Oaktree Specialty Lending (US:OCSL)2024-04-29 22:41Investment Performance - The company reported a significant increase in portfolio fair value, with 99.9% of investments valued based on market quotations or corroborated by independent valuation firms as of March 31, 2024[332]. - As of March 31, 2024, the company held $3,047.4 million in investments at fair value, an increase of 5.4% from $2,892.4 million on September 30, 2023[334]. - Approximately 92.4% of total assets represented investments at fair value as of March 31, 2024, compared to 89.9% as of September 30, 2023[334]. - The composition of the investment portfolio at cost as of March 31, 2024, included 84.20% in senior secured debt and 3.40% in common equity and warrants[340]. - The fair value of senior secured debt was 86.29% of total investments as of March 31, 2024, slightly down from 86.47% on September 30, 2023[340]. - The company’s investments in Biotechnology represented 3.89% at cost as of March 31, 2024, compared to 4.15% on September 30, 2023[341]. Investment Strategy - The company focuses on situational lending, select sponsor lending, stressed sector lending, and public credit to capitalize on less competitive areas for greater returns[318]. - The company aims to generate current income and capital appreciation through flexible financing solutions, including first and second lien loans, unsecured loans, and equity co-investments[317]. - The company emphasizes the importance of resilient business models in its investment strategy, targeting middle market companies with strong fundamentals[323]. - The company’s strategy includes co-investing in senior secured loans through joint ventures, enhancing its market presence in middle-market companies[339]. Financial Results - As of March 31, 2024, the total investment income was $94.0 million, a decrease of $2.3 million or 2.4% compared to $96.3 million for the same period in 2023[358]. - For the six months ended March 31, 2024, total investment income increased by $16.5 million or 9.4% to $192.0 million, compared to $175.5 million for the same period in 2023[359]. - Net expenses for the three months ended March 31, 2024, were $52.7 million, an increase of $2.3 million or 4.6% from $50.3 million in the same period in 2023[360]. - Net expenses for the six months ended March 31, 2024, increased by $15.8 million or 17.5% to $106.5 million compared to $90.6 million for the same period in 2023[361]. - Net investment income for the three months ended March 31, 2024, decreased by $4.6 million compared to the same period in 2023[362]. Debt and Financing - Total debt outstanding as of March 31, 2024, was $1,680.0 million, with a weighted average debt outstanding of $1,665.4 million for the six months ended March 31, 2024[379]. - The company issued $300.0 million in aggregate principal amount of the 2029 Notes, with net proceeds of $292.9 million after deducting costs[403]. - The company issued $350.0 million in aggregate principal amount of the 2027 Notes, with net proceeds of $344.8 million after deducting costs[401]. - The company has a revolving credit facility under the OSI2 Citibank Facility, allowing up to $400 million in borrowings, maturing on January 26, 2027[397]. - The company recorded interest expense of $12.1 million related to the OSI2 Citibank Facility for the six months ended March 31, 2024[399]. Cash Flow and Distributions - Cash distributions paid to stockholders during the six months ended March 31, 2024, totaled $89.8 million[372]. - The company declared a quarterly distribution of $0.55 per share for the period ending March 31, 2024, amounting to $42.8 million[387]. - The company declared a quarterly distribution of $0.55 per share on April 26, 2024, payable in cash on June 28, 2024[417]. - The company has $236.2 million in unfunded commitments as of March 31, 2024, with $209.1 million allocated for debt and equity financing to portfolio companies[376]. Market Conditions and Risks - The company is closely monitoring macroeconomic factors such as inflation and elevated interest rates, which have increased market volatility and impacted certain sectors[321]. - The company acknowledges the inherent uncertainties in valuing private securities and the potential for significant fluctuations in fair value estimates[333]. - The company regularly assesses interest rate risk and manages exposure by comparing interest-sensitive assets to liabilities[424]. Management and Governance - The company is externally managed by Oaktree, which provides investment advisory and administrative services under a formal agreement[315]. - The company has qualified as a Business Development Company and a Regulated Investment Company, allowing it to provide customized credit solutions[314]. - Oaktree waived additional base management fees totaling $1.5 million for each of the three months ended March 31, 2024, and June 30, 2024[418].