[Financial Performance](index=1&type=section&id=Financial%20Performance) [Financial Highlights (Q2 2025)](index=1&type=section&id=Financial%20Highlights%20(Q2%202025)) Oaktree Specialty Lending reported a decline in Q2 2025 financial metrics, including GAAP and Adjusted Net Investment Income, driven by a smaller portfolio and increased non-accrual investments, resulting in a lower NAV per share Key Financial Metrics | Financial Metric | Q2 2025 (ended Mar 31, 2025) | Q1 2025 (ended Dec 31, 2024) | Change | | :--- | :--- | :--- | :--- | | Total Investment Income (USD) | $77.6M ($0.90/share) | $86.6M ($1.05/share) | ▼ | | Adjusted Total Investment Income (USD) | $77.2M ($0.90/share) | $87.1M ($1.06/share) | ▼ | | GAAP Net Investment Income (USD) | $39.1M ($0.45/share) | $44.3M ($0.54/share) | ▼ | | Adjusted Net Investment Income (USD) | $38.7M ($0.45/share) | $44.7M ($0.54/share) | ▼ | | NAV per Share (USD) | $16.75 | $17.63 | ▼ | - The decline in investment income was primarily driven by a smaller average investment portfolio, the impact of certain investments being placed on non-accrual status, and decreases in reference rates[2](index=2&type=chunk) - The CEO acknowledged that "certain challenged portfolio company investments weighed on our results in the second quarter," indicating a focus on resolving these issues[3](index=3&type=chunk) [Results of Operations](index=3&type=section&id=Results%20of%20Operations) Total investment income decreased in Q2 2025, partially offset by lower net expenses, but significant net realized and unrealized losses resulted in a net decrease in net assets Consolidated Statements of Operations | (USD thousands) | Q2 2025 (ended Mar 31) | Q1 2025 (ended Dec 31) | Q2 2024 (ended Mar 31) | | :--- | :--- | :--- | :--- | | Total Investment Income | $77,568 | $86,647 | $94,029 | | Net Expenses | $38,235 | $42,082 | $52,662 | | Net Investment Income | $39,055 | $44,302 | $41,367 | | Net Realized/Unrealized Losses | $(75,304) | $(37,063) | $(32,030) | | **Net (Decrease) in Net Assets** | **$(36,249)** | **$7,239** | **$9,337** | - The **$9.9 million** quarterly decline in adjusted total investment income was primarily due to a smaller portfolio, non-accrual placements, and lower reference rates[7](index=7&type=chunk) - Net expenses decreased by **$3.8 million** quarter-over-quarter, driven by **$2.4 million** in lower interest expense and **$1.5 million** in lower Part I incentive fees[8](index=8&type=chunk) [Financial Position](index=3&type=section&id=Financial%20Position) As of March 31, 2025, NAV per share decreased to **$16.75**, while total debt was reduced, improving the total and net debt-to-equity ratios to **1.00x** and **0.93x** respectively Balance Sheet Highlights | Balance Sheet Metric | As of Mar 31, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Investment Portfolio at Fair Value (USD billions) | $2.89B | $2.84B | | Net Assets (USD billions) | $1.48B | $1.45B | | Net Asset Value per Share (USD) | $16.75 | $17.63 | | Total Debt to Equity Ratio (x) | 1.00x | 1.11x | | Net Debt to Equity Ratio (x) | 0.93x | 1.03x | - The decline in NAV per share from December 31, 2024, was primarily due to losses on certain debt and equity investments[2](index=2&type=chunk) [Portfolio Analysis](index=4&type=section&id=Portfolio%20Analysis) [Portfolio Overview and Investment Activity](index=4&type=section&id=Portfolio%20Overview%20and%20Investment%20Activity) The investment portfolio's fair value was **$2.9 billion** with **80.9%** in first-lien debt, but credit quality showed stress with non-accrual investments increasing to **4.6%** of debt at fair value Investment Activity (Q2 2025) | Investment Activity | Amount (USD thousands) | | :--- | :--- | | New Investment Commitments | $407,000 | | Proceeds from Exits/Sales | $279,400 | | **Net New Investments** | **$126,400** | - The portfolio remains heavily weighted towards floating-rate debt, which constituted **89.8%** of investments as of March 31, 2025, an increase from **87.6%** in the prior quarter[10](index=10&type=chunk) Non-Accrual Investments | Non-Accrual Investments | As of Mar 31, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Number of Investments | 10 | 9 | | As a % of Debt at Fair Value (%) | 4.6% | 3.9% | | As a % of Debt at Cost (%) | 7.6% | 5.1% | - The weighted average yield on new debt investments made during the quarter was **9.5%**[2](index=2&type=chunk) [Joint Venture Performance](index=5&type=section&id=Joint%20Venture%20Performance) Both SLF JV I and Glick JV experienced declines in fair value due to leverage and unrealized depreciation in their underlying investment portfolios - SLF JV I's investments decreased in fair value to **$128.6 million**; it held **$374.7 million** in assets across **52** portfolio companies with a debt-to-equity ratio of **1.3x**[17](index=17&type=chunk)[18](index=18&type=chunk) - Glick JV's investments decreased in fair value to **$47.3 million**; it held **$125.1 million** in assets across **41** portfolio companies with a debt-to-equity ratio of **1.3x**[19](index=19&type=chunk)[20](index=20&type=chunk) [Capital, Liquidity, and Shareholder Returns](index=5&type=section&id=Capital%2C%20Liquidity%2C%20and%20Shareholder%20Returns) [Liquidity and Capital Resources](index=5&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$97.8 million** cash and over **$1.0 billion** undrawn credit, refinancing debt with **$300 million** unsecured notes and shifting funding mix to **65%** unsecured borrowings - As of March 31, 2025, liquidity consisted of **$97.8 million** in unrestricted cash and over **$1.0 billion** of undrawn capacity under credit facilities[2](index=2&type=chunk)[22](index=22&type=chunk) - The company issued **$300 million** of **6.340%** unsecured notes due 2030 and repaid **$300 million** of notes that matured in February 2025, increasing the weighted average interest rate on debt to **6.7%**[2](index=2&type=chunk)[23](index=23&type=chunk) - The funding mix as of March 31, 2025, was **35%** secured and **65%** unsecured borrowings[21](index=21&type=chunk) [Distribution Declaration](index=2&type=section&id=Distribution%20Declaration) The Board declared a total cash distribution of **$0.42 per share** for the quarter, comprising a regular and a supplemental distribution, payable on June 30, 2025 - A quarterly cash distribution of **$0.40 per share** was declared[2](index=2&type=chunk)[4](index=4&type=chunk) - A supplemental cash distribution of **$0.02 per share** was also declared[2](index=2&type=chunk)[4](index=4&type=chunk) [Other Information](index=6&type=section&id=Other%20Information) [Recent Developments](index=6&type=section&id=Recent%20Developments) Post-quarter, on April 8, 2025, the company amended its Syndicated Facility, reducing interest rate margins, removing a key covenant, and extending maturity to April 2030 - On April 8, 2025, the company amended its senior secured credit facility with several favorable changes, including reduced interest rate margins on SOFR loans to **1.875%**, removal of the Consolidated Interest Coverage Ratio covenant, and extension of the final maturity date to April 8, 2030[25](index=25&type=chunk) [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted Net Investment Income to provide a clearer view of performance by excluding non-cash merger adjustments and capital gains incentive fees - Adjusted financial measures exclude non-cash income/gain/loss from the OCSI and OSI2 Mergers, which established a new cost basis for acquired assets under ASC 805[26](index=26&type=chunk)[27](index=27&type=chunk) - Adjusted Net Investment Income also excludes capital gains incentive fees (Part II incentive fees) to better align with management's view of core earnings[29](index=29&type=chunk) Reconciliation of GAAP to Adjusted Net Investment Income | (USD thousands) | Q2 2025 (ended Mar 31) | | :--- | :--- | | GAAP Net Investment Income | $39,055 | | Interest Income Adjustments (Merger) | $(373) | | Part II Incentive Fee | — | | **Adjusted Net Investment Income** | **$38,682** |

Core Viewpoint - Oaktree Specialty Lending Corporation reported a decline in financial performance for the second fiscal quarter of 2025, primarily due to lower investment income and challenges with certain portfolio investments [3][4][11]. Financial Performance - Total investment income for the second fiscal quarter of 2025 was $77.6 million ($0.90 per share), down from $86.6 million ($1.05 per share) in the first fiscal quarter [4][11]. - Adjusted total investment income was $77.2 million ($0.90 per share) for the second quarter, compared to $87.1 million ($1.06 per share) in the previous quarter [4][11]. - GAAP net investment income decreased to $39.1 million ($0.45 per share) from $44.3 million ($0.54 per share) in the prior quarter [4][11]. - Net asset value (NAV) per share fell to $16.75 as of March 31, 2025, down from $17.63 as of December 31, 2024, reflecting losses on certain investments [4][11]. Investment Activity - The company originated $407.0 million in new investment commitments and received $279.4 million from prepayments and exits during the quarter [4][12]. - The weighted average yield on new debt investments was 9.5% [4][12]. - As of March 31, 2025, the fair value of the investment portfolio was $2.9 billion, consisting of investments in 152 companies [12][16]. Debt and Liquidity - Total debt outstanding was $1,470.0 million, with a total debt to equity ratio of 1.00x and a net debt to equity ratio of 0.93x [4][26]. - Liquidity included $97.8 million in unrestricted cash and over $1.0 billion in undrawn capacity under credit facilities [4][24]. - The company issued $300 million in unsecured notes during the quarter, maturing on February 27, 2030, with an interest rate of 6.340% [4][23]. Distributions - A quarterly cash distribution of $0.40 per share and a supplemental distribution of $0.02 per share were declared, payable on June 30, 2025 [5][6]. Portfolio Composition - As of March 31, 2025, 94.9% of the portfolio at fair value consisted of debt investments, with 80.9% in first lien loans [17][18]. - The number of portfolio companies increased to 152 from 136 as of December 31, 2024 [12][17]. Recent Developments - On April 8, 2025, the company amended its senior secured credit facility, reducing interest rate margins and extending the maturity date [27]. Management Commentary - The CEO emphasized the focus on resolving challenges with certain portfolio investments and diversifying the portfolio to capitalize on market opportunities amid economic uncertainty [3][5].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-33901 Oaktree Specialty Lending Corporation (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware (State or jurisdiction of incorporation or organization) ...

Core Viewpoint - Oaktree Specialty Lending Corporation has successfully amended and extended its senior secured revolving credit facility, resulting in a lower interest rate and an extended maturity date, which is expected to positively impact net investment income [1][3]. Group 1: Credit Facility Details - The maturity of the senior secured revolving credit facility has been extended from June 2028 to April 2030 [1]. - The interest rate on the amended facility has been reduced from SOFR plus 2.00% to a range of SOFR plus 1.75% to 1.875%, depending on the debt outstanding, with an additional 0.10% SOFR adjustment [1]. - The current interest rate is SOFR plus 1.875%, plus the 0.10% SOFR adjustment [1]. - The minimum consolidated interest coverage ratio requirement of 2.25x has been removed [1]. Group 2: Facility Features - The amended facility retains an accordion feature, allowing Oaktree Specialty Lending to increase the facility size to a maximum of $1,500 million under certain conditions [2]. Group 3: Company Overview - Oaktree Specialty Lending Corporation is a specialty finance company focused on providing customized credit solutions to companies with limited access to public or syndicated capital markets [3]. - The company aims to generate current income and capital appreciation through flexible financing solutions, including first and second lien loans, unsecured and mezzanine loans, and preferred equity [3]. - Oaktree Specialty Lending is regulated as a business development company under the Investment Company Act of 1940 and is managed by Oaktree Capital Management, L.P. [3].

I rank Oaktree Specialty Lending ( OCSL ) low on my list of preferred BDCs, both because the metrics we will examine below are weak and because I believe there are better options within the sector.Mr. Mavroudis is a professional portfolio manager specializing in institutional and private portfolios. He focuses on risk management, which is accompanied by in-depth financial market analysis (fundamental, macro and technical) to control the risk undertaken by the portfolios. He invests in all financial instrume ...

Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is a specialty finance company dedicated to providing customized one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company's investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions including first and second lien loans, unsecured and mezzanine loans, and preferred equity. The Company is regulated as a business de ...

Core Viewpoint - Oaktree Specialty Lending (OCSL) presents an attractive investment opportunity based on its valuation, portfolio strategy, and yield, with shares trading at a significant discount to net asset value [1] Valuation - OCSL shares are currently trading at a large discount to their net asset value, indicating potential undervaluation in the market [1] Portfolio Strategy - The company employs a strategic approach to its portfolio, which contributes to its overall attractiveness as an investment [1] Yield - OCSL offers a compelling yield, making it an appealing option for income-focused investors [1]

Group 1 - Oaktree Specialty Lending Corporation (NASDAQ: OCSL) experienced a decline in its net asset value during the December quarter due to necessary write-downs of investment values [1] Group 2 - The company is under scrutiny for its investment strategies and the impact of market conditions on its asset valuations [1]

Core Viewpoint - Oaktree Specialty Lending Corporation has announced a public offering of $300 million in notes with a 6.340% interest rate, maturing on February 27, 2030, aimed at reducing debt and supporting general corporate purposes [1][2]. Group 1: Offering Details - The company priced an underwritten public offering of $300 million aggregate principal amount of 6.340% notes due 2030 [1]. - The notes may be redeemed at the company's option at any time at par plus a "make-whole" premium [1]. - The offering is expected to close on February 27, 2025, subject to customary closing conditions [3]. Group 2: Use of Proceeds - Oaktree Specialty Lending Corporation plans to use the net proceeds from this offering to reduce outstanding debt under its revolving credit facilities and for general corporate purposes [2]. Group 3: Company Overview - Oaktree Specialty Lending Corporation is a specialty finance company focused on providing customized credit solutions to companies with limited access to capital markets [6]. - The company's investment objective is to generate current income and capital appreciation through flexible financing solutions, including first and second lien loans, unsecured and mezzanine loans, and preferred equity [6]. - The company is regulated as a business development company under the Investment Company Act of 1940 and is externally managed by Oaktree Fund Advisors, LLC [6].

Group 1 - Oaktree Specialty Lending (NASDAQ: OCSL) is predicted to face near-term dividend cuts, indicating potential financial challenges ahead [1] - The article compares OCSL with BlackRock TCP Capital Corp, suggesting a broader context of performance within the Business Development Company (BDC) sector [1] Group 2 - The author has extensive experience in financial management and has contributed to the development of financial strategies for top-tier corporates [1] - Efforts have been made to institutionalize the REIT framework in Latvia to enhance liquidity in pan-Baltic capital markets [1] - The author has also worked on national SOE financing guidelines and frameworks to channel private capital into affordable housing [1]