UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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| Item 1.01. | Entry Into a Material Definitive Agreement |
CLO Transaction
On March 7, 2024 (the “Closing Date”), Blue Owl Credit Income Corp. (the “Company”) completed a $597 million term debt securitization transaction (the “CLO Transaction”), also known as a collateralized loan obligation transaction, which is a form of secured financing incurred by the Company. The secured notes and preferred shares issued in the CLO Transaction were issued by the Company’s consolidated subsidiary Owl Rock CLO XVI, LLC, a limited liability organized under the laws of the State of Delaware (the “Issuer”) and are backed by a portfolio of collateral obligations consisting of middle market loans and participation interests in middle market loans as well as by other assets of the Issuer.
The CLO Transaction was executed by the issuance of the following classes of notes and preferred shares pursuant to an indenture dated as of the Closing Date (the “Indenture”), by and among the Issuer and State Street Bank and Trust Company: (i) $342 million of AAA(sf) Class A Notes, which bear interest at three-month term SOFR plus 2.00%, (ii) $48 million of AA(sf) Class B Notes, which bear interest at three-month term SOFR plus 2.50% and (iii) $30 million of A(sf) Class C Notes, which bear interest at three-month term SOFR plus 3.30% (together, the “Secured Notes”). The Secured Notes are secured by middle market loans, participation interests in middle market loans and other assets of the Issuer. The Secured Notes are scheduled to mature on April 20, 2036. The Secured Notes were privately placed by Deutsche Bank Securities Inc., as Initial Purchaser.
Concurrently with the issuance of the Secured Notes, the Issuer issued approximately $177 million of subordinated securities in the form of 177,000 preferred shares at an issue price of U.S. $1,000 per share (the “Preferred Shares”). The Preferred Shares were issued by the Issuer as part of its issued share capital and are not secured by the collateral securing the Secured Notes. The Company purchased all of the Preferred Shares. The Company acts as retention holder in connection with the CLO Transaction for the purposes of satisfying certain U.S. and European Union regulations requiring sponsors of securitization transactions to retain exposure to the performance of the securitized assets and as such is required to retain a portion of the Preferred Shares.
As part of the CLO Transaction, the Company entered into a loan sale agreement with the Issuer dated as of the Closing Date (the “OCIC Loan Sale Agreement”), which provided for the contribution of approximately $206.563 million funded par amount of middle market loans from the Company to the Issuer on the Closing Date and for future sales from the Company to the Issuer on an ongoing basis. Such loans constituted part of the initial portfolio of assets securing the Secured Notes. The remainder of the initial portfolio assets securing the Secured Notes consisted of approximately $356.49 million funded par amount of middle market loans purchased by the Issuer from Core Income Funding II LLC, a wholly-owned subsidiary of the Company, under an additional loan sale agreement executed on the Closing Date between the Issuer and Core Income Funding II LLC (the “Core Income Funding II Loan Sale Agreement”). The Company and Core Income Funding II LLC each made customary representations, warranties, and covenants to the Issuer under the applicable loan sale agreement. No gain or loss was recognized as a result of these sales or contributions.
Through April 20, 2028, a portion of the proceeds received by the Issuer from the loans securing the Secured Notes may be used by the Issuer to purchase additional middle market loans under the direction of Blue Owl Credit Advisors LLC (“OCA”), the Company’s investment advisor, in its capacity as collateral manager for the Issuer and in accordance with the Company’s investing strategy and ability to originate eligible middle market loans.
The Secured Notes are the secured obligations of the Issuer, and the Indenture includes customary covenants and events of default. The Secured Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities (e.g., “blue sky”) laws, and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or pursuant to an applicable exemption from such registration.
OCA will serve as collateral manager for the Issuer under a collateral management agreement dated as of the Closing Date (the “Collateral Management Agreement”). OCA is entitled to receive fees for providing these services. OCA has waived its right to receive such fees but may rescind such waiver at any time; provided, however, that if the Adviser rescinds such waiver, the management fee payable to the Adviser pursuant to the Amended and Restated Investment Advisory Agreement, dated May 18, 2021, between the Adviser and the Company will be offset by the amount of the collateral management fee attributable to the CLO XVI Issuer’s equity or notes owned by the Company.
Amendment to Loan Financing and Servicing Agreement
In connection with the CLO Transaction, on March 7, 2024, Core Income Funding II LLC, entered into Amendment No. 7 (the “Amendment” and the facility as amended, the “Secured Credit Facility”), which amended that certain Loan Financing and Servicing Agreement, dated as of October 5, 2021 (as amended by Amendment No. 1, dated as of October 27, 2021, Amendment No. 2, dated as of December 20, 2021, Amendment No. 3, dated as of February 18, 2022, Amendment No. 4, dated as of April 11, 2022, Amendment No. 5, dated as of May 3, 2022 and the Joinder Agreement of Webster Bank, N.A, dated as of July 11, 2022, and Amendment No. 6, dated as of August 1, 2022), by and among Core Income Funding II LLC, as borrower, the Company, as equityholder and services provider, the lenders from time to time parties thereto, Deutsche Bank AG, New York Branch, as Facility Agent, State Street Bank and Trust Company, as Collateral Agent and Alter Domus (US) LLC, as Collateral Custodian. Among other changes, the Amendment modifies the make-whole fee for the six month period following the CLO Transaction.
The Company expects to use the proceeds of the issuance of the Secured Notes, net of certain fees and expenses, for general corporate purposes.
The above description of the documentation related to the CLO Transaction and other arrangements entered into on the Closing Date contained in this Current Report on Form 8-K do not purpose to be complete and are qualified in their entirety by reference to the underlying agreements, including the Indenture, the OCIC Loan Sale Agreement, the Core Income Funding II LLC Loan Sale Agreement and the Collateral Management Agreement, each filed as exhibits hereto and incorporated by reference herein.
| Item 2.03. | Creation of a Direct Financial Obligation |
The information set forth under Item 1.01 above is incorporated by reference into this Item 2.03.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits
SIGNATURE
Pursuant to the requirements 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 hereunto duly authorized.
| BLUE OWL CREDIT INCOME CORP. | ||||||
| Dated: March 11, 2024 |
By: |
/s/ Bryan Cole | ||||
| Name: Title: |
Bryan Cole Chief Operating Officer and Chief Financial Officer | |||||