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]

Financial Data and Key Metrics Changes - Adjusted net investment income (NII) was $45,000,000 or $0.54 per share for fiscal Q1, down slightly from $0.55 per share in the prior quarter [9][30] - Net asset value (NAV) per share declined to $17.63 from $18.09 last quarter [9][30] - Total debt outstanding was $1,610,000,000 with a weighted average interest rate of 6.2%, down from the previous quarter [32][33] Business Line Data and Key Metrics Changes - The portfolio had a fair value of $2,800,000,000 invested across 136 companies, with a weighted average yield on debt investments at 10.7% [12] - 82% of the portfolio is now in 1st lien position, up from 78% a year ago [12] - The median EBITDA of portfolio companies was $142,000,000 with a median leverage of 5.4 times [13] Market Data and Key Metrics Changes - The company originated $198,000,000 of new investment commitments with a weighted average yield of 9.6%, a slight decline from the previous quarter [23] - Paydowns, exits, and sales in Q1 generated $352,000,000, up from $338,000,000 in the fourth quarter [24] - The company noted that competition between broadly syndicated loans and private credit drove spreads lower, which are now stabilizing [20][21] Company Strategy and Development Direction - The company amended its dividend policy to include a base dividend of $0.40 per share and a supplemental dividend of $0.07 per share [7][8] - The equity raise of $100,000,000 is expected to help grow the asset base and diversify the portfolio [5][33] - The management emphasized a focus on investing in larger companies and strong sectors to further diversify the portfolio [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the current environment but expressed optimism about increased deal flow in 2025 due to favorable regulatory conditions and private equity activity [20][21] - The company remains committed to addressing troubled assets and converting them into performing credit assets [54] - Management believes that the current market environment presents attractive investment opportunities [40][66] Other Important Information - The company has a liquidity of approximately $1,100,000,000, including $113,000,000 in cash and $958,000,000 in undrawn capacity on credit facilities [33] - The company reported a $700,000 dividend from the Kemper joint venture [34] Q&A Session Summary Question: Inquiry about the $100,000,000 equity investment and future plans - Management clarified that the investment was made at NAV with a standard lockup provision, allowing for significant dry powder for future investments [38][39] Question: Discussion on the strategic shift towards larger company direct lending - Management explained that the focus on first lien lending is due to better risk-adjusted returns in the current market environment [41][46] Question: Options for upcoming debt maturity - Management indicated that they are considering all options, leveraging existing liquidity and facilities [50] Question: Goals for the company with the new dividend and fee structure - Management stated the goal is to cover the dividend comfortably, grow the asset base, and convert non-performing assets into income-generating assets [52][54] Question: Clarification on supplemental dividend levels - Management indicated that approximately 50% of excess earnings above the base dividend would be paid out as supplemental dividends [58] Question: Rationale for buying back shares at NAV - Management explained that purchasing at NAV allows for asset growth and diversification rather than simply buying shares at a discount [65][66]

Earnings Presentation NASDAQ: OCSL First Quarter 2025 Forward Looking Statements & Legal Disclosures Some of the statements in this presentation constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this presentation may include statements as to: our future operating results and distribution projections; the ability of Oaktree Fund Advisors, LLC (together with its affiliates, "Oaktree") to impl ...

Core Viewpoint - Oaktree Specialty Lending (OCSL) reported quarterly earnings of $0.54 per share, matching the Zacks Consensus Estimate, but down from $0.57 per share a year ago [1]. Financial Performance - The company posted revenues of $86.65 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 4.34%, and down from $97.99 million year-over-year [2]. - Oaktree Specialty Lending has not surpassed consensus EPS estimates over the last four quarters [2]. - The current consensus EPS estimate for the upcoming quarter is $0.53 on revenues of $87.94 million, and for the current fiscal year, it is $2.06 on revenues of $352.18 million [7]. Stock Performance - Oaktree Specialty Lending shares have increased by approximately 4.4% since the beginning of the year, outperforming the S&P 500's gain of 1.9% [3]. - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6]. Industry Outlook - The Financial - Miscellaneous Services industry, to which Oaktree Specialty Lending belongs, is currently in the top 30% of over 250 Zacks industries, suggesting a favorable industry outlook [8]. - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Oaktree's stock performance [5]. Future Considerations - The sustainability of Oaktree's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4]. - Investors are encouraged to monitor changes in earnings estimates for the coming quarters and the current fiscal year [7].

Financial Performance - Total investment income for Q1 2025 was $86.6 million ($1.05 per share), down from $94.7 million ($1.15 per share) in Q4 2024, primarily due to lower interest income and fee income [3]. - GAAP net investment income for Q1 2025 was $44.3 million ($0.54 per share), compared to $44.9 million ($0.55 per share) in Q4 2024, reflecting higher operating expenses [3]. - Adjusted total investment income for Q1 2025 was $87.1 million, down from $95.0 million in Q4 2024, primarily due to a decrease in interest income [8]. - Adjusted net investment income was $44.7 million ($0.54 per share) for Q1 2025, down from $45.2 million ($0.55 per share) in Q4 2024 [11]. - The net investment income per common share for the quarter was $0.54, slightly down from $0.55 in the previous quarter [46]. - The company reported a net increase in net assets resulting from operations of $7,239 thousand for the three months ended December 31, 2024, down from $36,913 thousand in the previous quarter [46]. Investment Activity - The company originated $198.1 million in new investment commitments and received $352.4 million from prepayments and exits during the quarter [3]. - New investment commitments totaled $198.1 million, down from $259.0 million in the prior quarter, with net new investments at $(151.1) million [1]. - The number of portfolio companies decreased to 136 from 144 in the previous quarter, with the average debt size per company remaining stable at $22,000 [1]. - As of December 31, 2024, the fair value of the investment portfolio was $2.8 billion, consisting of investments in 136 companies [16]. Asset and Liability Management - Total debt outstanding was $1,610.0 million as of December 31, 2024, with a total debt to equity ratio of 1.11x [3]. - The company's total debt to equity ratio was 1.11x, slightly down from 1.12x in the previous quarter [27]. - The total principal value of debt outstanding was $1.61 billion, with a funding mix of 41% secured and 59% unsecured borrowings [23]. - The company’s total liabilities decreased to $1,633,977 thousand as of December 31, 2024, from $1,710,530 thousand as of September 30, 2024, a reduction of approximately 4.5% [44]. - As of December 31, 2024, the company had $112.9 million in unrestricted cash and $957.5 million of undrawn capacity on its credit facilities [25]. Distribution and Earnings - A quarterly distribution of $0.40 per share and a supplemental distribution of $0.07 per share were declared, payable on March 31, 2025 [5]. - Adjusted Earnings for the three months ended December 31, 2024, amounted to $7,601,000, or $0.09 per share [36]. - The net increase in net assets resulting from operations for the three months ended December 31, 2024, was $7,239,000, or $0.09 per share [36]. Market and Economic Conditions - Forward-looking statements indicate potential risks including economic changes, geopolitical conflicts, and regulatory conditions [40]. - Total assets decreased to $3,083,792 thousand as of December 31, 2024, from $3,198,341 thousand as of September 30, 2024, representing a decline of approximately 3.6% [44]. - Total investments at fair value decreased to $2,835,294 thousand as of December 31, 2024, down from $3,021,279 thousand as of September 30, 2024, a decrease of about 6.2% [44]. Conference and Regulatory Information - The company will host a conference call on February 4, 2025, to discuss its first fiscal quarter 2025 results [37]. - Oaktree Specialty Lending Corporation is regulated as a business development company under the Investment Company Act of 1940 [39]. - The company aims to provide customized credit solutions to companies with limited access to public capital markets [39].