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Owl Rock beefs up on capital to pursue middle-market tech deals

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New name, same talent.

Owl Rock Technology Advisors, the same team supporting other Owl Rock CLOs, has launched an inaugural middle market CLO that is continuing the CLO manager's tradition of spreading underwriting responsibilities among a variety of banks.

The $333.5 million Owl Rock Technology Financing 2020-1 LLC deal, underwritten by MUFG Securities Americas, is split into a $200 million tranche rated single-A by S&P Global and a $133 million unrated, residual portion.

MUFG is a new addition to the CLO manager's stable of investment banks, according to Finsight. The others are Natixis, Deutsche Bank Securities, Societe Generale, Goldman Sachs and Bank of America.

Finsight recorded five other transactions completed this year by Owl Rock Capital Partners entities that, together with the current deal, total $2.9 billion. That's already significantly more than the $1.82 billion the firm issued in 2019, though unsurprising given investment trends this year.

S&P Global Market Intelligence noted in a Sept. 29 report that "software activity has made up the bulk of U.S. private equity and venture capital deal flow in 2020, as coronavirus lockdowns left consumers and companies alike looking for digital solutions."

In the report, Owl Rock co-portfolio manager Pravin Vazirani said that most technology and software companies that approached the firm have been looking to raise capital for offensive reasons, seeing an opportunity to be "a little more aggressive."

Owl Rock's most recently completed transaction, OWLR V, was issued in October and totaled $341 million. It was split into three tranches: a $182 million A-1 Class portion rated AAA and finding a spread of 185 basis points over three-month Libor, and $14 million A-2 Class piece, also rated AAA, that priced at 220 basis points over three-month Libor. Credit enhancement on the tranches was 48.00% and 44.00% respectively. Owl Rock retained an unrated, $145.5 million portion.

The current deal will be collateralized by at least 90% senior secured loans, senior secured bonds, cash and eligible investments, with a minimum of 85% of the loan borrowers required to be based in the U.S., according to the S&P Global pre-sale report. A maximum of 10% of the loans in the pool can be covenant-lite.

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