximately 90% of the fair value of the portfolio. The percentage of our lower names is 10% of fair value, down from 12% last quarter. While we certainly have a small number of credits which remain challenged, the vast majority of our portfolio continues to demonstrate solid financial performance and has proved to be resilient in the face of an uncertain economic environment.
While we remain vigilant about the economic impacts of COVID and recognize that the winter months have seen stricter lockdowns in certain geographies, we would note that the adverse economic impact has been less severe than what we experienced in the spring of last year. Businesses have adapted, and based on what we are hearing from our borrowers, many are continuing to recover towards pre-COVID operating levels despite these ongoing challenges.
Amendment activity this quarter remained modest with 3 material amendments. Our amendment activity peaked in the second quarter at 8 amendments. For the last 2 quarters, our pace of amendments has moderated to more ordinary levels. Where we do have amendments, we continue to see financial sponsors provide support in these situations either through material debt paydowns or additional equity support.
PIK interest represents less than 5% of 2020 annual total investment income, and no new borrowers were moved to PIK interest in the quarter. As of quarter end, we had one name on nonaccrual representing 0.5% of the total cost of the portfolio and 0.3% of fair value, down from 2 names, representing 2.1% of the portfolio on a cost basis last quarter. CIBT Global remains on nonaccrual status, and no new borrowers were added to nonaccrual status in the quarter.
Swipe Acquisition Corp., a manufacturer of gift cards and hotel key cards, which was placed on nonaccrual in the third quarter, was moved back to accrual status in the fourth quarter as a result of the capital structure rightsizing. As I noted on our last earnings call, commensurate with Swipe's debt restructuring, Owl Rock has become a controlling shareholder of the company. As this is the first time in our history where we've had to take control of a borrower, I would like to spend a minute here.
We remain very supportive of the business and management team and continue to believe in the long-term sustainability of the company. In order to best position the company in the near term, we rightsized the outstanding debt amount and equitized the remainder of the debt balance.
In contrast to the quick resolution we had on National Dentex last quarter, which was repaid at par, we recognize that this process will likely have a longer runway. We are working closely with the company to maximize the long-term value of our position. We are well prepared for this moment by having proactively made significant investments in our workout and portfolio management team over the last 2 years. And we will bring the full resources of our platform to bear in order to support the company going forward.
Moving on to originations, we saw robust investment activity in the fourth quarter, reflecting increased levels of M&A across the market. As I noted on last quarter's call, improving economic conditions and market strength stimulated M&A activity for private equity firms, with increased sales processes and tack-on acquisitions for portfolio companies, particularly for those least impacted by COVID. Owl Rock was well positioned to capture share in this more active market environment. We are very pleased with the investments we made.
Gross originations for the quarter were $1.5 billion, with funded originations of $1.3 billion. We had sales and repayments of $520 million for net funded activity of $755 million. For context, while this is one of our strongest quarters ever, it is not a record for us, and we've exceeded these quarterly volumes on multiple occasions before.
3 positions were fully repaid or exited, and we had partial pay downs or sales across 10 borrowers. Given the strong market conditions, we took the opportunity to sell some high-quality but lower-spread paper at attractive prices. This is the type of mix shift you can expect to continue to see as we optimize the portfolio as it reaches full deployment.
In the quarter, we added 12 new portfolio companies and provided incremental capital for 14 existing borrowers as we saw a significant amount of strategic acquisition activity across our borrowers. We're pleased to see the benefits of our growing incumbency positions as our borrowers are able to turn to us to support their strategic initiatives, and we're able to deploy additional capital into businesses we know well and where, in some cases, we have years of experience with the company.
We are pleased with the volume of investments we closed in the fourth quarter, which included 3 large unitranche or stretch first lien facilities and our sole commitment to a second lien facility for PCI Pharma Services, as well as the increased yield we were able to achieve while still maintaining our focus on credit quality.
The weighted average spread of new investments was roughly 690 basis points which helped increase our total portfolio spread to 655 basis points. For frame of reference, at the time of our IPO, the portfolio spread was 610 basis points and has increased consistently in each quarter since then.
In addition to the economic terms, the leverage levels, covenants and documentation terms were all attractive on the investments we made. As I noted earlier, our portfolio at quarter end now stands at over $10.8 billion across 119 portfolio companies, and we are very happy with the continued strong credit performance of our borrowers.
Now I'll turn it over to Alan to discuss our financial results in more detail.
Thank you, Craig. Good morning, everyone. I'm going to start off on Slide 7 of our earnings presentation, where you can see that we ended the fourth quarter with total portfolio investments of $10.8 billion, outstanding debt of $5.3 billion and total net assets of $5.7 billion.
Our net asset value per share increased to $14.74 as of December 31 compared to $14.67 as of September 30. We ended the quarter with leverage of 0.87x debt-to-equity and $2.1 billion in liquidity. Our dividend for the fourth quarter was $0.31 per share, plus our final special dividend of $0.08 per share, and our net investment income was $0.29 per share.
On the next slide, Slide 8, I'm going to talk through in a bit of detail the results of our revenues and expenses for the fourth quarter. You can see total investment income for the fourth quarter was $221 million, up $34.2 million or 18% from last quarter. This increase was primarily driven by increased interest income, a result of our ability to continue to grow the portfolio and progress towards our leverage target. This increase also includes income we booked in the fourth quarter related to the full paydown of National Dentex, which was $0.02 per share.
On the expense side, what you'll see is a large increase in net expenses, primarily driven by our fee waiver expiration and increased interest expense. Total expenses were $112.9 million, up $11.5 million or 11% from last quarter. You will also see net expenses, which is total expenses net of our fee waiver, of $104.9 million, up $44.1 million for the quarter. We did still have $8 million of fee waivers in the fourth quarter since the fee waiver didn't terminate until October 18, which is about $0.02 per share benefit to NII this quarter. That will go away for next quarter.
So to try to summarize here a bit, we're really pleased with our progress in building the portfolio. The activity level in the quarter allowed us to grow the portfolio at attractive spreads, which will help us -- which will help allow us to generate the expected earnings power to cover our dividend by the second half of the year.
As we look to the first quarter, there are a few items I want to call attention to. As I've mentioned, there are 2 nonrecurring items in the fourth quarter that we will not have the benefit of in the first quarter. The $0.02 per share of revenue from the National Dentex paydown and the $0.02 per share from the partial quarter fee waiver. Some of this $0.04 per share we expect will be partially offset by interest from new investments in the first quarter, and a full quarter's benefit of income from our investments made in the fourth quarter, the majority of which closed in December.
As a reminder, we had previously expected our NII would dip as the fee waivers expired and then improve as we approached our leverage target. So consistent with that, we should see NII per share down a little in the first quarter versus the fourth quarter before coming back up in the second and third quarters this year. However, I would note there are a number of factors that will impact NII in any given quarter, including origination and repayment levels.
A few final closing comments before handing back over to Craig. We continue to be well positioned in the industry given the strength of our balance sheet. We issued the largest bond ever in the BDC space in December, a $1 billion issuance, at our lowest cost to date, and our credit spreads have continued to tighten since that issuance. We very intentionally have built a well-diversified financing landscape, diversifying the number of facilities we have, the types of facilities and number of lenders we partner with.
Matching duration between the left and right sides of our balance sheet is another important aspect of our landscape. Our weighted average debt maturity is over 6 years, and we do not have any debt maturities until June of 2023. We continue to have one of the lowest leverage levels in the industry at 0.87x debt to equity.
As of December 31, we had $2.1 billion of liquidity. In total now, we have issued $3 billion of unsecured debt, which brings us to a current funding mix of 56% unsecured debt. Because of this, we continue to have a meaningful amount of excess collateral for our secured facilities, and we continue to have a significant cushion to our regulatory asset coverage of 150%.
Overall, we believe our funding profile continues to be very sound, and we continue to be in a very good position. Thank you all very much for your support and for joining us on today's call.
Craig, back to you.
Thanks, Alan. To close, I wanted to share our thoughts on the current market and touch on some of the earnings levers we have available to us. Market conditions in the fourth quarter were very constructive as we saw robust investment activity across the direct lending space.
Given how well our platform performed during COVID and our strong balance sheet, liquidity and relationships, we believe private equity firms wanted to work with us on their most important transactions. As we look to the first quarter, market conditions remain strong, and we have continued to see M&A financings drive activity levels. There was some pull forward of deals in the seasonally strong fourth quarter. So we expect deal activity will be down in the sector in the first quarter relative to Q4. Repayments may pick up given the robust syndicated market conditions. While it's hard to predict specific timing, we do expect many sponsors will look to refinance or engage in sale processes.
The deal opportunities we are seeing are broad-based across industries. We remain focused on less COVID-impacted sectors and are finding interesting opportunities across some of our largest sectors where we tend to have deep industry knowledge and high conviction in the broader industry fundamentals.
Before I close, I want to touch on some of the levers we have to drive higher earnings over the next few quarters, a topic I've spoken on in previous calls as this remains a focus for us given the expiration of the fee waiver. As I've highlighted previously, the biggest driver of expected earnings growth is the continued expansion of our portfolio as we move towards our target leverage level. With that in mind, we are certainly pleased with our origination activity this quarter, which allowed us to make significant progress on our leverage metrics.
Based on our current progress, we expect to get to target leverage by the second half of the year, although the pace of portfolio growth will depend on both repayments and origination activity. In addition, as our portfolio matures, we expect to benefit from higher levels of repayments, which should result in increased income and prepayment fees.
Further, we have continued to originate loans at higher spreads in recent quarters. We expect to be able to continue to lift our overall portfolio spread as we deploy capital into new investments and get repaid on some higher quality but lower spread investments. In addition, we believe we can continue to lower our overall cost of debt, which will further benefit earnings. Taking these factors into consideration, we feel confident that there are a number of levers that we can use to increase our NII.
As I've said on previous calls, we believe we are on track to cover our dividend from earnings by the second half of this year and until then, we expect to continue to pay our regular dividend of $0.31 per share each quarter, subject to our Board's approval.
To close, I'd like to highlight what we built over the last 5 years and the significant progress we've made over the past year. We believe our market position is strong, and we remain well positioned to be a direct lender of choice for private equity sponsors and borrowers in a very active time in the market. The portfolio stands today at $10.8 billion in investments comprised of roughly 80% first lien positions with an average spread on investments of 655 basis points.
From a credit perspective, we have only one name on nonaccrual status, which accounts for 0.3% of the fair value and 0.5% of the cost of the portfolio. We maintain meaningful downside protection on our investments with an average loan-to-value below 50%, which has remained consistent since inception.
Our platform is bolstered by the strength of our balance sheet. We maintain 4 investment-grade ratings, which have allowed us to raise a significant amount of unsecured debt at attractive levels. Taken together, we feel we have built a diverse and defensive portfolio of scale, supported by an attractive financing profile, which we believe provides a strong foundation for us to build on for years to come.
Thank you for joining us today. We appreciate your continued interest and support and look forward to speaking to you again next quarter.
Operator, please open the line for questions.
[Operator Instructions] Our first question comes from Robert Dodd with Raymond James.
On -- if I can, on the spread question, Craig. On Slide 13, obviously, we can see that, yes, I mean, your spreads have been the light blue line, like 6.3%, up to 6.55% now. I mean, given the competitiveness of the environment, I mean, you made comments about that there could be refinancing waves as well, given how aggressive some areas of the market are, maybe like the BSL market, which is not exactly what you do. But how -- where should we get the -- you sound very confident that you can continue to take that spread higher, maybe not a lot higher, but higher. So where -- how should we reconcile the very, very competitive environment and the fact that you expect the spread to continue to expand somewhat? I mean, is there a mix shift that you're talking about within there? Can you clarify that?
Sure, Robert. Thank you very much. So the first point I would make is we don't need very much spread expansion to cover our dividend. The significant increase in earnings is going to come just getting to our target leverage and repayments. The smallest factor is spread expansion. So it's maybe $0.01 a share based on our math. So it's not the driver. We have been able to achieve spread expansion, and you touched on it, it's really more about mix shift. Part of the way we scaled ORCC, and you're familiar with this, is we were investing, and we want -- we're so careful about credit quality. And so we put a pretty substantial amount of the portfolio, $1 billion-plus of paper that was first lien -- true first lien paper at relatively low spreads, in many cases, below 500 over.
And so part of what we're saying is as that paper is repaid or we sell it, this quarter, we sold a couple of positions to either other direct lenders or into the syndicated market, we can replace that paper with unitranche paper that carries at least 100, 150 basis points more spread. We have found opportunities to increase our spread just organically on new deals. The fourth quarter, we had very attractive pricing on new deals, unitranche, in particular, we did 1 or 2 second liens. We'll continue to do those. But I acknowledge the premise of your question, at this moment in time, sitting here on February 24, it's a competitive market, but we all know that comes and goes over the course of the quarter, over the course of the year. And I suspect we'll continue to find really nice market opportunities to get wider spread. But I think the bigger driver is mix shift.
Got it. I really appreciate that color. If I can kind of follow-on from the other side. The compression we're seeing in borrowing costs, frankly. I mean...
Yes.
As you said, I mean, you did $1 billion at 3.4% without asking you to put it down exactly. I mean, how low do you think you can take either your unsecured borrowing cost or maybe your all-in borrowing costs versus where it is today?
Alan, do you want to -- yes.
Yes, of course. Thanks, Robert. Look, we do think we can continue to tighten costs on the right side of the balance sheet over time. And we've been in the process of optimizing how we look at our financing landscape. Costs are definitely ripping tighter there as well.
Our bonds trade 50 basis points tighter today than when we did them. We thought 3.4% was pretty good, but they're trading 50 basis points tighter than that. We're well aware of some of the more recent prints or bonds, but you can take 50 basis points across a $3 billion bond complex. Obviously, the bonds are not callable, but, look, there's some real opportunities there over the next year or 2 to reduce our borrowing costs further.
Yes. I mean, to that point, there's been 2 more add-ons to BDCs this week with at premiums to what they issued at. Not that long ago...
Yes, we -- look, just because you brought it out, Robert, so I think it's a broader point for the space. I think it's a very encouraging sign for BDC shareholders, the strong reception that BDC bond deals are getting in the investment-grade bond market. And I speak of Owl Rock, but I speak of some of the other high-quality managers as well. I think this is a bit of a sea change that I'd like to think we, in a part, help drive which is getting more investment-grade bond buyers into the unsecured bond market for BDCs. I still think we print too wide, my opinion, but I think it's nice to see spreads continue to tighten. I think that there's general opportunities for spreads across the sector to continue to tighten beyond what we might do relative to the others.
I agree with you on that point as well.
Thank you.
Our next question comes from Ryan Lynch with KBW.
First, wanted to have -- wanted to discuss you with the leverage where you guys plan on operating now? Obviously, you guys have a leverage target of 0.9x to 1.25x. That's a pretty wide range. Given the current market dynamics today, given where we're just kind of coming out of this significant economic downturn, where within that target range would you like to operate?
Sure. I'll start, and Alan can chime in. Ryan, thanks. So the range is, as you said, 0.9x to 1.25x. And we're balancing a number of constituencies when we think about exactly where we're going to land there. Obviously, leverage is accretive for our shareholders, particularly with our low borrowing costs, but we obviously also want to make sure that we are -- have a really strong balance sheet in the eyes of the rating agencies and the investment-grade bond buyers as well. I think if you are modeling us right now, I think probably in the -- right now, the appropriate place to model us would be 1x. I think that's the right balance of those 2. And we still have some work to do to get to that 1x. So I think that's really where I would set your expectations.
We certainly think our portfolio, particularly the high-quality portfolio that we've built and the great credit performance could withstand higher leverage. But we -- from a financial policy standpoint, we really want to make sure we've got a super strong balance sheet and making sure leverage is comfortable as part of that, and that's the commitment we've made to the agencies and to the investment-grade bond community. We're proud of earning the trust of the agencies and the investment-grade bond buyers, even while we're a private BDC and want to continue to deliver strong results there. So 1x is probably a good number to model in.
Okay. Understood. And then you guys obviously have a good view of market dynamics and see a wide range of deal flow in the market. I would just love to get your guys take on what are you guys seeing in terms of terms, structures and leverage today in the market in February 2021 time frame? And how does that compare with levels that we were seeing kind of pre-COVID?
Sure. So I'm going to extend the lens a bit because I think it's instructive of how things have migrated. Obviously, when COVID hit, spreads blew out, we all know that. In the summer -- and we were active in the summer. We didn't do a lot. There wasn't a lot of deals to do. But at that point, you could get significant premiums to pre-COVID levels. I would say, directionally, 150 basis point premiums to pre-COVID levels. By the fourth quarter, we were still getting a very nice premium to pre-COVID levels, but it was not as wide as the COVID wides. So that premium might have been more like 75 to 100, instead of 150.
Today, my view is we are still wider than pre-COVID levels. But it's probably more like 50 basis points wider, not 75 to 100. There are certainly deals that might be inside of the 50, and there are deals that are wider than the 50. But if I was just going to give you a metric to give you a sense. Beyond just the pure spread though, I think the leverage levels remain reasonable. The covenant structures remain reasonable. The private equity firms are putting in significant checks into the deals that they do. So the loan to values are reasonable. And even at only a 50 basis point premium to pre-COVID levels, if you're talking about printing unitranche, just pick a number, L plus 600 with a floor, you're earning close to 8% on that. It's going to move up and down, but that's to give you a sense.
Our next question comes from Mickey Schleien with Ladenburg.
Craig, I wanted to follow up on the asset mix question. I noticed that at fair value, the proportion of the portfolio in unitranche has been trending down. I realize that, that ratio skews by appreciation in the equity portfolio. But I would like to understand whether you still like the unitranche market's risk-adjusted return in the current environment since that seems to be an important part of your plan to earn the dividend from NII?
Sure. I don't think it's moved too much, maybe a couple of percentage points. We -- unitranche we very much like. And I would say it's probably the type of loan we're most interested in making. Frankly, part of what you're seeing in the reduction in the percentage is we have to make a judgment every quarter on what's considered a unitranche, and we do that, and try to be, in a pretty analytical way. And over time, as our company, some of our unitranche, original unitranche loans are doing really well. And so they're deleveraging. And so their characteristics are becoming that of first lien rather than unitranche.
So it's not that we're seeking less unitranche, but it's really a sign of the quality of the unitranches that we are investing in. So don't read anything into a lack of appetite for unitranche. It's our first priority, I would say. We like the additional spread you can get and it's $1 attachment. It fits really well with that upper middle market sponsor target base. And you should expect us to continue to see unitranche in a meaningful way, just like we did in the fourth quarter, where it was our 2 biggest checks for the quarter.
I understand. And looking at the market overall, how do you feel about the loan market's balance between supply and demand? When you think about the K-shaped recovery, capital providers, including folks like you are all eager to find borrowers who are performing well. During the pandemic, they seemed to have an enough supply of capital available. And that could portend more compression in loan spreads as the year progresses. So I'd like to get your view on supply and demand and also just what level of LIBOR floors you're able to get right now?
Sure. Just to clarify, are you -- when you say the loan market, are you talking about broad -- the public market or our market or sort of a combo of both?
Your markets. The leverage loan markets, EBITDA on and lower.
Yes. Yes. Look, we -- I think that there's a very healthy balance between supply and demand. In any one month or any one quarter, it can move to the -- one direction or the other. It was not long ago where I would say there was -- there were borrowers that wanted to borrow that couldn't easily obtain attractive terms, right? You just have to go back to late summer and into September. And I think the borrowers would not have said they could get whatever they want. But as the economy improved, given the Fed's actions, it certainly opened up by the fourth quarter. But we got really attractive terms in the fourth quarter. I mean, look at the rates that we got in the fourth quarter.
So I'd say that speaks to a pretty healthy environment where high-quality companies can get financing in the direct lending market from high-quality firms like Owl Rock at a fair rate, and 8% plus, which we think is very attractive. There'll be periods of time where that tightens in and periods of time where that widens out. We really focus on the private equity community. And the private equity firms have multiples of the amount of capital that the direct lenders have, multiples. $1 trillion plus of dry powder in the private equity community. And so that's really what we serve.
There are times the syndicated market gets very strong, and that can be a competitive alternative. Right now, we're in one of those moments where the syndicated market is really strong. I've been in this market for 30 years. In my experience, it doesn't last forever, and it will swing. And so that pendulum can move a bit. But I feel really good that we'll continue to find deals we do that we like at good terms, that terms may be a bit better or a bit worse at any one moment in time, but we're in it for the long term, building out a long term portfolio. The loans we make are 5 to 7 years. So we're not trading these things in and out. And I think we're going to continue to find plenty of things to do.
Our next question comes from Devin Ryan with JMP Securities.
A follow-up just on the leverage question and conversation. I just want to get a little bit more context, if possible here. Clearly, you're making good progress and there's still room to get to the 1x. But should we be thinking about the 1x as more kind of an intermediate-term level as just the portfolio settles in, and then we could maybe start to think about getting towards the midpoint, which is, I think, 1.08x or something above the midpoint over a longer period or a change in the operating backdrop? But just a little bit more context would be helpful as I appreciate there's still room to get to 1x, so not to put the cart before the horse here.
Sure. Again, I think if you're modeling us, I would run it at 1x. Obviously, the investments we make are a bit lumpy and repayments are lumpy. And so we can't measure it as precisely down to the 100 basis points of leverage. And so I suppose at any one moment in time, 1x could be slightly higher, slightly lower. But I think in the -- you should model us at 1x.
Now we evolve at Owl Rock. I mean we evolved over the last 5 years. As folks will remember, there was a regulatory change where we couldn't go to 2x, and that changed. I mean, I certainly wouldn't want to describe this as set in stone forever. But I think in the near term, we're not signaling it's an intermediate step. We're signaling that's our target. But I suppose that there may be a quarter where it's slightly higher or slightly lower based on deal flow.
Okay. Got it. And then a follow-up here, just with the Blue Owl SPAC moving forward, it doesn't seem like much of a change for ORCC holders. But you guys have been able to spend some more time with the Dyal team in recent months since that was announced. I'm curious if there's any other synergies you guys see there that could flow down to ORCC or any other thoughts with that transaction?
Sure. But, obviously, I'm limited at what I can say at this point. And we put a lot of information out publicly. We, in particular, have pointed to opportunities on the origination side. Obviously, Dyal has wonderful relationships with many leading private equity firms, and that's Owl Rock's bread and butter in terms of the client base that we serve. So in particular, we think that's a very attractive opportunity. I'm limited at how much detail I can go into, but we're excited about the merger, everything is on track. And when the deal closes, we will be sure to come back to this group and talk in more detail about the power of that combination.
Congrats on another quarter of notable progress here.
Great. Thank you.
Thank you.
Our next question comes from Casey Alexander with Compass Point.
I mean I think part of the reason that you've been asked 6 times about the leverage question is that the analytical community has seen people who target 1x. And given the vintage that you originated so many of your assets in -- you're about to see a quarter sometime in the next few quarters where you get $1 billion of repayments. And you're going to constantly be chasing that 1x if that's where you believe full deployment is. And so wouldn't you, shouldn't you, couldn't you try to flex that a little higher, just to protect yourself from the vintage that you've previously originated that's about to go into some really significant repayments?
Sure, Casey. Thanks. So look, the first thing I want to highlight is if and when we do get the $1 billion of repayments, it's going to be really accretive to NII. We're going to have a significant pickup in NII, which will go a long way to covering our dividend and be very valuable for our shareholders. So while you're right, repayments create work, I just -- we have been below repayment pace versus peers for years. And I think we're -- based on what I'm seeing right now and conversations we're having with the private equity firms, I think there's a good chance that's going to change in the short term, and I think that's going to be very accretive. And so in a sense, I'm looking forward to that.
You're -- again, we don't have the ability to measure this down to a tiny increment. But I guess the part of your question that I just want to point out because we're being very transparent about this -- we care deeply about our investment-grade ratings. That's part of this. And we have to balance what we want to accomplish just get at 1x, so making sure that we maintain those ratings. And we'll find the right balance. We have, like in everything we do, we'll find that right balance. And if there's -- and you're right, we need to leave some cushion for repayments. But we have a prolific ability to originate, as we demonstrated again this quarter at $1.3 billion. So even if we got $1 billion of repayments, our platform has the ability to put out $1 billion-plus in a given quarter. So we're not far off from our target leverage. We're going to work hard to get there, recognizing there will be repayments. And we will try to balance getting the most attractive earnings profile with the strongest reception from the investment-grade bond community. And we'll continue to deliver just like we have for 5 years.
Great. Secondly, would you guys like to take this opportunity to give any sort of update on the share repurchase program that you announced last quarter?
Sure. I'm happy to do that. We did not use -- just for folks, to remind folks, we approved $100 million last quarter. Unlike the share repurchase program we put in place at the IPO, which was programmatic -- $150 million programmatically, which we used all of that, this $100 million is not programmatic. So it's discretionary, but it is subject to blackout windows as is typical with public share repurchase programs. We did not use any of the $100 million this quarter. The blackout programs constrained when we were able to use it and just candidly, it didn't line up. The most attractive market opportunities to buy the stock didn't line up with the blackout program. We're going to continue to look hard at it. And I would expect we'd do some. I'm pleased to see the stock has been moving up nicely over the last few weeks. But we continue to think the stock is undervalued, and we'll look to use the program based on market opportunities.
Our next question comes from Finian O'Shea with Wells Fargo Securities.
Craig, first question on the portfolio company operating performance, you outlined that it's returning to pre-COVID levels, which is, obviously, great. Looking at your, I think, third slide where you give the revenue and EBITDA lately, $460 million and $100 million, respectively. Those figures have shown really good performance, margin, et cetera, over the whole year. So I understand that's adjusted. You footnote that. But just for context, now that we've gone through COVID, can you give us a recap of what happens to, say, actual revenue and EBITDA for your portfolio and where it stands most recently?
Well, these numbers are a reflection of actual revenues and EBITDA. That's why we're showing them. But if your question is more just sort of -- give me some color on how the companies are doing, just generally, what I would say is one of the reasons why I think our portfolio has performed as well as it has is, in particular, our biggest positions are in sectors that were not heavily impacted by COVID. Our software and tech businesses grew during this period of time. They didn't shrink. Our food and beverage businesses grew during this period of time. Our health care businesses did very well. Our insurance services business did really well. So the biggest sectors, if you go through our 6, 7 biggest sectors, generally, those businesses continue to do well.
Certainly, there were some that had revenues that declined. But as you know, the overall impact on our portfolio was not significant. Where there were companies that were more heavily impacted, they were smaller positions. Certainly, we have a handful of businesses that are travel related. That's a sector -- obviously, those end markets were down considerably. And so, for example, we've got a couple of aerospace businesses. Their top lines were down considerably. And I would say the companies and the sponsors did a really nice job of offsetting as much as possible the revenue declines with significant cost cuts.
And so in a lot of cases, they were able to offset the revenue drops with margin improvements. So the EBITDA drop wasn't as much as we might have feared. But overall, I would say, just based on the end markets our company serve and the quality of the businesses, they held up well. And that's why the performance -- credit performance has been as strong as it is. That's why the average mark in the book is 97.5%. That's why we have only one nonaccrual. The companies are continuing to do just fine.
That's great. I appreciate that. And then just a second question, another on the potential Dyal merger with your manager. We've all seen the headlines related to pushback from a couple of your peers. That doesn't concern us, obviously, on this call. But as it relates to the BDC and direct lending franchise, are you seeing any pushback from the private equity manager constituencies within the Dyal network?
Not at all. No. I think, not at all. I think that we've built our business around being a great partner for private equity firms, and Dyal has done the same thing. Dyal and we have terrific brands with the private equity community, and this is an opportunity to do more with the private equity firms. And the reception we've gotten has been very supportive and encouraging. And I think that I'm excited about what we're going to be able to do going forward on a combined basis when the deal closes. So not only no pushback, I think it's been encouraging and an endorsement of the transaction.
Our next question comes from Kenneth Lee with RBC Capital Markets.
Just in terms of potential new investments over the near term. I think in the past, you talked about aiming towards the upper middle market segments. Wondering is this going to be any change? Or could we see even potentially larger EBITDA ranges for new potential borrowers? And relatedly, wondering if you could just comment on any expectations for average new investment sizes going forward?
Sure. In terms of size of company, I think we really feel validated during COVID as to our sweet spot being that upper middle market. The average $100 million EBITDA, I think it's actually been pretty consistent over the last couple of years. We love financing bigger companies than that. I mean, I'd love -- we love $200 million, $300 million EBITDA companies. We tend to do those more with second liens. Those bigger companies, generally -- although there are exceptions, and we have seen billion-dollar-plus unitranches, the bigger the company, the more likely they're not doing unitranche, and it might be more of a second lien opportunity.
We also look at smaller deals. I mean, they don't influence the numbers terribly, so you won't see them, but we do finance businesses that might be $25 million or $30 million of EBITDA, if it's a credit that we really like. But our sweet spot is in that $70 million to $110 million EBITDA business. And the good news is that, that opportunity set is growing. 5, 6 years ago, those companies didn't do direct deals. The pool of capital wasn't there for them to take advantage of. And now with us and the rise of some other large direct lenders, the private equity firms have now realized that they can do large financings direct and not go to the syndicated markets, and many of them become more and more comfortable with that. I think that opportunity set will continue to grow.
So I don't think they'll see a change. I think at any one moment in time, we could see a little higher or lower, particularly kind of depending on what's going on in the syndicated markets. I think I missed the second part of your question, but maybe if you could just remind me of that?
It was just expectations for average investment sizes?
Yes. I mean we've been pinned right around $90 million pretty consistently. We -- as you know, when we make an investment at Owl Rock, one of the benefits of our larger platform as we can speak for a bigger check and be a more appealing financing party. So very routinely an investment into ORCC is coming at the same time investment in other Owl Rock managed funds. So we've been averaging about $90 million or so. So I think that's as good an assumption as any. But it depends upon how big the deal is. We size things appropriately. We like 1% and 2% position sizes. So you can -- basically $90 million is just under 1%, a couple of hundred million bucks just under 2%. We have very few north of that.
Our last question comes from Mickey Schleien with Ladenburg.
Just a few follow-up questions. Alan, was there anything material in dividend income other than Moore Holdings? And what is the outlook for dividend income given that you sold Moore?
We did not sell the Moore positions. So that's -- you should expect similar on a go-forward basis. Moore has been a strong contributor. And so you should expect similar.
Okay. And what were the main drivers of the realized loss this quarter other than Moore and Swipe?
There was not a realized loss on Moore. Swipe would have been the realized loss.
Okay. And just thinking about the right side of the balance sheet, Alan. How do you think about mitigating the potential squeeze on earnings down the road when the Fed begins to potentially raise rates? In other words, would you consider increasing the proportion of your debt liabilities at fixed rates or swapping into fixed rates?
I think the great way about how we're set up here is we're entirely floating rate on the left side of the balance sheet. So Mickey, if you look in the back of the Q or K, we always put that interest sensitivity table in there. And you could see that as rates rise, our NII rises quite considerably. So I don't -- so I feel very comfortable about how we're set up there.
So what is the average LIBOR floor in the portfolio?
Bryan?
I think about 85 bps.
Yes.
About 85 bps. Just on it more, we'll call you off-line. I don't know what you're looking at, but we haven't sold Moore. It's been a great performer. It's generating lots of dividend income. So we'll -- if there's something that makes it look like we either took a loss or resold it, we'll help clear that up, but...
No, my mistake -- could be my mistake.
All good. Thanks, Mickey.
There are no further questions in the queue at this time. I'll turn the call back over to Craig Packer for closing comments.
Okay. Thank you all for joining. We appreciate your support. Look forward to talking to you again in the future. I hope you all of your families remain safe and well, and have a great day.
This concludes today's conference call. You may now disconnect.