Oaktree Specialty Lending (US:OCSL)2025-05-01 16:02Financial 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]