Core Insights - The article emphasizes the importance of dividend investing in quality blue-chip stocks, BDCs, and REITs for building a sustainable retirement income [1][2]. Group 1: Investment Strategy - The company focuses on a buy-and-hold investment strategy, prioritizing quality over quantity in its portfolio [1]. - The goal is to help lower and middle-class workers build investment portfolios that consist of high-quality, dividend-paying companies [1]. Group 2: Personal Investment Philosophy - The company aims to achieve financial independence through dividend income within the next 5-7 years [1]. - There is a strong emphasis on educating investors to conduct their own due diligence before making investment decisions [1].

Financial Data and Key Metrics Changes - Adjusted net investment income decreased to $39 million or $0.45 per share from $45 million or $0.54 per share in the previous quarter [5][22] - Net asset value declined to $16.75 per share from $17.63 in the prior quarter [5] - Investments on non-accrual status increased to 4.67% of fair market value and cost, compared to 3.95% in the first quarter [6] Business Line Data and Key Metrics Changes - The company committed $407 million of capital across 32 investments, compared to 13 investments totaling $198 million in the previous quarter [15] - The weighted average yield on new debt investments was 9.5%, slightly down from 9.6% in the prior quarter [16] - The portfolio's weighted average interest coverage declined to 1.8 times from 2.1 times in the previous quarter [17] Market Data and Key Metrics Changes - The median EBITDA of portfolio companies increased to approximately $158 million, up $16 million from the prior quarter [17] - The leverage in portfolio companies remained steady at 5.4 times, below overall middle market leverage levels [17] Company Strategy and Development Direction - The company is focusing on larger, more diversified businesses that can withstand uncertain times, emphasizing investments at the top of the capital structure [16][28] - The company is actively managing non-accrual investments and has taken steps to align interests with shareholders, including amending the incentive fee structure and purchasing shares [10][27] Management's Comments on Operating Environment and Future Outlook - The management noted significant uncertainty in the trade environment due to potential new tariffs and their impact on portfolio performance [28] - There is a cautious outlook on M&A activity, with expectations that many lenders will be more conservative in capital deployment [28] - The company believes it is well-positioned to navigate the current market environment and deliver attractive risk-adjusted returns to shareholders [29] Other Important Information - The company successfully issued new unsecured bonds to refinance existing bonds and amended its senior secured revolving credit facility, reducing interest rates [9][24] - The joint ventures currently hold $440 million of investments, generating attractive annualized ROEs of approximately 10.6% [25] Q&A Session Summary Question: Did the company lean into any liquid markets, structured finance, or syndicated loans in April? - The company was somewhat active but remained cautious due to unresolved tariff situations, experiencing a sell-off in high yield bonds and senior loans [32][33] Question: How successfully has the company been focusing on larger and diversified businesses? - The market conditions have been challenging, but there is a return of larger borrowers into the direct lending market, improving the pipeline for issuing direct loans [36][39] Question: What is the expected run rate for net investment income given the markdowns and changes in non-accruals? - The company is focused on working through non-accrual situations and expects repayments to remain significant despite market volatility [46][52] Question: Is the yield reflective of what the portfolio should generate going forward? - The decline in yield is attributed to reference rate declines and new non-accruals, but the current yield is considered a decent run rate [58][59] Question: What is the expected ROE for the joint ventures over time? - The company aims to achieve an ROE in the 11% to 12% range, depending on the opportunities available [62]

Financial Data and Key Metrics Changes - Adjusted net investment income decreased to $39 million or $0.45 per share from $45 million or $0.54 per share in the previous quarter [5][22] - Net asset value declined to $16.75 per share from $17.63 in the prior quarter [5] - Investments on non-accrual status increased to 4.67% of fair market value and cost, compared to 3.95% in the first quarter [6] Business Line Data and Key Metrics Changes - The company committed $407 million of capital across 32 investments, compared to 13 investments totaling $198 million in the previous quarter [15] - The weighted average yield on new debt investments was 9.5%, slightly down from 9.6% in the prior quarter [16] - The median EBITDA of portfolio companies increased to approximately $158 million, a $16 million increase from the prior quarter [17] Market Data and Key Metrics Changes - The leverage in portfolio companies remained steady at 5.4 times, below overall middle market leverage levels [17] - The portfolio's weighted average interest coverage declined to 1.8 times from 2.1 times in the previous quarter [17] - The JVs generated attractive annualized ROEs of approximately 10.6% in aggregate [25] Company Strategy and Development Direction - The company is focusing on larger, more diversified businesses to mitigate risks in the current environment [16][28] - There is a heightened focus on underwriting and risk evaluation due to potential impacts from tariffs and inflation [28] - The company aims to capitalize on opportunities during market volatility, leveraging its experience in capital solutions [28] Management's Comments on Operating Environment and Future Outlook - The management noted significant uncertainty surrounding the trade environment and its impact on M&A activity [27][28] - There is an expectation of cautious capital deployment among lenders due to the health of existing portfolio companies [28] - The company believes it is well-positioned to navigate the current market environment and deliver attractive risk-adjusted returns [28] Other Important Information - The company successfully issued new unsecured bonds to refinance existing bonds and amended its senior secured revolving credit facility, reducing interest rates [9][24] - The company has ample liquidity of approximately $1.1 billion, including $98 million in cash and $1 billion in undrawn capacity on credit facilities [24] Q&A Session Summary Question: Did the company lean into any liquid markets, structured finance, or syndicated loans in April? - The company was somewhat active but remained cautious due to unresolved tariff situations [32][33] Question: How successfully has the company been focusing on larger and diversified businesses? - The market conditions have been challenging, but there is a return of larger borrowers into the direct lending market [36][39] Question: Is the current yield reflective of what the portfolio should generate going forward? - The current yield is influenced by reference rate declines and markdowns from non-accruals, but it is considered a decent run rate [58][59] Question: Will repayment activity slow down during this period of volatility? - There is an expectation that repayments may slow down due to market volatility, but significant repayments are still anticipated [52][53] Question: What is the expected ROE for the joint ventures over time? - The company aims to achieve an ROE in the 11% to 12% range, depending on the opportunity set [62]

Financial Data and Key Metrics Changes - Adjusted net investment income decreased to $39 million or $0.45 per share from $45 million or $0.54 per share in the previous quarter [5] - Net asset value declined to $16.75 per share from $17.63 in the prior quarter [5] - Investments on non-accrual status increased to 4.67% of fair market value and cost, compared to 3.95% in the first quarter [6] Business Line Data and Key Metrics Changes - The company committed $407 million of capital across 32 investments, compared to 13 investments totaling $198 million in the previous quarter [15] - The weighted average yield on new debt investments was 9.5%, slightly down from 9.6% in the prior quarter [16] - The median EBITDA of portfolio companies increased to approximately $158 million, up $16 million from the prior quarter [16] Market Data and Key Metrics Changes - The leverage in portfolio companies remained steady at 5.4 times, below overall middle market leverage levels [16] - The portfolio's weighted average interest coverage declined to 1.8 times from 2.1 times in the previous quarter [16] - The joint ventures generated an attractive annualized ROE of approximately 10.6% [24] Company Strategy and Development Direction - The company is focusing on larger, more diversified businesses that can withstand uncertain times [16] - There is a heightened focus on underwriting and risk evaluation due to potential impacts from tariffs and inflation [28] - The company is actively seeking opportunities in capital solutions or rescue financing during periods of market volatility [28] Management's Comments on Operating Environment and Future Outlook - The management noted significant uncertainty surrounding the trade environment and its potential impact on portfolio performance [27] - There is an expectation of cautious capital deployment among lenders due to the current economic outlook [28] - The company believes it is well-positioned to navigate the current market environment and deliver attractive risk-adjusted returns to shareholders [29] Other Important Information - The company successfully issued new unsecured bonds to refinance existing bonds and amended its senior secured revolving credit facility, reducing interest rates [8] - The company has ample liquidity of approximately $1.1 billion, including $98 million in cash and $1 billion in undrawn capacity on credit facilities [23] Q&A Session Summary Question: Did the company lean into any liquid markets, structured finance, or syndicated loans in April? - The company was somewhat active but remained cautious due to unresolved tariff situations [32] Question: How successfully has the company been focusing on larger and diversified businesses? - The company noted that while larger borrowers were initially seeking better pricing in the broadly syndicated loan market, there has been a return of larger borrowers to the direct lending market [34][38] Question: Should the company expect any slowing of repayment activity during this period of volatility? - The management anticipates that repayments will remain significant but acknowledges that volatility may lead to a slowdown in the future [52] Question: Is the current yield reflective of what the portfolio should generate going forward? - The management indicated that the current yield is a decent run rate, influenced by reference rate declines and new non-accruals [59] Question: What is the expected ROE for the joint ventures over time? - The management believes achieving an ROE in the 11% to 12% range is achievable, depending on the opportunity set [62]

Company Performance - Oaktree Specialty Lending (OCSL) reported quarterly earnings of $0.45 per share, missing the Zacks Consensus Estimate of $0.51 per share, and down from $0.56 per share a year ago, representing an earnings surprise of -11.76% [1] - The company posted revenues of $77.57 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 6.81%, and down from year-ago revenues of $94.03 million [2] - Oaktree Specialty Lending has not surpassed consensus EPS or revenue estimates over the last four quarters [2] Stock Performance - Oaktree Specialty Lending shares have declined approximately 5.8% since the beginning of the year, compared to a decline of -5.3% for the S&P 500 [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the coming quarter is $0.48 on revenues of $84.26 million, and for the current fiscal year, it is $2 on revenues of $339.55 million [7] - The estimate revisions trend for Oaktree Specialty Lending is currently unfavorable, which may impact future stock movements [6] Industry Context - The Financial - Miscellaneous Services industry, to which Oaktree Specialty Lending belongs, is currently in the top 37% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Performance - Adjusted Net Investment Income and GAAP Net Investment Income were both $045 per share, compared to $054 per share in the previous quarter[9] - Net Asset Value per share decreased to $1675, down from $1763 as of December 31, 2024, primarily due to write-downs on certain debt and equity investments[9] - A quarterly cash distribution of $040 per share and a supplemental cash distribution of $002 per share were declared[9] Portfolio Composition and Investment Activity - Total investments at fair value amounted to $29 billion across 152 portfolio companies[9, 11] - New investment commitments totaled $407 million with a weighted average yield of 95% on new debt investments[9, 17] - $406 million was funded in new investments, while $279 million was received from prepayments, exits, other paydowns, and sales[9] - The portfolio is composed of 84% senior secured debt investments, including 81% first lien loans, and 90% of the debt portfolio is floating rate[9] Capital Structure and Liquidity - The company has $98 million in cash and $104 billion of undrawn capacity on credit facilities[9] - The existing revolving credit facility was repriced, extending the maturity by approximately 2 years and reducing pricing by 125 bps[9] - The company refinanced its 2025 notes with $300 million of unsecured notes due in 2030, priced at 634% (SOFR+219%)[9] Strategic Actions - Oaktree purchased $100 million of newly issued shares of OCSL common stock at a price of $1763/share[7] - An incentive fee cap was instituted, resulting in a waiver of $67 million of Part I incentive fees in the second fiscal quarter of 2025[7]

[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].

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents Oaktree Specialty Lending Corporation's unaudited financial statements, management's analysis, market risk, and internal controls assessment [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Oaktree Specialty Lending Corporation's unaudited consolidated financial statements, including statements of assets and liabilities, operations, changes in net assets, cash flows, and detailed schedules of investments for the periods ended March 31, 2025, and September 30, 2024. It also includes comprehensive notes explaining the company's organization, significant accounting policies, portfolio composition, fee income, share data, borrowings, tax information, realized and unrealized gains/losses, credit risk concentrations, related party transactions, financial highlights, derivative instruments, commitments, and subsequent events [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of March 31, 2025, Oaktree Specialty Lending Corporation reported total assets of $3,079,167 thousand, a decrease from $3,198,341 thousand as of September 30, 2024. Total investments at fair value decreased to $2,892,771 thousand from $3,021,279 thousand. Total liabilities also decreased to $1,604,054 thousand from $1,710,530 thousand, primarily due to reduced credit facilities payable. Net assets slightly decreased to $1,475,113 thousand, resulting in a net asset value per common share of $16.75, down from $18.09 | Metric (in thousands) | March 31, 2025 | September 30, 2024 | | :-------------------- | :------------- | :----------------- | | Total assets | $3,079,167 | $3,198,341 | | Total investments at fair value | $2,892,771 | $3,021,279 | | Cash and cash equivalents | $97,838 | $63,966 | | Total liabilities | $1,604,054 | $1,710,530 | | Credit facilities payable | $520,000 | $710,000 | | Unsecured notes payable | $928,486 | $928,693 | | Total net assets | $1,475,113 | $1,487,811 | | Net asset value per common share | $16.75 | $18.09 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, the company reported a net decrease in net assets from operations of $(36,249) thousand, a significant decline from a net increase of $9,337 thousand in the prior year period. Total investment income decreased by 17.5% to $77,568 thousand, while net expenses decreased by 27.4% to $38,235 thousand, largely due to waived incentive fees. The period saw substantial net unrealized depreciation of $(82,023) thousand, contributing to an earnings loss per common share of $(0.42) | Metric (in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Six months ended March 31, 2025 | Six months ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Total investment income | $77,568 | $94,029 | $164,215 | $192,014 | | Total expenses | $45,151 | $54,162 | $94,360 | $109,458 | | Management fees waived | $(183) | $(1,500) | $(933) | $(3,000) | | Part I incentive fees waived | $(6,733) | — | $(13,110) | — | | Net expenses | $38,235 | $52,662 | $80,317 | $106,458 | | Net investment income | $39,055 | $41,367 | $83,357 | $85,556 | | Net unrealized appreciation (depreciation) | $(82,023) | $(25,252) | $(101,637) | $(50,277) | | Net realized gains (losses) | $6,705 | $(6,603) | $(10,605) | $(15,056) | | Net increase (decrease) in net assets from operations | $(36,249) | $9,337 | $(29,010) | $19,872 | | Net investment income per common share | $0.45 | $0.52 | $0.99 | $1.09 | | Earnings (loss) per common share | $(0.42) | $0.12 | $(0.35) | $0.25 | [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) For the six months ended March 31, 2025, total net assets decreased by $12,698 thousand to $1,475,113 thousand, primarily driven by a net decrease from operations of $(29,010) thousand and distributions to stockholders of $(86,635) thousand. This was partially offset by a net increase from capital share transactions of $102,947 thousand, including $100,000 thousand from a private placement of common stock | Metric (in thousands) | Six months ended March 31, 2025 | Six months ended March 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Net investment income | $83,357 | $85,556 | | Net unrealized appreciation (depreciation) | $(101,637) | $(50,277) | | Net realized gains (losses) | $(10,605) | $(15,056) | | Net increase (decrease) in net assets from operations | $(29,010) | $19,872 | | Distributions to stockholders | $(86,635) | $(93,612) | | Issuance of common stock in private placement | $100,000 | — | | Issuance of common stock in connection with "at the market" offering | $2,947 | $78,286 | | Net increase (decrease) in net assets from capital share transactions | $102,947 | $82,075 | | Total increase (decrease) in net assets | $(12,698) | $8,335 | | Net assets at end of period | $1,475,113 | $1,524,099 | | Net asset value per common share | $16.75 | $18.72 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2025, the company generated $205,959 thousand in net cash from operating activities, a significant improvement from a net cash outflow of $(16,495) thousand in the prior year. This was primarily driven by proceeds from sales and repayments of investments totaling $640,297 thousand. Net cash used in financing activities was $(177,273) thousand, largely due to repayments of unsecured notes and credit facilities, partially offset by proceeds from a private placement of common stock | Metric (in thousands) | Six months ended March 31, 2025 | Six months ended March 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Net increase (decrease) in net assets from operations | $(29,010) | $19,872 | | Purchases of investments | $(600,873) | $(733,474) | | Proceeds from sales and repayments of investments | $640,297 | $540,176 | | Net cash provided by (used in) operating activities | $205,959 | $(16,495) | | Distributions paid in cash | $(80,891) | $(89,823) | | Borrowings under credit facilities | $325,000 | $70,000 | | Repayments of borrowings under credit facilities | $(515,000) | $(50,000) | | Repayments of unsecured notes | $(300,000) | — | | Issuance of unsecured notes | $299,976 | — | | Shares issued in private placement | $100,000 | — | | Net cash provided by (used in) financing activities | $(177,273) | $8,462 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $29,665 | $(8,047) | | Cash and cash equivalents and restricted cash, end of period | $108,208 | $137,492 | [Consolidated Schedule of Investments (March 31, 2025)](index=7&type=section&id=Consolidated%20Schedule%20of%20Investments%20(March%2031,%202025)) As of March 31, 2025, the company's total portfolio investments at fair value were $2,892,771 thousand, with a cost of $3,114,256 thousand. Control investments accounted for 15.7% of net assets, affiliate investments for 2.2%, and non-control/non-affiliate investments for 178.3%. The portfolio was primarily composed of first lien term loans across various industries, with a significant portion of investments categorized as Level 3 in the fair value hierarchy, indicating reliance on unobservable inputs for valuation | Investment Type | Cost (in thousands) | Fair Value (in thousands) | % of Net Assets | | :---------------- | :------------------ | :------------------------ | :-------------- | | Control Investments | $375,317 | $230,904 | 15.7% | | Affiliate Investments | $35,295 | $32,475 | 2.2% | | Non-Control/Non-Affiliate Investments | $2,703,644 | $2,629,392 | 178.3% | | Total Portfolio Investments | $3,114,256 | $2,892,771 | 196.1% | | Cash and Cash Equivalents and Restricted Cash | $108,208 | $108,208 | 7.3% | - As of March 31, 2025, **75.0%** of the Company's total assets were qualifying assets, and **25.0%** were non-qualifying assets under the Investment Company Act[38](index=38&type=chunk) - A significant portion of investments (Level 3) were valued using unobservable inputs, including market yield, revenue/EBITDA multiples, and transaction precedents, reflecting the illiquid nature of many debt investments[43](index=43&type=chunk)[126](index=126&type=chunk)[129](index=129&type=chunk) [Consolidated Schedule of Investments (September 30, 2024)](index=20&type=section&id=Consolidated%20Schedule%20of%20Investments%20(September%2030,%202024)) As of September 30, 2024, the company's total portfolio investments at fair value were $3,021,279 thousand, with a cost of $3,144,919 thousand. Control investments represented 19.5% of net assets, affiliate investments 2.4%, and non-control/non-affiliate investments 181.2%. Similar to the current period, a substantial portion of these investments were categorized as Level 3, indicating reliance on unobservable inputs for fair value determination | Investment Type | Cost (in thousands) | Fair Value (in thousands) | % of Net Assets | | :---------------- | :------------------ | :------------------------ | :-------------- | | Control Investments | $372,901 | $289,404 | 19.5% | | Affiliate Investments | $38,175 | $35,677 | 2.4% | | Non-Control/Non-Affiliate Investments | $2,733,843 | $2,696,198 | 181.2% | | Total Portfolio Investments | $3,144,919 | $3,021,279 | 203.1% | | Cash and Cash Equivalents and Restricted Cash | $78,543 | $78,543 | 5.3% | - As of September 30, 2024, **74.4%** of the Company's total assets were qualifying assets, and **25.6%** were non-qualifying assets under the Investment Company Act[61](index=61&type=chunk) - The fair value of Level 3 investments was determined using unobservable inputs such as market yield, revenue/EBITDA multiples, and transaction precedents, reflecting the illiquid nature of many debt investments[61](index=61&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Notes to Consolidated Financial Statements](index=31&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The Notes to Consolidated Financial Statements provide detailed disclosures on the company's operations, accounting policies, and financial instruments. Key areas covered include the company's structure as a BDC and RIC, valuation methodologies for its diverse investment portfolio (including Level 3 assets), revenue recognition practices for interest and fee income, and the accounting for various debt instruments and derivative contracts. The notes also detail related party transactions with Oaktree, share data, and recent developments affecting the company's financial position and performance [Note 1. Organization](index=31&type=section&id=Note%201.%20Organization) Oaktree Specialty Lending Corporation is a specialty finance company operating as a closed-end, externally managed Business Development Company (BDC) and a Regulated Investment Company (RIC). Its objective is to generate current income and capital appreciation through flexible financing solutions, including various types of loans, bonds, preferred equity, and co-investments. The company is managed by Oaktree Fund Advisors, LLC, an affiliate of Oaktree Capital Management, L.P., and has expanded through mergers with Oaktree Strategic Income Corporation (OCSI) in 2021 and Oaktree Strategic Income II, Inc. (OSI2) in 2023 - Oaktree Specialty Lending Corporation is a specialty finance company, BDC, and RIC, aiming for current income and capital appreciation through diverse financing solutions[64](index=64&type=chunk)[65](index=65&type=chunk) - The company is externally managed by Oaktree Fund Advisors, LLC, an affiliate of Oaktree Capital Management, L.P., which is part of Brookfield Corporation[66](index=66&type=chunk) - Significant growth occurred through mergers with Oaktree Strategic Income Corporation (OCSI) in March 2021 and Oaktree Strategic Income II, Inc. (OSI2) in January 2023[67](index=67&type=chunk)[68](index=68&type=chunk) [Note 2. Significant Accounting Policies](index=32&type=section&id=Note%202.%20Significant%20Accounting%20Policies) The company's financial statements are prepared under GAAP, following ASC Topic 946 for investment companies. Key policies include fair value measurements, with investments categorized into Level 1, 2, or 3 based on observability of inputs, and a multi-step valuation process overseen by Oaktree as the valuation designee. Revenue recognition policies detail accrual for interest income (including PIK interest), fee income, and dividend income. Other policies cover foreign currency translation, derivative instruments (forward contracts, interest rate swaps), cash and cash equivalents, deferred financing/offering costs, and income taxes, including RIC status and deferred tax assets/liabilities - Financial statements are prepared in accordance with GAAP and ASC Topic 946, requiring management estimates for investment valuation and revenue recognition[69](index=69&type=chunk)[70](index=70&type=chunk) - Fair value measurements categorize assets and liabilities into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs), with a multi-step valuation process involving Oaktree and independent valuation firms[73](index=73&type=chunk)[74](index=74&type=chunk)[90](index=90&type=chunk) - Revenue recognition includes accrual-based interest income (including PIK interest), fee income recognized upon investment closing or service rendering, and dividend income on ex-dividend/record dates. Non-accrual status is applied when collectibility is doubtful[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - The company uses foreign currency forward contracts and interest rate swaps to mitigate market risks, recognizing them at fair value. It maintains RIC status for tax purposes, distributing at least **90%** of taxable income[89](index=89&type=chunk)[91](index=91&type=chunk)[104](index=104&type=chunk) [Note 3. Portfolio Investments](index=38&type=section&id=Note%203.%20Portfolio%20Investments) As of March 31, 2025, the company's portfolio comprised $2.9 billion in 152 companies, with 84.3% in senior secured debt and 10.6% in subordinated debt. This represents a decrease from $3.0 billion in 144 companies as of September 30, 2024. The portfolio includes significant investments in joint ventures (SLF JV I and Glick JV) and a substantial portion of Level 3 investments, requiring unobservable inputs for valuation. The geographic and industry compositions are diverse, with Application Software and Multi-Sector Holdings being the largest sectors. The company recorded net realized gains of $6.7 million and net unrealized depreciation of $82.0 million for the three months ended March 31, 2025 Portfolio Composition (Fair Value) | Investment Type | March 31, 2025 (% of Total Investments) | September 30, 2024 (% of Total Investments) | | :---------------- | :-------------------------------------- | :-------------------------------------- | | Senior secured debt | 84.29% | 85.21% | | Debt investments in the JVs | 5.53% | 5.35% | | Subordinated debt | 5.04% | 3.64% | | Preferred equity | 2.42% | 2.20% | | Common equity and warrants | 2.17% | 2.85% | | LLC equity interests of the JVs | 0.55% | 0.75% | | Total | 100.00% | 100.00% | Key Financial Performance (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net realized gains (losses) | $6,705 | $(6,603) | | Net unrealized appreciation (depreciation) | $(82,023) | $(25,252) | - As of March 31, 2025, **ten investments** were on non-accrual status, representing **7.6%** of total debt investments at cost and **4.6%** at fair value[92](index=92&type=chunk) - The company co-invests in senior secured loans through two joint ventures: Senior Loan Fund JV I, LLC (SLF JV I) and OCSI Glick JV LLC (Glick JV)[142](index=142&type=chunk)[171](index=171&type=chunk) [Note 4. Fee Income](index=65&type=section&id=Note%204.%20Fee%20Income) For the three months ended March 31, 2025, total fee income was $1.7 million, with less than $0.1 million being recurring. This represents a decrease from $2.5 million in the prior year period, where $0.1 million was recurring. The decline in fee income was primarily due to lower amendment fees | Metric (in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total fee income | $1,700 | $2,500 | | Recurring fee income | < $100 | $100 | - The decrease in fee income was primarily driven by lower amendment fees[100](index=100&type=chunk) [Note 5. Share Data and Net Assets](index=65&type=section&id=Note%205.%20Share%20Data%20and%20Net%20Assets) For the three months ended March 31, 2025, the company reported an earnings loss per common share of $(0.42), down from $0.12 in the prior year. Net assets at period-end were $1,475,113 thousand, with 88,086 thousand common shares outstanding. During the six months ended March 31, 2025, the company issued 5,672,149 shares in a private placement for $100.0 million and 168,055 shares through an "at the market" offering for $3.0 million net proceeds. Distributions to stockholders for the six months ended March 31, 2025, totaled $1.02 per share, with $80.9 million paid in cash and $5.7 million reinvested through the DRIP | Metric (in thousands, except per share) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Earnings (loss) per common share | $(0.42) | $0.12 | | Weighted average common shares outstanding | 85,916 | 79,763 | | Net assets at end of period | $1,475,113 | $1,524,099 | | Common shares outstanding at end of period | 88,086 | 81,396 | Common Stock Issuances (Six months ended March 31, 2025) | Offering Type | Number of Shares Issued | Gross Proceeds (in thousands) | Net Proceeds (in thousands) | | :-------------- | :---------------------- | :---------------------------- | :-------------------------- | | Private Placement | 5,672,149 | $100,000 | $100,000 | | "At the market" offering | 168,055 | $2,987 | $2,960 | Distributions to Stockholders (Six months ended March 31, 2025) | Distribution Type | Amount per Share | Cash Distribution (in thousands) | DRIP Shares Value (in thousands) | | :------------------ | :--------------- | :------------------------------- | :------------------------------- | | Quarterly | $0.55 | $43,800 | $1,500 | | Quarterly | $0.40 | $31,500 | $3,700 | | Supplemental | $0.07 | $5,600 | $600 | | Total | $1.02 | $80,900 | $5,700 | [Note 6. Borrowings](index=68&type=section&id=Note%206.%20Borrowings) The company's borrowings include the Syndicated Facility, OSI2 Citibank Facility, and unsecured notes (2027, 2029, and 2030 Notes). As of March 31, 2025, $430.0 million was outstanding under the Syndicated Facility and $90.0 million under the OSI2 Citibank Facility, both secured. The 2025 Notes matured in February 2025. New 2030 Notes totaling $300.0 million were issued in February 2025. Interest rate swaps are used to hedge fixed-rate debt, aligning with the predominantly floating-rate investment portfolio. The company was in compliance with all financial covenants under the Syndicated Facility as of March 31, 2025 Debt Outstanding (in millions) | Debt Instrument | March 31, 2025 | September 30, 2024 | | :-------------- | :------------- | :----------------- | | Syndicated Facility | $430.0 | $430.0 | | OSI2 Citibank Facility | $90.0 | $280.0 | | 2025 Notes | — | $300.0 | | 2027 Notes | $350.0 | $350.0 | | 2029 Notes | $300.0 | $300.0 | | 2030 Notes | $300.0 | — | Interest Expense (in millions) | Debt Instrument | Three months ended March 31, 2025 | Six months ended March 31, 2025 | | :-------------- | :-------------------------------- | :------------------------------ | | Syndicated Facility | $8.4 | $17.8 | | OSI2 Citibank Facility | $4.2 | $9.9 | | 2025 Notes | $1.8 | $4.7 | | 2027 Notes | $6.0 | $12.1 | | 2029 Notes | $5.9 | $12.3 | | 2030 Notes | $1.9 | $1.9 | - The company uses interest rate swaps to hedge fixed-rate debt (2027, 2029, and 2030 Notes) to align with its predominantly floating-rate investment portfolio[236](index=236&type=chunk)[241](index=241&type=chunk)[246](index=246&type=chunk) - As of March 31, 2025, the company was in compliance with all financial covenants under the Syndicated Facility[223](index=223&type=chunk) [Note 7. Taxable/Distributable Income and Dividend Distributions](index=73&type=section&id=Note%207.%20Taxable/Distributable%20Income%20and%20Dividend%20Distributions) For the six months ended March 31, 2025, the company's estimated taxable/distributable income was $80,978 thousand, compared to $76,060 thousand in the prior year. This differs from net assets from operations due to unrealized gains/losses and other book/tax differences. The company maintains RIC status, requiring distribution of at least 90% of taxable income. As of September 30, 2024, it had $696.0 million in net capital loss carryforwards. Income tax expense for the six months ended March 31, 2025, was $0.5 million for net investment income and $0.1 million for realized/unrealized gains/losses Taxable/Distributable Income (in thousands) | Metric | Six months ended March 31, 2025 | Six months ended March 31, 2024 | | :----- | :------------------------------ | :------------------------------ | | Net increase (decrease) in net assets from operations | $(29,010) | $19,872 | | Net unrealized (appreciation) depreciation | $101,637 | $50,277 | | Taxable/Distributable Income (estimate) | $80,978 | $76,060 | - As of September 30, 2024, the company had **$696.0 million** in net capital loss carryforwards, with **$73.0 million** for short-term and **$623.0 million** for long-term capital gains, which do not expire[250](index=250&type=chunk) Income Tax Expense (in thousands) | Metric | Six months ended March 31, 2025 | Six months ended March 31, 2024 | | :----- | :------------------------------ | :------------------------------ | | Income tax related to net investment income | $541 | — | | Income tax related to realized and unrealized gains (losses) | $125 | $351 | [Note 8. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation](index=75&type=section&id=Note%208.%20Realized%20Gains%20or%20Losses%20and%20Net%20Unrealized%20Appreciation%20or%20Depreciation) For the three months ended March 31, 2025, the company recorded a net realized gain of $6.7 million, primarily from foreign currency forward contracts, partially offset by losses from FinThrive Software Intermediate Holdings Inc. In contrast, the prior year period saw a net realized loss of $6.6 million. Net unrealized depreciation for the three months ended March 31, 2025, was $82.0 million, mainly from debt and equity investments and foreign currency forward contracts, significantly higher than the $25.3 million depreciation in the prior year Net Realized Gains (Losses) (in millions) | Portfolio Company | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | | Foreign currency forward contracts | $7.9 | $(1.170) | | FinThrive Software Intermediate Holdings Inc | $(2.8) | — | | All Web Leads Inc | — | $(13.4) | | Ardonagh Midco 3 PLC | — | $4.6 | | Total, net | $6.7 | $(6.6) | Net Unrealized Appreciation (Depreciation) (in millions) | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :------- | :-------------------------------- | :-------------------------------- | | Debt investments | $(63.0) | $(13.5) | | Equity investments | $(10.0) | $(24.8) | | Foreign currency forward contracts | $(14.7) | $2.2 | | Total, net | $(82.0) | $(25.3) | [Note 9. Concentration of Credit Risks](index=76&type=section&id=Note%209.%20Concentration%20of%20Credit%20Risks) The company manages credit risk by depositing cash with high-credit-quality financial institutions and continuously monitoring their financial stability. While cash balances may exceed FDIC insurance limits, this practice aims to mitigate exposure to credit loss - The company mitigates credit risk by depositing cash with high-credit-quality financial institutions and monitoring their stability[267](index=267&type=chunk) - Cash balances may at times exceed FDIC insurance limits, but this is managed through careful selection and monitoring of financial institutions[97](index=97&type=chunk)[267](index=267&type=chunk) [Note 10. Related Party Transactions](index=77&type=section&id=Note%2010.%20Related%20Party%20Transactions) The company has significant related party transactions with Oaktree Fund Advisors, LLC (Oaktree) and Oaktree Fund Administration, LLC (Oaktree Administrator). Oaktree receives a base management fee (1.00% of gross assets, with waivers) and an incentive fee (Part I on income, Part II on capital gains). For the three months ended March 31, 2025, base management fees incurred were $7.3 million (net of waiver) and Part I incentive fees were $0.0 million (net of $6.7 million waiver). Oaktree Administrator provides administrative services, reimbursed at cost, with $0.5 million accrued for the three months ended March 31, 2025 Management and Incentive Fees (in thousands) | Fee Type | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :------- | :-------------------------------- | :-------------------------------- | | Base management fee (net of waiver) | $7,300 | $10,100 | | Part I incentive fee (net of waiver) | $0 | $8,500 | | Part I incentive fees waived | $6,733 | — | - Effective July 1, 2024, the base management fee is **1.00%** of total gross assets (excluding cash), with specific waivers applied until January 23, 2025[273](index=273&type=chunk) - The Part I incentive fee is subject to a **1.50%** hurdle rate and a 'catch-up' provision, with a waiver implemented effective October 1, 2024, based on a cumulative pre-incentive fee net return over trailing twelve quarters[276](index=276&type=chunk)[278](index=278&type=chunk) - Oaktree Administrator provides administrative services, reimbursed at cost, with **$0.5 million** accrued for the three months ended March 31, 2025[291](index=291&type=chunk) [Note 11. Financial Highlights](index=81&type=section&id=Note%2011.%20Financial%20Highlights) For the three months ended March 31, 2025, the net asset value per share decreased to $16.75 from $17.63 at the beginning of the period, primarily due to net unrealized depreciation of $(0.94) per share and distributions of $(0.47) per share. The total return for the period was 3.56%. The ratio of net investment income to average net assets was 10.63%, while the ratio of net expenses to average net assets was 10.41%. The asset coverage ratio at period-end was 198.34% | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net asset value per share at beginning of period | $17.63 | $19.14 | | Net asset value per share at end of period | $16.75 | $18.72 | | Net investment income (per share) | $0.45 | $0.52 | | Net unrealized appreciation (depreciation) (per share) | $(0.94) | $(0.31) | | Distributions of net investment income to stockholders (per share) | $(0.47) | $(0.55) | | Total return | 3.56% | (0.96)% | | Ratio of net investment income to average net assets | 10.63% | 10.92% | | Ratio of net expenses to average net assets | 10.41% | 13.90% | | Asset coverage ratio at end of period | 198.34% | 188.04% | [Note 12. Derivative Instruments](index=82&type=section&id=Note%2012.%20Derivative%20Instruments) The company utilizes foreign currency forward contracts to mitigate foreign exchange rate fluctuations and interest rate swaps to align fixed-rate debt with its floating-rate investment portfolio. As of March 31, 2025, the company had various foreign currency forward contracts with a net derivative liability of $(8,068) thousand. Additionally, interest rate swaps were in place for the 2027, 2029, and 2030 Notes, with a net derivative liability of $(11,151) thousand, reflecting the fair value of these hedging instruments - The company uses foreign currency forward contracts to mitigate foreign exchange rate fluctuations and interest rate swaps to align fixed-rate debt with its floating-rate investment portfolio[297](index=297&type=chunk)[300](index=300&type=chunk) Foreign Currency Forward Contracts (March 31, 2025, in thousands) | Description | Notional Amount to be Purchased | Notional Amount to be Sold | Cumulative Unrealized Appreciation /(Depreciation) | | :---------- | :------------------------------ | :------------------------- | :----------------------------------------------- | | Foreign currency forward contract | $116,789 | €112,945 | $(5,452) | | Foreign currency forward contract | $5,142 | C$7,433 | $(32) | | Foreign currency forward contract | $5,142 | ¥789,671 | $(160) | | Foreign currency forward contract | $20,354 | £17,649 | $(2,424) | | Total | | | $(8,068) | Interest Rate Swaps (March 31, 2025, in thousands) | Description | Notional Amount | Fair Value | | :---------- | :-------------- | :--------- | | Interest rate swap (Fixed 2.7% / Floating 3-month SOFR +1.658%) | $350,000 | $(18,077) | | Interest rate swap (Fixed 7.1% / Floating 3-month SOFR +3.1255%) | $300,000 | $2,110 | | Interest rate swap (Fixed 6.34% / Floating 3-month SOFR +2.1920%) | $300,000 | $4,816 | | Total | | $(11,151) | [Note 13. Commitments and Contingencies](index=83&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) As of March 31, 2025, the company had $299.8 million in off-balance sheet unfunded commitments, a decrease from $311.4 million as of September 30, 2024. These commitments include $272.6 million for debt and equity financing to portfolio companies and $27.1 million for joint ventures. Approximately $252.0 million of the portfolio company commitments can be drawn immediately, with the remainder subject to specific milestones or restrictions. The company is not currently a party to any pending material legal proceedings Unfunded Commitments (in thousands) | Category | March 31, 2025 | September 30, 2024 | | :------- | :------------- | :----------------- | | To portfolio companies | $272,600 | $284,300 | | To joint ventures | $27,100 | $27,100 | | Total unfunded commitments | $299,763 | $311,361 | - Approximately **$252.0 million** of the commitments to portfolio companies can be drawn immediately, with the remaining amount subject to certain milestones or restrictions[304](index=304&type=chunk) - The company is not currently a party to any pending material legal proceedings[443](index=443&type=chunk) [Note 14. Subsequent Events](index=85&type=section&id=Note%2014.%20Subsequent%20Events) On April 28, 2025, the Board of Directors declared quarterly and supplemental distributions totaling $0.42 per share, payable on June 30, 2025. Additionally, on April 8, 2025, the Syndicated Facility was amended to reduce interest rate margins, decrease the facility size to $1.160 billion (while increasing the accordion feature to $1.50 billion), remove the Consolidated Interest Coverage Ratio covenant, and extend the reinvestment period and final maturity date to April 8, 2029, and April 8, 2030, respectively Distribution Declaration (April 28, 2025) | Distribution Type | Amount per Share | | :---------------- | :--------------- | | Quarterly | $0.40 | | Supplemental | $0.02 | | Total | $0.42 | - On April 8, 2025, the Syndicated Facility was amended to reduce interest rate margins, decrease the facility size from **$1.218 billion** to **$1.160 billion**, increase the "accordion" feature to **$1.50 billion**, and extend the reinvestment period and final maturity date to April 8, 2029, and April 8, 2030, respectively[309](index=309&type=chunk)[431](index=431&type=chunk) - The amendment to the Syndicated Facility also removed the Consolidated Interest Coverage Ratio covenant[309](index=309&type=chunk)[431](index=431&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=90&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Oaktree Specialty Lending Corporation's business, its operating environment, and a detailed analysis of its financial performance and condition. The company focuses on providing customized credit solutions to middle-market companies, with a strategy emphasizing situational lending, select sponsor lending, stressed sector/rescue lending, and public credit. Key financial results for the six months ended March 31, 2025, show a decrease in total investment income and net investment income, but also a significant reduction in net expenses due to fee waivers. The company's liquidity and capital resources are deemed sufficient, supported by cash, credit facilities, and recent equity issuances, including a $100.0 million private placement - The company's investment objective is to generate current income and capital appreciation by providing flexible financing solutions to companies with limited access to public or syndicated capital markets[325](index=325&type=chunk) - Current investment strategy focuses on situational lending, select sponsor lending, stressed sector and rescue lending, and opportunistic public credit investments[326](index=326&type=chunk) Key Financial Performance (Six months ended March 31) | Metric (in millions) | 2025 | 2024 | | :------------------- | :----- | :----- | | Total investment income | $164.2 | $192.0 | | Net expenses | $80.3 | $106.5 | | Net investment income | $83.4 | $85.6 | | Net realized losses | $(10.6) | $(15.1) | | Net unrealized depreciation | $(101.6) | $(50.3) | - Net expenses decreased by **$26.1 million (24.6%)** for the six months ended March 31, 2025, primarily due to a **$15.9 million** reduction in Part I incentive fees (net of waivers) and lower interest and management fees[371](index=371&type=chunk) - The company's liquidity and capital resources are sufficient, with **$108.2 million** in cash and cash equivalents, **$1,097.5 million** of undrawn capacity on credit facilities, and recent equity issuances including a **$100.0 million** private placement[383](index=383&type=chunk)[386](index=386&type=chunk)[396](index=396&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=110&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks, primarily valuation risk for illiquid investments and interest rate risk. Valuation risk arises from the use of management judgment and unobservable inputs for fair value determination, which may differ from actual realized values. Interest rate risk stems from a predominantly floating-rate debt investment portfolio (89.8% at fair value as of March 31, 2025) and floating-rate borrowings. A hypothetical 100 basis point increase in interest rates would result in an approximate $9.6 million annualized net increase in net assets from operations, while a 100 basis point decrease would lead to a $9.5 million net decrease - The company is subject to valuation risk due to the inherent uncertainty in determining the fair value of illiquid investments, which relies on management judgment and unobservable inputs[434](index=434&type=chunk) Debt Investment Portfolio by Interest Rate Type | Metric | March 31, 2025 | September 30, 2024 | | :----- | :------------- | :----------------- | | Floating rate debt investments (at fair value) | 89.8% | 88.4% | | Floating rate debt investments (at cost) | 89.5% | 88.7% | Hypothetical Annualized Net Increase (Decrease) in Net Assets from Operations due to Interest Rate Changes (in thousands) | Basis Point Change | Net Increase (Decrease) | | :----------------- | :---------------------- | | +250 | $23,945 | | +100 | $9,556 | | -100 | $(9,523) | | -250 | $(22,890) | [Item 4. Controls and Procedures](index=112&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2025, management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level. There were no material changes in internal control over financial reporting during the three months ended March 31, 2025 - As of March 31, 2025, disclosure controls and procedures were evaluated as effective at the reasonable assurance level[440](index=440&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025[441](index=441&type=chunk) [PART II — OTHER INFORMATION](index=112&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section details legal proceedings, risk factors, equity sales, senior securities defaults, mine safety, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=112&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any pending material legal proceedings - The company is not currently a party to any pending material legal proceedings[443](index=443&type=chunk) [Item 1A. Risk Factors](index=112&type=section&id=Item%201A.%20Risk%20Factors) In addition to previously disclosed risks, the company highlights that existing or new tariffs could adversely affect its operations or those of its portfolio companies by increasing production costs or reducing product demand - Existing or new tariffs imposed on foreign goods or U.S. goods could adversely affect the company or its portfolio companies by increasing production costs or reducing demand for products[444](index=444&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=112&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[445](index=445&type=chunk) [Item 3. Defaults Upon Senior Securities](index=112&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[446](index=446&type=chunk) [Item 4. Mine Safety Disclosures](index=112&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Not applicable[447](index=447&type=chunk) [Item 5. Other Information](index=112&type=section&id=Item%205.%20Other%20Information) During the three months ended March 31, 2025, none of the company's officers or directors adopted or terminated any Rule 10b5-1 trading arrangements - During the three months ended March 31, 2025, none of the company's officers or directors adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities intended to satisfy Rule 10b5-1(c) conditions[448](index=448&type=chunk) [Item 6. Exhibits](index=113&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various amendments to the Restated Certificate of Incorporation and Bylaws, the Eighth Supplemental Indenture for the 6.340% Notes due 2030, a Letter Agreement with Oaktree Fund Advisors, LLC, and certifications from the Chief Executive Officer and Chief Financial Officer - Key exhibits include amendments to the Restated Certificate of Incorporation and Bylaws, the Eighth Supplemental Indenture for the **6.340% Notes due 2030**, and a Letter Agreement with Oaktree Fund Advisors, LLC[449](index=449&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002 are also filed[449](index=449&type=chunk) [Signatures](index=114&type=section&id=Signatures) The report is duly signed on behalf of Oaktree Specialty Lending Corporation by Armen Panossian, Chief Executive Officer, and Christopher McKown, Chief Financial Officer and Treasurer, on April 30, 2025 - The report is signed by Armen Panossian, Chief Executive Officer, and Christopher McKown, Chief Financial Officer and Treasurer, on April 30, 2025[452](index=452&type=chunk)

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].