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BDC Stock Report Issues Research Report on Owl Rock Capital Partners II

Owl Rock Capital Corp II has filed a Form N-2 for an initial public offering of up to 150 million of its common shares at an initial offering price of $9.47 per share.

The shares will be offered on a best-efforts, continuous basis through the company’s dealer manager, Owl Rock Capital Securities LLC.

SUMMARY:

What’s not to love for yield-hungry investors? Great diversification, quality and proven management, easy to monitor and fully regulated by the SEC.

Owl Rock employees also have a commitment of over $200 million across its platforms including $10 million invested in Owl Rock II. So, they are eating their own cooking.

Does that make this a free lunch? We think not. Asides from a massive stroke of bad luck in portfolio selection (a possibility in any managed funds) – most BDC’s and the middle market companies which they invest in are untested in a severe recession.

But then so are most non-alternative investments (like stocks) – with a final caution that this is not like investing in AAA corporate bonds from a large Company like Ralston Purina. Ralston serves pets that need to be fed, regardless of how the economy is doing, where interest rates are, or how the US dollar is performing. BDC’s are not similar in their risk profile.

With that said, we strongly recommend aggressive yield hungry investors take a close look at this offering, with the aid of an investment professional who can provide risk tolerance and portfolio balance advice.

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