Owl Rock Capital Corp III - FORM 10-Q

Attached files

file	filename
EX-32.2 - EX-32.2 - Owl Rock Capital Corp III	orcciii-ex322_6.htm
EX-32.1 - EX-32.1 - Owl Rock Capital Corp III	orcciii-ex321_8.htm
EX-31.2 - EX-31.2 - Owl Rock Capital Corp III	orcciii-ex312_7.htm
EX-31.1 - EX-31.1 - Owl Rock Capital Corp III	orcciii-ex311_9.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-56173

OWL ROCK CAPITAL CORPORATION III

(Exact name of Registrant as specified in its Charter)

Maryland		84-4493477
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

399 Park Avenue, 38^th Floor, New York, New York		10022
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 419-3000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☐ NO ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Small reporting company	☐

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of May 7, 2021 the registrant had 19,888,995 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	2
	Consolidated Statements of Assets and Liabilities as of March 31, 2021 (Unaudited) and December 31, 2020	2
	Consolidated Statement of Operations for the Three Months Ended March 31, 2021 (Unaudited)	3
	Consolidated Schedules of Investments as of March 31, 2021 (Unaudited) and December 31, 2020	4
	Consolidated Statement of Changes in Net Assets for the Three Months Ended March 31, 2021 (Unaudited)	15
	Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2021 (Unaudited)	16
	Notes to Consolidated Financial Statements (Unaudited)	17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signatures		59

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Owl Rock Capital Corporation III (the “Company,” “we” or “our”), our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

•

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

•

an economic downturn could disproportionately impact the companies that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;

•

an economic downturn could also impact availability and pricing of our financing and our ability to access the debt and equity capital markets;

•

a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

•

the impact of the novel strain of coronavirus known as “COVID-19” and related changes in base interest rates and significant market volatility on our business, our portfolio companies, our industry and the global economy;

•

interest rate volatility, including the decommissioning of LIBOR, could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

•

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;

•

our future operating results;

•

our business prospects and the prospects of our portfolio companies including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

•

our contractual arrangements and relationships with third parties;

•

the ability of our portfolio companies to achieve their objectives;

•

competition with other entities and our affiliates for investment opportunities;

•

the speculative and illiquid nature of our investments;

•

the use of borrowed money to finance a portion of our investments as well as any estimates regarding potential use of leverage;

•

the adequacy of our financing sources and working capital;

•

the loss of key personnel;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the ability of Owl Rock Diversified Advisors LLC (“the Adviser” or “our Adviser”) to locate suitable investments for us and to monitor and administer our investments;

•

the ability of the Adviser to attract and retain highly talented professionals;

•

our ability to qualify for and maintain our tax treatment as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and as a business development company (“BDC”);

•

the effect of legal, tax and regulatory changes, including the Coronavirus Aid, Relief and Economic Security Act signed into law in December 2020 and the American Rescue Plan Act of 2021, signed into law in March 2021; and

•

other risks, uncertainties and other factors previously identified in the reports and other documents we have filed with the Securities and Exchange Commission (“SEC”).

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These forward-looking statements apply only as of the date of this report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. Because we are an investment company, the forward-looking statements and projections contained in this report are excluded from the safe harbor protection provided by Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Owl Rock Capital Corporation III

Consolidated Statements of Assets and Liabilities

(Amounts in thousands, except share and per share amounts)

	March 31, 2021 (Unaudited)		December 31, 2020
Assets
Investments at fair value
Non-controlled, non-affiliated investments (amortized cost of $514,883 and $424,543, respectively)	$	519,355	$	427,209
Cash		89,262		82,612
Interest receivable		2,234		2,191
Subscriptions receivable		—		3,409
Prepaid expenses and other assets		291		410
Total Assets	$	611,142	$	515,831
Liabilities
Debt (net of unamortized debt issuance costs of $3,237 and $3,563, respectively)	$	311,707	$	225,215
Distribution payable		6,647		2,098
Management fee payable		543		214
Payables to affiliates		348		739
Payable for investments purchased		1,803		—
Accrued expenses and other liabilities		1,029		1,111
Total Liabilities		322,077		229,377
Commitments and contingencies (Note 7)
Net Assets
Common shares $0.01 par value, 500,000,000 shares authorized; 19,888,995 and 19,858,463 shares issued and outstanding, respectively		199		199
Additional paid-in-capital		285,017		284,577
Total distributable earnings (losses)		3,849		1,678
Total Net Assets		289,065		286,454
Total Liabilities and Net Assets	$	611,142	$	515,831
Net Asset Value Per Share	$	14.53	$	14.42

The accompanying notes are an integral part of these consolidated financial statements.

Owl Rock Capital Corporation III

Consolidated Statement of Operations

(Amounts in thousands, except share and per share amounts)

(Unaudited)

	For the Three Months Ended March 31, 2021
Investment Income
Investment income from non-controlled, non-affiliated investments:
Interest income (excluding payment-in-kind (“PIK”) interest income)	$	8,975
PIK interest income		913
Other income		289
Total investment income from non-controlled, non-affiliated investments		10,177
Total Investment Income		10,177
Expenses
Interest expense		1,432
Management fee		543
Professional fees		511
Directors' fees		256
Other general and administrative		362
Total Expenses		3,104
Net Investment Income Before Taxes		7,073
Excise tax expense (benefit)		33
Net Investment Income After Taxes	$	7,040
Net Realized and Change in Unrealized Gain (Loss)
Net change in unrealized gain (loss):
Non-controlled, non-affiliated investments		1,784
Translation of assets and liabilities in foreign currencies		(221	)
Total Net Change in Unrealized Gain (Loss)		1,563
Net realized gain (loss):
Non-controlled, non-affiliated investments		22
Foreign currency transactions		193
Total Net Realized Gain (Loss)		215
Total Net Realized and Change in Unrealized Gain (Loss)		1,778
Net Increase (Decrease) in Net Assets Resulting from Operations	$	8,818
Earnings Per Share - Basic and Diluted	$	0.44
Weighted Average Shares Outstanding - Basic and Diluted		19,879,496

The accompanying notes are an integral part of these consolidated financial statements.

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of March 31, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

Company⁽¹⁾⁽²⁾	Investment	Interest	Maturity Date	Par / Units		Amortized Cost⁽³⁾⁽⁴⁾			Fair Value			Percentage of Net Assets
Non-controlled/non-affiliated portfolio company investments
Debt Investments
Aerospace and defense
Peraton Corp.^{(5)(7)(15)(16)}	First lien senior secured loan	L + 3.75%	2/1/2028	$	1,812	$	1,803		$	1,810			0.6	%
					1,812		1,803			1,810			0.6	%
Business services
Hercules Borrower, LLC (dba The Vincit Group)^(5)(8)(16)	First lien senior secured loan	L + 6.50%	12/15/2026		36,995		36,462			36,626			12.7	%
Hercules Borrower, LLC (dba The Vincit Group)^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 6.50%	12/15/2026		-		(61	)		(43	)		—	%
Hercules Buyer, LLC (dba The Vincit Group)^(16)(17)	Unsecured notes	0.48% PIK	12/14/2029		1,052		1,050			1,050			0.4	%
					38,047		37,451			37,633			13.1	%
Chemicals
Aruba Investments Holdings, LLC (dba Angus Chemical Company)^(5)(8)(16)	Second lien senior secured loan	L + 7.75%	11/24/2028		6,500		6,407			6,435			2.2	%
Gaylord Chemical Company, L.L.C.^(5)(7)(16)	First lien senior secured loan	L + 6.00%	3/30/2027		30,391		30,088			30,087			10.4	%
Gaylord Chemical Company, L.L.C.^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 6.00%	3/30/2026		-		(26	)		(26	)		—	%
					36,891		36,469			36,496			12.6	%
Consumer products
CD&R Smokey Buyer, Inc. (fka Radio Systems)^(15)(16)	First lien senior secured notes	6.75%	7/15/2025		3,000		3,001			3,216			1.1	%
Olaplex, Inc.^(5)(6)(16)	First lien senior secured loan	L + 6.50%	1/8/2026		12,342		12,224			12,280			4.2	%
					15,342		15,225			15,496			5.3	%
Distribution
Individual Foodservice Holdings, LLC^(5)(8)(16)	First lien senior secured loan	L + 6.25%	11/22/2025		39,439		38,873			39,045			13.5	%
Individual Foodservice Holdings, LLC^{(5)(8)(11)(13)(16)}	First lien senior secured delayed draw term loan	L + 6.25%	6/30/2022		281		238			251			0.1	%
Individual Foodservice Holdings, LLC^{(5)(6)(11)(16)}	First lien senior secured revolving loan	L + 6.25%	11/22/2024		444		409			419			0.1	%
					40,164		39,520			39,715			13.7	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of March 31, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

Company⁽¹⁾⁽²⁾	Investment	Interest	Maturity Date	Par / Units		Amortized Cost⁽³⁾⁽⁴⁾			Fair Value			Percentage of Net Assets
Financial services
AxiomSL Group, Inc.^(5)(7)(16)	First lien senior secured loan	L + 6.50%	12/3/2027		17,832		17,575			17,743			6.1	%
AxiomSL Group, Inc.^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 6.50%	12/3/2025		-		(30	)		(11	)		—	%
Hg Genesis 8 Sumoco Limited^{(5)(9)(14)(16)}	Unsecured facility	G + 7.50% PIK	8/28/2025		19,654		18,778			19,703			6.8	%
Hg Saturn LuchaCo Limited^{(5)(9)(14)(16)}	Unsecured facility	G + 7.50% PIK	3/30/2026		24,835		24,658			24,524			8.5	%
					62,321		60,981			61,959			21.4	%
Food and beverage
Nutraceutical International Corporation^(5)(6)(16)	First lien senior secured loan	L + 7.00%	9/30/2026		11,691		11,527			11,635			4.0	%
Nutraceutical International Corporation^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 7.00%	9/30/2025		-		(10	)		(4	)		—	%
Shearer's Foods, LLC^(5)(6)(16)	Second lien senior secured loan	L + 7.75%	9/22/2028		30,000		29,714			29,925			10.4	%
					41,691		41,231			41,556			14.4	%
Healthcare equipment and services
Packaging Coordinators Midco, Inc.^(5)(8)(16)	Second lien senior secured loan	L + 8.25%	11/30/2028		36,269		35,565			35,725			12.4	%
Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)^(5)(7)(16)	First lien senior secured loan	L + 6.75%	1/31/2028		25,976		25,528			25,508			8.8	%
Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 6.75%	1/29/2026		-		(53	)		(48	)		—	%
					62,245		61,040			61,185			21.2	%
Healthcare providers and services
National Dentex Labs LLC (fka Barracuda Dental LLC)^(5)(7)(16)	First lien senior secured loan	L + 7.00%	10/27/2025		10,315		10,144			10,186			3.5	%
National Dentex Labs LLC (fka Barracuda Dental LLC)^{(5)(11)(12)(13)(16)}	First lien senior secured delayed draw term loan	L + 7.00%	6/30/2022		-		(17	)		-			—	%
National Dentex Labs LLC (fka Barracuda Dental LLC)^{(5)(7)(11)(16)}	First lien senior secured revolving loan	L + 7.00%	10/27/2025		898		872			878			0.3	%
Refresh Parent Holdings, Inc.^(5)(7)(16)	First lien senior secured loan	L + 6.50%	12/9/2026		14,941		14,726			14,792			5.1	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of March 31, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

Company⁽¹⁾⁽²⁾	Investment	Interest	Maturity Date	Par / Units		Amortized Cost⁽³⁾⁽⁴⁾			Fair Value			Percentage of Net Assets
Refresh Parent Holdings, Inc.^{(5)(7)(11)(13)(16)}	First lien senior secured delayed draw term loan	L + 6.50%	6/9/2022		2,673		2,601			2,646			0.9	%
Refresh Parent Holdings, Inc.^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 6.50%	12/9/2026		-		(26	)		(18	)		—	%
					28,827		28,300			28,484			9.8	%
Healthcare technology
RL Datix Holdings (USA), Inc.^{(5)(8)(14)(16)}	First lien senior secured loan	L + 5.00%	4/28/2025		5,000		4,884			4,925			1.7	%
RL Datix Holdings (USA), Inc.^{(5)(8)(14)(16)}	Second lien senior secured loan	L + 8.50%	4/27/2026		5,000		4,884			4,925			1.7	%
					10,000		9,768			9,850			3.4	%
Household products
Walker Edison Furniture Company LLC^(5)(7)(16)	First lien senior secured loan	L + 5.75%	3/31/2027		25,000		24,625			24,625			8.5	%
					25,000		24,625			24,625			8.5	%
Human resource support services
The Ultimate Software Group, Inc.^(5)(7)(16)	Second lien senior secured loan	L + 6.75%	5/3/2027		645		640			658			0.2	%
					645		640			658			0.2	%
Insurance
Asurion, LLC^{(5)(6)(15)(16)}	Second lien senior secured loan	L + 5.25%	1/31/2028		5,000		5,000			5,088			1.8	%
Ardonagh Midco 2 Plc^(14)(16)	Unsecured notes	11.50%	1/15/2027		213		211			229			0.1	%
Ardonagh Midco 3 Plc^{(5)(9)(14)(16)}	First lien senior secured loan	G + 7.71% (incl. 2.27% PIK)	7/14/2026		2,103		1,830			2,103			0.7	%
Ardonagh Midco 3 Plc^{(5)(10)(14)(16)}	First lien senior secured loan	E + 7.71% (incl. 2.27% PIK)	7/14/2026		228		212			228			0.1	%
Ardonagh Midco 3 Plc^{(5)(9)(11)(13)(14)(16)}	First lien senior secured delayed draw term loan	G + 7.71% (incl. 2.27% PIK)	7/14/2022		294		282			294			0.1	%
Peter C. Foy & Associates Insurance Services, LLC^(5)(8)(16)	First lien senior secured loan	L + 6.50%	3/31/2026		1,331		1,331			1,331			0.5	%
Peter C. Foy & Associates Insurance Services, LLC^{(5)(8)(11)(13)(16)}	First lien senior secured delayed draw term loan	L + 6.50%	4/30/2022		225		224			225			0.1	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of March 31, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

Company⁽¹⁾⁽²⁾	Investment	Interest	Maturity Date	Par / Units		Amortized Cost⁽³⁾⁽⁴⁾			Fair Value			Percentage of Net Assets
Peter C. Foy & Associates Insurance Services, LLC^{(5)(11)(12)(13)(16)}	First lien senior secured delayed draw term loan D	L + 6.25%	9/12/2022		-		(240	)		—			—	%
Peter C. Foy & Associates Insurance Services, LLC^{(5)(8)(11)(16)}	First lien senior secured revolving loan	L + 6.50%	3/31/2026		34		34			34			—	%
					9,428		8,884			9,532			3.4	%
Internet software and services
BCPE Nucleon (DE) SPV, LP^(5)(8)(16)	First lien senior secured loan	L + 7.00%	9/24/2026		40,000		39,425			39,600			13.7	%
BCTO BSI Buyer, Inc. (dba Buildertrend)^(5)(7)(16)	First lien senior secured loan	L + 7.00%	12/23/2026		8,482		8,400			8,440			2.9	%
BCTO BSI Buyer, Inc. (dba Buildertrend)^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 7.00%	12/23/2026		-		(10	)		(5	)		—	%
Forescout Technologies, Inc.^(5)(7)(16)	First lien senior secured loan	L + 9.50% (incl. 9.50% PIK)	8/17/2026		21,835		21,502			21,671			7.5	%
Forescout Technologies, Inc.^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 8.50%	8/18/2025		-		(35	)		(17	)		—	%
Granicus, Inc.^(5)(8)(16)	First lien senior secured loan	L + 6.50%	1/29/2027		10,596		10,346			10,358			3.6	%
Granicus, Inc.^{(5)(11)(12)(13)(16)}	First lien delayed draw term loan	L + 6.50%	1/30/2023		-		(48	)		(45	)		—	%
Granicus, Inc.^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 6.50%	1/29/2027		-		(28	)		(27	)		—	%
					80,913		79,552			79,975			27.7	%
Manufacturing
Gloves Buyer, Inc. (dba Protective Industrial Products)^(5)(6)(16)	Second lien senior secured loan	L + 8.25%	12/29/2028		6,300		6,146			6,174			2.1	%
Sonny's Enterprises LLC^(5)(6)(16)	First lien senior secured loan	L + 7.00%	8/5/2026		45,851		45,015			45,851			15.9	%
Sonny's Enterprises LLC^{(5)(11)(12)(16)}	First lien senior secured revolving loan	L + 7.00%	8/5/2025		-		(69	)		-			—	%
					52,151		51,092			52,025			18.0	%
Telecommunications
Park Place Technologies, LLC^(5)(6)(16)	First lien senior secured loan	L + 5.00%	11/10/2027		7,500		7,212			7,275			2.5	%
					7,500		7,212			7,275			2.5	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of March 31, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

Company⁽¹⁾⁽²⁾	Investment	Interest	Maturity Date	Par / Units		Amortized Cost⁽³⁾⁽⁴⁾		Fair Value		Percentage of Net Assets
Total non-controlled/non-affiliated portfolio company debt investments					512,977		503,793		508,274		175.8	%
Equity Investments
Business services
Hercules Buyer LLC (dba The Vincit Group)⁽¹⁶⁾⁽¹⁷⁾^(18)(19)	Common Units	N/A	N/A		452		450		450		0.1	%
							450		450		0.1	%
Healthcare equipment and services
KPCI Holdings, LP^(16)(18)(19)	LP Interest	N/A	N/A		4,701		4,701		4,701		1.6	%
Patriot Holdings SCSp (dba Corza Health, Inc.)^(16)(18)	Class A Units	8.00% PIK	N/A		1,388		1,388		1,388		0.5	%
Patriot Holdings SCSp (dba Corza Health, Inc.)^(16)(18)(19)	Class B Units	N/A	N/A		-		-		-		—	%
							6,089		6,089		2.1	%
Healthcare providers and services
Restore OMH Intermediate Holdings, Inc.^(16)(18)	Senior Preferred Stock	13.00% PIK	N/A		381		3,851		3,842		1.3	%
							3,851		3,842		1.3	%
Insurance
PCF Holdco, LLC^{(11)(16)(18)(19)}	Class A Units	N/A	N/A		-		-		-		—	%
							-		-		—	%
Manufacturing
Gloves Holdings, LP (dba Protective Industrial Products)^(16)(18)(19)	LP Interest	N/A	N/A		700		700		700		0.2	%
							700		700		0.2	%
Total non-controlled/non-affiliated portfolio company equity investments							11,090		11,081		3.7	%
Total Investments						$	514,883	$	519,355		179.5	%

________________

(1)

Certain portfolio company investments are subject to contractual restrictions on sales.

(2)

Unless otherwise indicated, all investments are considered Level 3 investments.

(3)

The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.

(4)

As of March 31, 2021, the net estimated unrealized gain for U.S. federal income tax purposes was $4.5 million based on a tax cost basis of $514.9 million. As of March 31, 2021, the estimated aggregate gross unrealized loss for U.S. federal income tax purposes was $163.9 thousand and the estimated aggregate gross unrealized gain for U.S. federal income tax purposes was $4.6 million.

(5)

Loan contains a variable rate structure and may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three-, six-, or twelve-month LIBOR), Euro Interbank Offered Rate (“EURIBOR” or “E”), British pound sterling LIBOR (“GBPLIBOR” or “G”), or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement.

(6)

The interest rate on these loans is subject to 1 month LIBOR, which as of March 31, 2021 was 0.11%.

(7)

The interest rate on these loans is subject to 3 month LIBOR, which as of March 31, 2021 was 0.19%.

(8)

The interest rate on these loans is subject to 6 month LIBOR, which as of March 31, 2021 was 0.21%.

(9)

The interest rate on this loan is subject to 6 month GBPLIBOR, which as of March 31, 2021 was 0.11%.

(10)

The interest rate on this loan is subject to 6 month EURIBOR, which as of March 31, 2021 was (0.51)%.

(11)

Position or portion thereof is an unfunded loan or equity commitment. See Note 7 “Commitments and Contingencies”.

(12)

The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan.

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of March 31, 2021

(Amounts in thousands, except share amounts)

(Unaudited)

(13)

The date disclosed represents the commitment period of the unfunded term loan. Upon expiration of the commitment period, the funded portion of the term loan may be subject to a longer maturity date.

(14)

This portfolio company is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of total assets. As of March 31, 2021, non-qualifying assets represented 9.3% of total assets as calculated in accordance with the regulatory requirements.

(15)

Level 2 investment.

(16)

Represents co-investment made with the Company’s affiliates in accordance with the terms of the exemptive relief that the Company relies on from the U.S. Securities and Exchange Commission. See Note 3 “Agreements and Related Party Transactions.”

(17)

We invest in this portfolio company through underlying blocker entities Hercules Blocker 1 LLC, Hercules Blocker 2 LLC, Hercules Blocker 3 LLC, Hercules Blocker 4 LLC, and Hercules Blocker 5 LLC.

(18)

Security acquired in transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. as of March 31, 2021, the aggregate fair value of these securities is $11.1 million or 3.7% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

Portfolio Company	Investment	Acquisition Date
Gloves Holdings, LP (dba Protective Industrial Products)	LP Interest	December 29, 2020
Hercules Buyer, LLC (dba The Vincit Group)	Common Units	December 15, 2020
KPCI Holdings, LP	LP Interest	November 30, 2020
Patriot Holdings SCSp (dba Corza Health, Inc.)	Class A Units	Janury 29, 2021
Patriot Holdings SCSp (dba Corza Health, Inc.)	Class B Units	Janury 29, 2021
PCF Holdco, LLC	Class A Units	March 30, 2021
Restore OMH Intermediate Holdings, Inc.	Senior Preferred Stock	December 9, 2020

(19)

Investment is non-income producing.

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of December 31, 2020

(Amounts in thousands, except share amounts)

Company(1)(2)	Investment	Interest	Maturity Date	Par / Units		Amortized Cost(3)(4)			Fair Value			Percentage of Net Assets
Non-controlled/non-affiliated portfolio company investments
Debt Investments
Business services
Hercules Borrower, LLC (dba The Vincit Group)(5)(8)(16)	First lien senior secured loan	L + 6.50%	12/15/2026	$	36,995	$	36,443		$	36,440			12.7	%
Hercules Borrower, LLC (dba The Vincit Group)(5)(11)(12)(16)	First lien senior secured revolving loan	L + 6.50%	12/15/2026		-		(64	)		(64	)		—	%
Hercules Buyer, LLC (dba The Vincit Group)(16)(17)	Unsecured notes	0.48% PIK	12/14/2029		1,052		1,050			1,050			0.4	%
					38,047		37,429			37,426			13.1	%
Chemicals
Aruba Investments Holdings, LLC (dba Angus Chemical Company)(5)(8)(16)	Second lien senior secured loan	L + 7.75%	11/24/2028		6,500		6,405			6,403			2.2	%
					6,500		6,405			6,403			2.2	%
Consumer products
CD&R Smokey Buyer, Inc. (fka Radio Systems)(15)(16)	First lien senior secured notes	6.75%	7/15/2025		3,000		3,002			3,212			1.1	%
Olaplex, Inc.(5)(6)(16)	First lien senior secured loan	L + 6.50%	1/8/2026		12,421		12,297			12,297			4.3	%
					15,421		15,299			15,509			5.4	%
Distribution
Individual Foodservice Holdings, LLC(5)(8)(16)	First lien senior secured loan	L + 6.25%	11/22/2025		39,537		38,944			38,944			13.6	%
Individual Foodservice Holdings, LLC(5)(11)(12)(13)(16)	First lien senior secured delayed draw term loan	L + 6.25%	6/30/2022		-		(44	)		(44	)		—	%
Individual Foodservice Holdings, LLC(5)(8)(11)(16)	First lien senior secured revolving loan	L + 6.25%	11/22/2024		555		518			518			0.2	%
					40,092		39,418			39,418			13.8	%
Financial services
AxiomSL Group, Inc.(5)(6)(16)	First lien senior secured loan	L + 6.50%	12/3/2027		17,877		17,610			17,608			6.1	%
AxiomSL Group, Inc.(5)(11)(12)(16)	First lien senior secured revolving loan	L + 6.50%	12/3/2025		-		(31	)		(32	)		—	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of December 31, 2020

(Amounts in thousands, except share amounts)

Company(1)(2)	Investment	Interest	Maturity Date	Par / Units		Amortized Cost(3)(4)			Fair Value			Percentage of Net Assets
Hg Genesis 8 Sumoco Limited(5)(9)(14)(16)	Unsecured facility	G + 7.5% (incl. 7.50% PIK)	8/28/2025		18,763		18,040			19,044			6.6	%
					36,640		35,619			36,620			12.7	%
Food and beverage
Nutraceutical International Corporation(5)(6)(16)	First lien senior secured loan	L + 7.00%	9/30/2026		10,221		10,072			10,118			3.5	%
Nutraceutical International Corporation(5)(11)(16)	First lien senior secured delayed draw term loan	L + 7.00%	9/30/2026		1,544		1,522			1,529			0.5	%
Nutraceutical International Corporation(5)(11)(12)(16)	First lien senior secured revolving loan	L + 7.00%	9/30/2025		-		(10	)		(7	)		—	%
Shearer's Foods, LLC(5)(7)(16)	Second lien senior secured loan	L + 7.75%	9/22/2028		30,000		29,707			29,850			10.4	%
					41,765		41,291			41,490			14.4	%
Healthcare equipment and services
Packaging Coordinators Midco, Inc.(5)(8)(16)	Second lien senior secured loan	L + 8.25%	11/30/2028		36,269		35,550			35,544			12.4	%
					36,269		35,550			35,544			12.4	%
Healthcare providers and services
Barracuda Dental LLC (dba National Dentex)(5)(7)(16)	First lien senior secured loan	L + 7.00%	10/27/2025		10,341		10,162			10,156			3.5	%
Barracuda Dental LLC (dba National Dentex)(5)(11)(12)(13)(16)	First lien senior secured delayed draw term loan	L + 7.00%	6/30/2022		-		(18	)		(27	)		—	%
Barracuda Dental LLC (dba National Dentex)(5)(7)(11)(16)	First lien senior secured revolving loan	L + 7.00%	10/27/2025		585		558			557			0.2	%
Refresh Parent Holdings, Inc.(5)(7)(16)	First lien senior secured loan	L + 6.50%	12/9/2026		14,979		14,756			14,754			5.2	%
Refresh Parent Holdings, Inc.(5)(11)(12)(13)(16)	First lien senior secured delayed draw term loan	L + 6.50%	6/9/2022		-		(12	)		(12	)		—	%
Refresh Parent Holdings, Inc.(5)(7)(11)(16)	First lien senior secured revolving loan	L + 6.50%	12/9/2026		510		483			483			0.2	%
					26,415		25,929			25,911			9.1	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of December 31, 2020

(Amounts in thousands, except share amounts)

Company(1)(2)	Investment		Interest	Maturity Date	Par / Units	Amortized Cost(3)(4)		Fair Value		Percentage of Net Assets
Healthcare technology
Project Ruby Ultimate Parent Corp. (dba Wellsky)(5)(6)(16)	First lien senior secured loan	L + 4.25%		2/9/2024	10,357	10,202		10,201		3.6	%
Project Ruby Ultimate Parent Corp. (dba Wellsky)(5)(6)(16)	Second lien senior secured loan	L + 8.25%		2/9/2025	4,643	4,551		4,550		1.6	%
RL Datix Holdings (USA), Inc.(5)(8)(14)(16)	First lien senior secured loan	L + 5.00%		4/28/2025	5,000	4,879		4,900		1.7	%
RL Datix Holdings (USA), Inc.(5)(8)(14)(16)	Second lien senior secured loan	L + 8.50%		4/27/2026	5,000	4,879		4,900		1.7	%
					25,000	24,511		24,551		8.6	%
Human resource support services
The Ultimate Software Group, Inc.(5)(7)(16)	Second lien senior secured loan	L + 6.75%		5/3/2027	645	639		658		0.2	%
					645	639		658		0.2	%
Insurance
Asurion, LLC(5)(6)(15)(16)	Second lien senior secured loan	L + 6.50%		8/4/2025	1,190	1,184		1,197		0.4	%
Ardonagh Midco 2 Plc(14)(16)	Unsecured notes	12.75% PIK		1/15/2027	200	198		214		0.1	%
Ardonagh Midco 3 Plc(5)(9)(14)(16)	First lien senior secured loan	G + 8.25% (incl. 2.81% PIK)		7/14/2026	2,060	1,804		2,060		0.7	%
Ardonagh Midco 3 Plc(5)(10)(14)(16)	First lien senior secured loan	E + 8.25% (incl. 2.81% PIK)		7/14/2026	235	209		235		0.1	%
Ardonagh Midco 3 Plc(5)(9)(11)(13)(14)(16)	First lien senior secured delayed draw term loan	G + 8.25% (incl. 2.81% PIK)		7/14/2022	73	59		73		—	%
					3,758	3,454		3,779		1.3	%
Internet software and services
BCPE Nucleon (DE) SPV, LP(5)(7)(16)	First lien senior secured loan	L + 7.00%		9/24/2026	45,000	44,329		44,325		15.5	%
BCTO BSI Buyer, Inc. (dba Buildertrend)(5)(7)(16)	First lien senior secured loan	L + 7.00%		12/23/2026	8,482	8,398		8,397		2.9	%
BCTO BSI Buyer, Inc. (dba Buildertrend)(5)(11)(12)(16)	First lien senior secured revolving loan	L + 7.00%		12/23/2026	-	(10	)	(10	)	—	%
Forescout Technologies, Inc.(5)(7)(16)	First lien senior secured loan	L + 9.5% (incl. 9.50% PIK)		8/17/2026	21,328	20,985		21,062		7.4	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of December 31, 2020

(Amounts in thousands, except share amounts)

Company(1)(2)	Investment			Interest	Maturity Date		Par / Units		Amortized Cost(3)(4)				Fair Value				Percentage of Net Assets
Forescout Technologies, Inc.(5)(11)(12)(16)	First lien senior secured revolving loan		L + 8.50%		8/18/2025		-		(37		)		(29		)		—		%
Granicus, Inc.(5)(8)(16)	First lien senior secured loan		L + 7.00%		8/21/2026		17,870		17,444				18,050				6.3		%
Granicus, Inc.(5)(11)(12)(16)		First lien senior secured revolving loan		L + 7.00%		8/21/2026		-		(26		)		-				—	%
								92,680		91,083				91,795				32.1	%
Manufacturing
Gloves Buyer, Inc. (dba Protective Industrial Products)(5)(6)(16)		Second lien senior secured loan		L + 8.25%		12/29/2028		6,300		6,143				6,143				2.1	%
Sonny's Enterprises LLC(5)(6)(16)		First lien senior secured loan		L + 7.00%		8/5/2026		35,582		34,908				35,048				12.2	%
Sonny's Enterprises LLC(5)(6)(16)		First lien senior secured delayed draw term loan		L + 7.00%		8/5/2026		10,385		10,188				10,229				3.6	%
Sonny's Enterprises LLC(5)(11)(12)(16)		First lien senior secured revolving loan		L + 7.00%		8/5/2025		-		(72		)		(59		)		—	%
								52,267		51,167				51,361				17.9	%
Telecommunications
Park Place Technologies, LLC(5)(6)(16)		First lien senior secured loan		L + 5.00%		11/10/2027		7,500		7,204				7,200				2.5	%
								7,500		7,204				7,200				2.5	%
Total non-controlled/non-affiliated portfolio company debt investments								422,999		414,998				417,665				145.7	%
Equity Investments
Business services
Hercules Buyer LLC (dba The Vincit Group)(16)(18)		LLC Interest		N/A		N/A		452		450				450				0.1	%
										450				450				0.1	%
Healthcare equipment and services
KPCI Holdings, LP(16)(18)		LP Interest		N/A		N/A		4,701		4,701				4,701				1.6	%
										4,701				4,701				1.6	%
Healthcare providers and services
Restore OMH Intermediate Holdings, Inc.(16)(18)		Senior Preferred Stock		N/A		N/A		381		3,694				3,693				1.3	%
										3,694				3,693				1.3	%
Manufacturing
Gloves Holdings, LP (dba Protective Industrial Products)(16)(18)		LLC Interest		N/A		N/A		700		700				700				0.2	%
										700				700				0.2	%

Owl Rock Capital Corporation III

Consolidated Schedule of Investments

as of December 31, 2020

(Amounts in thousands, except share amounts)

Company(1)(2)

Investment

Interest

Maturity Date

Par /

Units

Amortized

Cost(3)(4)

Fair

Value

Percentage

of Net

Assets

Total non-controlled/non-affiliated portfolio company equity investments

9,545

9,544

3.2

Total Investments

424,543

427,209

148.9

________________

(1)

Certain portfolio company investments are subject to contractual restrictions on sales.

(2)

Unless otherwise indicated, all investments are considered Level 3 investments.

(3)

The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.

(4)

As of December 31, 2020, the net estimated unrealized gain for U.S. federal income tax purposes was $2.7 million based on a tax cost basis of $424.5 million. As of December 31, 2020, the estimated aggregate gross unrealized loss for U.S. federal income tax purposes was $43.8 thousand and the estimated aggregate gross unrealized gain for U.S. federal income tax purposes was $2.7 million.

(5)

(6)

The interest rate on these loans is subject to 1 month LIBOR, which as of December 31, 2020 was 0.14%.

(7)

The interest rate on these loans is subject to 3 month LIBOR, which as of December 31, 2020 was 0.24%.

(8)

The interest rate on these loans is subject to 6 month LIBOR, which as of December 31, 2020 was 0.26%.

(9)

The interest rate on this loan is subject to 6 month GBPLIBOR, which as of December 31, 2020 was 0.03%.

(10)

The interest rate on this loan is subject to 6 month EURIBOR, which as of December 31, 2020 was (0.53%).

(11)

Position or portion thereof is an unfunded loan commitment. See Note 7 “Commitments and Contingencies”.

(12)

(13)

The date disclosed represents the commitment period of the unfunded term loan. Upon expiration of the commitment period, the funded portion of the term loan may be subject to a longer maturity date.

(14)

This portfolio company is not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of total assets. As of December 31, 2020, non-qualifying assets represented 6.1% of total assets as calculated in accordance with the regulatory requirements.

(15)

Level 2 investment.

(16)

(17)

We invest in this portfolio company through underlying blocker entities Hercules Blocker 1 LLC, Hercules Blocker 2 LLC, Hercules Blocker 3 LLC, Hercules Blocker 4 LLC, and Hercules Blocker 5 LLC.

(18)

Security acquired in transaction exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted securities” under the Securities Act. As of December 31, 2020, the aggregate fair value of these securities is $9.5 million or 3.2% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:

Portfolio Company	Investment	Acquisition Date
Hercules Buyer, LLC (dba The Vincit Group)	Common Units	December 15, 2020
KPCI Holdings, LP	LP Interest	November 30, 2020
Restore OMH Intermediate Holdings, Inc.	Senior Preferred Stock	December 9, 2020
Gloves Holdings, LP (dba Protective Industrial Products)	LP Interest	December 29, 2020

The accompanying notes are an integral part of these consolidated financial statements.

Owl Rock Capital Corporation III

Consolidated Statement of Changes in Net Assets

(Amounts in thousands)

(Unaudited)

	For the Three Months Ended March 31, 2021
Increase (Decrease) in Net Assets Resulting from Operations
Net investment income (loss)	$	7,040
Net change in unrealized gain (loss)		1,563
Net realized gain (loss)		215
Net Increase in Net Assets Resulting from Operations		8,818
Distributions
Distributions declared from earnings		(6,647	)
Net Decrease in Net Assets Resulting from Shareholders' Distributions		(6,647	)
Capital Share Transactions
Reinvestment of distributions		440
Net Increase in Net Assets Resulting from Capital Share Transactions		440
Total Increase in Net Assets		2,611
Net Assets, at beginning of period		286,454
Net Assets, at end of period	$	289,065

The accompanying notes are an integral part of these consolidated financial statements.

Owl Rock Capital Corporation III

Consolidated Statement of Cash Flows

(Amounts in thousands)

(Unaudited)

	For the Three Months Ended March 31, 2021
Cash Flows from Operating Activities
Net Increase (Decrease) in Net Assets Resulting from Operations	$	8,818
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Purchases of investments, net		(129,209	)
Proceeds from investments and investment repayments, net		41,301
Net amortization of discount on investments		(966	)
Payment-in-kind interest		(1,271	)
Payment-in-kind dividends		(173	)
Net change in unrealized (gain) loss on investments		(1,784	)
Net change in unrealized (gain) loss on translation of assets and liabilities in foreign currencies		221
Net realized (gain) loss on investments		(22	)
Amortization of debt issuance costs	337
Amortization of offering costs		125
Changes in operating assets and liabilities:
(Increase) decrease in interest receivable		(43	)
(Increase) decrease in prepaid expenses and other assets		—
Increase (decrease) in management fee payable		329
Increase (decrease) in payables to affiliates		(391	)
Increase (decrease) in payables for investments purchased		1,803
Increase (decrease) in accrued expenses and other liabilities		(82	)
Net cash used in operating activities		(81,007	)
Cash Flows from Financing Activities
Borrowings on debt		219,927
Payments on debt		(134,000	)
Debt issuance costs		(11	)
Proceeds from issuance of common shares		3,409
Offering costs paid		(10	)
Cash distributions paid to shareholders		(1,658	)
Net cash provided by financing activities		87,657
Net increase (decrease) in cash		6,650
Cash, beginning of period		82,612
Cash, end of period	$	89,262

Supplemental and Non-Cash Information
Interest expense paid	$	925
Distributions declared during the period	$	6,647
Reinvestment of distributions during the period	$	440
Distribution payable	$	6,647
Excise taxes paid	$	8

The accompanying notes are an integral part of these consolidated financial statements.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Organization

Owl Rock Capital Corporation III (the “Company”) is a Maryland corporation formed on January 27, 2020. The Company was formed primarily to originate and make loans to, and make debt and equity investments in middle-market companies based primarily in the United States. The Company invests in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity and equity-related securities including warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity. The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.

The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, the Company intends to elect to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On April 24, 2020, the Company formed a wholly-owned subsidiary, OR Lending III LLC, a Delaware limited liability company, which holds a California finance lenders license. OR Lending III LLC intends to make loans to borrowers headquartered in California. From time to time the Company may form wholly-owned subsidiaries to facilitate the normal course of business.

Owl Rock Diversified Advisors LLC (the “Adviser”) serves as the Company’s investment adviser. The Adviser is an indirect subsidiary of Owl Rock Capital Partners, L.P. ("Owl Rock Capital Partners"). The Adviser is registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Subject to the overall supervision of the Company’s board of directors (the “Board”), the Adviser manages the day-to-day operations of, and provides investment advisory and management services to, the Company.

On December 23, 2020, Owl Rock Capital Group, LLC (“Owl Rock Capital Group”), the parent of the Adviser (and a subsidiary of Owl Rock Capital Partners), and Dyal Capital Partners (“Dyal”) announced they are merging to form Blue Owl Capital Inc. (“Blue Owl”). Blue Owl will enter the public market via its acquisition by Altimar Acquisition Corporation (NYSE:ATAC) (“Altimar”), a special purpose acquisition company (the “Transaction”). If the Transaction is consummated, there will be no changes to the Company’s investment strategy or the Adviser’s investment team or investment process with respect to the Company; however, the Transaction will result in a change in control of the Adviser, which will be deemed an assignment of the Investment Advisory Agreement in accordance with the 1940 Act. As a result, the Board, after considering the Transaction and subsequent change in control, has determined that upon consummation of the Transaction and subject to the approval of the Company’s shareholders, the Company should enter into an amended and restated investment advisory agreement with the Adviser on terms that are identical to the Investment Advisory Agreement. At a special meeting of the Company’s shareholders held on March 17, 2021, the Company’s shareholders approved the Company's entry, upon consummation of the Transaction, into the amended and restated advisory agreement with the Adviser on terms that are identical to the Advisory Agreement. The Board also determined that upon consummation of the Transaction, the Company should enter into an amended and restated administration agreement with the Adviser on terms that are identical to the Administration Agreement.

The Company conducts private offerings (the “Private Offering”) of its common shares to accredited investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. At the closing of any Private Offering, each investor makes a capital commitment (a “Capital Commitment”) to purchase shares of the Company’s common stock pursuant to a subscription agreement (“Subscription Agreement”) entered into with the Company. Until the earlier of a Liquidity Event (as defined below) and the end of the Commitment Period (as defined below), investors are required to fund drawdowns to purchase shares of the Company’s common stock up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice to its investors. The initial closing of the Private Offering occurred on June 5, 2020 (the “Initial Closing”). During the Commitment Period (as defined below), the Adviser may, in its sole discretion, permit one or more additional closings (“Subsequent Closings”) as additional Capital Commitments are obtained (the conclusion of all Subsequent Closings, if any, the “Final Closing”). The “Commitment Period” will continue until the seven year anniversary of the Initial Closing. If the Company has not consummated a Liquidity Event (as defined below) by the end of the Commitment Period, subject to extension for two additional one-year periods, in the sole discretion of the Board, the Board (subject to any necessary shareholder approvals and applicable requirements of the Investment Company Act of 1940 (the “1940 Act”)) will use its commercially reasonable efforts to wind down and/or liquidate and dissolve the Company in an orderly manner. A “Liquidity Event” could include: (i) future quotation or listing of the Company’s securities on a national securities exchange (“Exchange Listing)”; (ii) a transaction, including a merger, in which shareholders receive cash or shares of an entity, including an entity that is affiliated with the Company, and such shares are listed on a national securities exchange; or (iii) the sale of all or substantially all of the Company’s assets.

On June 17, 2020, the Company commenced its loan origination and investment activities contemporaneously with the initial drawdown from investors in the Private Offering. In June 2020, the Company made its first portfolio investment.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Note 2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company is an investment company and, therefore, applies the specialized accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies. In the opinion of management, all adjustments considered necessary for the fair presentation of the consolidated financial statements have been included. The Company was initially capitalized on June 4, 2020 and commenced operations on June 5, 2020 with the initial closing of its Private Offering. The Company’s fiscal year ends on December 31.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual amounts could differ from those estimates and such differences could be material.

Cash

Cash consists of deposits held at a custodian bank. Cash is carried at cost, which approximates fair value. The Company deposits its cash with highly-rated banking corporations and, at times, may exceed the insured limits under applicable law.

Investments at Fair Value

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.

Investments for which market quotations are readily available are typically valued at the bid price of those market quotations. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available, as is the case for substantially all of the Company’s investments, are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Company’s audit committee and independent third-party valuation firm(s) engaged at the direction of the Board.

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of the Company’s investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase or sale transaction, public offering or subsequent equity sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.

The Board undertakes a multi-step valuation process, which includes, among other procedures, the following:

•

With respect to investments for which market quotations are readily available, those investments will typically be valued at the bid price of those market quotations;

•

With respect to investments for which market quotations are not readily available, the valuation process begins with the independent valuation firm(s) providing a preliminary valuation of each investment to the Adviser’s valuation committee;

•

Preliminary valuation conclusions are documented and discussed with the Adviser’s valuation committee. Agreed upon valuation recommendations are presented to the Audit Committee;

•

The Audit Committee reviews the valuation recommendations and recommends values for each investment to the Board; and

•

The Board reviews the recommended valuations and determines the fair value of each investment.

The Company conducts this valuation process on a quarterly basis.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

The Company applies Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:

•

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

•

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs. In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of the inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (such as broker quotes), the Company subjects those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, the Company, or the independent valuation firm(s), reviews pricing support provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Foreign Currency

Foreign currency amounts are translated into U.S. dollars on the following basis:

•

cash, fair value of investments, outstanding debt, other assets and liabilities: at the spot exchange rate on the last business day of the period; and

•

purchases and sales of investments, borrowings and repayments of such borrowings, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions.

The Company includes net changes in fair values on investments held resulting from foreign exchange rate fluctuations with the change in unrealized gains (losses) on translation of assets and liabilities in foreign currencies on the Consolidated Statement of Operations. The Company’s current approach to hedging the foreign currency exposure in its non-U.S. dollar denominated investments is primarily to borrow the par amount in local currency under the Company’s Subscription Credit Facility to fund these investments. Fluctuations arising from the translation of foreign currency borrowings are included with the net change in unrealized gains (losses) on translation of assets and liabilities in foreign currencies on the Consolidated Statement of Operations.

Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

Rule 2a-5 under the 1940 Act was recently adopted by the SEC and establishes requirements for determining fair value in good faith for purposes of the 1940 Act. The Company intends to comply with the new rule’s requirements on or before the compliance date in September 2022.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Interest and Dividend Income Recognition

Interest income is recorded on the accrual basis and includes amortization of discounts or premiums. Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK interest represents accrued interest that is added to the principal amount of the investment on the respective interest payment dates rather than being paid in cash and generally becomes due at maturity. Discounts and premiums to par value on securities purchased are amortized into interest income over the contractual life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the amortization of discounts or premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. If at any point the Company believes PIK interest is not expected to be realized, the investment generating PIK interest will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest income. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection. As of March 31, 2021, no investments are on non-accrual status.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Other Income

From time to time, the Company may receive fees for services provided to portfolio companies. These fees are generally only available to the Company as a result of closing investments, are generally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Adviser provides vary by investment, but can include closing, work, diligence or other similar fees and fees for providing managerial assistance to the Company’s portfolio companies.

Organization Expenses

Costs associated with the organization of the Company are expensed as incurred. These expenses consist primarily of legal fees and other costs of organizing the Company.

Offering Expenses

Costs associated with the offering of common shares of the Company are capitalized as deferred offering expenses and are included in prepaid expenses and other assets in the Consolidated Statements of Assets and Liabilities and are amortized over a twelve-month period beginning with commencement of operations and any additional expenses for other offerings from incurrence. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the Company’s registration statement, and registration fees.

Debt Issuance Costs

The Company records origination and other expenses related to its debt obligations as deferred financing costs. These expenses are deferred and amortized utilizing the effective yield method, over the life of the related debt instrument. Debt issuance costs are presented on the Consolidated Statements of Assets and Liabilities as a direct deduction from the debt liability. In circumstances in which there is not an associated debt liability amount recorded in the consolidated financial statements when the debt issuance costs are incurred, such debt issuance costs will be reported on the Consolidated Statements of Assets and Liabilities as an asset until the debt liability is recorded.

Reimbursement of Transaction-Related Expenses

The Company may receive reimbursement for certain transaction-related expenses in pursuing investments. Transaction-related expenses, which are generally expected to be reimbursed by the Company’s portfolio companies, are typically deferred until the transaction is consummated and are recorded in prepaid expenses and other assets on the date incurred. The costs of successfully completed investments not otherwise reimbursed are borne by the Company and are included as a component of the investment’s cost basis.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Cash advances received in respect of transaction-related expenses are recorded as cash with an offset to accrued expenses and other liabilities. Accrued expenses and other liabilities are relieved as reimbursable expenses are incurred.

Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act. The Company also intends to elect to be treated as a RIC under the Code beginning with its taxable year ending December 31, 2020. So long as the Company maintains its tax treatment as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Instead, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company.

To qualify as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses. In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. There were no material uncertain tax positions through December 31, 2020.

Distributions to Common Shareholders

Distributions to common shareholders are recorded on the record date. The amount to be distributed is determined by the Board and is generally based upon the earnings estimated by the Adviser. Net realized long-term capital gains, if any, would generally be distributed at least annually, although the Company may decide to retain such capital gains for investment.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any cash distributions on behalf of shareholders, unless a shareholder elects to receive cash. As a result, if the Board authorizes and declares a cash distribution, then the shareholders who have not “opted out” of the dividend reinvestment plan will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. The Company expects to use newly issued shares to implement the dividend reinvestment plan.

Consolidation

As provided under Regulation S-X and ASC Topic 946 - Financial Services - Investment Companies, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company's wholly-owned subsidiaries in its consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

New Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848),” which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. ASU No. 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates and is currently evaluating the impact of adopting ASU No. 2020-04 and 2021-01 on the consolidated financial statements.

Other than the aforementioned guidance, the Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Note 3. Agreements and Related Party Transactions

Administration Agreement

The Company has entered into an Administration Agreement (the “Administration Agreement”) with the Adviser. Under the terms of the Administration Agreement, the Adviser performs, or oversees the performance of, required administrative services, which include providing office space, equipment and office services, maintaining financial records, preparing reports to shareholders and reports filed with the SEC, and managing the payment of expenses and the performance of administrative and professional services rendered by others.

The Administration Agreement also provides that the Company reimburses the Adviser for certain organization costs incurred prior to the commencement of the Company’s operations, and for certain offering costs.

The Company reimburses the Adviser for services performed for it pursuant to the terms of the Administration Agreement. In addition, pursuant to the terms of the Administration Agreement, the Adviser may delegate its obligations under the Administration Agreement to an affiliate or to a third party and the Company will reimburse the Adviser for any services performed for it by such affiliate or third party.

Unless earlier terminated as described below, the Administration Agreement, and subject to the consummation of the Transaction, the amended and restated administration agreement, will remain in effect until June 4, 2022 and from year to year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, a majority of the independent directors. The Administration Agreement may be terminated at any time, without the payment of any penalty, upon 60 days’ written notice, by the vote of a majority of the outstanding voting securities of the Company (as defined in the 1940 Act), or by the vote of a majority of the Board or by the Adviser. The Board has determined that upon consummation of the Transaction, the Company should enter into an amended and restated administration agreement with the Adviser on terms that are identical to the Administration Agreement.

No person who is an officer, director, or employee of the Adviser or its affiliates and who serves as a director of the Company receives any compensation from the Company for his or her services as a director. However, the Company reimburses the Adviser (or its affiliates) for an allocable portion of the compensation paid by the Adviser or its affiliates to the Company’s Chief Compliance Officer, Chief Financial Officer and their respective staffs (based on the percentage of time those individuals devote, on an estimated basis, to the business and affairs of the Company). Directors who are not affiliated with the Adviser receive compensation for their services and reimbursement of expenses incurred to attend meetings.

For the three months ended March 31, 2021, the Company incurred expenses of approximately $0.3 million for costs and expenses reimbursable to the Adviser under the terms of the Administration Agreement.

Investment Advisory Agreement

The Company has entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with the Adviser. Under the terms of the Investment Advisory Agreement, the Adviser is responsible for managing the Company’s business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring its investments, and monitoring its portfolio companies on an ongoing basis through a team of investment professionals.

The Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to the Company are not impaired.

Unless earlier terminated as described below, the Investment Advisory Agreement, and subject to the consummation of the Transaction, the amended and restated investment advisory agreement, will remain in effect until June 4, 2022 and from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the Company’s outstanding voting securities and, in each case, by a majority of independent directors.

The Investment Advisory Agreement will automatically terminate within the meaning of the 1940 Act and related SEC guidance and interpretations in the event of its assignment. In accordance with the 1940 Act, without payment of penalty, the Company may terminate the Investment Advisory Agreement with the Adviser upon 60 days’ written notice. The decision to terminate the agreement may be made by a majority of the Board or the shareholders holding a majority (as defined under the 1940 Act) of the outstanding shares of the Company’s common stock or the Adviser. In addition, without payment of penalty, the Adviser may generally terminate the Investment Advisory Agreement upon 60 days’ written notice.

On December 23, 2020, Owl Rock Capital Group, the parent of the Adviser (and a subsidiary of Owl Rock Capital Partners), and Dyal announced they are merging to form Blue Owl. Blue Owl will enter the public market via its acquisition by Altimar, a special purpose acquisition company. The Transaction, if consummated, will result in a change in control of the Adviser, which will

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

be deemed an assignment of the Investment Advisory Agreement in accordance with the 1940 Act. As a result, the Board, after considering the Transaction and subsequent change in control, has determined that upon consummation of the Transaction and subject to the approval of the Company’s shareholders, the Company should enter into an amended and restated investment advisory agreement with the Adviser on terms that are identical to the Investment Advisory Agreement. At a special meeting of the Company's shareholders held on March 17, 2021, the Company's shareholders approved the Company's entry, upon consummation of the Transaction, into the amended and restated advisory agreement with the Adviser on terms that are identical to the Advisory Agreement.

From time to time, the Adviser may pay amounts owed by the Company to third-party providers of goods or services, including the Board, and the Company will subsequently reimburse the Adviser for such amounts paid on its behalf. Amounts payable to the Adviser are settled in the normal course of business without formal payment terms.

Under the terms of the Investment Advisory Agreement, the Company will pay the Adviser a base management fee and may also pay to it certain incentive fees. The cost of both the management fee and the incentive fee will ultimately be borne by the Company’s shareholders.

The management fee is payable quarterly in arrears. Prior to an Exchange Listing, the management fee is payable at an annual rate of 0.50% of the Company’s average gross assets, excluding cash and cash equivalents but including assets purchased with borrowed amounts, at the end of the Company’s two most recently completed calendar quarters.

Following an Exchange Listing, the management fee is payable at an annual rate of (x) 1.50% of the Company’s average gross assets (excluding cash and cash equivalents but including assets purchased with borrowed amounts) that is above an asset coverage ratio of 200% calculated in accordance with Sections 18 and 61 of the 1940 Act and (y) 1.00% of the Company’s average gross assets (excluding cash and cash equivalents but including assets purchased with borrowed amounts) that is below an asset coverage ratio of 200% calculated in accordance with Sections 18 and 61 of the 1940 Act, in each case, at the end of the two most recently completed calendar quarters. The management fee for any partial month or quarter, as the case may be, will be appropriately prorated and adjusted for any share issuances or repurchases during the relevant calendar months or quarters, as the case may be.

For the three months ended March 31, 2021, management fees were $543 thousand.

Pursuant to the Investment Advisory Agreement, the Adviser will not be entitled to an incentive fee prior to an Exchange Listing. Following an Exchange Listing, the incentive fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on the Company’s pre-incentive fee net investment income and a portion is based on the Company’s capital gains. The portion of the incentive fee based on pre-incentive fee net investment income will be calculated and payable quarterly in arrears commencing with the first calendar quarter following an Exchange Listing, and will equal 100% of the pre-incentive fee net investment income in excess of a 1.5% quarterly “hurdle rate,” until the Adviser has received 17.5% of the total pre-incentive fee net investment income for that calendar quarter and, for pre-incentive fee net investment income in excess of 1.82% quarterly, 17.5% of all remaining pre-incentive fee net investment income for that calendar quarter.

The second component of the incentive fee, the capital gains incentive fee, payable at the end of each calendar year in arrears, equals 17.5% of cumulative realized capital gains from the date on which an Exchange Listing, if any, becomes effective (the "Listing Date") to the end of each calendar year, less cumulative realized capital losses and unrealized capital depreciation from the Listing Date to the end of each calendar year, less the aggregate amount of any previously paid capital gains incentive fee for prior periods. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. The fees that are payable under the Investment Advisory Agreement for any partial period will be appropriately prorated. For the sole purpose of calculating the capital gains incentive fee, the cost basis as of the Listing Date for all of our investments made prior to the Listing Date will be equal to the fair market value of such investments as of the last day of the calendar quarter in which the Listing Date occurs; provided, however, that in no event will the capital gains incentive fee payable pursuant to the Investment Advisory Agreement be in excess of the amount permitted by the Advisers Act of 1940, as amended, including Section 205 thereof.

There were no performance based incentive fees on net investment income for the three months ended March 31, 2021.

There were no capital gains based incentive fees for the three months ended March 31, 2021.

Dealer Manager Agreement; Placement Agent Agreement

On June 4, 2020, the Company and the Adviser entered into a dealer manager agreement (the “Dealer Manager Agreement”) with Owl Rock Capital Securities LLC (“Owl Rock Securities”), pursuant to which Owl Rock Securities and certain participating broker-dealers will solicit Capital Commitments. In addition, the Company has entered into a placement agent agreement (the

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

“Placement Agent Agreement”) with Owl Rock Securities pursuant to which employees of Owl Rock Securities may conduct placement activities.

Owl Rock Securities, an affiliate of Owl Rock (as defined below), is registered as a broker-dealer with the SEC and is a member of the Financial Industry Regulatory Authority. Fees paid pursuant to these agreements will be paid by the Adviser.

Affiliated Transactions

The Company may be prohibited under the 1940 Act from participating in certain transactions with its affiliates without prior approval of the directors who are not interested persons, and in some cases, the prior approval of the SEC. The Company relies on exemptive relief that has been granted to Owl Rock Capital Advisors LLC (“ORCA”) and its affiliates to co-invest with other funds managed by the Adviser or its affiliates, in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to such exemptive relief, the Company generally is permitted to co-invest with certain of its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Board make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to the Company and its shareholders and do not involve overreaching of the Company or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of the Company’s shareholders and is consistent with its investment objective and strategies, and (3) the investment by its affiliates would not disadvantage the Company, and the Company’s participation would not be on a basis different from or less advantageous than that on which its affiliates are investing.

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, the Company was permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in its existing portfolio companies with certain private funds managed by the Adviser or its affiliates and covered by the Company’s exemptive relief, even if such private funds have not previously invested in such existing portfolio company. Without this order, the private funds would generally not be able to participate in such follow-on investments with the Company unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with the Company. Although the conditional exemptive order has expired, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extent that any BDC with an existing coinvestment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein. The Adviser is under common control with ORCA, Owl Rock Technology Advisors LLC (“ORTA”) and Owl Rock Capital Private Fund Advisors LLC (“ORPFA”), which are also investment advisers and indirect subsidiaries of Owl Rock Capital Partners. The Adviser, ORCA, ORTA and ORPFA are referred to as the “Owl Rock Advisers” and together with Owl Rock Capital Partners are referred to, collectively, as “Owl Rock.” The Owl Rock Advisers’ allocation policy seeks to ensure equitable allocation of investment opportunities over time between the Company, Owl Rock Capital Corporation, Owl Rock Capital Corporation II, and Owl Rock Core Income Corp., which are BDCs advised by ORCA, Owl Rock Technology Finance Corp., a BDC advised by ORTA, and other funds managed by the Adviser or its affiliates (collectively, the “Owl Rock Clients”). As a result of exemptive relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolio of the Owl Rock Clients that could avail themselves of the exemptive relief.

License Agreement

The Company has entered into a license agreement (the “License Agreement”), pursuant to which an affiliate of Owl Rock Capital Partners LP has granted the Company a non-exclusive license to use the name “Owl Rock.” Under the License Agreement, the Company has a right to use the Owl Rock name for so long as the Adviser or one of its affiliates remains the Company’s investment adviser. Other than with respect to this limited license, the Company will have no legal right to the “Owl Rock” name or logo.

Note 4. Investments

Under the 1940 Act, the Company is required to separately identify non-controlled investments where it owns 5% or more of a portfolio company’s outstanding voting securities and/or has the power to exercise control over the management or policies of such portfolio company as investments in “affiliated” companies. In addition, under the 1940 Act, the Company is required to separately identify investments where it owns more than 25% of a portfolio company’s outstanding voting securities and/or has the power to exercise control over the management or policies of such portfolio company as investments in “controlled” companies. Under the 1940 Act, "non-affiliated investments" are defined as investments that are neither controlled investments nor affiliated investments. Detailed information with respect to the Company’s non-controlled, non-affiliated; non-controlled, affiliated; and controlled affiliated investments is contained in the accompanying consolidated financial statements, including the consolidated schedule of investments. The information in the tables below is presented on an aggregate portfolio basis, without regard to whether they are non-controlled non-affiliated, non-controlled affiliated or controlled affiliated investments.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Investments at fair value and amortized cost consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31, 2021				December 31, 2020
($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
First-lien senior secured debt investments	$	370,740	$	373,838	$	306,652	$	308,112
Second-lien senior secured debt investments		88,356		88,930		89,058		89,245
Unsecured debt investments		44,697		45,506		19,288		20,308
Equity investments		11,090		11,081		9,545		9,544
Total Investments	$	514,883	$	519,355	$	424,543	$	427,209

The industry composition of investments based on fair value as of March 31, 2021 and December 31, 2020 was as follows:

	March 31, 2021			December 31, 2020
Aerospace and defense		0.3	%		-	%
Business services		7.3			8.9
Chemicals		7.1			1.5
Consumer products		3.0			3.6
Distribution		7.7			9.2
Financial services		11.9			8.6
Food and beverage		8.0			9.7
Healthcare equipment and services		13.0			8.3
Healthcare providers and services		6.2			8.0
Healthcare technology		1.9			5.7
Household products		4.7			-
Human resource support services		0.1			0.2
Insurance		1.8			0.9
Internet software and services		15.4			21.5
Manufacturing		10.2			12.2
Telecommunications		1.4			1.7
Total		100.0	%		100.0	%

The geographic composition of investments based on fair value as of March 31, 2021 and December 31, 2020 was as follows:

	March 31, 2021			December 31, 2020
United States:
Midwest		10.0	%		15.6	%
Northeast		17.7			15.1
South		37.9			37.9
West		23.5			24.0
International		10.9			7.4	⁽¹⁾
Total		100.0	%		100.0	%

________________

(1)

As of December 31, 2020, the geographic composition of International was fully comprised of the United Kingdom.

Note 5. Fair Value of Investments

Investments

The following tables present the fair value hierarchy of investments as of March 31, 2021 and December 31, 2020:

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

	Fair Value Hierarchy as of March 31, 2021
($ in thousands)	Level 1		Level 2		Level 3		Total
First-lien senior secured debt investments	$	—	$	5,026	$	368,812	$	373,838
Second-lien senior secured debt investments		—		5,088		83,842		88,930
Unsecured debt investments		—		—		45,506		45,506
Equity investments		—		—		11,081		11,081
Total Investments at fair value	$	—	$	10,114	$	509,241	$	519,355

	Fair Value Hierarchy as of December 31, 2020
($ in thousands)	Level 1		Level 2		Level 3		Total
First-lien senior secured debt investments	$	—	$	3,212	$	304,900	$	308,112
Second-lien senior secured debt investments		—		1,197		88,048		89,245
Unsecured debt investments		—		—		20,308		20,308
Equity investments		—		—		9,544		9,544
Total Investments at fair value	$	—	$	4,409	$	422,800	$	427,209

The following table presents changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three months ended March 31, 2021:

	As of and for the Three Months Ended March 31, 2021
($ in thousands)	First-lien senior secured debt investments			Second-lien senior secured debt investments			Unsecured debt investments			Equity investments			Total
Fair value, beginning of period	$	304,900		$	88,048		$	20,308		$	9,544		$	422,800
Purchases of investments, net⁽¹⁾		96,915			—			25,397			1,541			123,853
Proceeds from investments, net		(35,468	)		(4,641	)		—			—			(40,109	)
Net change in unrealized gain (loss)		1,624			312			(211	)		(8	)		1,717
Net realized gains (losses)		22			—			—			—			22
Net amortization of discount on investments		819			123			12			4			958
Transfers into (out of) Level 3⁽²⁾		—			—			—			—			—
Fair value, end of period	$	368,812		$	83,842		$	45,506		$	11,081		$	509,241

________________

(1)

Purchases may include PIK.

(2)

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

The following table presents information with respect to net change in unrealized gains (losses) on investments for which Level 3 inputs were used in determining the fair value that are still held by the Company for the three months ended March 31, 2021:

($ in thousands)	Net change in unrealized gain (loss) for the Three Months Ended March 31, 2021 on Investments Held at March 31, 2021
First-lien senior secured debt investments	$	2,255
Second-lien senior secured debt investments		311
Unsecured debt investments		(211	)
Equity investments		(8	)
Total Investments	$	2,347

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of March 31, 2021 and December 31, 2020. The weighted average range of unobservable inputs is based on fair value of investments. The tables are not intended to be all-inclusive but instead capture the significant unobservable inputs relevant to the Company’s determination of fair value.

As of March 31, 2021

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input

First-lien senior secured debt investments

276,790

Yield Analysis

Market Yield

6.3% - 10.4% (8.5%)

Decrease

92,022

Recent Transaction

Transaction Price

97.8% - 100.0% (98.7%)

Increase

Second-lien senior secured debt investments

83,842

Yield Analysis

Market Yield

6.8% - 10.7% (10.0%)

Decrease

Unsecured debt investments⁽¹⁾

24,524

Recent Transaction

Transaction Price

98.8%

Increase

19,703

Yield Analysis

Market Yield

6.5%

Decrease

1,050

Market Approach

EBITDA Multiple

14.9x

Increase

Equity investments

5,851

Market Approach

EBITDA Multiple

13.4x - 16.0x (15.6x)

Increase

3,842

Yield Analysis

Market Yield

14.6%

Decrease

1,388

Recent Transaction

Transaction Price

100.0%

Increase

________________

(1)

Excludes Level 3 investment with a fair value of $229 thousand, which the Company valued using indicative bid prices obtained from brokers.

As of December 31, 2020

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input

First-lien senior secured debt investments

201,691

Recent Transaction

Transaction Price

96.0% - 99.0% (98.5%)

Increase

103,209

Yield Analysis

Market Yield

6.3% - 10.5% (9.1%)

Decrease

Second-lien senior secured debt investments

52,640

Recent Transaction

Transaction Price

97.5% - 98.5% (98.0%)

Increase

35,408

Yield Analysis

Market Yield

6.9% - 10.1% (9.4%)

Decrease

Unsecured debt investments

1,050

Recent Transaction

Transaction Price

100.0%

Increase

19,258

Yield Analysis

Market Yield

8.1% - 9.3% (8.1%)

Decrease

Equity investments

9,544

Recent Transaction

Transaction Price

97.0% - 100.0% (99.0%)

Increase

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

The Company typically determines the fair value of its performing Level 3 debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to the expected life, portfolio company performance since close, and other terms and risks associated with an investment. Among other factors, a determinant of risk is the amount of leverage used by the portfolio company relative to its total enterprise value, and the rights and remedies of the Company’s investment within the portfolio company’s capital structure.

Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 debt investments primarily include current market yields, including relevant market indices, but may also include quotes from brokers, dealers, and pricing services as indicated by comparable investments. For the Company’s Level 3 equity investments, a market approach, based on comparable publicly-traded company and comparable market transaction multiples of revenues, earnings before income taxes, depreciation and amortization (“EBITDA”) or some combination thereof and comparable market transactions are typically used.

Debt Not Carried at Fair Value

Fair value is estimated by discounting remaining payments using applicable current market rates, which take into account changes in the Company’s marketplace credit ratings, or market quotes, if available. The following table presents the carrying and fair values of the Company’s debt obligations as of March 31, 2021 and December 31, 2020:

	March 31, 2021				December 31, 2020
($ in thousands)	Net Carrying Value⁽¹⁾		Fair Value		Net Carrying Value⁽²⁾		Fair Value
Subscription Credit Facility	$	311,707	$	311,707	$	225,215	$	225,215
Total Debt	$	311,707	$	311,707	$	225,215	$	225,215

________________

(1)

The carrying value of the Company’s Subscription Credit Facility is presented net of deferred financing costs of $3.2 million.

(2)

The carrying value of the Company’s Subscription Credit Facility is presented net of deferred financing costs of $3.6 million.

The following table presents fair value measurements of the Company’s debt obligations as of March 31, 2021 and December 31, 2020:

($ in thousands)	March 31, 2021		December 31, 2020
Level 1	$	—	$	—
Level 2		—		—
Level 3		311,707		225,215
Total Debt	$	311,707	$	225,215

Financial Instruments Not Carried at Fair Value

As of March 31, 2021 and December 31, 2020, the carrying amounts of the Company’s assets and liabilities, other than investments at fair value and debt, approximate fair value due to their short maturities.

Note 6. Debt

In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. As of March 31, 2021 and December 31, 2020, the Company’s asset coverage was 191% and 225%, respectively.

Debt obligations consisted of the following as of March 31, 2021 and December 31, 2020:

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

	March 31, 2021
($ in thousands)	Aggregate Principal Committed		Outstanding Principal		Amount Available⁽¹⁾		Net Carrying Value⁽²⁾
Subscription Credit Facility⁽³⁾	$	425,000	$	314,944	$	110,056	$	311,707
Total Debt	$	425,000	$	314,944	$	110,056	$	311,707

________________

(1)

The amount available reflects any limitation related to the Subscription Credit Facility’s borrowing base.

(2)

The carrying value of the Company’s Subscription Credit Facility is presented net of deferred financing costs of $3.2 million.

(3)

Includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.

	December 31, 2020
($ in thousands)	Aggregate Principal Committed		Outstanding Principal		Amount Available⁽¹⁾		Net Carrying Value⁽²⁾
Subscription Credit Facility⁽³⁾	$	425,000	$	228,778	$	196,222	$	225,215
Total Debt	$	425,000	$	228,778	$	196,222	$	225,215

________________

(1)

The amount available reflects any limitation related to the Subscription Credit Facility’s borrowing base.

(2)

The carrying value of the Company’s Subscription Credit Facility is presented net of deferred financing costs of $3.6 million.

(3)

Includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.

For the three months ended March 31, 2021, the components of interest expense were as follows:

	For the Three Months Ended March 31,
($ in thousands)	2021
Interest expense	$	1,095
Amortization of debt issuance costs		337
Total Interest Expense	$	1,432
Average interest rate		2.6	%
Average daily borrowings	$	169,473

Description of Facilities

Subscription Credit Facility

On August 12, 2020 (the “Closing Date”), the Company entered into a revolving credit facility (the “Subscription Credit Facility”) with State Street Bank and Trust Company (“State Street”) as administrative agent (the “Administrative Agent”), and State Street and PNC Bank, National Association (“PNC”), as lenders.

As of March 31, 2021, the maximum principal amount of the Subscription Credit Facility was $425 million, subject to availability under the borrowing base, which is based on unused capital commitments. The Subscription Credit Facility includes a provision permitting the Company to further increase the size of the Subscription Credit Facility under certain circumstances up to a maximum principal amount not to exceed $1.0 billion, if the existing or new lenders agree to commit to such further increase, which is referred to as the accordion feature. On September 28, 2020, City National Bank (“City National”) agreed to provide a commitment through the Subscription Credit Facility’s accordion feature, increasing the maximum principal amount of the facility from $350 million to $400 million. On December 15, 2020, California Bank & Trust agreed to provide a commitment through the Subscription Credit Facility’s accordion feature, increasing the maximum principal amount of the facility from $400 million to $425 million. On April 8, 2021, Western Alliance Bank (dba Bridge Bank) agreed to provide a commitment through the Subscription Credit Facility’s accordion feature, increasing the maximum principal amount of the facility from $425 million to $550 million.

Borrowings under the Subscription Credit Facility bear interest, at the Company’s election at the time of drawdown, at a rate per annum equal to (i) in the case of LIBOR rate loans, an adjusted LIBOR rate for the applicable interest period plus 2.00% or (ii) in the case of reference rate loans, the greatest of (A) a prime rate plus 1.00%, (B) the federal funds rate plus 1.50%, and (C) one-month LIBOR plus 1.00%. The Company generally borrows utilizing LIBOR loans, generally electing one-month LIBOR upon borrowing.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Loans may be converted from one rate to another at any time at the Company’s election, subject to certain conditions. The Company also will pay an unused commitment fee of 0.25% per annum on the unused commitments.

The Subscription Credit Facility will mature upon the earliest of: (i) the date three (3) years from the Closing Date (the “Stated Maturity Date”); (ii) the date upon which the Administrative Agent declares the obligations under the Subscription Credit Facility due and payable after the occurrence of an event of default; (iii) forty-five (45) days prior to the scheduled termination of the commitment period under the Company’s subscription agreements; (iv) forty-five (45) days prior to the date of any listing of the Company’s common stock on a national securities exchange and certain other liquidity events; (v) the termination of the commitment period under the Company’s subscription agreements (if earlier than the scheduled date); and (vi) the date the Company terminates the commitments pursuant to the Subscription Credit Facility. At the Company’s option and subject to the consent of each of the Lenders and the Administrative Agent in their sole discretion, the Stated Maturity Date may be extended by up to 364 days subject to satisfaction of customary conditions.

The Subscription Credit Facility is secured by a perfected first priority security interest in the Company’s right, title, and interest in and to the capital commitments of the Company’s private investors, including the Company’s right to make capital calls, receive and apply capital contributions, enforce remedies and claims related thereto together with capital call proceeds and related rights, and a pledge of the collateral account into which capital call proceeds are deposited.

The Subscription Credit Facility contains customary covenants, including certain limitations on the incurrence by the Company of additional indebtedness and on the Company’s ability to make distributions to the Company’s shareholders, or redeem, repurchase or retire shares of stock, upon the occurrence of certain events, and customary events of default (with customary cure and notice provisions).

Transfers of interests in the Company by investors must comply with certain sections of the Subscription Credit Facility and the Company shall notify the Administrative Agent before such transfers take place. Such transfers may trigger mandatory prepayment obligations.

Note 7. Commitments and Contingencies

Portfolio Company Commitments

From time to time, the Company may enter into commitments to fund investments. As of March 31, 2021 and December 31, 2020, the Company had the following outstanding commitments to fund investments in current portfolio companies:

Portfolio Company	Investment	March 31, 2021		December 31, 2020
($ in thousands)
Ardonagh Midco 3 PLC	First lien senior secured delayed draw term loan	$	147	$	365
AxiomSL Group, Inc.	First lien senior secured revolving loan		2,123		2,123
National Dentex Labs LLC (fka Barracuda Dental LLC)	First lien senior secured delayed draw term loan		5,073		5,073
National Dentex Labs LLC (fka Barracuda Dental LLC)	First lien senior secured revolving loan		663		976
BCTO BSI Buyer, Inc. (dba Buildertrend)	First lien senior secured revolving loan		1,018		1,018
Forescout Technologies, Inc.	First lien senior secured revolving loan		2,288		2,288
Gaylord Chemical Company, L.L.C.	First lien senior secured revolving loan		2,609		-
Granicus, Inc.	First lien delayed draw term loan		2,967		-
Granicus, Inc.	First lien senior secured revolving loan		1,187		1,128
Hercules Borrower LLC (dba The Vincit Group)	First lien senior secured revolving loan		4,298		4,298
Individual Foodservice Holdings, LLC	First lien senior secured delayed draw term loan		2,683		2,964
Individual Foodservice Holdings, LLC	First lien senior secured revolving loan		2,054		1,943
Nutraceutical International Corporation	First lien senior secured revolving loan		735		735
Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)	First lien senior secured revolving loan		2,654		-

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Portfolio Company	Investment	March 31, 2021		December 31, 2020
Peter C. Foy & Associates Insurance Services, LLC	First lien senior secured delayed draw term loan C		90		-
Peter C. Foy & Associates Insurance Services, LLC	First lien senior secured delayed draw term loan D		43,207		-
Peter C. Foy & Associates Insurance Services, LLC	First lien senior secured revolving loan		109		-
PCF Holdco, LLC	Class A Units		3,678		-
Refresh Parent Holdings, Inc.	First lien senior secured delayed draw term loan		2,234		4,914
Refresh Parent Holdings, Inc.	First lien senior secured revolving loan		1,796		1,286
Sonny's Enterprises LLC	First lien senior secured revolving loan		3,944		3,944
Total Unfunded Portfolio Company Commitments		$	85,557	$	33,055

The Company maintains sufficient borrowing capacity along with undrawn Capital Commitments to cover outstanding unfunded portfolio company commitments that the Company may be required to fund.

Investor Commitments

As of March 31, 2021, the Company had approximately $1.5 billion in total Capital Commitments from investors (approximately $1.2 billion undrawn), of which $62.4 million is from entities affiliated with or related to the Adviser (approximately $44.8 million undrawn). These undrawn Capital Commitments will no longer remain in effect following the completion of a Liquidity Event.

As of December 31, 2020, the Company had approximately $1.4 billion in total Capital Commitment from investors (approximately $1.1 billion undrawn), of which $55.1 million is from entities affiliated with or related to the Adviser (approximately $37.6 million undrawn). These undrawn Capital Commitments will no longer remain in effect following the completion of a Liquidity Event.

Other Commitments and Contingencies

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At March 31, 2021, management was not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.

Note 8. Net Assets

Subscriptions and Drawdowns

In connection with its formation, the Company has the authority to issue 500,000,000 common shares at $0.01 per share par value.

On June 4, 2020, the Company issued 100 common shares for $1,500 to Owl Rock Diversified Advisors LLC.

The Company has entered into Subscription Agreements with investors providing for the private placement of the Company’s common shares. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase the Company’s common shares up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a capital call notice to its investors.

During the three months ended March 31, 2021, the Company did not deliver any capital call notices to investors.

On April 30, 2021, the Company delivered a capital drawdown notice to its investors relating to the sale of approximately 10,183,299 shares of the company's common stock, par value $0.01 per share, expected to close on or about May 13, 2021 for an aggregate offering price of $150.0 million.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Distributions

The following table reflects the distributions declared on shares of the Company’s common stock during the three months ended March 31, 2021:

	March 31, 2021
Date Declared	Record Date	Payment Date	Distribution per Share
February 23, 2021	March 31, 2021	May 14, 2021	$	0.33

On May 5, 2021, the Board declared a distribution of 90% of estimated second quarter taxable income and net capital gains, if any, for shareholders of record on June 30, 2021, payable on or before August 13, 2021.

Dividend Reinvestment

With respect to distributions, the Company has adopted an “opt out” dividend reinvestment plan for common shareholders. As a result, in the event of a declared distribution, each shareholder that has not “opted out” of the dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional shares of the Company’s common stock rather than receiving cash distributions. Shareholders who receive distributions in the form of shares of common stock will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.

The following table reflects the common stock issued pursuant to the dividend reinvestment plan during the three months ended March 31, 2021:

Date Declared		Record Date		Payment Date		Shares
December 31, 2020		December 31, 2020		January 29, 2021			30,532

Note 9. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2021:

($ in thousands, except per share amounts)	For the Three Months Ended March 31, 2021
Increase (decrease) in net assets resulting from operations	$	8,818
Weighted average shares of common stock outstanding—basic and diluted		19,879,496
Earnings per common share—basic and diluted	$	0.44

Note 10. Income Tax

The Company intends to elect to be treated as a RIC under Subchapter M of the Code, and intends to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, the Company must, among other things, distribute to its shareholders in each taxable year generally at least 90% of the Company’s investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. To maintain tax treatment as a RIC, the Company, among other things, intends to make the requisite distributions to its shareholders, which generally relieves the Company from corporate-level U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, the Company can be expected to carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, the Company will accrue excise tax on estimated excess taxable income.

For the three months ended March 31, 2021, the Company accrued U.S. federal excise tax of $33.0 thousand.

Owl Rock Capital Corporation III

Notes to Consolidated Financial Statements (Unaudited) - Continued

Note 11. Financial Highlights

The following are the financial highlights for a common share outstanding during the three months ended March 31, 2021:

($ in thousands, except share and per share amounts)	For the Three Months Ended March 31, 2021
Per share data:
Net asset value, beginning of period	$	14.42
Net investment income⁽¹⁾		0.35
Net realized and unrealized gain (loss)⁽¹⁾		0.09
Total from operations		0.44
Distributions declared from net investment income⁽²⁾		(0.33	)
Total increase in net assets		0.11
Net asset value, end of period	$	14.53
Shares outstanding, end of period		19,888,995
Total Return, based on net asset value⁽³⁾		3.1		%
Ratios / Supplemental Data
Asset coverage ratio⁽⁴⁾		191.2		%
Ratio of total expenses to average net assets⁽⁵⁾		4.4		%
Ratio of net investment income to average net assets⁽⁵⁾		9.9		%
Net assets, end of period	$	289,065
Weighted-average shares outstanding		19,879,496
Total capital commitments, end of period		1,461,852
Ratio of total contributed capital to total committed capital, end of period		19.50		%
Portfolio turnover rate		8.2		%

________________

(1)

The per share data was derived using the weighted average shares outstanding during the period.

(2)

The per share data was derived using the actual shares outstanding at the date of the relevant transaction.

(3)

Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share, if any, divided by the beginning NAV per share.

(4)

In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing.

(5)

The ratio reflects an annualized amount, except in the case of non-recurring expenses (e.g. initial organization expenses).

Note 12. Subsequent Events

The Company’s management evaluated subsequent events through the date of issuance of these consolidated financial statements. Other than those previously disclosed, there have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, these consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with “ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS”. This discussion contains forward-looking statements, which relate to future events or the future performance or financial condition of Owl Rock Capital Corporation III and involves numerous risks and uncertainties, including, but not limited to, those described in our Form 10-K for the fiscal year ended December 31, 2020 and in “ITEM 1A. RISK FACTORS.” This discussion also should be read in conjunction with the “Cautionary Statement Regarding Forward Looking Statements” set forth on page 1 of this Quarterly Report on Form 10-Q. Actual results could differ materially from those implied or expressed in any forward-looking statements.

Overview

Owl Rock Capital Corporation III (the “Company”, “we”, “us” or “our”) is a Maryland corporation formed on January 27, 2020. We were formed primarily to originate and make loans to, and make debt and equity investments in middle-market companies based primarily in the United States. We invest in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity and equity-related securities including warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity. Our investment objective is to generate current income and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.

We were initially capitalized on June 4, 2020 and commenced operations on June 5, 2020. As a result, comparisons to prior period are not meaningful. We are managed by Owl Rock Diversified Advisors LLC (“the Adviser” or “our Adviser”). The Adviser is registered with the U.S. Securities and Exchange Commission (the “SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Subject to the overall supervision of our board of directors (“the Board” or “our Board”), the Adviser manages our day-to-day operations, and provides investment advisory and management services to us. The Adviser or its affiliates may engage in certain origination activities and receive attendant arrangement, structuring or similar fees. The Adviser is responsible for managing our business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring our investments, and monitoring our portfolio companies on an ongoing basis through a team of investment professionals. The Board consists of eight directors, five of whom are independent.

We conduct private offerings (each, a “Private Offering”) of our common shares to accredited investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. At the closing of each Private Offering, each investor makes a capital commitment (a “Capital Commitment”) to purchase shares of our common stock pursuant to a subscription agreement entered into with us. Until the earlier of a Liquidity Event (as defined below) and the end of the Commitment Period (as defined below), investors are required to fund drawdowns to purchase shares of our common stock up to the amount of their respective Capital Commitment on an as-needed basis each time we deliver a drawdown notice to our investors. The initial closing of the Private Offering occurred on June 5, 2020 (the “Initial Closing”). As of May 7, 2021, we had $1.5 billion in total Capital Commitments from investors, of which $62.4 million is from entities affiliated with or related to our Adviser. From time to time during the Commitment Period (as defined below), the Adviser may, in its sole discretion, permit one or more additional closings (“Subsequent Closings”) as additional Capital Commitments are obtained (the conclusion of all Subsequent Closings, if any, the “Final Closing”). The “Commitment Period” will continue until the seven year anniversary of the Initial Closing. If we have not consummated a Liquidity Event by the end of the Commitment Period, subject to extension for two additional one-year periods, in the sole discretion of the Board, the Board (subject to any necessary shareholder approvals and applicable requirements of the Investment Company Act of 1940 (the “1940 Act”)) will use its commercially reasonable efforts to wind down and/or liquidate and dissolve the Company in an orderly manner. A Liquidity Event could include: (i) future quotation or listing of our securities on a national securities exchange (“Exchange Listing)”; (ii) a transaction, including a merger, in which shareholders receive cash or shares of an entity, including an entity that is affiliated with us, and such shares are listed on a national securities exchange; or (iii) the sale of all or substantially all of our assets.

Placement activities are conducted by our officers and the Adviser. In addition, we may enter into agreements with placement agents or broker-dealers to solicit Capital Commitments. For example, the Company and the Adviser entered into a dealer manager agreement with Owl Rock Capital Securities LLC (“Owl Rock Securities”) pursuant to which Owl Rock Securities and certain participating broker-dealers will solicit Capital Commitments and the Company entered into a placement agent agreement with Owl Rock Securities pursuant to which employees of Owl Rock Securities may conduct placement activities. Owl Rock Securities, an affiliate of Owl Rock, is registered as a broker-dealer with the SEC and is a member of the Financial Industry Regulatory Authority. In addition, the Company, the Adviser and third party placement agents may enter into placement agreements from time to time, pursuant to which such placement agents will solicit Capital Commitments. Fees paid pursuant to these agreements will be paid by our Adviser.

The Adviser is under common control with Owl Rock Capital Advisors LLC (“ORCA”), Owl Rock Technology Advisors LLC ("ORTA"), and Owl Rock Capital Private Fund Advisors LLC ("ORPFA"), which are also investment advisers and subsidiaries of Owl Rock Capital Partners. ORCA serves as the investment adviser to Owl Rock Capital Corporation, Owl Rock Capital Corporation II and Owl Rock Core Income Corp. ORTA serves as investment adviser to Owl Rock Technology Finance Corp. The Adviser,

ORCA, ORTA and ORPFA are referred to as the "Owl Rock Advisers" and together with Owl Rock Capital Partners are referred to, collectively, as "Owl Rock."

On December 23, 2020, Owl Rock Capital Group, LLC (“Owl Rock Capital Group”), the parent of the Adviser (and a subsidiary of Owl Rock Capital Partners), and Dyal Capital Partners (“Dyal”) announced they are merging to form Blue Owl Capital Inc. (“Blue Owl”). Blue Owl will enter the public market via its acquisition by Altimar Acquisition Corporation (NYSE:ATAC) (“Altimar”), a special purpose acquisition company (the “Transaction”). If the Transaction is consummated, there will be no changes to the Company’s investment strategy or the Adviser’s investment team or investment process with respect to the Company; however, the Transaction will result in a change in control of the Adviser, which will be deemed an assignment of the Investment Advisory Agreement in accordance with the 1940 Act. As a result, the Board, after considering the Transaction and subsequent change in control, has determined that upon consummation of the Transaction and subject to the approval of the Company’s shareholders at a special meeting, the Company should enter into an amended and restated investment advisory agreement with the Adviser on terms that are identical to the Investment Advisory Agreement. At a special meeting of the Company's shareholders held on March 17, 2021, the Company's shareholders approved the Company's entry, upon consummation of the Transaction, into the amended and restated advisory agreement with the Adviser on terms that are identical to the Advisory Agreement. The Board also determined that upon consummation of the Transaction, the Company should enter into an amended and restated administration agreement with the Adviser on terms that are identical to the Administration Agreement.

We may be prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, the prior approval of the SEC. We rely on exemptive relief, that has been granted by the SEC to ORCA and certain of its affiliates, to permit us to co-invest with other funds managed by the Adviser or certain of its affiliates, including Owl Rock Capital Corporation, Owl Rock Capital Corporation II, Owl Rock Technology Finance Corp. and Owl Rock Core Income Corp., and other funds managed by the Adviser or its affiliates (together with the Company, the “Owl Rock Clients”), in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to such exemptive relief, we generally are permitted to co-invest with certain of our affiliates if a “required majority” (as defined in Section 57(o) of the “1940 Act”) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching by us or our shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of our shareholders and is consistent with our investment objective and strategies, and (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing. In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs, through December 31, 2020, we were permitted, subject to the satisfaction of certain conditions, to complete follow-on investments in our existing portfolio companies with certain private funds managed by the Adviser or its affiliates and covered by our exemptive relief, even if such private funds have not previously invested in such existing portfolio company. Without this order, the private funds would generally not be able to participate in such follow-on investments with us unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with us. Although the conditional exemptive order has expired, the SEC’s Division of Investment Management has indicated that until March 31, 2022, it will not recommend enforcement action, to the extent that any BDC with an existing coinvestment order continues to engage in certain transactions described in the conditional exemptive order, pursuant to the same terms and conditions described therein. The Owl Rock Advisers’ allocation policy seeks to ensure equitable allocation of investment opportunities over time between us and other funds managed by our Adviser or its affiliates. As a result of the exemptive relief, there could be significant overlap in our investment portfolio and the investment portfolio of other funds established by the Adviser or its affiliates, including the Owl Rock Clients, that could avail themselves of the exemptive relief.

On April 24, 2020, we formed a wholly-owned subsidiary, OR Lending III LLC, a Delaware limited liability company, which holds a California finance lenders license. OR Lending III LLC intends to make loans to borrowers headquartered in California. From time to time we may form wholly-owned subsidiaries to facilitate our normal course of business.

We have elected to be regulated as a BDC under the 1940 Act and intend to elect to be treated as a regulated investment company (“RIC”) for tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). As a result, we are required to comply with various statutory and regulatory requirements, such as:

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the requirement to invest at least 70% of our assets in “qualifying assets”, as such term is defined in the 1940 Act;

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source of income limitations;

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asset diversification requirements; and

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the requirement to distribute (or be treated as distributing) in each taxable year at least 90% of our investment company taxable income and tax-exempt interest for that taxable year.

COVID-19 Developments

In March 2020, the outbreak of COVID -19 was recognized as a pandemic by the World Health Organization and in response to the outbreak, our Adviser instituted a work from home policy until it is deemed safe to return to the office.

We have and continue to assess the impact of COVID-19 on our portfolio companies. We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide, the effectiveness of governmental responses designed to mitigate strain to businesses and the economy and the magnitude of the economic impact of the outbreak. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

We have built out our portfolio management team to include workout experts and continue to closely monitor our portfolio companies; however, we are unable to predict the duration of any business and supply-chain disruptions, whether COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition.

Our Investment Framework

We are a Maryland corporation organized primarily to originate and make loans to, and make debt and equity investments in, U.S. middle market companies. Our investment objective is to generate current income, and to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Since our Adviser and its affiliates began investment activities in April 2016 through March 31, 2021, our Adviser and its affiliates have originated $30.0 billion aggregate principal amount of investments, of which $28.0 billion of aggregate principal amount of investments prior to any subsequent exits or repayments, was retained by either us or a corporation or fund advised by our Adviser or its affiliates. We seek to generate current income primarily in U.S. middle market companies through direct originations of senior secured loans or originations of unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, investments in equity and equity-related securities including warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity.

We define “middle market companies” generally to mean companies with earnings before interest expense, income tax expense, depreciation and amortization, or “EBITDA,” between $10 million and $250 million annually and/or annual revenue of $50 million to $2.5 billion at the time of investment, although we may on occasion invest in smaller or larger companies if an opportunity presents itself. We generally seek to invest in companies with a loan-to-value ratio of 50% or below. Our target credit investments will typically have maturities between three and ten years and generally range in size between $20 million and $250 million. The investment size will vary with the size of our capital base.

We expect that generally our portfolio composition will be majority debt or income producing securities, which may include “covenant-lite” loans (as defined below), with a lesser allocation to equity or equity-linked opportunities. In addition, we may invest a portion of our portfolio in opportunistic investments, which will not be our primary focus, but will be intended to enhance returns to our shareholders. These investments may include high-yield bonds and broadly-syndicated loans. Our portfolio composition may fluctuate from time to time based on market conditions and interest rates.

Covenants are contractual restrictions that lenders place on companies to limit the corporate actions a company may pursue. Generally, the loans in which we expect to invest will have financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance. However, to a lesser extent, we may invest in “covenant-lite” loans. We use the term “covenant-lite” to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.

As of March 31, 2021, our average debt investment size in each of our portfolio companies was approximately $17.5 million based on fair value. As of March 31, 2021, our portfolio companies, excluding investments that fall outside of our typical borrower profile, represented 76.5% of our total debt portfolio based on fair value and these portfolio companies had weighted average annual revenue of $474 million and weighted average annual EBITDA of $108 million.

The companies in which we invest use our capital to support their growth, acquisitions, market or product expansion, refinancings and/or recapitalizations. The debt in which we invest typically is not rated by any rating agency, but if these instruments were rated, they would likely receive a rating of below investment grade (that is, below BBB- or Baa3), which is often referred to as “high yield” or “junk”.

Key Components of Our Results of Operations

Investments

We focus primarily on the direct origination of loans to middle market companies domiciled in the United States.

Our level of investment activity (both the number of investments and the size of each investment) can and will vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make.

In addition, as part of our risk strategy on investments, we may reduce the levels of certain investments through partial sales or syndication to additional lenders.

Revenues

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of three to ten years. As of March 31, 2021, 99.1% of our debt investments based on fair value bear interest at a floating rate, subject to interest rate floors, in certain cases. Interest on our debt investments is generally payable either monthly or quarterly.

Our investment portfolio consists primarily of floating rate loans, and our credit facility bears interest at floating rates. Macro trends in base interest rates like London Interbank Offered Rate (“LIBOR”) and any alternative reference rates may affect our net investment income over the long term. However, because we generally originate loans to a small number of portfolio companies each quarter, and those investments vary in size, our results in any given period, including the interest rate on investments that were sold or repaid in a period compared to the interest rate of new investments made during that period, often are idiosyncratic, and reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macro trends.

Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts under U.S. generally accepted accounting principles (“U.S. GAAP”) as interest income using the effective yield method for term instruments and the straight-line method for revolving or delayed draw instruments. Repayments of our debt investments can reduce interest income from period to period. The frequency or volume of these repayments may fluctuate significantly. We record prepayment premiums on loans as interest income. We may also generate revenue in the form of commitment, loan origination, structuring, or due diligence fees, fees for providing managerial assistance to our portfolio companies and possibly consulting fees. Certain of these fees may be capitalized and amortized as additional interest income over the life of the related loan.

Dividend income on equity investments is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded companies.

Our portfolio activity will also reflect the proceeds from sales of investments. We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized gains (losses) on investments in the Consolidated Statement of Operations.

Expenses

Our primary operating expenses include the payment of the management fee, expenses reimbursable under the Administration Agreement and Investment Advisory Agreement, legal and professional fees, interest and other debt expenses and other operating expenses. The management fee compensates our Adviser for work in identifying, evaluating, negotiating, closing, monitoring and realizing our investments. The Adviser will not be entitled to an incentive fee prior to an Exchange Listing.

Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory and management services to us, the base compensation, bonus and benefits, and the routine overhead expenses of such personnel allocable to such services, are provided and paid for by the Adviser. In addition, the Adviser shall be solely responsible for any placement or “finder’s” fees payable to placement agents engaged by the Company or its affiliates in connection with the offering of securities by the Company. We bear our allocable portion of the costs of the compensation, benefits and related administrative expenses (including travel expenses) of our officers who provide operational and administrative services hereunder, their respective staffs and other professionals who provide services to us (including, in each case, employees of the Adviser or an affiliate) who assist with the preparation, coordination, and administration of the foregoing or provide other “back office” or “middle office” financial or operational services to us. We shall reimburse the Adviser (or its affiliates) for an allocable portion of the compensation paid by the Adviser (or its affiliates) to such individuals (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs and in acting on our behalf). We also will bear all other costs and expenses of our operations,

administration and transactions, including, but not limited to (i) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Investment Advisory Agreement; (ii) our allocable portion of overhead and other expenses incurred by the Adviser in performing its administrative obligations under the Investment Advisory Agreement and the Administration Agreement; and (iii) all other costs and expenses of our operations and transactions including, without limitation, those relating to:

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the cost of our organization and any offerings;

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the cost of calculating our net asset value, including the cost of any third-party valuation services;

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the cost of effecting any sales and repurchases of our common stock and other securities;

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fees and expenses payable under any dealer manager agreements, if any;

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debt service and other costs of borrowings or other financing arrangements;

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costs of hedging;

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expenses, including travel expense, incurred by the Adviser, or members of the investment team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, enforcing our rights;

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escrow agent, transfer agent and custodial fees and expenses;

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fees and expenses associated with marketing efforts;

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federal and state registration fees, any stock exchange listing fees and fees payable to rating agencies;

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federal, state and local taxes;

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independent directors’ fees and expenses including certain travel expenses;

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costs of preparing financial statements and maintaining books and records and filing reports or other documents with the SEC (or other regulatory bodies) and other reporting and compliance costs, including registration fees, listing fees and licenses, and the compensation of professionals responsible for the preparation of the foregoing;

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the costs of any reports, proxy statements or other notices to our shareholders (including printing and mailing costs), the costs of any shareholder or director meetings and the compensation of personnel responsible for the preparation of the foregoing and related matters;

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commissions and other compensation payable to brokers or dealers;

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research and market data;

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fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;

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direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;

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fees and expenses associated with independent audits, outside legal and consulting costs;

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costs of winding up;

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costs incurred in connection with the formation or maintenance of entities or vehicles to hold our assets for tax or other purposes;

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extraordinary expenses (such as litigation or indemnification); and

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costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws.

We expect, but cannot ensure, that our general and administrative expenses will increase in dollar terms during periods of asset growth, but will decline as a percentage of total assets during such periods.

Leverage

The amount of leverage we use in any period depends on a variety of factors, including cash available for investing, the cost of financing and general economic and market conditions. We are generally permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to the common stock if our asset coverage, as defined in the 1940 Act, would at least be equal to 150% immediately after each such issuance. This means that generally, we may borrow $2 for investment purposes of every $1 of investor equity. Our current target leverage ratio is 0.90x-1.25x.

In any period, our interest expense will depend largely on the extent of our borrowing and we expect interest expense will increase as we increase our leverage over time subject to the limits of the 1940 Act. In addition, we may dedicate assets to financing facilities.

Market Trends

We believe the middle-market lending environment provides opportunities for us to meet our goal of making investments that generate attractive risk-adjusted returns based on a combination of the following factors, which continue to remain true in the current environment, with the economic shutdown resulting from the COVID-19 national health emergency.

Limited Availability of Capital for Middle-Market Companies. We believe that regulatory and structural changes in the market have reduced the amount of capital available to U.S. middle-market companies. In particular, we believe there are currently fewer providers of capital to middle market companies. We believe that many commercial and investment banks have, in recent years, de-emphasized their service and product offerings to middle-market businesses in favor of lending to large corporate clients and managing capital markets transactions. In addition, these lenders may be constrained in their ability to underwrite and hold bank loans and high yield securities for middle-market issuers as they seek to meet existing and future regulatory capital requirements. We also believe that there is a lack of market participants that are willing to hold meaningful amounts of certain middle-market loans. As a result, we believe our ability to minimize syndication risk for a company seeking financing by being able to hold its loans without having to syndicate them, coupled with reduced capacity of traditional lenders to serve the middle-market, present an attractive opportunity to invest in middle-market companies.

Capital Markets Have Been Unable to Fill the Void in U.S. Middle Market Finance Left by Banks. While underwritten bond and syndicated loan markets have been robust in recent years, middle market companies are less able to access these markets for reasons including the following:

High Yield Market – Middle market companies generally are not issuing debt in an amount large enough to be an attractively sized bond. High yield bonds are generally purchased by institutional investors who, among other things, are focused on the liquidity characteristics of the bond being issued. For example, mutual funds and exchange traded funds (“ETFs”) are significant buyers of underwritten bonds. However, mutual funds and ETFs generally require the ability to liquidate their investments quickly in order to fund investor redemptions and/or comply with regulatory requirements. Accordingly, the existence of an active secondary market for bonds is an important consideration in these entities’ initial investment decision. Because there is typically little or no active secondary market for the debt of U.S. middle market companies, mutual funds and ETFs generally do not provide debt capital to U.S. middle market companies. We believe this is likely to be a persistent problem and creates an advantage for those like us who have a more stable capital base and have the ability to invest in illiquid assets.

Syndicated Loan Market – While the syndicated loan market is modestly more accommodating to middle market issuers, as with bonds, loan issue size and liquidity are key drivers of institutional appetite and, correspondingly, underwriters’ willingness to underwrite the loans. Loans arranged through a bank are done either on a “best efforts” basis or are underwritten with terms plus provisions that permit the underwriters to change certain terms, including pricing, structure, yield and tenor, otherwise known as “flex”, to successfully syndicate the loan, in the event the terms initially marketed are insufficiently attractive to investors. Furthermore, banks are generally reluctant to underwrite middle market loans because the arrangement fees they may earn on the placement of the debt generally are not sufficient to meet the banks’ return hurdles. Loans provided by companies such as ours provide certainty to issuers in that we can commit to a given amount of debt on specific terms, at stated coupons and with agreed upon fees. As we are the ultimate holder of the loans, we do not require market “flex” or other arrangements that banks may require when acting on an agency basis.

Robust Demand for Debt Capital. We believe U.S. middle market companies will continue to require access to debt capital to refinance existing debt, support growth and finance acquisitions. In addition, we believe the large amount of uninvested capital held by funds of private equity firms, estimated by Preqin Ltd., an alternative assets industry data and research company, to be $1.5 trillion as of October 2020, will continue to drive deal activity. We expect that private equity sponsors will continue to pursue acquisitions and leverage their equity investments with secured loans provided by companies such as us.

The Middle Market is a Large Addressable Market. According to GE Capital’s National Center for the Middle Market 2^nd quarter 2020 Middle Market Indicator, there are approximately 200,000 U.S. middle market companies, which have approximately 48 million aggregate employees. Moreover, the U.S. middle market accounts for one-third of private sector gross domestic product (“GDP”). GE defines U.S. middle market companies as those between $10 million and $1 billion in annual revenue, which we believe has significant overlap with our definition of U.S. middle market companies.

Attractive Investment Dynamics. An imbalance between the supply of, and demand for, middle market debt capital creates attractive pricing dynamics. We believe the directly negotiated nature of middle market financings also generally provides more favorable terms to the lender, including stronger covenant and reporting packages, better call protection, and lender-protective change of control provisions. Additionally, we believe BDC managers’ expertise in credit selection and ability to manage through credit cycles has generally resulted in BDCs experiencing lower loss rates than U.S. commercial banks through credit cycles. Further, we believe that historical middle market default rates have been lower, and recovery rates have been higher, as compared to the larger market capitalization, broadly distributed market, leading to lower cumulative losses. Lastly, we believe that in the current

environment, as the economy reopens following the economic shutdown resulting from the COVID-19 national health emergency, lenders with available capital may be able to take advantage of attractive investment opportunities as the economy reopens and may be able to achieve improved economic spreads and documentation terms.

Conservative Capital Structures. Following the credit crisis, which we define broadly as occurring between mid-2007 and mid-2009, lenders have generally required borrowers to maintain more equity as a percentage of their total capitalization, specifically to protect lenders during economic downturns. With more conservative capital structures, U.S. middle market companies have exhibited higher levels of cash flows available to service their debt. In addition, U.S. middle market companies often are characterized by simpler capital structures than larger borrowers, which facilitates a streamlined underwriting process and, when necessary, restructuring process.

Attractive Opportunities in Investments in Loans. We invest in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity and equity-related securities. We believe that opportunities in senior secured loans are significant because of the floating rate structure of most senior secured debt issuances and because of the strong defensive characteristics of these types of investments. Given the current low interest rate environment, we believe that debt issues with floating interest rates offer a superior return profile as compared with fixed-rate investments, since floating rate structures are generally less susceptible to declines in value experienced by fixed-rate securities in a rising interest rate environment. Senior secured debt also provides strong defensive characteristics. Senior secured debt has priority in payment among an issuer’s security holders whereby holders are due to receive payment before junior creditors and equity holders. Further, these investments are secured by the issuer’s assets, which may provide protection in the event of a default.

Portfolio and Investment Activity

As of March 31, 2021, based on fair value, our portfolio consisted of 72.0% first lien senior secured debt investments (of which 51.2% we consider to be unitranche debt investments (including “last out” portions of such loans)), 17.1% second lien senior secured debt investments, 8.8% unsecured debt investments, and 2.1% equity investments.

As of March 31, 2021, our weighted average total yield of the portfolio at fair value and amortized cost was 8.2% and 8.3%, respectively, and our weighted average yield of accruing debt and income producing securities at fair value and amortized cost was 8.3% and 8.4%, respectively.

As of March 31, 2021, we had investments in 29 portfolio companies with an aggregate fair value of $519.4 million.

Based on current market conditions, the pace of our investment activities, including originations and repayments, may vary. Currently, the strength of the financing and merger and acquisitions markets, coupled with the improved operational and financial performance of portfolio companies as COVID restrictions have eased, has led to increased originations and an active pipeline of investment opportunities.

Our investment activity for the three months ended March 31, 2021 is presented below (information presented herein is at par value unless otherwise indicated).

($ in thousands)	For the Three Months Ended March 31, 2021
New investment commitments
Gross originations	$	183,304
Less: Sell downs		—
Total new investment commitments	$	183,304
Principal amount of investments funded:
First-lien senior secured debt investments	$	95,301
Second-lien senior secured debt investments		5,000
Unsecured debt investments		25,065
Equity investments		1,370
Total principal amount of investments funded	$	126,736
Principal amount of investments sold or repaid:
First-lien senior secured debt investments	$	(33,272	)
Second-lien senior secured debt investments		(5,910	)
Unsecured debt investments		—
Equity investments		—
Total principal amount of investments sold or repaid	$	(39,182	)
Number of new investment commitments in new portfolio companies⁽¹⁾	7
Average new investment commitment amount	$	25,472
Weighted average term for new debt investment commitments (in years)		4.8
Percentage of new debt investment commitments at floating rates		100.0	%
Percentage of new debt investment commitments at fixed rates		0.0	%
Weighted average interest rate of new debt investment commitments⁽²⁾		7.3	%
Weighted average spread over LIBOR of new floating rate debt investment commitments		6.4	%

________________

(1)

Number of new investment commitments represents commitments to a particular portfolio company.

(2)

Assumes each floating rate commitment is subject to the greater of the interest rate floor (if applicable) or 3-month LIBOR, which was 0.19% as of March 31, 2021.

As of March 31, 2021 and December 31, 2020, our investments consisted of the following:

	March 31, 2021					December 31, 2020
($ in thousands)	Amortized Cost		Fair Value			Amortized Cost		Fair Value
First lien senior secured debt investments		370,740		373,838	⁽¹⁾		306,652		308,112	⁽¹⁾
Second-lien senior secured debt investments		88,356		88,930			89,058		89,245
Unsecured debt investments		44,697		45,506			19,288		20,308
Equity investments		11,090		11,081			9,545		9,544
Total Investments	$	514,883	$	519,355		$	424,543	$	427,209

________________

(1)

51.2% and 45.7% of which we consider unitranche loans as of March 31, 2021 and December 31, 2020, respectively.

The table below describes investments by industry composition based on fair value as of March 31, 2021 and December 31, 2020:

	March 31, 2021			December 31, 2020
Aerospace and defense		0.3	%		-	%
Business services		7.3			8.9
Chemicals		7.1			1.5
Consumer products		3.0			3.6
Distribution		7.7			9.2
Financial services		11.9			8.6
Food and beverage		8.0			9.7
Healthcare equipment and services		13.0			8.3
Healthcare providers and services		6.2			8.0
Healthcare technology		1.9			5.7
Household products		4.7			-
Human resource support services		0.1			0.2
Insurance		1.8			0.9
Internet software and services		15.4			21.5
Manufacturing		10.2			12.2
Telecommunications		1.4			1.7
Total		100.0	%		100.0	%

The table below describes investments by geographic composition based on fair value as of March 31, 2021 and December 31, 2020:

	March 31, 2021			December 31, 2020
United States:
Midwest		10.0	%		15.6	%
Northeast		17.7			15.1
South		37.9			37.9
West		23.5			24.0
International		10.9			7.4	⁽¹⁾
Total		100.0	%		100.0	%

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(1)

As of December 31, 2020, the geographic composition of International was fully comprised of the United Kingdom.

The weighted average yields and interest rates of our investments at fair value as of March 31, 2021 and December 31, 2020 were as follows:

	March 31, 2021			December 31, 2020
Weighted average total yield of portfolio		8.2	%		8.4	%
Weighted average total yield of debt and income producing securities		8.3	%		8.5	%
Weighted average interest rate of debt securities		7.9	%		8.0	%
Weighted average spread over LIBOR of all floating rate investments		7.0	%		7.1	%

The weighted average yield of our debt and income producing securities is not the same as a return on investment for our shareholders but, rather, relates to our investment portfolio and is calculated before the payment of all of our and our subsidiaries’ fees and expenses. The weighted average yield was computed using the effective interest rates as of each respective date, including accretion of original issue discount and loan origination fees, but excluding investments on non-accrual status, if any. There can be no assurance that the weighted average yield will remain at its current level.

Our Adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action with respect to each portfolio company. Our Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

•

assessment of success of the portfolio company in adhering to its business plan and compliance with covenants;

•

periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;

•

comparisons to other companies in the portfolio company’s industry; and

•

review of monthly or quarterly financial statements and financial projections for portfolio companies.

As part of the monitoring process, our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser rates the credit risk of all investments on a scale of 1 to 5. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The rating system is as follows:


Investment Rating		Description
1		Investments rated 1 involve the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since origination or acquisition are generally favorable;
2		Investments rated 2 involve an acceptable level of risk that is similar to the risk at the time of origination or acquisition. The borrower is generally performing as expected and the risk factors are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2;
3		Investments rated 3 involve a borrower performing below expectations and indicates that the loan’s risk has increased somewhat since origination or acquisition;
4		Investments rated 4 involve a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due); and
5		Investments rated 5 involve a borrower performing substantially below expectations and indicates that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

Our Adviser rates the investments in our portfolio at least quarterly and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments rated 3, 4 or 5, our Adviser enhances its level of scrutiny over the monitoring of such portfolio company.

The following table shows the composition of our portfolio on the 1 to 5 rating scale as of March 31, 2021 and December 31, 2020:

	March 31, 2021					December 31, 2020
Investment Rating	Investments at Fair Value		Percentage of Total Portfolio			Investments at Fair Value		Percentage of Total Portfolio
($ in thousands)
1	$	—		—	%	$	—		—	%
2		519,355		100.0			427,209		100.0
3		—		—			—		—
4		—		—			—		—
5		—		—			—		—
Total	$	519,355		100.0	%	$	427,209		100.0	%

The following table shows the amortized cost of our performing and non-accrual debt investments as of March 31, 2021 and December 31, 2020:

	March 31, 2021					December 31, 2020
($ in thousands)	Amortized Cost		Percentage			Amortized Cost		Percentage
Performing	$	503,793		100.0	%	$	414,998		100.0	%
Non-accrual		—		—			—		—
Total	$	503,793		100.0	%	$	414,998		100.0	%

Results of Operations

We were initially capitalized on June 4, 2020 and commenced operations on June 5, 2020. As a result, comparisons to prior period are not meaningful. The following table represents the operating results for the three months ended March 31, 2021:

($ in millions)	For the Three Months Ended March 31, 2021
Total Investment Income	$	10.2
Less: Operating expenses		3.2
Net Investment Income (Loss) Before Taxes		7.0
Less: Income taxes (benefit), including excise taxes		-
Net Investment Income (Loss) After Taxes	$	7.0
Net change in unrealized gain (loss)		1.6
Net realized gain (loss)		0.2
Net Increase (Decrease) in Net Assets Resulting from Operations	$	8.8

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio.

Investment Income

Investment income for the three months ended March 31, 2021 was as follows:

	For the Three Months Ended March 31,
($ in millions)	2021
Interest income (excluding PIK interest income)	$	9.0
PIK interest income		0.9
Other income		0.3
Total investment income	$	10.2

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Investment income for the three months ended March 31, 2021 was $10.2 million, substantially all of which consisted of interest from investments.

As we were in the development stage through June 30, 2020, no revenues were earned during periods prior to July 1, 2020.

Expenses

Expenses for the three months ended March 31, 2021 were as follows:

	For the Three Months Ended March 31,
($ in millions)	2021
Interest expense	$	1.4
Management fee		0.5
Professional fees		0.5
Directors' fees		0.3
Other general and administrative		0.4
Total operating expenses	$	3.1

Under the terms of the Administration Agreement, we reimburse the Adviser for services performed for us. In addition, pursuant to the terms of the Administration Agreement, the Adviser may delegate its obligations under the Administration Agreement to an affiliate or to a third party and we reimburse the Adviser for any services performed for us by such affiliate or third party.

For the three months ended March 31, 2021

Expenses for the three months ended March 31, 2021 were $3.1 million, which consisted of $1.4 million in interest expense, $0.5 million in management fee, $0.5 million in professional fees, $0.3 million in directors’ fees and $0.4 million in other general and administrative expenses.

Income Taxes, Including Excise Taxes

We intend to elect to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our shareholders in each taxable year generally at least 90% of our investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieves us from corporate-level U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we can be expected to carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, we will accrue excise tax on estimated excess taxable income.

For the three months ended March 31, 2021, we accrued U.S. federal excise tax of $33.0 thousand.

Net Change in Unrealized Gains (Losses)

We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. During the three months ended March 31, 2021, net change in unrealized gains (losses) were comprised of the following:

	For the Three Months Ended March 31,
($ in millions)	2021
Net change in unrealized gain (loss) on investments	$	1.8
Net change in translation of assets and liabilities in foreign currencies		(0.2	)
Net change in unrealized gain (loss)	$	1.6

For the three months ended March 31, 2021

For the three months ended March 31, 2021, the net change in unrealized gain (loss) was primarily driven by an increase in the fair value of our debt investments as compared to December 31, 2020. As of March 31, 2021, the fair value of our debt investments as a percentage of principal was 99.1%, as compared to 98.7% as of December 31, 2020.

Net Realized Gains (Losses)

We recognized a realized gain on a partially exited portfolio company of approximately $22.2 thousand and a realized gain on foreign currency transactions of approximately $0.2 million during the three months ended March 31, 2021.

Financial Condition, Liquidity and Capital Resources

Our liquidity and capital resources are generated primarily from the proceeds of capital drawdowns of our privately placed Capital Commitments, cash flows from interest and fees earned from our investments and principal repayments and our credit facility. The primary uses of our cash are (i) investments in portfolio companies and other investments and to comply with certain portfolio diversification requirements, (ii) the cost of operations (including paying or reimbursing our Adviser), (iii) debt service, repayment and other financing costs of any borrowings and (iv) cash distributions to the holders of our shares.

We may from time to time enter into additional debt facilities, increase the size of our existing credit facility or issue additional debt securities. Additional financings could include SPV drop down facilities and unsecured notes. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 150%. As of March 31, 2021, our asset coverage ratio was 191%. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund.

Cash as of March 31, 2021, taken together with our uncalled Capital Commitments of $1.2 billion and available debt capacity of $110.1 million, is expected to be sufficient for our investing activities and to conduct our operations in the near term.

As of March 31, 2021, we had $89.3 million in cash. During the three months ended March 31, 2021, we used $81.0 million in cash for operating activities, primarily as a result of funding portfolio investments of $129.2 million, partially offset by sales and repayments of $41.3 million and other operating activity of $6.9 million. Lastly, cash provided by financing activities was $87.7 million during the period, which was the result of proceeds from the issuance of shares, net of offering costs paid, of $3.4 million and proceeds from net borrowings on our credit facility, net of debt issuance costs, of $86.0 million, partially offset by distributions paid of $1.7 million.

Equity

Subscriptions and Drawdowns

In connection with our formation, we have the authority to issue 500,000,000 common shares at $0.01 per share par value.

On June 4, 2020, the Company issued 100 common shares for $1,500 to Owl Rock Diversified Advisors LLC.

We have entered into subscription agreements (the “Subscription Agreements”) with investors providing for the private placement of our common shares. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase our common shares up to the amount of their respective Capital Commitment on an as-needed basis each time we deliver a drawdown notice to our investors.

During the three months ended March 31, 2021, we did not deliver any capital call notices to investors.

On April 30, 2021, we delivered a capital drawdown notice to our investors relating to the sale of approximately 10,183,299 shares of the company's common stock, par value $0.01 per share, expected to close on or about May 13, 2021 for an aggregate offering price of $150.0 million.

Distributions

The following table reflects the distributions declared on shares of our common stock during the three months ended March 31, 2021:

	March 31, 2021
Date Declared	Record Date	Payment Date	Distribution per Share
February 23, 2021	March 31, 2021	May 14, 2021	$	0.33

Dividend Reinvestment

With respect to distributions, we adopted an “opt out” dividend reinvestment plan for common shareholders. As a result, in the event of a declared distribution, each shareholder that has not “opted out” of the dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional shares of our common stock rather than receiving cash distributions.

Shareholders who receive distributions in the form of shares of common stock will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.

The following table reflects the common stock issued pursuant to the dividend reinvestment plan during the three months ended March 31, 2021:

Date Declared		Record Date		Payment Date		Shares
December 31, 2020		December 31, 2020		January 29, 2021			30,532

Debt

Aggregate Borrowings

Debt obligations consisted of the following as of March 31, 2021 and December 31, 2020:

	March 31, 2021
($ in thousands)	Aggregate Principal Committed		Outstanding Principal		Amount Available⁽¹⁾		Net Carrying Value⁽²⁾
Subscription Credit Facility⁽³⁾	$	425,000	$	314,944	$	110,056	$	311,707
Total Debt	$	425,000	$	314,944	$	110,056	$	311,707

________________

(1)

The amount available reflects any limitations related to each credit facility’s borrowing base.

(2)

The carrying value of the Company’s Subscription Credit Facility is presented net of deferred financing costs of $3.2 million.

(3)

Includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.

	December 31, 2020
($ in thousands)	Aggregate Principal Committed		Outstanding Principal		Amount Available⁽¹⁾		Net Carrying Value⁽²⁾
Subscription Credit Facility⁽³⁾	$	425,000	$	228,778	$	196,222	$	225,215
Total Debt	$	425,000	$	228,778	$	196,222	$	225,215

________________

(1)

The amount available reflects any limitations related to each credit facility’s borrowing base.

(2)

The carrying value of the Company’s Subscription Credit Facility is presented net of deferred financing costs of $3.6 million.

(3)

Includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.

For the three months ended March 31, 2021, the components of interest expense were as follows:

	For the Three Months Ended March 31,
($ in thousands)	2021
Interest expense	$	1,095
Amortization of debt issuance costs		337
Total Interest Expense	$	1,432
Average interest rate		2.6	%
Average daily borrowings	$	169,473

Senior Securities

Information about our senior securities is shown in the following table as of March 31, 2021 and December 31, 2020.

Class and Period	Total Amount Outstanding Exclusive of Treasury Securities⁽¹⁾ ($ in millions)		Asset Coverage per Unit⁽²⁾		Involuntary Liquidating Preference per Unit⁽³⁾		Average Market Value per Unit⁽⁴⁾
Subscription Credit Facility
March 31, 2021 (unaudited)	$	314.9	$	1,912		—	N/A
December 31, 2020	$	228.8	$	2,250		—	N/A

________________

(1)

Total amount of each class of senior securities outstanding at the end of the period presented.

(2)

Asset coverage per unit is the ratio of the carrying value of our total assets, less all liabilities excluding indebtedness represented by senior securities in this table, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness and is calculated on a consolidated basis.

(3)

The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The "—" in this column indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

(4)

Not applicable, as senior securities are not registered for public trading on a stock exchange.

Credit Facility

Subscription Credit Facility

On August 12, 2020 (the “Closing Date”), we entered into a revolving credit facility (the “Subscription Credit Facility”) with State Street Bank and Trust Company (“State Street”) as administrative agent (the “Administrative Agent”), and State Street and PNC Bank, National Association (“PNC”), as lenders.

As of March 31, 2021, the maximum principal amount of the Subscription Credit Facility was $425 million, subject to availability under the borrowing base, which is based on unused capital commitments. The Subscription Credit Facility includes a provision permitting us to further increase the size of the Subscription Credit Facility under certain circumstances up to a maximum principal amount not to exceed $1.0 billion, if the existing or new lenders agree to commit to such further increase, which is referred to as the accordion feature. On September 28, 2020, City National Bank (“City National”) agreed to provide a commitment through the Subscription Credit Facility’s accordion feature, increasing the maximum principal amount of the facility from $350 million to $400 million. On December 15, 2020, California Bank & Trust agreed to provide a commitment through the Subscription Credit Facility’s accordion feature, increasing the maximum principal amount of the facility from $400 million to $425 million. On April 8, 2021, Western Alliance Bank (dba Bridge Bank) agreed to provide a commitment through the Subscription Credit Facility’s accordion feature, increasing the maximum principal amount of the facility from $425 million to $550 million.

Borrowings under the Subscription Credit Facility bear interest, at our election at the time of drawdown, at a rate per annum equal to (i) in the case of LIBOR rate loans, an adjusted LIBOR rate for the applicable interest period plus 2.00% or (ii) in the case of reference rate loans, the greatest of (A) a prime rate plus 1.00%, (B) the federal funds rate plus 1.50%, and (C) one-month LIBOR plus 1.00%. We generally borrow utilizing LIBOR loans, generally electing one-month LIBOR upon borrowing. Loans may be converted from one rate to another at any time at our election, subject to certain conditions. We also will pay an unused commitment fee of 0.25% per annum on the unused commitments.

The Subscription Credit Facility will mature upon the earliest of: (i) the date three (3) years from the Closing Date (the “Stated Maturity Date”); (ii) the date upon which the Administrative Agent declares the obligations under the Subscription Credit Facility due and payable after the occurrence of an event of default; (iii) forty-five (45) days prior to the scheduled termination of the commitment period under our subscription agreements; (iv) forty-five (45) days prior to the date of any listing of our common stock on a national securities exchange and certain other liquidity events; (v) the termination of the commitment period under our subscription agreements (if earlier than the scheduled date); and (vi) the date we terminate the commitments pursuant to the Subscription Credit Facility. At our option and subject to the consent of each of the Lenders and the Administrative Agent in their sole discretion, the Stated Maturity Date may be extended by up to 364 days subject to satisfaction of customary conditions.

The Subscription Credit Facility is secured by a perfected first priority security interest in our right, title, and interest in and to the capital commitments of our private investors, including our right to make capital calls, receive and apply capital contributions, enforce remedies and claims related thereto together with capital call proceeds and related rights, and a pledge of the collateral account into which capital call proceeds are deposited.

The Subscription Credit Facility contains customary covenants, including certain limitations on the incurrence by us of additional indebtedness and on our ability to make distributions to our shareholders, or redeem, repurchase or retire shares of stock, upon the occurrence of certain events, and customary events of default (with customary cure and notice provisions).

Transfers of interests by our investors must comply with certain sections of the Subscription Credit Facility and we shall notify the Administrative Agent before such transfers take place. Such transfers may trigger mandatory prepayment obligations.

Off-Balance Sheet Arrangements

Portfolio Company Commitments

From time to time, we may enter into commitments to fund investments. As of March 31, 2021 and December 31, 2020, we had the following outstanding commitments to fund investments in current portfolio companies:

Portfolio Company	Investment	March 31, 2021		December 31, 2020
($ in thousands)
Ardonagh Midco 3 PLC	First lien senior secured delayed draw term loan	$	147	$	365
AxiomSL Group, Inc.	First lien senior secured revolving loan		2,123		2,123
National Dentex Labs LLC (fka Barracuda Dental LLC)	First lien senior secured delayed draw term loan		5,073		5,073
National Dentex Labs LLC (fka Barracuda Dental LLC)	First lien senior secured revolving loan		663		976
BCTO BSI Buyer, Inc. (dba Buildertrend)	First lien senior secured revolving loan		1,018		1,018
Forescout Technologies, Inc.	First lien senior secured revolving loan		2,288		2,288
Gaylord Chemical Company, L.L.C.	First lien senior secured revolving loan		2,609		-
Granicus, Inc.	First lien delayed draw term loan		2,967		-
Granicus, Inc.	First lien senior secured revolving loan		1,187		1,128
Hercules Borrower LLC (dba The Vincit Group)	First lien senior secured revolving loan		4,298		4,298
Individual Foodservice Holdings, LLC	First lien senior secured delayed draw term loan		2,683		2,964
Individual Foodservice Holdings, LLC	First lien senior secured revolving loan		2,054		1,943
Nutraceutical International Corporation	First lien senior secured revolving loan		735		735
Patriot Acquisition TopCo S.A.R.L (dba Corza Health, Inc.)	First lien senior secured revolving loan		2,654		-
Peter C. Foy & Associates Insurance Services, LLC	First lien senior secured delayed draw term loan C		90		-
Peter C. Foy & Associates Insurance Services, LLC	First lien senior secured delayed draw term loan D		43,207		-
Peter C. Foy & Associates Insurance Services, LLC	First lien senior secured revolving loan		109		-
PCF Holdco, LLC	Class A Units		3,678		-
Refresh Parent Holdings, Inc.	First lien senior secured delayed draw term loan		2,234		4,914
Refresh Parent Holdings, Inc.	First lien senior secured revolving loan		1,796		1,286
Sonny's Enterprises LLC	First lien senior secured revolving loan		3,944		3,944
Total Unfunded Portfolio Company Commitments		$	85,557	$	33,055

We maintain sufficient borrowing capacity along with undrawn Capital Commitments to cover outstanding unfunded portfolio company commitments that we may be required to fund. We seek to carefully consider our unfunded portfolio company commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage ratio, along with undrawn Capital Commitments from our investors to cover any outstanding portfolio company unfunded commitments we are required to fund.

Investor Commitments

As of March 31, 2021, we had approximately $1.5 billion in total Capital Commitments from investors (approximately $1.2 billion undrawn), of which $62.4 million is from entities affiliated with or related to the Adviser (approximately $44.8 million undrawn). These undrawn Capital Commitments will no longer remain in effect following the completion of a Liquidity Event.

As of December 31, 2020, we had approximately $1.4 billion in total Capital Commitments from investors (approximately $1.1 billion undrawn), of which $55.1 million is from entities affiliated with or related to the Adviser (approximately $37.6 million undrawn). These undrawn Capital Commitments will no longer remain in effect following the completion of a Liquidity Event.

Other Commitments and Contingencies

From time to time, we may become a party to certain legal proceedings incidental to the normal course of our business. At March 31, 2021, we were not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.

Contractual Obligations

A summary of our contractual payment obligations under our credit facility as of March 31, 2021 is as follows:

	Payments Due by Period
($ in millions)	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
Subscription Credit Facility	$	314.9	$	—	$	314.9	$	—	$	—
Total Contractual Obligations	$	314.9	$	—	$	314.9	$	—	$	—

Related-Party Transactions

We have entered into a number of business relationships with affiliated or related parties, including the following:

•

the Investment Advisory Agreement;

•

the Administration Agreement;

•

the Dealer Manager Agreement;

•

the Placement Agent Agreement; and

•

the License Agreement.

In addition to the aforementioned agreements, we rely on exemptive relief that has been granted to ORCA and certain of its affiliates to permit us to co-invest with other funds managed the Owl Rock Advisers, including the Owl Rock Clients, in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. See “ITEM 1. – Notes to Consolidated Financial Statements – Note 3. Agreements and Related Party Transactions” for further details.

Critical Accounting Policies

The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies should be read in connection with our risk factors as described in our Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 2, 2021, and in “ITEM 1A. RISK FACTORS.”

Investments at Fair Value

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.

Investments for which market quotations are readily available are typically valued at the bid price of those market quotations. To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available, as is the case for substantially all of our investments, are valued at fair value as determined in good faith by our Board, based on, among other things, the input of the Adviser, our audit committee and independent third-party valuation firm(s) engaged at the direction of the Board.

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of our investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company’s debt and equity),

the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.

The Board undertakes a multi-step valuation process, which includes, among other procedures, the following:

•

With respect to investments for which market quotations are readily available, those investments will typically be valued at the bid price of those market quotations;

•

Preliminary valuation conclusions are documented and discussed with the Adviser’s valuation committee. Agreed upon valuation recommendations are presented to the Audit Committee;

•

The Audit Committee reviews the valuation recommendations and recommends values for each investment to the Board; and

•

The Board reviews the recommended valuations and determines the fair value of each investment.

We conduct this valuation process on a quarterly basis.

We apply Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”), as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, we consider its principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:

•

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.

•

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurred. In addition to using the above inputs in investment valuations, we apply the valuation policy approved by our Board that is consistent with ASC 820. Consistent with the valuation policy, we evaluate the source of the inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), we subject those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, we, or the independent valuation firm(s), review pricing support provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

Rule 2a-5 under the 1940 Act was recently adopted by the SEC and establishes requirements for determining fair value in good faith for purposes of the 1940 Act. We intend to comply with the new rule’s requirements on or before the compliance date in September 2022.

Interest and Dividend Income Recognition

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. If at any point we believe PIK interest is not expected to be realized, the investment generating PIK interest will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest income. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Distributions

We intend to elect to be treated for U.S. federal income tax purposes, and qualify annually thereafter, as a RIC under Subchapter M of the Code. To obtain and maintain our tax treatment as a RIC, we must distribute (or be deemed to distribute) in each taxable year distributions for tax purposes equal to at least 90 percent of the sum of our:

•

investment company taxable income (which is generally our ordinary income plus the excess of realized short-term capital gains over realized net long-term capital losses), determined without regard to the deduction for dividends paid, for such taxable year; and

•

net tax-exempt interest income (which is the excess of our gross tax-exempt interest income over certain disallowed deductions) for such taxable year.

As a RIC, we (but not our shareholders) generally will not be subject to U.S. federal tax on investment company taxable income and net capital gains that we distribute to our shareholders.

We intend to distribute annually all or substantially all of such income. To the extent that we retain our net capital gains or any investment company taxable income, we generally will be subject to corporate-level U.S. federal income tax. We can be expected to carry forward our net capital gains or any investment company taxable income in excess of current year dividend distributions, and pay the U.S. federal excise tax as described below.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax payable by us. We may be subject to a nondeductible 4% U.S. federal excise tax if we do not distribute (or are treated as distributing) during each calendar year an amount at least equal to the sum of:

•

98% of our net ordinary income excluding certain ordinary gains or losses for that calendar year;

•

98.2% of our capital gain net income, adjusted for certain ordinary gains and losses, recognized for the twelve-month period ending on October 31 of that calendar year; and

•

100% of any income or gains recognized, but not distributed, in preceding years.

While we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% U.S. federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed and as a result, in such cases, the excise tax will be imposed. In such an event, we will be liable for this tax only on the amount by which we do not meet the foregoing distribution requirement.

We intend to pay quarterly distributions to our shareholders out of assets legally available for distribution. All distributions will be paid at the discretion of our Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as our Board may deem relevant from time to time.

To the extent our current taxable earnings for a year fall below the total amount of our distributions for that year, a portion of those distributions may be deemed a return of capital to our shareholders for U.S. federal income tax purposes. Thus, the source of a

distribution to our shareholders may be the original capital invested by the shareholder rather than our income or gains. Shareholders should read written disclosure carefully and should not assume that the source of any distribution is our ordinary income or gains.

We have adopted an “opt out” dividend reinvestment plan for our common shareholders. As a result, if we declare a cash dividend or other distribution, each shareholder that has not “opted out” of our dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional shares of our common stock rather than receiving cash distributions. Shareholders who receive distributions in the form of shares of common stock will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.

Income Taxes

We have elected to be treated as a BDC under the 1940 Act. We also intend to elect to be treated as a RIC under the Code beginning with its taxable period ending December 31, 2020. So long as we maintain our tax treatment as a RIC, we generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute at least annually to our shareholders as distributions. Rather, any tax liability related to income earned and distributed by us represents obligations of our investors and will not be reflected in our consolidated financial statements.

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, we must distribute to our shareholders, for each taxable year, at least 90% of our “investment company taxable income” for that year, which is generally our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses. In order for us to not be subject to U.S. federal excise taxes, we must distribute annually an amount at least equal to the sum of (i) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. We, at our discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income.

We evaluate tax positions taken or expected to be taken in the course of preparing our consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. There were no material uncertain tax positions through December 31, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including valuation risk and interest rate risk.

Valuation Risk

We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board, based on, among other things, the input of the Adviser, our Audit Committee and independent third-party valuation firm(s) engaged at the direction of the Board, and in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.

Interest Rate Risk

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. We intend to fund portions of our investments with borrowings, and at such time, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. Accordingly, we cannot assure you that a significant change in market interest rates will not have a material adverse effect on our net investment income.

As of March 31, 2021, 99.1% of our debt investments based on fair value were at floating rates. Additionally, the weighted average LIBOR floor, based on fair value, of our debt investments was 0.90%.

Based on our Consolidated Statement of Assets and Liabilities as of March 31, 2021, the following table shows the annualized impact on net income of hypothetical base rate changes in interest rates on our debt investments (considering interest rate floors for floating rate instruments) assuming each floating rate investment is subject to 3-month LIBOR and there are no changes in our investment and borrowing structure:

($ in thousands)	Interest Income			Interest Expense			Net Income
Up 300 basis points	$	11,594		$	9,448		$	2,146
Up 200 basis points	$	6,507		$	6,299		$	208
Up 100 basis points	$	1,420		$	3,149		$	(1,729	)
Up 50 basis points	$	222		$	1,575		$	(1,353	)
Down 25 basis points	$	(67	)	$	(612	)	$	545
Down 50 basis points	$	(67	)	$	(612	)	$	545

We may in the future hedge against interest rate fluctuations by using hedging instruments such as interest rate swaps, futures, options, and forward contracts. While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments.

Currency Risk

From time to time, we may make investments that are denominated in a foreign currency. These investments are translated into U.S. dollars at each balance sheet date, exposing us to movements in foreign exchange rates. We may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us. We may seek to utilize instruments such as, but not limited to, forward contracts to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates. We also have the ability to borrow in certain foreign currencies under our credit facility. Instead of entering into a foreign currency forward contract in connection with loans or other investments we have made that are denominated in a foreign currency, we may borrow in that currency to establish a natural hedge against our loan or investment. To the extent the loan or investment is based on a floating rate other than a rate under which we can borrow under our credit facility, we may seek to utilize interest rate derivatives to hedge our exposure to changes in the associated rate.

Item 4. Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective as of the end of the period covered by the Quarterly Report on Form 10-Q.

(b)

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “ITEM 1A. RISK FACTORS” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 are not the only risks facing us. Additionally risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

The interest rates of our term loans to our portfolio companies that extend beyond 2021 might be subject to change based on recent regulatory changes, including the decommissioning of LIBOR.

LIBOR is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in term loans we extend to portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR.

On March 5, 2021, the United Kingdom's Financial Conduct Authority (the "FCA"), which regulates LIBOR, announced that it will not compel panel banks to contribute to the overnight 1, 3, 6 and 12 months USA LIBOR tenors after June 30, 2023 and all other tenors after December 31, 2021. It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. Central banks and regulators in a number of major jurisdictions (for example, United States, United Kingdom, European Union, Switzerland and Japan) have convened working groups to find, and implement the transition to, suitable replacements for interbank offered rates ("IBORs"). To identify a successor rate for U.S. dollar LIBOR, the Alternative Reference Rates Committee ("ARRC"), a U.S.-based group convened by the U.S. Federal Reserve Board and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. In addition, on March 25, 2020, the FCA stated that although the central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed, the outbreak of COVID-19 has impacted the timing of many firms' transition planning, and the FCA will continue to assess the impact of the COVID-19 outbreak on transition timelines and update the marketplace as soon as possible. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere or, whether the COVID-19 outbreak will have further effect on LIBOR transition plans.

The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market value of and/or transferability of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations. In addition, while the majority of our LIBOR-linked loans contemplate that LIBOR may cease to exist and allow for amendment to a new base rate without the approval of 100% of the lenders, if LIBOR ceases to exist, we will still need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate, in order to replace LIBOR with the new standard that is established, which may have an adverse effect on our overall financial condition or results of operations. Following the replacement of LIBOR, some or all of these credit agreements may bear interest at a lower interest rate, which could have an adverse impact on the value and liquidity of our investment in these portfolio companies and, as a result on our results of operations. Moreover, if LIBOR ceases to exist, we may need to renegotiate certain terms of our credit facilities. If we are unable to do so, amounts drawn under our credit facilities may bear interest at a higher rate, which would increase the cost of our borrowings and, in turn, affect our results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Other than the shares issued pursuant to our dividend reinvestment plan, we did not sell any unregistered equity securities, except as previously disclosed in certain 8-Ks filed with the SEC.

On January 29, 2021, pursuant to our dividend reinvestment plan, we issued 30,532 shares of our common stock, at a price of $14.42 per share, to stockholders of record as of December 31, 2020 that did not opt out of our dividend reinvestment plan in order to satisfy the reinvestment portion of our dividends. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits



Exhibit Number		Description of Exhibits

3.1		Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form 10 filed on June 5, 2020).
3.2		Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form 10 filed on June 5, 2020).
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

________________

* Filed herein.

**Furnished herein.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Owl Rock Capital Corporation III

Date: May 7, 2021	By:	/s/ Craig W. Packer
		Craig W. Packer
		Chief Executive Officer

	Owl Rock Capital Corporation III

Date: May 7, 2021	By:	/s/ Bryan Cole
		Bryan Cole
		Chief Financial Officer and Chief Accounting Officer

Owl Rock Capital Corp III - FORM 10-Q - May 7, 2021

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