Item 1. Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
| | | | | | | | | | | | | | |
| | December 31, 2022 (unaudited) | | September 30, 2022 |
| ASSETS |
| Investments at fair value: | | | | |
Control investments (cost December 31, 2022: $281,911; cost September 30, 2022: $260,305) | | $ | 232,462 | | | $ | 214,165 | |
Affiliate investments (cost December 31, 2022: $24,327; cost September 30, 2022: $27,353) | | 23,173 | | | 26,196 | |
Non-control/Non-affiliate investments (cost December 31, 2022: $2,471,776; cost September 30, 2022: $2,330,096) | | 2,387,235 | | | 2,253,750 | |
Total investments at fair value (cost December 31, 2022: $2,778,014; cost September 30, 2022: $2,617,754) | | 2,642,870 | | | 2,494,111 | |
| Cash and cash equivalents | | 17,382 | | | 23,528 | |
| Restricted cash | | 1,863 | | | 2,836 | |
| Interest, dividends and fees receivable | | 37,802 | | | 35,598 | |
| Due from portfolio companies | | 6,181 | | | 22,495 | |
| Receivables from unsettled transactions | | 8,657 | | | 4,692 | |
| Due from broker | | 39,760 | | | 45,530 | |
| Deferred financing costs | | 6,781 | | | 7,350 | |
| Deferred offering costs | | 32 | | | 32 | |
| Deferred tax asset, net | | 1,722 | | | 1,687 | |
| Derivative assets at fair value | | — | | | 6,789 | |
| Other assets | | 4,210 | | | 1,665 | |
| Total assets | | $ | 2,767,260 | | | $ | 2,646,313 | |
| LIABILITIES AND NET ASSETS |
| Liabilities: | | | | |
| Accounts payable, accrued expenses and other liabilities | | $ | 3,035 | | | $ | 3,701 | |
| Base management fee and incentive fee payable | | 16,871 | | | 15,940 | |
| Due to affiliate | | 3,260 | | | 3,180 | |
| Interest payable | | 13,368 | | | 7,936 | |
| Payables from unsettled transactions | | 20,974 | | | 26,981 | |
| Derivative liability at fair value | | 44,139 | | | 41,969 | |
| Credit facilities payable | | 860,000 | | | 700,000 | |
Unsecured notes payable (net of $4,650 and $5,020 of unamortized financing costs as of December 31, 2022 and September 30, 2022, respectively) | | 603,624 | | | 601,043 | |
| Total liabilities | | 1,565,271 | | | 1,400,750 | |
| Commitments and contingencies (Note 13) | | | | |
| Net assets: | | | | |
Common stock, $0.01 par value per share, 250,000 shares authorized; 61,220 and 61,125 shares issued and outstanding as of December 31, 2022 and September 30, 2022, respectively (1) | | 612 | | | 611 | |
| Additional paid-in-capital | | 1,829,653 | | | 1,827,721 | |
| Accumulated overdistributed earnings | | (628,276) | | | (582,769) | |
Total net assets (equivalent to $19.63 and $20.38 per common share as of December 31, 2022 and September 30, 2022, respectively) (Note 11) (1) | | 1,201,989 | | | 1,245,563 | |
| Total liabilities and net assets | | $ | 2,767,260 | | | $ | 2,646,313 | |
__________
(1) As discussed in Note 2, the Company completed a 1-for-3 reverse stock split on January 20, 2023, effective as of the commencement of trading on January 23, 2023. The issued and outstanding shares and net asset value per share reflect the reverse stock split on a retroactive basis.
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | |
| | Three months ended
December 31, 2022 | | Three months ended
December 31, 2021 |
| Interest income: | | | | |
| Control investments | | $ | 4,567 | | | $ | 3,480 | |
| Affiliate investments | | 641 | | | 334 | |
| Non-control/Non-affiliate investments | | 64,298 | | | 51,635 | |
| Interest on cash and cash equivalents | | 472 | | | 1 | |
| Total interest income | | 69,978 | | | 55,450 | |
| PIK interest income: | | | | |
| Non-control/Non-affiliate investments | | 6,130 | | | 4,663 | |
| Total PIK interest income | | 6,130 | | | 4,663 | |
| Fee income: | | | | |
| Control investments | | 13 | | | 13 | |
| Affiliate investments | | 5 | | | 5 | |
| Non-control/Non-affiliate investments | | 2,003 | | | 894 | |
| Total fee income | | 2,021 | | | 912 | |
| Dividend income: | | | | |
| Control investments | | 1,050 | | | 3,916 | |
| Total dividend income | | 1,050 | | | 3,916 | |
| Total investment income | | 79,179 | | | 64,941 | |
| Expenses: | | | | |
| Base management fee | | 9,917 | | | 9,952 | |
| Part I incentive fee | | 7,703 | | | 6,457 | |
| Part II incentive fee | | — | | | 1,751 | |
| Professional fees | | 1,500 | | | 1,322 | |
| Directors fees | | 160 | | | 123 | |
| Interest expense | | 20,719 | | | 9,400 | |
| Administrator expense | | 298 | | | 390 | |
| General and administrative expenses | | 746 | | | 693 | |
| Total expenses | | 41,043 | | | 30,088 | |
| Fees waived | | (750) | | | (750) | |
| Net expenses | | 40,293 | | | 29,338 | |
| Net investment income before taxes | | 38,886 | | | 35,603 | |
| (Provision) benefit for taxes on net investment income | | — | | | (3,308) | |
| Excise tax | | (78) | | | — | |
| Net investment income | | 38,808 | | | 32,295 | |
| Unrealized appreciation (depreciation): | | | | |
| Control investments | | (3,309) | | | (667) | |
| Affiliate investments | | 3 | | | (251) | |
| Non-control/Non-affiliate investments | | (8,675) | | | (2,831) | |
| Foreign currency forward contracts | | (11,001) | | | (837) | |
| Net unrealized appreciation (depreciation) | | (22,982) | | | (4,586) | |
| Realized gains (losses): | | | | |
| Control investments | | — | | | 1,868 | |
| Non-control/Non-affiliate investments | | (7,651) | | | 4,481 | |
| Foreign currency forward contracts | | 4,448 | | | 2,972 | |
| Net realized gains (losses) | | (3,203) | | | 9,321 | |
| (Provision) benefit for taxes on realized and unrealized gains (losses) | | 549 | | | 2,378 | |
| Net realized and unrealized gains (losses), net of taxes | | (25,636) | | | 7,113 | |
| Net increase (decrease) in net assets resulting from operations | | $ | 13,172 | | | $ | 39,408 | |
| Net investment income per common share — basic and diluted (1) | | $ | 0.63 | | | $ | 0.54 | |
| Earnings (loss) per common share — basic and diluted (Note 5) (1) | | $ | 0.22 | | | $ | 0.66 | |
| Weighted average common shares outstanding — basic and diluted (1) | | 61,142 | | | 60,127 | |
__________
(1) As discussed in Note 2, the Company completed a 1-for-3 reverse stock split on January 20, 2023, effective as of the commencement of trading on January 23, 2023. The weighted average common shares outstanding and per share information reflect the reverse stock split on a retroactive basis.
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | |
| | Three months ended
December 31, 2022 | | Three months ended
December 31, 2021 |
| Operations: | | | | |
| Net investment income | | $ | 38,808 | | | $ | 32,295 | |
| Net unrealized appreciation (depreciation) | | (22,982) | | | (4,586) | |
| Net realized gains (losses) | | (3,203) | | | 9,321 | |
| (Provision) benefit for taxes on realized and unrealized gains (losses) | | 549 | | | 2,378 | |
| Net increase (decrease) in net assets resulting from operations | | 13,172 | | | 39,408 | |
| Stockholder transactions: | | | | |
| Distributions to stockholders | | (58,679) | | | (27,956) | |
| Net increase (decrease) in net assets from stockholder transactions | | (58,679) | | | (27,956) | |
| Capital share transactions: | | | | |
| Issuance of common stock under dividend reinvestment plan | | 1,933 | | | 786 | |
| Net increase (decrease) in net assets from capital share transactions | | 1,933 | | | 786 | |
| Total increase (decrease) in net assets | | (43,574) | | | 12,238 | |
| Net assets at beginning of period | | 1,245,563 | | | 1,312,823 | |
| Net assets at end of period | | $ | 1,201,989 | | | $ | 1,325,061 | |
| Net asset value per common share | | $ | 19.63 | | | $ | 22.03 | |
| Common shares outstanding at end of period | | 61,220 | | | 60,156 | |
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | | | | | | | | | | | |
| | Three months ended
December 31, 2022 | | Three months ended
December 31, 2021 |
| Operating activities: | | | | |
| Net increase (decrease) in net assets resulting from operations | | $ | 13,172 | | | $ | 39,408 | |
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | | | | |
| Net unrealized (appreciation) depreciation | | 22,982 | | | 4,586 | |
| Net realized (gains) losses | | 3,203 | | | (9,321) | |
| PIK interest income | | (6,130) | | | (4,663) | |
| Accretion of original issue discount on investments | | (5,127) | | | (7,076) | |
| Accretion of original issue discount on unsecured notes payable | | 170 | | | 170 | |
| Amortization of deferred financing costs | | 828 | | | 924 | |
| Deferred taxes | | (35) | | | (959) | |
| Purchases of investments | | (261,404) | | | (246,623) | |
| Proceeds from the sales and repayments of investments | | 108,831 | | | 235,020 | |
| Changes in operating assets and liabilities: | | | | |
| (Increase) decrease in interest, dividends and fees receivable | | (1,842) | | | 1,796 | |
| (Increase) decrease in due from portfolio companies | | 16,314 | | | (803) | |
| (Increase) decrease in receivables from unsettled transactions | | (3,966) | | | (17,673) | |
| (Increase) decrease in due from broker | | 5,770 | | | (1,810) | |
| (Increase) decrease in other assets | | (2,546) | | | (564) | |
| Increase (decrease) in accounts payable, accrued expenses and other liabilities | | (554) | | | 3,145 | |
| Increase (decrease) in base management fee and incentive fee payable | | 931 | | | (6,459) | |
| Increase (decrease) in due to affiliate | | 80 | | | (854) | |
| Increase (decrease) in interest payable | | 5,432 | | | 2,101 | |
| Increase (decrease) in payables from unsettled transactions | | (6,007) | | | 32,717 | |
| Increase (decrease) in director fees payable | | — | | | 123 | |
| Net cash provided by (used in) operating activities | | (109,898) | | | 23,185 | |
| Financing activities: | | | | |
| Distributions paid in cash | | (56,746) | | | (27,170) | |
| Borrowings under credit facilities | | 202,000 | | | 70,000 | |
| Repayments of borrowings under credit facilities | | (42,000) | | | (50,000) | |
| Deferred financing costs paid | | — | | | (334) | |
| Net cash provided by (used in) financing activities | | 103,254 | | | (7,504) | |
| Effect of exchange rate changes on foreign currency | | (475) | | | (1,259) | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | | (7,119) | | | 14,422 | |
| Cash and cash equivalents and restricted cash, beginning of period | | 26,364 | | | 31,635 | |
| Cash and cash equivalents and restricted cash, end of period | | $ | 19,245 | | | $ | 46,057 | |
| Supplemental information: | | | | |
| Cash paid for interest | | $ | 14,289 | | | $ | 6,205 | |
| Non-cash financing activities: | | | | |
| Issuance of shares of common stock under dividend reinvestment plan | | $ | 1,933 | | | $ | 786 | |
| Reconciliation to the Consolidated Statements of Assets and Liabilities | | December 31,
2022 | | September 30,
2022 |
| Cash and cash equivalents | | $ | 17,382 | | | $ | 23,528 | |
| Restricted cash | | 1,863 | | | 2,836 | |
| Total cash and cash equivalents and restricted cash | | $ | 19,245 | | | $ | 26,364 | |
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
Control Investments | | | | | | | | | (8)(9) |
| C5 Technology Holdings, LLC | | Data Processing & Outsourced Services | | | | | | | |
829 Common Units | | | | | $ | — | | | $ | — | | | (15) |
34,984,460.37 Preferred Units | | | | | 34,984 | | | 27,638 | | | (15) |
| | | | | 34,984 | | | 27,638 | | | |
| Dominion Diagnostics, LLC | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024 | 9.73 | % | | $ | 14,297 | | | 14,297 | | | 14,297 | | | (6)(15) |
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024 | | | — | | | — | | | — | | | (6)(15)(19) |
30,030.8 Common Units in DD Healthcare Services Holdings, LLC | | | | | 15,222 | | | 4,227 | | | (15) |
| | | | | 29,519 | | | 18,524 | | | |
| OCSI Glick JV LLC | | Multi-Sector Holdings | | | | | | | (14) |
Subordinated Debt, LIBOR+4.50% cash due 10/20/2028 | 7.67 | % | | 59,049 | | | 49,961 | | | 49,536 | | | (6)(11)(15)(19) |
87.5% equity interest | | | | | — | | | — | | | (11)(16)(19) |
| | | | | 49,961 | | | 49,536 | | | |
| Senior Loan Fund JV I, LLC | | Multi-Sector Holdings | | | | | | | (14) |
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | 10.17 | % | | 112,656 | | | 112,656 | | | 112,656 | | | (6)(11)(15)(19) |
87.5% LLC equity interest | | | | | 54,791 | | | 24,108 | | | (11)(12)(16)(19) |
| | | | | 167,447 | | | 136,764 | | | |
Total Control Investments (19.3% of net assets) | | | | | $ | 281,911 | | | $ | 232,462 | | | |
| | | | | | | | | |
| Affiliate Investments | | | | | | | | | (17) |
| Assembled Brands Capital LLC | | Specialized Finance | | | | | | | |
First Lien Revolver, LIBOR+6.75% cash due 10/17/2023 | 11.48 | % | | $ | 21,464 | | | $ | 21,464 | | | $ | 21,252 | | | (6)(15)(19) |
1,609,201 Class A Units | | | | | 764 | | | 354 | | | (15) |
1,019,168.80 Preferred Units, 6% | | | | | 1,019 | | | 1,243 | | | (15) |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | — | | | — | | | (15) |
| | | | | 23,247 | | | 22,849 | | | |
| Caregiver Services, Inc. | | Health Care Services | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | 1,080 | | | 324 | | | (15) |
| | | | | 1,080 | | | 324 | | | |
Total Affiliate Investments (1.9% of net assets) | | | | | $ | 24,327 | | | $ | 23,173 | | | |
| | | | | | | | | |
| Non-Control/Non-Affiliate Investments | | | | | | | | | (18) |
| 107 Fair Street LLC | | Real Estate Development | | | | | | | |
First Lien Delayed Draw Term Loan, 12.50% cash due 5/17/2024 | | | $ | 1,174 | | | $ | 1,111 | | | $ | 1,108 | | | (10)(15)(19) |
| | | | | 1,111 | | | 1,108 | | | |
| 112-126 Van Houten Real22 LLC | | Real Estate Development | | | | | | | |
First Lien Delayed Draw Term Loan, 12.00% cash due 5/4/2024 | | | 3,239 | | | 3,167 | | | 3,159 | | | (10)(15)(19) |
| | | | | 3,167 | | | 3,159 | | | |
| A.T. Holdings II Ltd. | | Biotechnology | | | | | | | |
First Lien Revenue Interest Financing Term Loan 14.25% cash due 9/13/2029 | | | 15,939 | | | 15,939 | | | 15,939 | | | (11)(15) |
| | | | | 15,939 | | | 15,939 | | | |
| A.T. Holdings II SÀRL | | Biotechnology | | | | | | | |
First Lien Term Loan, 12.50% PIK due 1/20/2023 | | | 15,643 | | | 15,640 | | | 15,722 | | | (11)(15) |
| | | | | 15,640 | | | 15,722 | | | |
| Access CIG, LLC | | Diversified Support Services | | | | | | | |
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026 | 11.82 | % | | 20,000 | | | 19,932 | | | 17,800 | | | (6)(15) |
| | | | | 19,932 | | | 17,800 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Accupac, Inc. | | Personal Products | | | | | | | |
First Lien Term Loan, SOFR+5.50% cash due 1/16/2026 | 10.16 | % | | $ | 15,935 | | | $ | 15,668 | | | $ | 15,903 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+5.50% cash due 1/16/2026 | | | — | | | — | | | (6) | | | (6)(15)(19) |
First Lien Revolver, SOFR+5.50% cash due 1/16/2026 | 10.17 | % | | 908 | | | 874 | | | 904 | | | (6)(15)(19) |
| | | | | 16,542 | | | 16,801 | | | |
| Acquia Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 10/31/2025 | 10.74 | % | | 27,349 | | | 27,064 | | | 27,240 | | | (6)(15) |
First Lien Revolver, LIBOR+7.00% cash due 10/31/2025 | 12.18 | % | | 1,317 | | | 1,296 | | | 1,308 | | | (6)(15)(19) |
| | | | | 28,360 | | | 28,548 | | | |
| ADB Companies, LLC | | Construction & Engineering | | | | | | | |
First Lien Term Loan, SOFR+6.25% cash due 12/18/2025 | 11.34 | % | | 14,505 | | | 14,079 | | | 14,254 | | | (6)(15) |
| | | | | 14,079 | | | 14,254 | | | |
| ADC Therapeutics SA | | Biotechnology | | | | | | | |
First Lien Term Loan, SOFR+7.50% cash due 8/15/2029 | 12.23 | % | | 6,589 | | | 6,269 | | | 6,274 | | | (6)(11)(15) |
First Lien Delayed Draw Term Loan, SOFR+7.50% cash due 8/15/2029 | | | — | | | (38) | | | (35) | | | (6)(11)(15)(19) |
28,948 Common Stock Warrants (exercise price $8.297) expiration 8/15/2032 | | | | | 174 | | | 50 | | | (11)(15) |
| | | | | 6,405 | | | 6,289 | | | |
| Aden & Anais Merger Sub, Inc. | | Apparel, Accessories & Luxury Goods | | | | | | | |
51,645 Common Units in Aden & Anais Holdings, Inc. | | | | | 5,165 | | | — | | | (15) |
| | | | | 5,165 | | | — | | | |
| AI Sirona (Luxembourg) Acquisition S.a.r.l. | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/2026 | 9.15 | % | | € | 24,838 | | | 27,775 | | | 24,255 | | | (6)(11)(15) |
| | | | | 27,775 | | | 24,255 | | | |
| AIP RD Buyer Corp. | | Distributors | | | | | | | |
Second Lien Term Loan, SOFR+7.75% cash due 12/23/2029 | 12.17 | % | | $ | 14,414 | | | 14,163 | | | 13,960 | | | (6)(15) |
14,410 Common Units in RD Holding LP | | | | | 1,352 | | | 1,528 | | | (15) |
| | | | | 15,515 | | | 15,488 | | | |
| AirStrip Technologies, Inc. | | Application Software | | | | | | | |
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/2025 | | | | | 90 | | | — | | | (15) |
| | | | | 90 | | | — | | | |
| All Web Leads, Inc. | | Advertising | | | | | | | |
First Lien Term Loan, LIBOR+1.00% cash 7.50% PIK due 12/29/2023 | 5.73 | % | | 23,562 | | | 22,547 | | | 22,354 | | | (6)(15) |
| | | | | 22,547 | | | 22,354 | | | |
| Altice France S.A. | | Integrated Telecommunication Services | | | | | | | |
Fixed Rate Bond, 5.50% cash due 10/15/2029 | | | 4,050 | | | 3,533 | | | 3,095 | | | (11) |
| | | | | 3,533 | | | 3,095 | | | |
| Alto Pharmacy Holdings, Inc. | | Health Care Technology | | | | | | | |
First Lien Term Loan, SOFR+8.00% cash 3.50% PIK due 10/14/2027 | 12.68 | % | | 8,640 | | | 7,904 | | | 7,930 | | | (6)(15) |
166,414 Common Stock Warrants (exercise price $15.46) expiration date 10/14/2032 | | | | | 642 | | | 629 | | | (15) |
| | | | | 8,546 | | | 8,559 | | | |
| Alvogen Pharma US, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 12.23 | % | | 12,968 | | | 12,711 | | | 12,903 | | | (6)(15) |
| | | | | 12,711 | | | 12,903 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| | | | | | | | | |
| Alvotech Holdings S.A. | | Biotechnology | | | | | | | (13) |
Tranche A Fixed Rate Bond 8.50% cash 3.50% PIK due 11/16/2026 | | | $ | 26,179 | | | $ | 25,798 | | | $ | 25,684 | | | (11)(15) |
Tranche B Fixed Rate Bond 8.50% cash 3.50% PIK due 11/16/2026 | | | 25,612 | | | 25,264 | | | 25,128 | | | (11)(15) |
587,930 Common Shares in Alvotech SA | | | | | 5,308 | | | 5,879 | | | (11) |
124,780 Seller Earn Out Shares in Alvotech SA | | | | | 485 | | | 418 | | | (11)(15) |
293,082 $10.00 Put Options on Common Shares in Alvotech SA | | | | | — | | | 580 | | | (11)(15) |
408,508 Common Stock Warrants (exercise price $0.01) expiration 12/31/2027 | | | | | — | | | 4,081 | | | (11)(15) |
| | | | | 56,855 | | | 61,770 | | | |
| American Auto Auction Group, LLC | | Consumer Finance | | | | | | | |
Second Lien Term Loan, SOFR+8.75% cash due 1/2/2029 | 13.33 | % | | 14,760 | | | 14,503 | | | 11,439 | | | (6)(15) |
| | | | | 14,503 | | | 11,439 | | | |
| American Tire Distributors, Inc. | | Distributors | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 10.61 | % | | 9,870 | | | 9,747 | | | 9,081 | | | (6) |
| | | | | 9,747 | | | 9,081 | | | |
| AMMC CLO 27 | | Multi-Sector Holdings | | | | | | | |
Class E Notes, SOFR+8.89% cash due 1/20/2036 | 13.49 | % | | 2,275 | | | 2,037 | | | 2,087 | | | (6)(11) |
| | | | | 2,037 | | | 2,087 | | | |
| Amplify Finco Pty Ltd. | | Movies & Entertainment | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 8.98 | % | | 15,181 | | | 14,014 | | | 14,637 | | | (6)(11)(15) |
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/2027 | 12.73 | % | | 12,500 | | | 12,188 | | | 11,833 | | | (6)(11)(15) |
| | | | | 26,202 | | | 26,470 | | | |
| Anastasia Parent, LLC | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 8.48 | % | | 2,729 | | | 2,254 | | | 2,043 | | | (6) |
| | | | | 2,254 | | | 2,043 | | | |
| Ankura Consulting Group LLC | | Research & Consulting Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.00% cash due 3/19/2029 | 12.36 | % | | 2,996 | | | 2,951 | | | 2,558 | | | (6)(15) |
| | | | | 2,951 | | | 2,558 | | | |
| Apptio, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/10/2025 | 9.94 | % | | 34,458 | | | 33,818 | | | 33,769 | | | (6)(15) |
First Lien Revolver, LIBOR+6.00% cash due 1/10/2025 | 9.94 | % | | 1,338 | | | 1,312 | | | 1,294 | | | (6)(15)(19) |
| | | | | 35,130 | | | 35,063 | | | |
| APX Group Inc. | | Electrical Components & Equipment | | | | | | | |
Fixed Rate Bond, 5.75% cash due 7/15/2029 | | | 2,075 | | | 1,742 | | | 1,721 | | | (11) |
| | | | | 1,742 | | | 1,721 | | | |
| Ardonagh Midco 3 PLC | | Insurance Brokers | | | | | | | |
First Lien Term Loan, EURIBOR+7.00% cash due 7/14/2026 | 8.00 | % | | € | 1,964 | | | 2,176 | | | 2,103 | | | (6)(11)(15) |
First Lien Term Loan, SONIA+7.00% cash due 7/14/2026 | 10.43 | % | | £ | 18,636 | | | 23,058 | | | 22,485 | | | (6)(11)(15) |
First Lien Term Loan, LIBOR+5.75% cash due 7/14/2026 | 8.81 | % | | $ | 10,519 | | | 10,368 | | | 10,561 | | | (6)(11)(15) |
First Lien Term Loan, SONIA+5.75% cash due 7/14/2026 | 7.48 | % | | £ | 3,649 | | | 3,666 | | | 3,908 | | | (6)(11)(15) |
| | | | | 39,268 | | | 39,057 | | | |
| Associated Asphalt Partners, LLC | | Construction Materials | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 4/5/2024 | 9.63 | % | | $ | 2,493 | | | 2,353 | | | 1,928 | | | (6) |
| | | | | 2,353 | | | 1,928 | | | |
| Astra Acquisition Corp. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 10/25/2028 | 9.63 | % | | 5,640 | | | 5,489 | | | 5,006 | | | (6) |
| | | | | 5,489 | | | 5,006 | | | |
| athenahealth Group Inc. | | Health Care Technology | | | | | | | |
18,635 Shares of Series A Preferred Stock in Minerva Holdco, Inc., 10.75% | | | | | 18,264 | | | 15,606 | | | (15) |
| | | | | 18,264 | | | 15,606 | | | |
| Athenex, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, 11.00% cash due 6/19/2026 | | | 12,556 | | | 12,191 | | | 12,036 | | | (11)(15) |
| First Lien Revenue Interest Financing Term Loan due 5/31/2031 | | | 8,649 | | | 8,604 | | | 8,649 | | | (11)(15) |
328,149 Common Stock Warrants (exercise price $0.4955) expiration date 6/19/2027 | | | | | 973 | | | 7 | | | (11)(15) |
| | | | | 21,768 | | | 20,692 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Aurora Lux Finco S.À.R.L. | | Airport Services | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 10.32 | % | | $ | 22,368 | | | $ | 22,050 | | | $ | 21,274 | | | (6)(11)(15) |
| | | | | 22,050 | | | 21,274 | | | |
| Avalara, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+7.25% cash due 10/19/2028 | 11.83 | % | | 41,467 | | | 40,466 | | | 40,430 | | | (6)(15) |
First Lien Revolver, SOFR+7.25% cash due 10/19/2028 | | | — | | | (100) | | | (104) | | | (6)(15)(19) |
| | | | | 40,366 | | | 40,326 | | | |
| The Avery | | Real Estate Operating Companies | | | | | | | |
First Lien Term Loan in T8 Urban Condo Owner, LLC, LIBOR+7.30% cash due 2/17/2023 | 11.69 | % | | 15,301 | | | 15,279 | | | 15,391 | | | (6)(15) |
Subordinated Debt in T8 Senior Mezz LLC, LIBOR+12.50% cash due 2/17/2023 | 17.24 | % | | 3,706 | | | 3,701 | | | 3,733 | | | (6)(15) |
| | | | | 18,980 | | | 19,124 | | | |
| BAART Programs, Inc. | | Health Care Services | | | | | | | |
First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/2027 | 9.73 | % | | 2,541 | | | 2,497 | | | 2,420 | | | (6)(15)(19) |
Second Lien Term Loan, LIBOR+8.50% cash due 6/11/2028 | 13.23 | % | | 7,166 | | | 7,059 | | | 6,944 | | | (6)(15) |
Second Lien Delayed Draw Term Loan, LIBOR+8.50% cash due 6/11/2028 | 13.23 | % | | 5,197 | | | 5,042 | | | 4,854 | | | (6)(15)(19) |
| | | | | 14,598 | | | 14,218 | | | |
| Berner Food & Beverage, LLC | | Soft Drinks | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 7/30/2027 | 9.91 | % | | 32,995 | | | 32,555 | | | 32,533 | | | (6)(15) |
First Lien Revolver, PRIME+4.50% cash due 7/30/2026 | 12.00 | % | | 897 | | | 859 | | | 857 | | | (6)(15)(19) |
| | | | | 33,414 | | | 33,390 | | | |
| BioXcel Therapeutics, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, 8.00% cash 2.25% PIK due 4/19/2027 | | | 5,383 | | | 5,184 | | | 5,028 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 8.00% cash 2.25% PIK due 4/19/2027 | | | — | | | — | | | — | | | (11)(15)(19) |
| First Lien Revenue Interest Financing Term Loan due 9/30/2032 | | | 2,432 | | | 2,432 | | | 2,432 | | | (11)(15) |
| First Lien Revenue Interest Financing Delayed Draw Term Loan due 9/30/2032 | | | — | | | — | | | — | | | (11)(15)(19) |
21,177 Common Stock Warrants (exercise price $20.04) expiration date 4/19/2029 | | | | | 125 | | | 275 | | | (11)(15) |
| | | | | 7,741 | | | 7,735 | | | |
| Blackhawk Network Holdings, Inc. | | Data Processing & Outsourced Services | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026 | 10.94 | % | | 30,625 | | | 30,300 | | | 26,391 | | | (6) |
| | | | | 30,300 | | | 26,391 | | | |
| Blumenthal Temecula, LLC | | Automotive Retail | | | | | | | |
First Lien Term Loan, 9.00% cash due 9/24/2023 | | | 3,979 | | | 3,980 | | | 3,960 | | | (15) |
1,293,324 Preferred Units in Unstoppable Automotive AMV, LLC | | | | | 1,293 | | | 1,267 | | | (15) |
298,460 Preferred Units in Unstoppable Automotive VMV, LLC | | | | | 298 | | | 292 | | | (15) |
298,460 Common Units in Unstoppable Automotive AMV, LLC | | | | | 298 | | | 379 | | | (15) |
| | | | | 5,869 | | | 5,898 | | | |
| Cadence Aerospace, LLC | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash 2.00% PIK due 11/14/2023 | 10.92 | % | | 14,332 | | | 13,700 | | | 13,178 | | | (6)(15) |
| | | | | 13,700 | | | 13,178 | | | |
| CircusTrix Holdings, LLC | | Leisure Facilities | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 7/16/2023 | 9.57 | % | | 10,668 | | | 10,201 | | | 10,465 | | | (6)(15) |
| | | | | 10,201 | | | 10,465 | | | |
| Clear Channel Outdoor Holdings Inc. | | Advertising | | | | | | | |
Fixed Rate Bond, 7.50% cash due 6/1/2029 | | | 4,311 | | | 4,311 | | | 3,174 | | | (11) |
Fixed Rate Bond, 7.75% cash due 4/15/2028 | | | 676 | | | 649 | | | 494 | | | (11) |
| | | | | 4,960 | | | 3,668 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Condor Merger Sub Inc. | | Systems Software | | | | | | | |
Fixed Rate Bond, 7.375% cash due 2/15/2030 | | | $ | 8,420 | | | $ | 8,248 | | | $ | 6,785 | | | |
| | | | | 8,248 | | | 6,785 | | | |
| Continental Intermodal Group LP | | Oil & Gas Storage & Transportation | | | | | | | |
First Lien Term Loan, LIBOR+8.50% cash due 1/28/2025 | 12.88 | % | | 19,992 | | | 19,286 | | | 17,893 | | | (6)(15) |
| Common Stock Warrants expiration date 7/28/2025 | | | | | 648 | | | 220 | | | (15) |
| | | | | 19,934 | | | 18,113 | | | |
| Convergeone Holdings, Inc. | | IT Consulting & Other Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026 | 9.38 | % | | 11,882 | | | 11,684 | | | 6,963 | | | (6) |
| | | | | 11,684 | | | 6,963 | | | |
| Conviva Inc. | | Application Software | | | | | | | |
517,851 Shares of Series D Preferred Stock | | | | | 605 | | | 894 | | | (15) |
| | | | | 605 | | | 894 | | | |
| CorEvitas, LLC | | Health Care Technology | | | | | | | |
First Lien Term Loan, SOFR+6.125% cash due 12/13/2025 | 10.55 | % | | 13,677 | | | 13,527 | | | 13,344 | | | (6)(15) |
First Lien Revolver, PRIME+4.75% cash due 12/13/2025 | 12.25 | % | | 305 | | | 289 | | | 261 | | | (6)(15)(19) |
1,099 Class A2 Common Units in CorEvitas Holdings, L.P. | | | | | 690 | | | 2,340 | | | (15) |
| | | | | 14,506 | | | 15,945 | | | |
| Covetrus, Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, SOFR+5.00% cash due 9/20/2029 | 9.58 | % | | 10,336 | | | 9,733 | | | 9,711 | | | (6) |
| | | | | 9,733 | | | 9,711 | | | |
| Coyote Buyer, LLC | | Specialty Chemicals | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 2/6/2026 | 10.41 | % | | 18,153 | | | 17,766 | | | 17,798 | | | (6)(15) |
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025 | | | — | | | (13) | | | (26) | | | (6)(15)(19) |
| | | | | 17,753 | | | 17,772 | | | |
| Cuppa Bidco BV | | Soft Drinks | | | | | | | |
First Lien Term Loan, EURIBOR+4.75% cash due 7/30/2029 | 7.50 | % | | € | 12,340 | | | 10,521 | | | 10,997 | | | (6)(11) |
| | | | | 10,521 | | | 10,997 | | | |
| Delta Leasing SPV II LLC | | Specialized Finance | | | | | | | |
Subordinated Delayed Draw Term Loan, 10.00% cash due 8/31/2029 | | | $ | 8,365 | | | 8,365 | | | 8,365 | | | (11)(15)(19) |
419 Series C Preferred Units in Delta Financial Holdings LLC | | | | | 419 | | | 419 | | | (11)(15) |
2.09 Common Units in Delta Financial Holdings LLC | | | | | 2 | | | 2 | | | (11)(15) |
31.37 Common Warrants (exercise price $1.00) | | | | | — | | | — | | | (11)(15) |
| | | | | 8,786 | | | 8,786 | | | |
| Delta Topco, Inc. | | Systems Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 12/1/2028 | 11.65 | % | | 6,680 | | | 6,647 | | | 5,319 | | | (6) |
| | | | | 6,647 | | | 5,319 | | | |
| Dialyze Holdings, LLC | | Health Care Equipment | | | | | | | |
First Lien Term Loan, LIBOR+9.00% cash due 8/4/2026 | 13.73 | % | | 20,965 | | | 19,913 | | | 20,912 | | | (6)(15) |
Subordinated Term Loan, 8.00% PIK due 9/30/2027 | | | 520 | | | 520 | | | 494 | | | (15) |
5,403,823 Class A Warrants (exercise price $1.00) expiration date 8/4/2028 | | | | | 1,405 | | | 1,297 | | | (15) |
| | | | | 21,838 | | | 22,703 | | | |
| Digital.AI Software Holdings, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 2/10/2027 | 11.09 | % | | 9,877 | | | 9,593 | | | 9,768 | | | (6)(15) |
First Lien Revolver, LIBOR+7.00% cash due 2/10/2027 | 11.59 | % | | 251 | | | 229 | | | 239 | | | (6)(15)(19) |
| | | | | 9,822 | | | 10,007 | | | |
| DirecTV Financing, LLC | | Cable & Satellite | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 8/2/2027 | 9.38 | % | | 8,166 | | | 8,012 | | | 7,968 | | | (6) |
| | | | | 8,012 | | | 7,968 | | | |
| Dryden 66 Euro CLO 2018 | | Multi-Sector Holdings | | | | | | | |
Class DR Notes, EURIBOR+3.35% cash due 1/18/2032 | 4.75 | % | | € | 1,500 | | | 1,335 | | | 1,389 | | | (6)(11) |
| | | | | 1,335 | | | 1,389 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| DTI Holdco, Inc. | | Research & Consulting Services | | | | | | | |
First Lien Term Loan, SOFR+4.75% cash due 4/26/2029 | 8.84 | % | | $ | 4,988 | | | $ | 4,897 | | | $ | 4,607 | | | (6) |
| | | | | 4,897 | | | 4,607 | | | |
| Eagleview Technology Corporation | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026 | 12.23 | % | | 8,974 | | | 8,884 | | | 7,897 | | | (6)(15) |
| | | | | 8,884 | | | 7,897 | | | |
| EOS Fitness Opco Holdings, LLC | | Leisure Facilities | | | | | | | |
487.5 Class A Preferred Units, 12% | | | | | 488 | | | 1,067 | | | (15) |
12,500 Class B Common Units | | | | | — | | | — | | | (15) |
| | | | | 488 | | | 1,067 | | | |
| Establishment Labs Holdings Inc. | | Health Care Technology | | | | | | | |
First Lien Term Loan, 3.00% cash 6.00% PIK due 4/21/2027 | | | 10,576 | | | 10,441 | | | 10,100 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 3.00% cash 6.00% PIK due 4/21/2027 | | | 1,694 | | | 1,667 | | | 1,694 | | | (11)(15)(19) |
| | | | | 12,108 | | | 11,794 | | | |
| Fairbridge Strategic Capital Funding LLC | | Real Estate Operating Companies | | | | | | | |
First Lien Delayed Draw Term Loan, 9.00% cash due 12/24/2028 | | | 31,000 | | | 31,000 | | | 31,000 | | | (15)(19) |
2,500 Warrant Units (exercise price $0.01) expiration date 11/24/2031 | | | | | — | | | 3 | | | (11)(15) |
| | | | | 31,000 | | | 31,003 | | | |
| FINThrive Software Intermediate Holdings, Inc. | | Health Care Technology | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 12/17/2029 | 11.13 | % | | 25,061 | | | 24,685 | | | 19,273 | | | (6) |
| | | | | 24,685 | | | 19,273 | | | |
| Fortress Biotech, Inc. | | Biotechnology | | | | | | | |
First Lien Term Loan, 11.00% cash due 8/27/2025 | | | 9,466 | | | 9,106 | | | 8,922 | | | (11)(15) |
331,200 Common Stock Warrants (exercise price $3.20) expiration date 8/27/2030 | | | | | 405 | | | 26 | | | (11)(15) |
| | | | | 9,511 | | | 8,948 | | | |
| Frontier Communications Holdings, LLC | | Integrated Telecommunication Services | | | | | | | |
Fixed Rate Bond, 6.00% cash due 1/15/2030 | | | 4,881 | | | 4,432 | | | 3,841 | | | (11) |
| | | | | 4,432 | | | 3,841 | | | |
| GKD Index Partners, LLC | | Specialized Finance | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 6/29/2023 | 11.73 | % | | 24,819 | | | 24,682 | | | 24,641 | | | (6)(15) |
First Lien Revolver, LIBOR+7.00% cash due 6/29/2023 | 11.75 | % | | 1,280 | | | 1,272 | | | 1,268 | | | (6)(15)(19) |
| | | | | 25,954 | | | 25,909 | | | |
| GoldenTree Loan Management EUR CLO 2 | | Multi-Sector Holdings | | | | | | | |
Class D Notes, EURIBOR+2.85% cash due 1/20/2032 | 4.31 | % | | € | 1,000 | | | 865 | | | 899 | | | (6)(11) |
| | | | | 865 | | | 899 | | | |
| Grove Hotel Parcel Owner, LLC | | Hotels, Resorts & Cruise Lines | | | | | | | |
First Lien Term Loan, SOFR+8.00% cash due 6/21/2027 | 12.33 | % | | $ | 14,275 | | | 14,020 | | | 13,990 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+8.00% cash due 6/21/2027 | | | — | | | (51) | | | (57) | | | (6)(15)(19) |
First Lien Revolver, SOFR+8.00% cash due 6/21/2027 | | | — | | | (26) | | | (29) | | | (6)(15)(19) |
| | | | | 13,943 | | | 13,904 | | | |
| Harbor Purchaser Inc. | | Education Services | | | | | | | |
First Lien Term Loan, SOFR+5.25% cash due 4/9/2029 | 9.67 | % | | 9,369 | | | 9,070 | | | 8,938 | | | (6) |
| | | | | 9,070 | | | 8,938 | | | |
| Hayfin Emerald CLO XI | | Multi-Sector Holdings | | | | | | | |
Class E Notes, EURIBOR+8.12% cash due 1/25/2036 | 10.11 | % | | € | 2,250 | | | 2,041 | | | 2,079 | | | (6)(11) |
| | | | | 2,041 | | | 2,079 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Horizon Aircraft Finance I | | Specialized Finance | | | | | | | |
Class A Notes, 4.458% cash due 12/15/2038 | | | $ | 7,112 | | | $ | 5,697 | | | $ | 5,838 | | | (6)(11) |
| | | | | 5,697 | | | 5,838 | | | |
| iCIMs, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+3.375% cash 3.875% PIK due 8/18/2028 | 7.14 | % | | 19,203 | | | 18,888 | | | 18,420 | | | (6)(15) |
First Lien Term Loan, SOFR+7.25% cash due 8/18/2028 | 11.52 | % | | 2,944 | | | 2,895 | | | 2,885 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+6.75% cash due 8/18/2028 | | | — | | | — | | | — | | | (6)(15)(19) |
First Lien Revolver, SOFR+6.75% cash due 8/18/2028 | | | — | | | (30) | | | (75) | | | (6)(15)(19) |
| | | | | 21,753 | | | 21,230 | | | |
| Immucor, Inc. | | Health Care Supplies | | | | | | | |
First Lien Term Loan, LIBOR+5.75% cash due 7/2/2025 | 10.48 | % | | 8,547 | | | 8,395 | | | 8,635 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.00% cash 3.50% PIK due 10/2/2025 | 12.73 | % | | 22,819 | | | 22,401 | | | 23,275 | | | (6)(15) |
| | | | | 30,796 | | | 31,910 | | | |
| Impel Neuropharma, Inc. | | Health Care Technology | | | | | | | |
| First Lien Revenue Interest Financing Term Loan due 2/15/2031 | | | 13,482 | | | 13,482 | | | 13,428 | | | (15) |
First Lien Term Loan, SOFR+8.75% cash due 3/17/2027 | 13.20 | % | | 12,161 | | | 11,956 | | | 11,876 | | | (6)(15) |
| | | | | 25,438 | | | 25,304 | | | |
| Innocoll Pharmaceuticals Limited | | Health Care Technology | | | | | | | |
First Lien Term Loan, 11.00% cash due 1/26/2027 | | | 6,817 | | | 6,569 | | | 6,336 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 11.00% cash due 1/26/2027 | | | — | | | — | | | — | | | (11)(15)(19) |
56,999 Tranche A Warrant Shares (exercise price $4.23) expiration date 1/26/2029 | | | | | 135 | | | 662 | | | (11)(15) |
| | | | | 6,704 | | | 6,998 | | | |
| Integral Development Corporation | | Other Diversified Financial Services | | | | | | | |
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024 | | | | | 113 | | | — | | | (15) |
| | | | | 113 | | | — | | | |
| Inventus Power, Inc. | | Electrical Components & Equipment | | | | | | | |
First Lien Term Loan, SOFR+5.00% cash due 3/29/2024 | 9.84 | % | | 18,612 | | | 18,536 | | | 18,054 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2024 | 13.23 | % | | 13,674 | | | 13,535 | | | 13,195 | | | (6)(15) |
| | | | | 32,071 | | | 31,249 | | | |
| INW Manufacturing, LLC | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+5.75% cash due 3/25/2027 | 10.48 | % | | 35,156 | | | 34,394 | | | 30,059 | | | (6)(15) |
| | | | | 34,394 | | | 30,059 | | | |
| IPC Corp. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 10/1/2026 | 9.44 | % | | 34,357 | | | 33,660 | | | 32,553 | | | (6)(15) |
| | | | | 33,660 | | | 32,553 | | | |
| Ivanti Software, Inc. | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 12/1/2028 | 12.01 | % | | 10,247 | | | 10,196 | | | 5,994 | | | (6) |
| | | | | 10,196 | | | 5,994 | | | |
| Jazz Acquisition, Inc. | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+7.50% cash due 1/29/2027 | 11.88 | % | | 35,912 | | | 34,918 | | | 36,176 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.00% cash due 6/18/2027 | 12.38 | % | | 528 | | | 480 | | | 483 | | | (6) |
| | | | | 35,398 | | | 36,659 | | | |
| Kings Buyer, LLC | | Environmental & Facilities Services | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 10/29/2027 | 11.23 | % | | 13,589 | | | 13,453 | | | 13,153 | | | (6)(15) |
First Lien Revolver, LIBOR+6.50% cash due 10/29/2027 | 11.75 | % | | 659 | | | 640 | | | 599 | | | (6)(15)(19) |
| | | | | 14,093 | | | 13,752 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Latam Airlines Group S.A. | | Airlines | | | | | | | |
First Lien Term Loan, SOFR+9.50% cash due 11/3/2027 | 13.99 | % | | $ | 26,205 | | | $ | 24,034 | | | $ | 25,864 | | | (6)(11) |
| | | | | 24,034 | | | 25,864 | | | |
| Lift Brands Holdings, Inc. | | Leisure Facilities | | | | | | | |
2,000,000 Class A Common Units in Snap Investments, LLC | | | | | 1,399 | | | — | | | (15) |
| | | | | 1,399 | | | — | | | |
| Lightbox Intermediate, L.P. | | Real Estate Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026 | 9.73 | % | | 36,913 | | | 36,233 | | | 35,621 | | | (6)(15) |
| | | | | 36,233 | | | 35,621 | | | |
| Liquid Environmental Solutions Corporation | | Environmental & Facilities Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.50% cash due 11/30/2026 | 12.88 | % | | 4,357 | | | 4,289 | | | 4,215 | | | (6)(15) |
Second Lien Delayed Draw Term Loan, LIBOR+8.50% cash due 11/30/2026 | 12.94 | % | | 2,370 | | | 2,323 | | | 2,257 | | | (6)(15)(19) |
450.75 Class A2 Units in LES Group Holdings, L.P. | | | | | 451 | | | 451 | | | (15) |
| | | | | 7,063 | | | 6,923 | | | |
| LSL Holdco, LLC | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/31/2028 | 10.38 | % | | 21,315 | | | 20,839 | | | 20,089 | | | (6)(15) |
First Lien Revolver, LIBOR+6.00% cash due 1/31/2028 | 10.38 | % | | 2,137 | | | 2,101 | | | 2,014 | | | (6)(15) |
| | | | | 22,940 | | | 22,103 | | | |
| LTI Holdings, Inc. | | Electronic Components | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026 | 11.13 | % | | 2,140 | | | 2,095 | | | 1,712 | | | (6) |
| | | | | 2,095 | | | 1,712 | | | |
| Marinus Pharmaceuticals, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, 11.50% cash due 5/11/2026 | | | 17,203 | | | 16,972 | | | 16,573 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 11.50% cash due 5/11/2026 | | | — | | | — | | | — | | | (11)(15)(19) |
| | | | | 16,972 | | | 16,573 | | | |
| Mesoblast, Inc. | | Biotechnology | | | | | | | |
First Lien Term Loan, 8.00% cash 1.75% PIK due 11/19/2026 | | | 7,247 | | | 6,717 | | | 6,474 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 8.00% cash 1.75% PIK due 11/19/2026 | | | — | | | 1 | | | — | | | (11)(15)(19) |
209,588 Warrant Shares (exercise price $7.26) expiration date 11/19/2028 | | | | | 480 | | | 222 | | | (11)(15) |
53,887 Warrant Shares (exercise price $3.70) expiration 11/19/2028 | | | | | — | | | 81 | | | (11)(15) |
| | | | | 7,198 | | | 6,777 | | | |
| MHE Intermediate Holdings, LLC | | Diversified Support Services | | | | | | | |
First Lien Term Loan, SOFR+6.00% cash due 7/21/2027 | 9.50 | % | | 18,344 | | | 18,057 | | | 17,678 | | | (6)(15) |
First Lien Revolver, SOFR+6.00% cash due 7/21/2027 | 10.94 | % | | 200 | | | 178 | | | 148 | | | (6)(15)(19) |
| | | | | 18,235 | | | 17,826 | | | |
| Mindbody, Inc. | | Internet Services & Infrastructure | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 11.72 | % | | 45,487 | | | 44,616 | | | 44,486 | | | (6)(15) |
First Lien Revolver, LIBOR+8.00% cash due 2/14/2025 | | | — | | | (48) | | | (88) | | | (6)(15)(19) |
| | | | | 44,568 | | | 44,398 | | | |
| Mosaic Companies, LLC | | Home Improvement Retail | | | | | | | |
First Lien Term Loan, LIBOR+6.75% cash due 7/2/2026 | 10.93 | % | | 45,907 | | | 45,266 | | | 45,127 | | | (6)(15) |
| | | | | 45,266 | | | 45,127 | | | |
| MRI Software LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 10.23 | % | | 25,768 | | | 25,392 | | | 24,833 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026 | | | — | | | (11) | | | (95) | | | (6)(15)(19) |
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | | | — | | | (13) | | | (65) | | | (6)(15)(19) |
| | | | | 25,368 | | | 24,673 | | | |
| Navisite, LLC | | Data Processing & Outsourced Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.50% cash due 12/30/2026 | 13.23 | % | | 22,560 | | | 22,260 | | | 21,545 | | | (6)(15) |
| | | | | 22,260 | | | 21,545 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| NeuAG, LLC | | Fertilizers & Agricultural Chemicals | | | | | | | |
First Lien Term Loan, LIBOR+10.50% cash due 9/11/2024 | 15.23 | % | | $ | 50,276 | | | $ | 49,271 | | | $ | 52,292 | | | (6)(15) |
| | | | | 49,271 | | | 52,292 | | | |
| NFP Corp. | | Other Diversified Financial Services | | | | | | | |
Fixed Rate Bond 6.875% cash due 8/15/2028 | | | 10,191 | | | 9,787 | | | 8,423 | | | |
| | | | | 9,787 | | | 8,423 | | | |
| NN, Inc. | | Industrial Machinery | | | | | | | |
First Lien Term Loan, LIBOR+6.88% cash due 9/19/2026 | 11.26 | % | | 58,564 | | | 57,577 | | | 55,958 | | | (6)(11)(15) |
| | | | | 57,577 | | | 55,958 | | | |
| OCP EURO CLO 2022-6 | | Multi-Sector Holdings | | | | | | | |
Class D Notes, EURIBOR+6.06% cash due 1/20/2033 | 8.05 | % | | € | 2,500 | | | 2,503 | | | 2,576 | | | (6)(11) |
Class E Notes, EURIBOR+6.87% cash due 1/20/2033 | 8.86 | % | | 3,000 | | | 2,677 | | | 2,728 | | | (6)(11) |
| | | | | 5,180 | | | 5,304 | | | |
| OEConnection LLC | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+4.00% cash due 9/25/2026 | 8.42 | % | | $ | 3,315 | | | 3,165 | | | 3,167 | | | (6) |
Second Lien Term Loan, SOFR+7.00% cash due 9/25/2027 | 11.42 | % | | 7,519 | | | 7,396 | | | 7,221 | | | (6)(15) |
| | | | | 10,561 | | | 10,388 | | | |
| OTG Management, LLC | | Airport Services | | | | | | | |
First Lien Term Loan, LIBOR+2.00% cash 8.00% PIK due 9/1/2025 | 6.76 | % | | 21,993 | | | 21,728 | | | 21,993 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+2.00% cash 8.00% PIK due 9/1/2025 | | | — | | | (30) | | | — | | | (6)(15)(19) |
| | | | | 21,698 | | | 21,993 | | | |
| P & L Development, LLC | | Pharmaceuticals | | | | | | | |
Fixed Rate Bond, 7.75% cash due 11/15/2025 | | | 7,776 | | | 7,817 | | | 6,318 | | | |
| | | | | 7,817 | | | 6,318 | | | |
| Park Place Technologies, LLC | | Internet Services & Infrastructure | | | | | | | |
First Lien Term Loan, SOFR+5.00% cash due 11/10/2027 | 9.42 | % | | 4,838 | | | 4,703 | | | 4,575 | | | (6) |
| | | | | 4,703 | | | 4,575 | | | |
| Performance Health Holdings, Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 7/12/2027 | 10.73 | % | | 17,976 | | | 17,705 | | | 17,537 | | | (6)(15) |
| | | | | 17,705 | | | 17,537 | | | |
| PFNY Holdings, LLC | | Leisure Facilities | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 12/31/2026 | 10.74 | % | | 26,088 | | | 25,674 | | | 25,632 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 12/31/2026 | 10.74 | % | | 2,228 | | | 2,188 | | | 2,184 | | | (6)(15)(19) |
First Lien Revolver, LIBOR+7.00% cash due 12/31/2026 | 11.76 | % | | 1,252 | | | 1,232 | | | 1,230 | | | (6)(15) |
| | | | | 29,094 | | | 29,046 | | | |
| Planview Parent, Inc. | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 12/18/2028 | 11.98 | % | | 28,627 | | | 28,198 | | | 25,693 | | | (6)(15) |
| | | | | 28,198 | | | 25,693 | | | |
| Pluralsight, LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+8.00% cash due 4/6/2027 | 11.83 | % | | 48,689 | | | 47,993 | | | 47,471 | | | (6)(15) |
First Lien Revolver, LIBOR+8.00% cash due 4/6/2027 | 12.36 | % | | 1,766 | | | 1,716 | | | 1,678 | | | (6)(15)(19) |
| | | | | 49,709 | | | 49,149 | | | |
| PRGX Global, Inc. | | Data Processing & Outsourced Services | | | | | | | |
First Lien Term Loan, LIBOR+6.75% cash due 3/3/2026 | 11.50 | % | | 31,186 | | | 30,466 | | | 30,578 | | | (6)(15) |
First Lien Revolver, LIBOR+6.75% cash due 3/3/2026 | | | — | | | (31) | | | (49) | | | (6)(15)(19) |
80,515 Class B Common Units | | | | | 79 | | | 121 | | | (15) |
| | | | | 30,514 | | | 30,650 | | | |
| Profrac Holdings II, LLC | | Industrial Machinery | | | | | | | |
First Lien Term Loan, SOFR+7.25% cash due 3/4/2025 | 11.10 | % | | 22,984 | | | 22,496 | | | 22,432 | | | (6)(15) |
| | | | | 22,496 | | | 22,432 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Project Boost Purchaser, LLC | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+8.00% cash due 5/31/2027 | 12.38 | % | | $ | 5,250 | | | $ | 5,173 | | | $ | 4,955 | | | (6)(15) |
| | | | | 5,173 | | | 4,955 | | | |
| Quantum Bidco Limited | | Food Distributors | | | | | | | |
First Lien Term Loan, SONIA+6.00% cash due 1/29/2028 | 9.63 | % | | £ | 3,501 | | | $ | 4,655 | | | $ | 3,599 | | | (6)(11)(15) |
| | | | | 4,655 | | | 3,599 | | | |
| QuorumLabs, Inc. | | Application Software | | | | | | | |
64,887,669 Junior-2 Preferred Stock | | | | | 375 | | | — | | | (15) |
| | | | | 375 | | | — | | | |
| Radiology Partners Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 7/9/2025 | 8.64 | % | | $ | 3,400 | | | 3,221 | | | 2,870 | | | (6) |
Fixed Rate Bond, 9.25% cash due 2/1/2028 | | | 4,755 | | | 4,721 | | | 2,677 | | | |
| | | | | 7,942 | | | 5,547 | | | |
| Relativity ODA LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.50% PIK due 5/12/2027 | | | 25,405 | | | 25,002 | | | 24,846 | | | (6)(15) |
First Lien Revolver, LIBOR+6.50% cash due 5/12/2027 | | | — | | | (40) | | | (47) | | | (6)(15)(19) |
| | | | | 24,962 | | | 24,799 | | | |
| Renaissance Holding Corp. | | Diversified Banks | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 5/29/2026 | 11.38 | % | | 3,542 | | | 3,515 | | | 3,315 | | | (6) |
| | | | | 3,515 | | | 3,315 | | | |
| RumbleOn, Inc. | | Automotive Retail | | | | | | | |
First Lien Term Loan, LIBOR+8.25% cash due 8/31/2026 | 12.98 | % | | 36,092 | | | 34,407 | | | 34,540 | | | (6)(11)(15) |
First Lien Delayed Draw Term Loan, LIBOR+8.25% cash due 8/31/2026 | 12.98 | % | | 10,920 | | | 10,185 | | | 10,243 | | | (6)(11)(15)(19) |
164,660 Class B Common Stock Warrants (exercise price $31.50) expiration date 7/25/2023 | | | | | 1,202 | | | — | | | (11)(15) |
| | | | | 45,794 | | | 44,783 | | | |
| Salus Workers' Compensation, LLC | | Other Diversified Financial Services | | | | | | | |
First Lien Term Loan, SOFR+10.00% cash due 10/7/2026 | 14.32 | % | | 27,848 | | | 26,787 | | | 26,804 | | | (6)(15) |
First Lien Revolver, SOFR+10.00% cash due 10/7/2026 | 14.32 | % | | 931 | | | 812 | | | 814 | | | (6)(15)(19) |
991,019 Common Stock Warrants (exercise price $4.83) expiration date 10/7/2032 | | | | | 327 | | | 307 | | | (15) |
| | | | | 27,926 | | | 27,925 | | | |
| SCP Eye Care Services, LLC | | Health Care Services | | | | | | | |
Second Lien Term Loan, SOFR+8.75% cash due 10/7/2030 | 12.52 | % | | 8,010 | | | 7,777 | | | 7,778 | | | (6)(15) |
Second Lien Delayed Draw Term Loan, SOFR+8.75% cash due 10/7/2030 | | | — | | | (35) | | | (68) | | | (6)(15)(19) |
1,037 Units in Eyesouth Co-Investor FT Aggregator LLC | | | | | 1,037 | | | 1,113 | | | (15) |
| | | | | 8,779 | | | 8,823 | | | |
| scPharmaceuticals Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, SOFR+8.75% cash due 10/13/2027 | 11.75 | % | | 5,212 | | | 4,945 | | | 4,957 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+8.75% cash due 10/13/2027 | | | — | | | — | | | — | | | (6)(15)(19) |
53,700 Common Stock Warrants (exercise price $5.40) expiration date 10/12/2029 | | | | | 175 | | | 262 | | | (15) |
| | | | | 5,120 | | | 5,219 | | | |
| ShareThis, Inc. | | Application Software | | | | | | | |
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024 | | | | | 367 | | | — | | | (15) |
| | | | | 367 | | | — | | | |
| SiO2 Medical Products, Inc. | | Metal & Glass Containers | | | | | | | |
First Lien Term Loan, 5.50% cash 8.50% PIK due 12/21/2026 | | | 47,112 | | | 46,447 | | | 44,520 | | | (15) |
415.34 Common Stock Warrants (exercise price $4,920.75) expiration date 7/31/2028 | | | | | 681 | | | 243 | | | (15) |
| | | | | 47,128 | | | 44,763 | | | |
| SM Wellness Holdings, Inc. | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 4/17/2028 | 9.42 | % | | 3,395 | | | 2,784 | | | 2,767 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.00% cash due 4/16/2029 | 12.67 | % | | 9,109 | | | 8,972 | | | 6,604 | | | (6)(15) |
| | | | | 11,756 | | | 9,371 | | | |
| | | | | | | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| SonicWall US Holdings Inc. | | Technology Distributors | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 5/18/2026 | 12.20 | % | | $ | 3,195 | | | $ | 3,163 | | | $ | 2,971 | | | (6)(15) |
| | | | | 3,163 | | | 2,971 | | | |
| Sorrento Therapeutics, Inc. | | Biotechnology | | | | | | | |
50,000 Common Stock Units | | | | | 197 | | | 44 | | | (11) |
| | | | | 197 | | | 44 | | | |
| Spanx, LLC | | Apparel Retail | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 11/20/2028 | 9.64 | % | | 4,523 | | | 4,447 | | | 4,415 | | | (6)(15) |
First Lien Revolver, LIBOR+5.25% cash due 11/18/2027 | 9.29 | % | | 330 | | | 280 | | | 260 | | | (6)(15)(19) |
| | | | | 4,727 | | | 4,675 | | | |
| SPX Flow, Inc. | | Industrial Machinery | | | | | | | |
First Lien Term Loan, SOFR+4.50% cash due 4/5/2029 | 8.92 | % | | 1,496 | | | 1,410 | | | 1,401 | | | (6) |
| | | | | 1,410 | | | 1,401 | | | |
| SumUp Holdings Luxembourg S.À.R.L. | | Other Diversified Financial Services | | | | | | | |
First Lien Term Loan, EURIBOR+8.50% cash due 3/10/2026 | 10.49 | % | | € | 16,911 | | | 19,415 | | | 17,732 | | | (6)(11)(15) |
| | | | | 19,415 | | | 17,732 | | | |
| Sunland Asphalt & Construction, LLC | | Construction & Engineering | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/13/2026 | 11.15 | % | | $ | 42,510 | | | 41,624 | | | 41,702 | | | (6)(15) |
| | | | | 41,624 | | | 41,702 | | | |
| Superior Industries International, Inc. | | Auto Parts & Equipment | | | | | | | |
First Lien Term Loan, SOFR+8.00% cash due 12/16/2028 | 12.32 | % | | 39,774 | | | 38,591 | | | 38,581 | | | (6)(15) |
| | | | | 38,591 | | | 38,581 | | | |
| Supermoose Borrower, LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 8.48 | % | | 3,457 | | | 3,162 | | | 2,994 | | | (6) |
| | | | | 3,162 | | | 2,994 | | | |
| SVP-Singer Holdings Inc. | | Home Furnishings | | | | | | | |
First Lien Term Loan, LIBOR+6.75% cash due 7/28/2028 | 11.48 | % | | 20,714 | | | 19,554 | | | 17,917 | | | (6)(15) |
| | | | | 19,554 | | | 17,917 | | | |
| Swordfish Merger Sub LLC | | Auto Parts & Equipment | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026 | 11.14 | % | | 12,500 | | | 12,476 | | | 11,434 | | | (6)(15) |
| | | | | 12,476 | | | 11,434 | | | |
| Tacala, LLC | | Restaurants | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/2028 | 11.88 | % | | 9,448 | | | 9,343 | | | 8,610 | | | (6) |
| | | | | 9,343 | | | 8,610 | | | |
| Tahoe Bidco B.V. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 9/29/2028 | 10.29 | % | | 23,215 | | | 22,833 | | | 22,866 | | | (6)(11)(15) |
First Lien Revolver, LIBOR+6.00% cash due 10/1/2027 | | | — | | | (28) | | | (26) | | | (6)(11)(15)(19) |
| | | | | 22,805 | | | 22,840 | | | |
| Tecta America Corp. | | Construction & Engineering | | | | | | | |
Second Lien Term Loan, SOFR+8.50% cash due 4/9/2029 | 12.94 | % | | 5,203 | | | 5,125 | | | 4,982 | | | (6)(15) |
| | | | | 5,125 | | | 4,982 | | | |
| Telestream Holdings Corporation | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+9.75% cash due 10/15/2025 | 13.67 | % | | 18,276 | | | 17,941 | | | 17,765 | | | (6)(15) |
First Lien Revolver, SOFR+9.75% cash due 10/15/2025 | 13.67 | % | | 1,231 | | | 1,212 | | | 1,182 | | | (6)(15)(19) |
| | | | | 19,153 | | | 18,947 | | | |
| TerSera Therapeutics LLC | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, LIBOR+9.50% cash due 3/30/2026 | 13.88 | % | | 29,663 | | | 29,375 | | | 29,057 | | | (6)(15) |
668,879 Common Units of TerSera Holdings LLC | | | | | 2,028 | | | 4,662 | | | (15) |
| | | | | 31,403 | | | 33,719 | | | |
| TGNR HoldCo LLC | | Integrated Oil & Gas | | | | | | | |
Subordinated Debt, 11.50% cash due 5/14/2026 | | | 4,984 | | | 4,873 | | | 4,847 | | | (10)(11)(15) |
| | | | | 4,873 | | | 4,847 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Thrasio, LLC | | Internet & Direct Marketing Retail | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 12/18/2026 | 11.17 | % | | $ | 37,399 | | | $ | 36,532 | | | $ | 34,126 | | | (6)(15) |
8,434 Shares of Series C-3 Preferred Stock in Thrasio Holdings, Inc. | | | | | 101 | | | 71 | | | (15) |
284,650.32 Shares of Series C-2 Preferred Stock in Thrasio Holdings, Inc. | | | | | 2,409 | | | 1,882 | | | (15) |
48,352 Shares of Series D Preferred Stock in Thrasio Holdings, Inc. | | | | | 979 | | | 852 | | | (15) |
25,780 Shares of Series X Preferred Stock in Thrasio Holdings, Inc. | | | | | 25,564 | | | 29,070 | | | (15) |
| | | | | 65,585 | | | 66,001 | | | |
| TIBCO Software Inc. | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+4.50% cash due 3/20/2029 | 9.18 | % | | 12,032 | | | 10,986 | | | 10,775 | | | (6) |
| | | | | 10,986 | | | 10,775 | | | |
| Touchstone Acquisition, Inc. | | Health Care Supplies | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 12/29/2028 | 10.38 | % | | 6,001 | | | 5,897 | | | 5,866 | | | (6)(15) |
| | | | | 5,897 | | | 5,866 | | | |
| Trinitas CLO XV | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+7.45% cash due 4/22/2034 | 11.77 | % | | 1,000 | | | 810 | | | 846 | | | (6)(11) |
| | | | | 810 | | | 846 | | | |
| Uniti Group LP | | Specialized REITs | | | | | | | |
Fixed Rate Bond, 6.50% cash due 2/15/2029 | | | 4,500 | | | 4,074 | | | 2,990 | | | (11) |
Fixed Rate Bond, 4.75% cash due 4/15/2028 | | | 300 | | | 260 | | | 240 | | | (11) |
| | | | | 4,334 | | | 3,230 | | | |
| Win Brands Group LLC | | Housewares & Specialties | | | | | | | |
First Lien Term Loan, LIBOR+15.00% cash due 1/22/2026 | 20.75 | % | | 2,238 | | | 2,217 | | | 2,137 | | | (6)(15) |
3,621 Class F Warrants in Brand Value Growth LLC (exercise price $0.01) expiration date 1/25/2027 | | | | | — | | | 128 | | | (15) |
| | | | | 2,217 | | | 2,265 | | | |
| Windstream Services II, LLC | | Integrated Telecommunication Services | | | | | | | |
First Lien Term Loan, SOFR+6.25% cash due 9/21/2027 | 10.67 | % | | 25,432 | | | 24,612 | | | 23,131 | | | (6) |
18,032 Shares of Common Stock in Windstream Holdings II, LLC | | | | | 216 | | | 279 | | | (15) |
109,420 Warrants in Windstream Holdings II, LLC | | | | | 1,842 | | | 1,695 | | | (15) |
| | | | | 26,670 | | | 25,105 | | | |
| WP CPP Holdings, LLC | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025 | 8.17 | % | | 7,545 | | | 7,029 | | | 6,598 | | | (6) |
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 12.17 | % | | 6,000 | | | 5,866 | | | 5,055 | | | (6)(15) |
| | | | | 12,895 | | | 11,653 | | | |
| WPEngine, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 3/27/2026 | 10.19 | % | | 40,536 | | | 39,991 | | | 40,131 | | | (6)(15) |
| | | | | 39,991 | | | 40,131 | | | |
| WWEX Uni Topco Holdings, LLC | | Air Freight & Logistics | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 7/26/2029 | 11.73 | % | | 5,000 | | | 4,925 | | | 4,191 | | | (6)(15) |
| | | | | 4,925 | | | 4,191 | | | |
| Zayo Group Holdings, Inc. | | Alternative Carriers | | | | | | | |
Fixed Rate Bond, 4.00% cash due 3/1/2027 | | | 250 | | | 214 | | | 185 | | | |
| | | | | 214 | | | 185 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Zep Inc. | | Specialty Chemicals | | | | | | | |
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025 | 12.98 | % | | $ | 19,578 | | | $ | 19,545 | | | $ | 13,704 | | | (6)(15) |
| | | | | 19,545 | | | 13,704 | | | |
| Zephyr Bidco Limited | | Specialized Finance | | | | | | | |
Second Lien Term Loan, SONIA+7.50% cash due 7/23/2026 | 10.96 | % | | £ | 18,000 | | | 23,839 | | | 16,369 | | | (6)(11)(15) |
| | | | | 23,839 | | | 16,369 | | | |
Total Non-Control/Non-Affiliate Investments (198.6% of net assets) | | | | | $ | 2,471,776 | | | $ | 2,387,235 | | | |
Total Portfolio Investments (219.9% of net assets) | | | | | $ | 2,778,014 | | | $ | 2,642,870 | | | |
| Cash and Cash Equivalents and Restricted Cash | | | | | | | | | |
JP Morgan Prime Money Market Fund, Institutional Shares | | | | | $ | 3,421 | | | $ | 3,421 | | | |
Other cash accounts | | | | | 15,824 | | | 15,824 | | | |
Total Cash and Cash Equivalents and Restricted Cash (1.6% of net assets) | | | | | $ | 19,245 | | | $ | 19,245 | | | |
Total Portfolio Investments and Cash and Cash Equivalents and Restricted Cash (221.5% of net assets) | | | | | $ | 2,797,259 | | | $ | 2,662,115 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Instrument | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Counterparty | | Cumulative Unrealized Appreciation /(Depreciation) |
| Foreign currency forward contract | | $ | 44,825 | | | € | 44,224 | | | 2/9/2023 | | JPMorgan Chase Bank, N.A. | | $ | (2,499) | |
| Foreign currency forward contract | | $ | 46,412 | | | £ | 39,965 | | | 2/9/2023 | | JPMorgan Chase Bank, N.A. | | (1,712) | |
| | | | | | | | | | $ | (4,211) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Instrument | | Company Receives | | Company Pays | | Counterparty | | Maturity Date | | Notional Amount | | Fair Value |
| Interest rate swap | | Fixed 2.7% | | Floating 3-month LIBOR +1.658% | | Royal Bank of Canada | | 1/15/2027 | | $350,000 | | $(39,928) |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2022
(dollar amounts in thousands)
(unaudited)
(1)All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)Each of the Company's investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.
(6)The interest rate on the principal balance outstanding for most of the floating rate loans is indexed to the London Interbank Offered Rate ("LIBOR") and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans may also be indexed to the secured overnight financing rate ("SOFR") or the sterling overnight index average ("SONIA"). The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over the reference rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of December 31, 2022, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 4.38%, the 90-day LIBOR at 4.73%, the 180-day LIBOR at 5.15%, the PRIME at 7.50%, the 30-day SOFR at 4.32%, the 90-day SOFR at 4.58%, the 180-day SOFR at 4.79%, the SONIA at 3.43%, the 30-day EURIBOR at 1.90%, the 90-day EURIBOR at 1.99% and the 180-day EURIBOR at 0.38%. Most loans include an interest floor, which generally ranges from 0% to 2%. SOFR and SONIA based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(7)Principal includes accumulated payment in kind ("PIK") interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)Control Investments generally are defined by the Investment Company Act of 1940, as amended (the "Investment Company Act"), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" these portfolio companies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the three months ended December 31, 2022 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)This investment represents a participation interest in the underlying securities shown.
(11)Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of December 31, 2022, qualifying assets represented 73.8% of the Company's total assets and non-qualifying assets represented 26.2% of the Company's total assets.
(12)Income producing through payment of dividends or distributions.
(13)One half of the Seller Earn Out Shares will vest if, at any time through June 16, 2027, the Alvotech SA common share price is at or above a volume weighted average price ("VWAP") of $15.00 per share for any ten trading days within any twenty trading day period, and the other half will vest, if at any time during such period, the common share price is at or above a VWAP of $20.00 per share for any ten trading days within any twenty trading day period.
(14)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)As of December 31, 2022, these investments were categorized as Level 3 within the fair value hierarchy established by Financial Accounting Standards Board ("FASB") guidance under Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820").
(16)This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.
(17)Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
Control Investments | | | | | | | | | (8)(9) |
| C5 Technology Holdings, LLC | | Data Processing & Outsourced Services | | | | | | | |
829 Common Units | | | | | $ | — | | | $ | — | | | (15) |
34,984,460.37 Preferred Units | | | | | 34,984 | | | 27,638 | | | (15) |
| | | | | 34,984 | | | 27,638 | | | |
| Dominion Diagnostics, LLC | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024 | 8.68 | % | | $ | 14,333 | | | 14,333 | | | 14,333 | | | (6)(15) |
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024 | | | — | | | — | | | — | | | (6)(15)(19) |
30,030.8 Common Units in DD Healthcare Services Holdings, LLC | | | | | 15,222 | | | 4,946 | | | (15) |
| | | | | 29,555 | | | 19,279 | | | |
| OCSI Glick JV LLC | | Multi-Sector Holdings | | | | | | | (14) |
Subordinated Debt, LIBOR+4.50% cash due 10/20/2028 | 6.30 | % | | 59,662 | | | 50,194 | | | 50,283 | | | (6)(11)(15)(19) |
87.5% equity interest | | | | | — | | | — | | | (11)(16)(19) |
| | | | | 50,194 | | | 50,283 | | | |
| Senior Loan Fund JV I, LLC | | Multi-Sector Holdings | | | | | | | (14) |
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | 8.80 | % | | 96,250 | | | 96,250 | | | 96,250 | | | (6)(11)(15)(19) |
87.5% LLC equity interest | | | | | 49,322 | | | 20,715 | | | (11)(12)(16)(19) |
| | | | | 145,572 | | | 116,965 | | | |
Total Control Investments (17.2% of net assets) | | | | | $ | 260,305 | | | $ | 214,165 | | | |
| | | | | | | | | |
| Affiliate Investments | | | | | | | | | (17) |
| Assembled Brands Capital LLC | | Specialized Finance | | | | | | | |
First Lien Revolver, LIBOR+6.75% cash due 10/17/2023 | 10.42 | % | | $ | 24,490 | | | $ | 24,490 | | | $ | 24,225 | | | (6)(15)(19) |
1,609,201 Class A Units | | | | | 764 | | | 370 | | | (15) |
1,019,168.80 Preferred Units, 6% | | | | | 1,019 | | | 1,223 | | | (15) |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | — | | | — | | | (15) |
| | | | | 26,273 | | | 25,818 | | | |
| Caregiver Services, Inc. | | Health Care Services | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | 1,080 | | | 378 | | | (15) |
| | | | | 1,080 | | | 378 | | | |
Total Affiliate Investments (2.1% of net assets) | | | | | $ | 27,353 | | | $ | 26,196 | | | |
| | | | | | | | | |
| Non-Control/Non-Affiliate Investments | | | | | | | | | (18) |
| 109 Montgomery Owner LLC | | Real Estate Operating Companies | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 2/2/2023 | 9.80 | % | | $ | 389 | | | $ | 387 | | | $ | 727 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 2/2/2023 | | | — | | | (31) | | | — | | | (6)(15)(19) |
| | | | | 356 | | | 727 | | | |
| A.T. Holdings II SÀRL | | Biotechnology | | | | | | | |
First Lien Term Loan, 10.50% PIK due 12/22/2022 | | | 33,997 | | | 33,960 | | | 34,891 | | | (11)(15) |
| | | | | 33,960 | | | 34,891 | | | |
| Access CIG, LLC | | Diversified Support Services | | | | | | | |
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026 | 10.82 | % | | 20,000 | | | 19,927 | | | 19,075 | | | (6) |
| | | | | 19,927 | | | 19,075 | | | |
| Accupac, Inc. | | Personal Products | | | | | | | |
First Lien Term Loan, SOFR+5.50% cash due 1/16/2026 | 9.12 | % | | 15,976 | | | 15,686 | | | 15,944 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+5.50% cash due 1/16/2026 | | | — | | | — | | | (6) | | | (6)(15)(19) |
First Lien Revolver, SOFR+5.50% cash due 1/16/2026 | 9.14 | % | | 500 | | | 462 | | | 495 | | | (6)(15)(19) |
| | | | | 16,148 | | | 16,433 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Acquia Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 10/31/2025 | 9.63 | % | | $ | 27,349 | | | $ | 27,038 | | | $ | 27,158 | | | (6)(15) |
First Lien Revolver, LIBOR+7.00% cash due 10/31/2025 | 10.64 | % | | 914 | | | 890 | | | 898 | | | (6)(15)(19) |
| | | | | 27,928 | | | 28,056 | | | |
| ADB Companies, LLC | | Construction & Engineering | | | | | | | |
First Lien Term Loan, SOFR+6.25% cash due 12/18/2025 | 9.80 | % | | 14,685 | | | 14,217 | | | 14,431 | | | (6)(15) |
| | | | | 14,217 | | | 14,431 | | | |
| ADC Therapeutics SA | | Biotechnology | | | | | | | |
First Lien Term Loan, SOFR+7.50% cash due 8/15/2029 | 11.20 | % | | 6,589 | | | 6,256 | | | 6,262 | | | (6)(11)(15) |
First Lien Delayed Draw Term Loan, SOFR+7.50% cash due 8/15/2029 | | | — | | | (38) | | | (37) | | | (6)(11)(15)(19) |
28,948 Common Stock Warrants (exercise price $8.297) expiration 8/15/2032 | | | | | 174 | | | 73 | | | (11)(15) |
| | | | | 6,392 | | | 6,298 | | | |
| Aden & Anais Merger Sub, Inc. | | Apparel, Accessories & Luxury Goods | | | | | | | |
51,645 Common Units in Aden & Anais Holdings, Inc. | | | | | 5,165 | | | — | | | (15) |
| | | | | 5,165 | | | — | | | |
| AI Sirona (Luxembourg) Acquisition S.a.r.l. | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/2026 | 7.94 | % | | € | 24,838 | | | 27,752 | | | 22,143 | | | (6)(11)(15) |
| | | | | 27,752 | | | 22,143 | | | |
| AIP RD Buyer Corp. | | Distributors | | | | | | | |
Second Lien Term Loan, SOFR+7.75% cash due 12/23/2029 | 10.88 | % | | $ | 14,414 | | | 14,154 | | | 13,910 | | | (6)(15) |
14,410 Common Units in RD Holding LP | | | | | 1,352 | | | 1,291 | | | (15) |
| | | | | 15,506 | | | 15,201 | | | |
| AirStrip Technologies, Inc. | | Application Software | | | | | | | |
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/2025 | | | | | 90 | | | — | | | (15) |
| | | | | 90 | | | — | | | |
| All Web Leads, Inc. | | Advertising | | | | | | | |
First Lien Term Loan, LIBOR+8.50% PIK due 12/29/2023 | | | 23,338 | | | 22,057 | | | 22,141 | | | (6)(15) |
| | | | | 22,057 | | | 22,141 | | | |
| Altice France S.A. | | Integrated Telecommunication Services | | | | | | | |
Fixed Rate Bond, 5.50% cash due 10/15/2029 | | | 4,050 | | | 3,518 | | | 3,057 | | | (11) |
| | | | | 3,518 | | | 3,057 | | | |
| Alvogen Pharma US, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 11.20 | % | | 13,134 | | | 12,847 | | | 13,068 | | | (6)(15) |
| | | | | 12,847 | | | 13,068 | | | |
| Alvotech Holdings S.A. | | Biotechnology | | | | | | | (13) |
Tranche A Fixed Rate Bond 10.00% cash due 6/24/2025 | | | 24,043 | | | 23,747 | | | 23,923 | | | (11)(15) |
Tranche B Fixed Rate Bond 10.00% cash due 6/24/2025 | | | 23,522 | | | 23,264 | | | 23,404 | | | (11)(15) |
587,930 Common Shares in Alvotech SA | | | | | 5,308 | | | 3,974 | | | (11) |
124,780 Seller Earn Out Shares in Alvotech SA | | | | | 485 | | | 212 | | | (11)(15) |
| | | | | 52,804 | | | 51,513 | | | |
| American Auto Auction Group, LLC | | Consumer Finance | | | | | | | |
Second Lien Term Loan, SOFR+8.75% cash due 1/2/2029 | 12.30 | % | | 14,760 | | | 14,492 | | | 13,284 | | | (6)(15) |
| | | | | 14,492 | | | 13,284 | | | |
| American Tire Distributors, Inc. | | Distributors | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 9.03 | % | | 9,895 | | | 9,772 | | | 9,293 | | | (6) |
| | | | | 9,772 | | | 9,293 | | | |
| Amplify Finco Pty Ltd. | | Movies & Entertainment | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 7.92 | % | | 15,220 | | | 13,973 | | | 14,687 | | | (6)(11)(15) |
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/2027 | 11.67 | % | | 12,500 | | | 12,188 | | | 11,958 | | | (6)(11)(15) |
| | | | | 26,161 | | | 26,645 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Anastasia Parent, LLC | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 7.42 | % | | $ | 2,736 | | | $ | 2,260 | | | $ | 2,189 | | | (6) |
| | | | | 2,260 | | | 2,189 | | | |
| Ankura Consulting Group LLC | | Research & Consulting Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.00% cash due 3/19/2029 | 10.78 | % | | 4,346 | | | 4,281 | | | 3,813 | | | (6)(15) |
| | | | | 4,281 | | | 3,813 | | | |
| Apptio, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/10/2025 | 8.46 | % | | 34,458 | | | 33,737 | | | 33,738 | | | (6)(15) |
First Lien Revolver, LIBOR+6.00% cash due 1/10/2025 | 8.46 | % | | 892 | | | 863 | | | 846 | | | (6)(15)(19) |
| | | | | 34,600 | | | 34,584 | | | |
| APX Group Inc. | | Electrical Components & Equipment | | | | | | | |
Fixed Rate Bond, 5.75% cash due 7/15/2029 | | | 2,075 | | | 1,733 | | | 1,645 | | | (11) |
| | | | | 1,733 | | | 1,645 | | | |
| Ardonagh Midco 3 PLC | | Insurance Brokers | | | | | | | |
First Lien Term Loan, EURIBOR+7.00% cash due 7/14/2026 | 8.00 | % | | € | 1,964 | | | 2,176 | | | 1,927 | | | (6)(11)(15) |
First Lien Term Loan, SONIA+7.00% cash due 7/14/2026 | 9.19 | % | | £ | 18,636 | | | 23,139 | | | 20,826 | | | (6)(11)(15) |
First Lien Term Loan, LIBOR+5.75% cash due 7/14/2026 | 8.81 | % | | $ | 10,519 | | | 10,357 | | | 10,328 | | | (6)(11)(15) |
First Lien Delayed Draw Term Loan, SONIA+5.75% cash due 7/14/2026 | | | £ | — | | | (44) | | | — | | | (6)(11)(15)(19) |
| | | | | 35,628 | | | 33,081 | | | |
| ASP Unifrax Holdings, Inc. | | Trading Companies & Distributors | | | | | | | |
Fixed Rate Bond, 7.50% cash due 9/30/2029 | | | $ | 5,500 | | | 5,408 | | | 3,641 | | | |
Fixed Rate Bond, 5.25% cash due 9/30/2028 | | | 2,500 | | | 2,220 | | | 1,926 | | | |
| | | | | 7,628 | | | 5,567 | | | |
| Associated Asphalt Partners, LLC | | Construction Materials | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 4/5/2024 | 8.06 | % | | 2,501 | | | 2,331 | | | 1,934 | | | (6) |
| | | | | 2,331 | | | 1,934 | | | |
| Astra Acquisition Corp. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 10/25/2028 | 8.37 | % | | 5,640 | | | 5,482 | | | 4,822 | | | (6) |
| | | | | 5,482 | | | 4,822 | | | |
| athenahealth Group Inc. | | Health Care Technology | | | | | | | |
18,635 Shares of Series A Preferred Stock in Minerva Holdco, Inc., 10.75% | | | | | 18,264 | | | 16,575 | | | (15) |
| | | | | 18,264 | | | 16,575 | | | |
| Athenex, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, 11.00% cash due 6/19/2026 | | | 13,346 | | | 12,929 | | | 12,812 | | | (11)(15) |
| First Lien Revenue Interest Financing Term Loan due 5/31/2031 | | | 8,309 | | | 8,264 | | | 8,309 | | | (11)(15) |
328,149 Common Stock Warrants (exercise price $0.4955 expiration date 6/19/2027 | | | | | 973 | | | 16 | | | (11)(15) |
| | | | | 22,166 | | | 21,137 | | | |
| Aurora Lux Finco S.À.R.L. | | Airport Services | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 8.78 | % | | 22,425 | | | 22,086 | | | 21,326 | | | (6)(11)(15) |
| | | | | 22,086 | | | 21,326 | | | |
| The Avery | | Real Estate Operating Companies | | | | | | | |
First Lien Term Loan in T8 Urban Condo Owner, LLC, LIBOR+7.30% cash due 2/17/2023 | 10.44 | % | | 15,674 | | | 15,605 | | | 15,682 | | | (6)(15) |
Subordinated Debt in T8 Senior Mezz LLC, LIBOR+12.50% cash due 2/17/2023 | 16.17 | % | | 3,789 | | | 3,774 | | | 3,800 | | | (6)(15) |
| | | | | 19,379 | | | 19,482 | | | |
| BAART Programs, Inc. | | Health Care Services | | | | | | | |
First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/2027 | 8.12 | % | | 2,546 | | | 2,503 | | | 2,395 | | | (6)(15)(19) |
Second Lien Term Loan, LIBOR+8.50% cash due 6/11/2028 | 11.62 | % | | 7,166 | | | 7,059 | | | 6,915 | | | (6)(15) |
Second Lien Delayed Draw Term Loan, LIBOR+8.50% cash due 6/11/2028 | 11.62 | % | | 4,227 | | | 4,070 | | | 3,839 | | | (6)(15)(19) |
| | | | | 13,632 | | | 13,149 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| | | | | | | | | |
| Berner Food & Beverage, LLC | | Soft Drinks | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 7/30/2027 | 8.31 | % | | $ | 33,078 | | | $ | 32,612 | | | $ | 32,053 | | | (6)(15) |
First Lien Revolver, PRIME+4.50% cash due 7/30/2026 | 10.75 | % | | 1,702 | | | 1,660 | | | 1,617 | | | (6)(15)(19) |
| | | | | 34,272 | | | 33,670 | | | |
| BioXcel Therapeutics, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, 10.25% cash due 4/19/2027 | | | 5,322 | | | 5,111 | | | 5,114 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 10.25% cash due 4/19/2027 | | | — | | | — | | | — | | | (11)(15)(19) |
| First Lien Revenue Interest Financing Term Loan due 9/30/2032 | | | 2,353 | | | 2,353 | | | 2,353 | | | (11)(15) |
| First Lien Revenue Interest Financing Delayed Draw Term Loan due 9/30/2032 | | | — | | | — | | | — | | | (11)(15)(19) |
21,177 Common Stock Warrants (exercise price $20.04) expiration date 4/19/2029 | | | | | 125 | | | 98 | | | (11)(15) |
| | | | | 7,589 | | | 7,565 | | | |
| Blackhawk Network Holdings, Inc. | | Data Processing & Outsourced Services | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026 | 9.50 | % | | 30,625 | | | 30,276 | | | 29,017 | | | (6) |
| | | | | 30,276 | | | 29,017 | | | |
| Blumenthal Temecula, LLC | | Automotive Retail | | | | | | | |
First Lien Term Loan, 9.00% cash due 9/24/2023 | | | 3,979 | | | 3,980 | | | 3,960 | | | (15) |
1,293,324 Preferred Units in Unstoppable Automotive AMV, LLC | | | | | 1,293 | | | 1,280 | | | (15) |
298,460 Preferred Units in Unstoppable Automotive VMV, LLC | | | | | 298 | | | 295 | | | (15) |
298,460 Common Units in Unstoppable Automotive AMV, LLC | | | | | 298 | | | 349 | | | (15) |
| | | | | 5,869 | | | 5,884 | | | |
| Cadence Aerospace, LLC | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash 2.00% PIK due 11/14/2023 | 9.31 | % | | 14,294 | | | 13,471 | | | 13,143 | | | (6)(15) |
| | | | | 13,471 | | | 13,143 | | | |
| Carvana Co. | | Automotive Retail | | | | | | | |
Fixed Rate Bond, 5.625% cash due 10/1/2025 | | | 6,700 | | | 5,825 | | | 4,724 | | | (11) |
| | | | | 5,825 | | | 4,724 | | | |
| CCO Holdings LLC | | Cable & Satellite | | | | | | | |
Fixed Rate Bond, 4.50% cash due 5/1/2032 | | | 2,097 | | | 1,746 | | | 1,603 | | | (11) |
| | | | | 1,746 | | | 1,603 | | | |
| CircusTrix Holdings, LLC | | Leisure Facilities | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 7/16/2023 | 8.62 | % | | 10,692 | | | 10,004 | | | 10,209 | | | (6)(15) |
| | | | | 10,004 | | | 10,209 | | | |
| CITGO Holding, Inc. | | Oil & Gas Refining & Marketing | | | | | | | |
Fixed Rate Bond, 9.25% cash due 8/1/2024 | | | 7,857 | | | 7,857 | | | 7,807 | | | |
| | | | | 7,857 | | | 7,807 | | | |
| CITGO Petroleum Corp. | | Oil & Gas Refining & Marketing | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 3/28/2024 | 9.37 | % | | 795 | | | 770 | | | 797 | | | (6) |
| | | | | 770 | | | 797 | | | |
| Clear Channel Outdoor Holdings Inc. | | Advertising | | | | | | | |
Fixed Rate Bond, 7.50% cash due 6/1/2029 | | | 4,311 | | | 4,311 | | | 3,132 | | | (11) |
Fixed Rate Bond, 5.125% cash due 8/15/2027 | | | 1,374 | | | 1,229 | | | 1,163 | | | (11) |
Fixed Rate Bond, 7.75% cash due 4/15/2028 | | | 676 | | | 648 | | | 512 | | | (11) |
| | | | | 6,188 | | | 4,807 | | | |
| Condor Merger Sub Inc. | | Systems Software | | | | | | | |
Fixed Rate Bond, 7.375% cash due 2/15/2030 | | | 8,420 | | | 8,243 | | | 6,900 | | | |
| | | | | 8,243 | | | 6,900 | | | |
| Continental Intermodal Group LP | | Oil & Gas Storage & Transportation | | | | | | | |
First Lien Term Loan, LIBOR+8.50% cash due 1/28/2025 | 11.62 | % | | 22,537 | | | 21,642 | | | 20,396 | | | (6)(15) |
| Common Stock Warrants expiration date 7/28/2025 | | | | | 648 | | | 457 | | | (15) |
| | | | | 22,290 | | | 20,853 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Convergeone Holdings, Inc. | | IT Consulting & Other Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026 | 8.12 | % | | $ | 11,913 | | | $ | 11,697 | | | $ | 8,596 | | | (6) |
| | | | | 11,697 | | | 8,596 | | | |
| Conviva Inc. | | Application Software | | | | | | | |
517,851 Shares of Series D Preferred Stock | | | | | 605 | | | 894 | | | (15) |
| | | | | 605 | | | 894 | | | |
| CorEvitas, LLC | | Health Care Technology | | | | | | | |
First Lien Term Loan, SOFR+5.75% cash due 12/13/2025 | 8.88 | % | | 13,712 | | | 13,554 | | | 13,583 | | | (6)(15) |
First Lien Revolver, PRIME+4.75% cash due 12/13/2025 | 11.00 | % | | 916 | | | 898 | | | 898 | | | (6)(15)(19) |
1,099 Class A2 Common Units in CorEvitas Holdings, L.P. | | | | | 690 | | | 2,340 | | | (15) |
| | | | | 15,142 | | | 16,821 | | | |
| Covetrus, Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, SOFR+5.00% cash due 9/20/2029 | 7.65 | % | | 10,336 | | | 9,716 | | | 9,681 | | | (6) |
| | | | | 9,716 | | | 9,681 | | | |
| Coyote Buyer, LLC | | Specialty Chemicals | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 2/6/2026 | 8.81 | % | | 18,200 | | | 17,790 | | | 17,843 | | | (6)(15) |
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025 | | | — | | | (13) | | | (26) | | | (6)(15)(19) |
| | | | | 17,777 | | | 17,817 | | | |
| Delivery Hero FinCo LLC | | Internet & Direct Marketing Retail | | | | | | | |
First Lien Term Loan, SOFR+5.75% cash due 8/12/2027 | 8.49 | % | | 4,988 | | | 4,882 | | | 4,757 | | | (6)(11) |
| | | | | 4,882 | | | 4,757 | | | |
| Delta Leasing SPV II LLC | | Specialized Finance | | | | | | | |
Subordinated Delayed Draw Term Loan, 10.00% cash due 8/31/2029 | | | 4,183 | | | 4,183 | | | 4,183 | | | (11)(15)(19) |
419 Series C Preferred Units in Delta Financial Holdings LLC | | | | | 419 | | | 419 | | | (11)(15) |
2.09 Common Units in Delta Financial Holdings LLC | | | | | 2 | | | 2 | | | (11)(15) |
31.37 Common Warrants (exercise price $1.00) | | | | | — | | | — | | | (11)(15) |
| | | | | 4,604 | | | 4,604 | | | |
| Delta Topco, Inc. | | Systems Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 12/1/2028 | 9.34 | % | | 6,680 | | | 6,647 | | | 5,934 | | | (6) |
| | | | | 6,647 | | | 5,934 | | | |
| Dialyze Holdings, LLC | | Health Care Equipment | | | | | | | |
First Lien Term Loan, LIBOR+9.00% cash 2.00% PIK due 8/4/2026 | 12.67 | % | | 24,396 | | | 23,083 | | | 22,993 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+9.00% cash 2.00% PIK due 8/4/2026 | | | — | | | (135) | | | (129) | | | (6)(15)(19) |
5,403,823 Class A Warrants (exercise price $1.00) expiration date 8/4/2028 | | | | | 1,405 | | | 1,297 | | | (15) |
| | | | | 24,353 | | | 24,161 | | | |
| Digital.AI Software Holdings, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 2/10/2027 | 9.91 | % | | 9,902 | | | 9,599 | | | 9,793 | | | (6)(15) |
First Lien Revolver, LIBOR+6.50% cash due 2/10/2027 | 9.41 | % | | 251 | | | 228 | | | 239 | | | (6)(15)(19) |
| | | | | 9,827 | | | 10,032 | | | |
| DirecTV Financing, LLC | | Cable & Satellite | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 8/2/2027 | 8.12 | % | | 19,242 | | | 18,970 | | | 17,973 | | | (6) |
| | | | | 18,970 | | | 17,973 | | | |
| DTI Holdco, Inc. | | Research & Consulting Services | | | | | | | |
First Lien Term Loan, SOFR+4.75% cash due 4/26/2029 | 7.33 | % | | 5,000 | | | 4,906 | | | 4,760 | | | (6) |
| | | | | 4,906 | | | 4,760 | | | |
| Eagleview Technology Corporation | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026 | 11.17 | % | | 8,974 | | | 8,884 | | | 8,503 | | | (6)(15) |
| | | | | 8,884 | | | 8,503 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| EOS Fitness Opco Holdings, LLC | | Leisure Facilities | | | | | | | |
487.5 Class A Preferred Units, 12% | | | | | $ | 488 | | | $ | 966 | | | (15) |
12,500 Class B Common Units | | | | | — | | | — | | | (15) |
| | | | | 488 | | | 966 | | | |
| Establishment Labs Holdings Inc. | | Health Care Technology | | | | | | | |
First Lien Term Loan, 3.00% cash 6.00% PIK due 4/21/2027 | | | $ | 10,418 | | | 10,275 | | | 10,231 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 3.00% cash 6.00% PIK due 4/21/2027 | | | | | 3 | | | — | | | (11)(15)(19) |
| | | | | 10,278 | | | 10,231 | | | |
| Fairbridge Strategic Capital Funding LLC | | Real Estate Operating Companies | | | | | | | (20) |
First Lien Delayed Draw Term Loan, 9.00% cash due 12/24/2028 | | | 27,850 | | | 27,850 | | | 27,850 | | | (15)(19) |
2,500 Warrant Units (exercise price $0.01) expiration date 11/24/2031 | | | | | — | | | 3 | | | (11)(15) |
| | | | | 27,850 | | | 27,853 | | | |
| FINThrive Software Intermediate Holdings, Inc. | | Health Care Technology | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 12/17/2029 | 9.87 | % | | 25,061 | | | 24,685 | | | 21,646 | | | (6) |
| | | | | 24,685 | | | 21,646 | | | |
| Fortress Biotech, Inc. | | Biotechnology | | | | | | | |
First Lien Term Loan, 11.00% cash due 8/27/2025 | | | 9,466 | | | 9,071 | | | 9,008 | | | (11)(15) |
331,200 Common Stock Warrants (exercise price $3.20) expiration date 8/27/2030 | | | | | 405 | | | 66 | | | (11)(15) |
| | | | | 9,476 | | | 9,074 | | | |
| Frontier Communications Holdings, LLC | | Integrated Telecommunication Services | | | | | | | |
Fixed Rate Bond, 6.00% cash due 1/15/2030 | | | 4,881 | | | 4,420 | | | 3,845 | | | (11) |
| | | | | 4,420 | | | 3,845 | | | |
| GKD Index Partners, LLC | | Specialized Finance | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 6/29/2023 | 10.67 | % | | 25,128 | | | 24,915 | | | 24,851 | | | (6)(15) |
First Lien Revolver, LIBOR+7.00% cash due 6/29/2023 | 10.60 | % | | 1,280 | | | 1,268 | | | 1,262 | | | (6)(15)(19) |
| | | | | 26,183 | | | 26,113 | | | |
| Global Medical Response, Inc. | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025 | 7.37 | % | | 5,572 | | | 5,435 | | | 4,848 | | | (6) |
| | | | | 5,435 | | | 4,848 | | | |
| Grove Hotel Parcel Owner, LLC | | Hotels, Resorts & Cruise Lines | | | | | | | |
First Lien Term Loan, SOFR+8.00% cash due 6/21/2027 | 11.04 | % | | 14,311 | | | 14,041 | | | 14,060 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+8.00% cash due 6/21/2027 | | | — | | | (54) | | | (50) | | | (6)(15)(19) |
First Lien Revolver, SOFR+8.00% cash due 6/21/2027 | | | — | | | (27) | | | (25) | | | (6)(15)(19) |
| | | | | 13,960 | | | 13,985 | | | |
| Harbor Purchaser Inc. | | Education Services | | | | | | | |
First Lien Term Loan, SOFR+5.25% cash due 4/9/2029 | 8.38 | % | | 9,392 | | | 9,080 | | | 8,582 | | | (6) |
| | | | | 9,080 | | | 8,582 | | | |
| iCIMs, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+6.75% cash due 8/18/2028 | 9.49 | % | | 19,203 | | | 18,874 | | | 18,867 | | | (6)(15) |
First Lien Delayed Draw Term Loan, SOFR+6.75% cash due 8/18/2028 | | | — | | | — | | | — | | | (6)(15)(19) |
First Lien Revolver, SOFR+6.75% cash due 8/18/2028 | | | — | | | (31) | | | (32) | | | (6)(15)(19) |
| | | | | 18,843 | | | 18,835 | | | |
| Immucor, Inc. | | Health Care Supplies | | | | | | | |
First Lien Term Loan, LIBOR+5.75% cash due 7/2/2025 | 9.42 | % | | 8,569 | | | 8,401 | | | 8,407 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.00% cash 3.50% PIK due 10/2/2025 | 11.67 | % | | 22,619 | | | 22,162 | | | 22,275 | | | (6)(15) |
| | | | | 30,563 | | | 30,682 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Impel Neuropharma, Inc. | | Health Care Technology | | | | | | | |
| First Lien Revenue Interest Financing Term Loan due 2/15/2031 | | | $ | 13,083 | | | $ | 13,083 | | | $ | 13,083 | | | (15) |
First Lien Term Loan, SOFR+8.75% cash due 3/17/2027 | 12.45 | % | | 12,161 | | | 11,944 | | | 11,942 | | | (6)(15) |
| | | | | 25,027 | | | 25,025 | | | |
| Innocoll Pharmaceuticals Limited | | Health Care Technology | | | | | | | |
First Lien Term Loan, 11.00% cash due 1/26/2027 | | | 6,817 | | | 6,553 | | | 6,408 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 11.00% cash due 1/26/2027 | | | — | | | — | | | — | | | (11)(15)(19) |
56,999 Tranche A Warrant Shares (exercise price $4.23) expiration date 1/26/2029 | | | | | 135 | | | 609 | | | (11)(15) |
| | | | | 6,688 | | | 7,017 | | | |
| Integral Development Corporation | | Other Diversified Financial Services | | | | | | | |
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024 | | | | | 113 | | | — | | | (15) |
| | | | | 113 | | | — | | | |
| Inventus Power, Inc. | | Electrical Components & Equipment | | | | | | | |
First Lien Term Loan, SOFR+5.00% cash due 3/29/2024 | 8.55 | % | | 18,660 | | | 18,567 | | | 18,134 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2024 | 12.17 | % | | 13,674 | | | 13,514 | | | 13,154 | | | (6)(15) |
| | | | | 32,081 | | | 31,288 | | | |
| INW Manufacturing, LLC | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+5.75% cash due 3/25/2027 | 9.42 | % | | 35,625 | | | 34,806 | | | 31,528 | | | (6)(15) |
| | | | | 34,806 | | | 31,528 | | | |
| IPC Corp. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 10/1/2026 | 9.44 | % | | 34,357 | | | 33,612 | | | 32,639 | | | (6)(15) |
| | | | | 33,612 | | | 32,639 | | | |
| Ivanti Software, Inc. | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 12/1/2028 | 10.33 | % | | 10,247 | | | 10,196 | | | 7,702 | | | (6) |
| | | | | 10,196 | | | 7,702 | | | |
| Jazz Acquisition, Inc. | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+7.50% cash due 1/29/2027 | 10.62 | % | | 36,234 | | | 35,170 | | | 36,392 | | | (6)(15) |
Second Lien Term Loan, LIBOR+8.00% cash due 6/18/2027 | 11.12 | % | | 528 | | | 478 | | | 481 | | | (6) |
| | | | | 35,648 | | | 36,873 | | | |
| Kings Buyer, LLC | | Environmental & Facilities Services | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 10/29/2027 | 10.17 | % | | 13,623 | | | 13,487 | | | 13,351 | | | (6)(15) |
First Lien Revolver, LIBOR+6.50% cash due 10/29/2027 | 10.17 | % | | 329 | | | 311 | | | 292 | | | (6)(15)(19) |
| | | | | 13,798 | | | 13,643 | | | |
| LaserShip, Inc. | | Air Freight & Logistics | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 5/7/2029 | 10.38 | % | | 2,394 | | | 2,370 | | | 1,867 | | | (6)(15) |
| | | | | 2,370 | | | 1,867 | | | |
| Lift Brands Holdings, Inc. | | Leisure Facilities | | | | | | | |
2,000,000 Class A Common Units in Snap Investments, LLC | | | | | 1,399 | | | — | | | (15) |
| | | | | 1,399 | | | — | | | |
| Lightbox Intermediate, L.P. | | Real Estate Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026 | 8.67 | % | | 41,008 | | | 40,243 | | | 39,573 | | | (6)(15) |
| | | | | 40,243 | | | 39,573 | | | |
| Liquid Environmental Solutions Corporation | | Environmental & Facilities Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.50% cash due 11/30/2026 | 11.38 | % | | 4,357 | | | 4,285 | | | 4,226 | | | (6)(15) |
Second Lien Delayed Draw Term Loan, LIBOR+8.50% cash due 11/30/2026 | 11.38 | % | | 2,370 | | | 2,323 | | | 2,265 | | | (6)(15)(19) |
450.75 Class A2 Units in LES Group Holdings, L.P. | | | | | 451 | | | 451 | | | (15) |
| | | | | 7,059 | | | 6,942 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| | | | | | | | | |
| LSL Holdco, LLC | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/31/2028 | 9.12 | % | | $ | 19,236 | | | $ | 18,894 | | | $ | 18,707 | | | (6)(15) |
First Lien Revolver, LIBOR+6.00% cash due 1/31/2028 | 9.12 | % | | 1,710 | | | 1,672 | | | 1,651 | | | (6)(15)(19) |
| | | | | 20,566 | | | 20,358 | | | |
| LTI Holdings, Inc. | | Electronic Components | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026 | 9.87 | % | | 2,140 | | | 2,092 | | | 1,890 | | | (6) |
| | | | | 2,092 | | | 1,890 | | | |
| Marinus Pharmaceuticals, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, 11.50% cash due 5/11/2026 | | | 17,203 | | | 16,954 | | | 16,644 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 11.50% cash due 5/11/2026 | | | — | | | — | | | — | | | (11)(15)(19) |
| | | | | 16,954 | | | 16,644 | | | |
| Mesoblast, Inc. | | Biotechnology | | | | | | | |
First Lien Term Loan, 8.00% cash 1.75% PIK due 11/19/2026 | | | 7,215 | | | 6,650 | | | 6,440 | | | (11)(15) |
First Lien Delayed Draw Term Loan, 8.00% cash 1.75% PIK due 11/19/2026 | | | — | | | 1 | | | — | | | (11)(15)(19) |
209,588 Warrant Shares (exercise price $7.26) expiration date 11/19/2028 | | | | | 480 | | | 170 | | | (11)(15) |
| | | | | 7,131 | | | 6,610 | | | |
| MHE Intermediate Holdings, LLC | | Diversified Support Services | | | | | | | |
First Lien Term Loan, SOFR+6.00% cash due 7/21/2027 | 9.50 | % | | 18,390 | | | 18,088 | | | 17,691 | | | (6)(15) |
First Lien Revolver, SOFR+6.00% cash due 7/21/2027 | | | — | | | (23) | | | (54) | | | (6)(15)(19) |
| | | | | 18,065 | | | 17,637 | | | |
| Mindbody, Inc. | | Internet Services & Infrastructure | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash 1.50% PIK due 2/14/2025 | 10.64 | % | | 45,665 | | | 44,689 | | | 44,523 | | | (6)(15) |
First Lien Revolver, LIBOR+8.00% cash due 2/14/2025 | | | — | | | (54) | | | (100) | | | (6)(15)(19) |
| | | | | 44,635 | | | 44,423 | | | |
| Mosaic Companies, LLC | | Home Improvement Retail | | | | | | | |
First Lien Term Loan, LIBOR+6.75% cash due 7/2/2026 | 9.89 | % | | 46,499 | | | 45,802 | | | 45,421 | | | (6)(15) |
| | | | | 45,802 | | | 45,421 | | | |
| MRI Software LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 9.17 | % | | 29,565 | | | 29,128 | | | 28,734 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026 | | | — | | | (12) | | | (96) | | | (6)(15)(19) |
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | | | — | | | (13) | | | (51) | | | (6)(15)(19) |
| | | | | 29,103 | | | 28,587 | | | |
| Navisite, LLC | | Data Processing & Outsourced Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.50% cash due 12/30/2026 | 12.17 | % | | 22,560 | | | 22,241 | | | 21,524 | | | (6)(15) |
| | | | | 22,241 | | | 21,524 | | | |
| NeuAG, LLC | | Fertilizers & Agricultural Chemicals | | | | | | | |
First Lien Term Loan, LIBOR+10.50% cash due 9/11/2024 | 14.17 | % | | 50,459 | | | 49,301 | | | 51,972 | | | (6)(15) |
| | | | | 49,301 | | | 51,972 | | | |
| NFP Corp. | | Other Diversified Financial Services | | | | | | | |
Fixed Rate Bond 6.875% cash due 8/15/2028 | | | 10,191 | | | 9,773 | | | 7,966 | | | |
| | | | | 9,773 | | | 7,966 | | | |
| NN, Inc. | | Industrial Machinery | | | | | | | |
First Lien Term Loan, LIBOR+6.88% cash due 9/19/2026 | 9.99 | % | | 58,713 | | | 57,655 | | | 56,805 | | | (6)(11)(15) |
| | | | | 57,655 | | | 56,805 | | | |
| OEConnection LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026 | 7.12 | % | | 3,323 | | | 3,162 | | | 3,207 | | | (6) |
Second Lien Term Loan, LIBOR+7.00% cash due 9/25/2027 | 10.05 | % | | 7,519 | | | 7,389 | | | 7,237 | | | (6)(15) |
| | | | | 10,551 | | | 10,444 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| OTG Management, LLC | | Airport Services | | | | | | | |
First Lien Term Loan, LIBOR+2.00% cash 8.00% PIK due 9/1/2025 | 5.08 | % | | $ | 21,557 | | | $ | 21,267 | | | $ | 21,557 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+2.00% cash 8.00% PIK due 9/1/2025 | | | — | | | (31) | | | — | | | (6)(15)(19) |
| | | | | 21,236 | | | 21,557 | | | |
| P & L Development, LLC | | Pharmaceuticals | | | | | | | |
Fixed Rate Bond, 7.75% cash due 11/15/2025 | | | 7,776 | | | 7,820 | | | 5,846 | | | |
| | | | | 7,820 | | | 5,846 | | | |
| Park Place Technologies, LLC | | Internet Services & Infrastructure | | | | | | | |
First Lien Term Loan, SOFR+5.00% cash due 11/10/2027 | 8.13 | % | | 9,850 | | | 9,460 | | | 9,374 | | | (6) |
| | | | | 9,460 | | | 9,374 | | | |
| Performance Health Holdings, Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 7/12/2027 | 8.88 | % | | 17,976 | | | 17,690 | | | 17,537 | | | (6)(15) |
| | | | | 17,690 | | | 17,537 | | | |
| PFNY Holdings, LLC | | Leisure Facilities | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 12/31/2026 | 9.28 | % | | 26,154 | | | 25,712 | | | 25,893 | | | (6)(15) |
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 12/31/2026 | 9.25 | % | | 2,228 | | | 2,186 | | | 2,203 | | | (6)(15)(19) |
First Lien Revolver, LIBOR+7.00% cash due 12/31/2026 | | | — | | | (21) | | | (13) | | | (6)(15)(19) |
| | | | | 27,877 | | | 28,083 | | | |
| Planview Parent, Inc. | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 12/18/2028 | 10.92 | % | | 28,627 | | | 28,198 | | | 27,482 | | | (6)(15) |
| | | | | 28,198 | | | 27,482 | | | |
| Pluralsight, LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+8.00% cash due 4/6/2027 | 10.68 | % | | 48,689 | | | 47,951 | | | 47,155 | | | (6)(15) |
First Lien Revolver, LIBOR+8.00% cash due 4/6/2027 | | | — | | | (53) | | | (111) | | | (6)(15)(19) |
| | | | | 47,898 | | | 47,044 | | | |
| PRGX Global, Inc. | | Data Processing & Outsourced Services | | | | | | | |
First Lien Term Loan, LIBOR+6.75% cash due 3/3/2026 | 10.42 | % | | 33,775 | | | 32,931 | | | 33,116 | | | (6)(15) |
First Lien Revolver, LIBOR+6.75% cash due 3/3/2026 | | | — | | | (34) | | | (49) | | | (6)(15)(19) |
80,515 Class B Common Units | | | | | 79 | | | 89 | | | (15) |
| | | | | 32,976 | | | 33,156 | | | |
| Profrac Holdings II, LLC | | Industrial Machinery | | | | | | | |
First Lien Term Loan, SOFR+8.50% cash due 3/4/2025 | 10.01 | % | | 23,275 | | | 22,722 | | | 22,810 | | | (6)(15) |
| | | | | 22,722 | | | 22,810 | | | |
| Project Boost Purchaser, LLC | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+8.00% cash due 5/31/2027 | 11.12 | % | | 5,250 | | | 5,168 | | | 5,047 | | | (6)(15) |
| | | | | 5,168 | | | 5,047 | | | |
| Quantum Bidco Limited | | Food Distributors | | | | | | | |
First Lien Term Loan, SONIA+6.00% cash due 1/29/2028 | 8.39 | % | | £ | 3,501 | | | 4,646 | | | 3,367 | | | (6)(11)(15) |
| | | | | 4,646 | | | 3,367 | | | |
| QuorumLabs, Inc. | | Application Software | | | | | | | |
64,887,669 Junior-2 Preferred Stock | | | | | 375 | | | — | | | (15) |
| | | | | 375 | | | — | | | |
| Radiology Partners Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+4.25%cash due 7/9/2025 | 7.33 | % | | $ | 3,400 | | | 3,202 | | | 2,880 | | | (6) |
Fixed Rate Bond, 9.25% cash due 2/1/2028 | | | 4,755 | | | 4,720 | | | 3,109 | | | |
| | | | | 7,922 | | | 5,989 | | | |
| Relativity ODA LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.50% PIK due 5/12/2027 | | | 24,692 | | | 24,265 | | | 24,101 | | | (6)(15) |
First Lien Revolver, LIBOR+6.50% cash due 5/12/2027 | | | — | | | (43) | | | (64) | | | (6)(15)(19) |
| | | | | 24,222 | | | 24,037 | | | |
| Renaissance Holding Corp. | | Diversified Banks | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 5/29/2026 | 10.12 | % | | 3,542 | | | 3,515 | | | 3,402 | | | (6) |
| | | | | 3,515 | | | 3,402 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| RP Escrow Issuer LLC | | Health Care Distributors | | | | | | | |
Fixed Rate Bond, 5.25% cash due 12/15/2025 | | | $ | 1,325 | | | $ | 1,218 | | | $ | 1,097 | | | |
| | | | | 1,218 | | | 1,097 | | | |
| RumbleOn, Inc. | | Automotive Retail | | | | | | | |
First Lien Term Loan, LIBOR+8.25% cash due 8/31/2026 | 11.92 | % | | 37,656 | | | 35,775 | | | 36,187 | | | (6)(11)(15) |
First Lien Delayed Draw Term Loan, LIBOR+8.25% cash due 8/31/2026 | 11.92 | % | | 11,393 | | | 10,583 | | | 10,760 | | | (6)(11)(15)(19) |
164,660 Class B Common Stock Warrants (exercise price $33.00) expiration date 2/28/2023 | | | | | 1,202 | | | 74 | | | (11)(15) |
| | | | | 47,560 | | | 47,021 | | | |
| Sabert Corporation | | Metal & Glass Containers | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026 | 7.63 | % | | 1,691 | | | 1,610 | | | 1,623 | | | (6) |
| | | | | 1,610 | | | 1,623 | | | |
| ShareThis, Inc. | | Application Software | | | | | | | |
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024 | | | | | 367 | | | — | | | (15) |
| | | | | 367 | | | — | | | |
| SiO2 Medical Products, Inc. | | Metal & Glass Containers | | | | | | | |
First Lien Term Loan, 5.50% cash 8.50% PIK due 12/21/2026 | | | 46,121 | | | 45,413 | | | 45,295 | | | (15) |
415.34 Common Stock Warrants (exercise price $4,920.75) expiration date 7/31/2028 | | | | | 681 | | | 681 | | | (15) |
| | | | | 46,094 | | | 45,976 | | | |
| SM Wellness Holdings, Inc. | | Health Care Services | | | | | | | |
Second Lien Term Loan, LIBOR+8.00% cash due 4/16/2029 | 10.74 | % | | 9,109 | | | 8,972 | | | 8,289 | | | (6)(15) |
| | | | | 8,972 | | | 8,289 | | | |
| SonicWall US Holdings Inc. | | Technology Distributors | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 5/18/2026 | 10.48 | % | | 3,195 | | | 3,163 | | | 2,997 | | | (6)(15) |
| | | | | 3,163 | | | 2,997 | | | |
| Sorrento Therapeutics, Inc. | | Biotechnology | | | | | | | |
50,000 Common Stock Units | | | | | 197 | | | 79 | | | (11) |
| | | | | 197 | | | 79 | | | |
| Spanx, LLC | | Apparel Retail | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 11/20/2028 | 8.30 | % | | 4,534 | | | 4,455 | | | 4,427 | | | (6)(15) |
First Lien Revolver, LIBOR+5.25% cash due 11/18/2027 | 8.03 | % | | 866 | | | 813 | | | 796 | | | (6)(15)(19) |
| | | | | 5,268 | | | 5,223 | | | |
| SPX Flow, Inc. | | Industrial Machinery | | | | | | | |
First Lien Term Loan, SOFR+4.50% cash due 4/5/2029 | 7.63 | % | | 1,500 | | | 1,410 | | | 1,393 | | | (6) |
| | | | | 1,410 | | | 1,393 | | | |
| SumUp Holdings Luxembourg S.À.R.L. | | Other Diversified Financial Services | | | | | | | |
First Lien Term Loan, EURIBOR+8.50% cash due 3/10/2026 | 10.00 | % | | € | 16,911 | | | 19,414 | | | 16,360 | | | (6)(11)(15) |
| | | | | 19,414 | | | 16,360 | | | |
| Sunland Asphalt & Construction, LLC | | Construction & Engineering | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/13/2026 | 8.88 | % | | $ | 42,618 | | | 41,654 | | | 41,723 | | | (6)(15) |
| | | | | 41,654 | | | 41,723 | | | |
| Supermoose Borrower, LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 7.42 | % | | 3,466 | | | 3,141 | | | 3,056 | | | (6) |
| | | | | 3,141 | | | 3,056 | | | |
| SVP-Singer Holdings Inc. | | Home Furnishings | | | | | | | |
First Lien Term Loan, LIBOR+6.75% cash due 7/28/2028 | 10.42 | % | | 20,766 | | | 19,550 | | | 18,188 | | | (6)(15) |
| | | | | 19,550 | | | 18,188 | | | |
| Swordfish Merger Sub LLC | | Auto Parts & Equipment | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026 | 9.81 | % | | 12,500 | | | 12,474 | | | 11,469 | | | (6)(15) |
| | | | | 12,474 | | | 11,469 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Tacala, LLC | | Restaurants | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/2028 | 10.62 | % | | $ | 9,448 | | | $ | 9,338 | | | $ | 8,692 | | | (6) |
| | | | | 9,338 | | | 8,692 | | | |
| Tahoe Bidco B.V. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 9/29/2028 | 8.68 | % | | 23,215 | | | 22,815 | | | 22,843 | | | (6)(11)(15) |
First Lien Revolver, LIBOR+6.00% cash due 10/1/2027 | | | — | | | (29) | | | (28) | | | (6)(11)(15)(19) |
| | | | | 22,786 | | | 22,815 | | | |
| Tecta America Corp. | | Construction & Engineering | | | | | | | |
Second Lien Term Loan, LIBOR+8.50% cash due 4/9/2029 | 11.62 | % | | 5,203 | | | 5,125 | | | 5,034 | | | (6)(15) |
| | | | | 5,125 | | | 5,034 | | | |
| Telestream Holdings Corporation | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+9.25% cash due 10/15/2025 | 12.11 | % | | 18,323 | | | 17,956 | | | 17,865 | | | (6)(15) |
First Lien Revolver, SOFR+9.25% cash due 10/15/2025 | 12.20 | % | | 1,231 | | | 1,210 | | | 1,187 | | | (6)(15)(19) |
| | | | | 19,166 | | | 19,052 | | | |
| TerSera Therapeutics LLC | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, LIBOR+9.50% cash due 3/30/2026 | 13.17 | % | | 29,663 | | | 29,352 | | | 29,031 | | | (6)(15) |
668,879 Common Units of TerSera Holdings LLC | | | | | 2,028 | | | 4,077 | | | (15) |
| | | | | 31,380 | | | 33,108 | | | |
| TGNR HoldCo LLC | | Integrated Oil & Gas | | | | | | | |
Subordinated Debt, 11.50% cash due 5/14/2026 | | | 4,984 | | | 4,866 | | | 4,872 | | | (10)(11)(15) |
| | | | | 4,866 | | | 4,872 | | | |
| Thrasio, LLC | | Internet & Direct Marketing Retail | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 12/18/2026 | 11.17 | % | | 37,494 | | | 36,569 | | | 35,807 | | | (6)(15) |
8,434 Shares of Series C-3 Preferred Stock in Thrasio Holdings, Inc. | | | | | 101 | | | 69 | | | (15) |
284,650.32 Shares of Series C-2 Preferred Stock in Thrasio Holdings, Inc. | | | | | 2,409 | | | 2,320 | | | (15) |
48,352 Shares of Series D Preferred Stock in Thrasio Holdings, Inc. | | | | | 979 | | | 979 | | | (15) |
23,201 Shares of Series X Preferred Stock in Thrasio Holdings, Inc. | | | | | 22,986 | | | 26,487 | | | (15)(19) |
| | | | | 63,044 | | | 65,662 | | | |
| TIBCO Software Inc. | | Application Software | | | | | | | |
First Lien Term Loan, SOFR+4.50% cash due 3/20/2029 | 8.15 | % | | 12,032 | | | 10,949 | | | 10,827 | | | (6) |
| | | | | 10,949 | | | 10,827 | | | |
| Touchstone Acquisition, Inc. | | Health Care Supplies | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 12/29/2028 | 9.12 | % | | 6,016 | | | 5,908 | | | 5,895 | | | (6)(15) |
| | | | | 5,908 | | | 5,895 | | | |
| Uniti Group LP | | Specialized REITs | | | | | | | |
Fixed Rate Bond, 6.50% cash due 2/15/2029 | | | 4,500 | | | 4,060 | | | 3,026 | | | (11) |
Fixed Rate Bond, 4.75% cash due 4/15/2028 | | | 300 | | | 258 | | | 238 | | | (11) |
| | | | | 4,318 | | | 3,264 | | | |
| Win Brands Group LLC | | Housewares & Specialties | | | | | | | |
First Lien Term Loan, LIBOR+15.00% cash due 1/22/2026 | 19.64 | % | | 2,316 | | | 2,293 | | | 2,264 | | | (6)(15) |
3,621 Class F Warrants in Brand Value Growth LLC (exercise price $0.01) expiration date 1/25/2027 | | | | | — | | | 192 | | | (15) |
| | | | | 2,293 | | | 2,456 | | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) | | Cost | | Fair Value | | Notes |
| Windstream Services II, LLC | | Integrated Telecommunication Services | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 9/21/2027 | 9.37 | % | | $ | 25,499 | | | $ | 24,632 | | | $ | 23,204 | | | (6) |
18,032 Shares of Common Stock in Windstream Holdings II, LLC | | | | | 216 | | | 296 | | | (15) |
109,420 Warrants in Windstream Holdings II, LLC | | | | | 1,842 | | | 1,799 | | | (15) |
| | | | | 26,690 | | | 25,299 | | | |
| WP CPP Holdings, LLC | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025 | 6.56 | % | | 7,564 | | | 6,989 | | | 6,795 | | | (6) |
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 10.56 | % | | 6,000 | | | 5,855 | | | 5,070 | | | (6)(15) |
| | | | | 12,844 | | | 11,865 | | | |
| WPEngine, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 3/27/2026 | 10.19 | % | | 40,536 | | | 39,947 | | | 40,131 | | | (6)(15) |
| | | | | 39,947 | | | 40,131 | | | |
| WWEX Uni Topco Holdings, LLC | | Air Freight & Logistics | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 7/26/2029 | 10.67 | % | | 5,000 | | | 4,925 | | | 4,538 | | | (6)(15) |
| | | | | 4,925 | | | 4,538 | | | |
| Zayo Group Holdings, Inc. | | Alternative Carriers | | | | | | | |
Fixed Rate Bond, 4.00% cash due 3/1/2027 | | | 250 | | | 212 | | | 201 | | | |
| | | | | 212 | | | 201 | | | |
| Zep Inc. | | Specialty Chemicals | | | | | | | |
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025 | 11.92 | % | | 19,578 | | | 19,542 | | | 16,152 | | | (6)(15) |
| | | | | 19,542 | | | 16,152 | | | |
| Zephyr Bidco Limited | | Specialized Finance | | | | | | | |
Second Lien Term Loan, SONIA+7.50% cash due 7/23/2026 | 9.72 | % | | £ | 18,000 | | | 23,804 | | | 16,552 | | | (6)(11)(15) |
| | | | | 23,804 | | | 16,552 | | | |
Total Non-Control/Non-Affiliate Investments (180.9% of net assets) | | | | | $ | 2,330,096 | | | $ | 2,253,750 | | | |
Total Portfolio Investments (200.2% of net assets) | | | | | $ | 2,617,754 | | | $ | 2,494,111 | | | |
| Cash and Cash Equivalents and Restricted Cash | | | | | | | | | |
JP Morgan Prime Money Market Fund, Institutional Shares | | | | | $ | 5,261 | | | $ | 5,261 | | | |
Other cash accounts | | | | | 21,103 | | | 21,103 | | | |
Total Cash and Cash Equivalents and Restricted Cash (2.1% of net assets) | | | | | $ | 26,364 | | | $ | 26,364 | | | |
Total Portfolio Investments and Cash and Cash Equivalents and Restricted Cash (202.4% of net assets) | | | | | $ | 2,644,118 | | | $ | 2,520,475 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Instrument | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Counterparty | | Cumulative Unrealized Appreciation /(Depreciation) |
| Foreign currency forward contract | | $ | 43,179 | | | € | 41,444 | | | 11/10/2022 | | JPMorgan Chase Bank, N.A. | | $ | 2,466 | |
| Foreign currency forward contract | | $ | 45,692 | | | £ | 37,033 | | | 11/10/2022 | | JPMorgan Chase Bank, N.A. | | 4,323 | |
| | | | | | | | | | $ | 6,789 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Instrument | | Company Receives | | Company Pays | | Counterparty | | Maturity Date | | Notional Amount | | Fair Value |
| Interest rate swap | | Fixed 2.7% | | Floating 3-month LIBOR +1.658% | | Royal Bank of Canada | | 1/15/2027 | | $350,000 | | $(41,969) |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2022
(dollar amounts in thousands)
(1)All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)Each of the Company's investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.
(6)The interest rate on the principal balance outstanding for most of the floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans may also be indexed to SOFR or SONIA. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over the reference rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2022, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 3.12%, the 90-day LIBOR at 3.67%, the 180-day LIBOR at 4.17%, the 360-day LIBOR at 4.78%, the PRIME at 6.25%, the 30-day SOFR at 3.03%, the 90-day SOFR at 3.55%, the SONIA at 1.69%, the 30-day EURIBOR at 0.69%, the 90-day EURIBOR at 0.99% and the 180-day EURIBOR at 0.38%. Most loans include an interest floor, which generally ranges from 0% to 1%. SOFR and SONIA based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(7)Principal includes accumulated PIK interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)Control Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" these portfolio companies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the year ended September 30, 2022 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)This investment represents a participation interest in the underlying securities shown.
(11)Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2022, qualifying assets represented 75.7% of the Company's total assets and non-qualifying assets represented 24.3% of the Company's total assets.
(12)Income producing through payment of dividends or distributions.
(13)One half of the Seller Earn Out Shares will vest if, at any time through June 16, 2027, the Alvotech SA common share price is at or above a VWAP of $15.00 per share for any ten trading days within any twenty trading day period, and the other half will vest, if at any time during such period, the common share price is at or above a VWAP of $20.00 per share for any ten trading days within any twenty trading day period.
(14)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)As of September 30, 2022, these investments were categorized as Level 3 within the fair value hierarchy established by FASB guidance under ASC 820.
(16)This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.
(17)Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)This investment was renamed during the three months ended March 31, 2022. For periods prior to March 31, 2022, this investment was referenced as Realfi Strategic Capital Funding LLC.
See notes to Consolidated Financial Statements.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 1. Organization
Oaktree Specialty Lending Corporation (together with its consolidated subsidiaries, the "Company") is a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company was formed in late 2007 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for U.S. federal income tax purposes.
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, bonds, preferred equity and certain equity co-investments. The Company may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions.
The Company is externally managed by Oaktree Fund Advisors, LLC ("Oaktree"), pursuant to an investment advisory agreement between the Company and Oaktree (as amended and restated, the "Investment Advisory Agreement"). Oaktree is an affiliate of Oaktree Capital Management, L.P. ("OCM"), the Company's external investment adviser from October 17, 2017 through May 3, 2020. Oaktree Fund Administration, LLC ("Oaktree Administrator"), a subsidiary of OCM, provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement between the Company and Oaktree Administrator (the "Administration Agreement"). See Note 10. In 2019, Brookfield Corporation (f/k/a Brookfield Asset Management Inc.) ("Brookfield") acquired a majority economic interest in Oaktree Capital Group, LLC. Oaktree and its affiliates operate as an independent business within Brookfield, with their own product offerings and investment, marketing and support teams.
On March 19, 2021, the Company acquired Oaktree Strategic Income Corporation (“OCSI”), pursuant to that certain Agreement and Plan of Merger (the “OCSI Merger Agreement”), dated as of October 28, 2020, by and among OCSI, the Company, Lion Merger Sub, Inc., a wholly-owned subsidiary of the Company, and, solely for the limited purposes set forth therein, Oaktree. Pursuant to the OCSI Merger Agreement, OCSI was merged with and into the Company in a two-step transaction, with the Company as the surviving company (the "OCSI Merger”).
On January 23, 2023, the Company acquired Oaktree Strategic Income II, Inc. (“OSI2”) pursuant to that certain Agreement and Plan of Merger (the “OSI2 Merger Agreement”), dated as of September 14, 2022, by and among OSI2, the Company, Project Superior Merger Sub, Inc., a wholly-owned subsidiary of the Company, and, solely for the limited purposes set forth therein, Oaktree. Pursuant to the OSI2 Merger Agreement, OSI2 was merged with and into the Company in a two-step transaction with the Company as the surviving company (the “OSI2 Merger”). See Note 14.
Note 2. Significant Accounting Policies
Basis of Presentation:
The Consolidated Financial Statements of the Company have been prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. The Company is an investment company following the accounting and reporting guidance in ASC Topic 946, Financial Services - Investment Companies ("ASC 946").
Certain prior period amounts have been reclassified to conform to the current period presentation. All per share amounts and common shares outstanding as of and for the three months ended December 31, 2022 and all prior periods reflect the Company's 1-for-3 reverse stock split completed on January 20, 2023 and effective as of the commencement of trading on January 23, 2023.
Use of Estimates:
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Consolidation:
The accompanying Consolidated Financial Statements include the accounts of Oaktree Specialty Lending Corporation and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain subsidiaries that hold investments are treated as pass through entities for U.S. federal income tax purposes. The assets of certain of the consolidated subsidiaries are not directly available to satisfy the claims of the creditors of Oaktree Specialty Lending Corporation or any of its other subsidiaries.
As an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements but rather are included on the Statements of Assets and Liabilities as investments at fair value.
Fair Value Measurements:
The Company values its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
•Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•Level 3 — Unobservable inputs that reflect Oaktree's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Oaktree's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of the Company's investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
Oaktree seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If Oaktree is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within Oaktree's set threshold, Oaktree seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, Oaktree does not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, Oaktree values such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that the Company is deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. Oaktree may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and Oaktree considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, Oaktree depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
Oaktree estimates the fair value of certain privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
Rule 2a-5 under the Investment Company Act permits boards of directors of registered investment companies and Business Development Companies to either (i) choose to determine fair value in good faith or (ii) designate a valuation designee tasked with determining fair value in good faith, subject to the board’s oversight. The Company's Board of Directors has designated Oaktree to serve as its valuation designee effective September 8, 2022.
Oaktree undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:
•The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree's valuation team;
•Preliminary valuations are then reviewed and discussed with management of Oaktree;
•Separately, independent valuation firms prepare valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to Oaktree;
•Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
•The Audit Committee reviews the valuation report with Oaktree, and Oaktree responds and supplements the valuation report to reflect any discussions between Oaktree and the Audit Committee; and
•Oaktree, as valuation designee, determines the fair value of each investment in the Company's portfolio.
The fair value of the Company's investments as of December 31, 2022 and September 30, 2022 was determined by Oaktree, as the Company's valuation designee. The Company has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of its portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
With the exception of the line items entitled "deferred financing costs," "deferred offering costs," "other assets," "deferred tax asset, net," "credit facilities payable" and "unsecured notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statements of Assets and Liabilities. The carrying value of the line items titled "interest, dividends and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "due from broker," "accounts payable, accrued expenses and other liabilities," "base management fee and incentive fee payable," "due to affiliate," "interest payable" and "payables from unsettled transactions" approximate fair value due to their short maturities.
Foreign Currency Translation:
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the prevailing foreign exchange rate on the reporting date. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Derivative Instruments:
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to reduce the Company's exposure to fluctuations in the value of foreign currencies. In a foreign currency forward contract, the Company agrees to receive or deliver a fixed quantity of one currency for another at a pre-determined price at a future date. Foreign currency forward contracts are marked-to-market at the applicable forward rate. Unrealized appreciation (depreciation) on foreign currency forward contracts is recorded within derivative assets or derivative liabilities on the Consolidated Statements of Assets and Liabilities by counterparty on a net basis, not taking into account collateral posted which is recorded separately, if applicable. Purchases and settlements of foreign currency forward contracts having the same settlement date and counterparty are generally settled net and any realized gains or losses are recognized on the settlement date. The Company does not utilize hedge accounting with respect to foreign currency forward contracts and as such, the Company recognizes its foreign currency forward contracts at fair value with changes included in the net unrealized appreciation (depreciation) on the Consolidated Statements of Operations.
Interest Rate Swaps
The Company uses an interest rate swap to hedge some of the Company's fixed rate debt. The Company designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship, and therefore the periodic payments are recognized as components of interest expense in the Consolidated Statements of Operations. Depending on the nature of the balance at period end, the fair value of the interest rate swap is either included as a derivative asset or derivative liability on the Company's Consolidated Statements of Assets and Liabilities. The change in fair value of the interest rate swap is offset by a change in the carrying value of the fixed rate debt. Any amounts paid to the counterparty to cover collateral obligations under the terms of the interest rate swap agreement are included in due from broker on the Company's Consolidated Statements of Assets and Liabilities.
Investment Income:
Interest Income
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash and the portfolio
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
company, in management’s judgment, is likely to continue timely payment of its remaining obligations. As of each of December 31, 2022 and September 30, 2022, there were no investments on non-accrual status.
In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
PIK Interest Income
The Company's investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company's assessment of the portfolio company's business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. The Company's determination to cease accruing PIK interest is generally made well before the Company's full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by the Company to Oaktree. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s stockholders, even though the Company has not yet collected the cash and may never do so.
Fee Income
Oaktree or its affiliates may provide financial advisory services to portfolio companies and, in return, the Company may receive fees for capital structuring services. These fees are generally non-recurring and are recognized by the Company upon the investment closing date. The Company may also receive additional fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are typically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
The Company generally recognizes dividend income on the ex-dividend date for public securities and the record date for private equity investments. Distributions received from private equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from private equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents consist of demand deposits and highly liquid investments with maturities of three months or less when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and cash equivalents are included on the Company's Consolidated Schedule of Investments and cash equivalents are classified as Level 1 assets.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
As of December 31, 2022 and September 30, 2022, included in restricted cash was $1.9 million and $2.8 million, respectively, that was held at Wells Fargo Bank, N.A. in connection with the Citibank Facility (as defined in Note 6. Borrowings). Pursuant to the terms of the Citibank Facility, the Company was restricted in terms of access to $1.9 million and $2.8 million as of December 31, 2022 and September 30, 2022, respectively, until the occurrence of the periodic distribution dates and, in connection therewith, the Company’s submission of its required periodic reporting schedules and verifications of the Company’s compliance with the terms of the Citibank Facility.
Due from Portfolio Companies:
Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, including proceeds from the sale of portfolio companies not yet received or being held in escrow and excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).
Receivables/Payables from Unsettled Transactions:
Receivables/payables from unsettled transactions consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset when incurred. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability when incurred. Deferred financing costs are amortized using the effective interest method over the term of the respective debt arrangement. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense. For extinguishments of the Company’s unsecured notes payable, any unamortized deferred financing costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.
Deferred Offering Costs:
Legal fees and other costs incurred in connection with the Company’s shelf registration statement are capitalized as deferred offering costs in the Consolidated Statements of Assets and Liabilities. To the extent any such costs relate to equity offerings, these costs are charged as a reduction of capital upon utilization. To the extent any such costs relate to debt offerings, these costs are treated as deferred financing costs and are amortized over the term of the respective debt arrangement. Any deferred offering costs that remain at the expiration of the shelf registration statement or when it becomes probable that an offering will not be completed are expensed.
Income Taxes:
The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to U.S. federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income within the tax rules under Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar year 2021. For the calendar year 2022, the Company incurred $0.1 million of excise tax. The Company does not expect to incur a U.S. federal excise tax for calendar year 2023.
The Company holds certain portfolio investments through taxable subsidiaries. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s Consolidated Financial
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more-likely-than-not" to be sustained assuming examination by tax authorities. Management has analyzed the Company's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2019, 2020 and 2021. The Company identifies its major tax jurisdictions as U.S. Federal and California, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Recently Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31, 2022. As of December 31, 2022, the adoption of this guidance did not have an impact on the Company's Consolidated Financial Statements.
Note 3. Portfolio Investments
As of December 31, 2022, 219.9% of net assets at fair value, or $2.6 billion, was invested in 156 portfolio companies, including (i) $136.8 million in subordinated notes and limited liability company ("LLC") equity interests of Senior Loan Fund JV I, LLC ("SLF JV I"), a joint venture through which the Company and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation ("Kemper"), co-invest in senior secured loans of middle-market companies and other corporate debt securities and (ii) $49.5 million in subordinated notes and LLC equity interests of OCSI Glick JV LLC ("Glick JV" and, together with SLF JV I, the "JVs"), a joint venture through which the Company and GF Equity Funding 2014 LLC ("GF Equity Funding") co-invest primarily in senior secured loans of middle-market companies. As of December 31, 2022, 1.6% of net assets at fair value, or $19.2 million, was invested in cash and cash equivalents (including $1.9 million of restricted cash). In comparison, as of September 30, 2022, 200.2% of net assets at fair value, or $2.5 billion, was invested in 149 portfolio investments, including (i) $117.0 million in subordinated notes and LLC equity interests of SLF JV I and (ii) $50.3 million in subordinated notes and LLC equity interests of Glick JV. As of September 30, 2022, 2.1% of net assets at fair value, or $26.4 million, was invested in cash and cash equivalents (including $2.8 million of restricted cash). As of December 31, 2022, 86.3% of the Company's portfolio at fair value consisted of senior secured debt investments and 8.5% consisted of subordinated debt investments, including the debt investments in the JVs. As of September 30, 2022, 86.9% of the Company's portfolio at fair value consisted of senior secured debt investments and 8.1% consisted of subordinated debt investments, including the debt investments in the JVs.
The Company also held equity investments in certain of its portfolio companies consisting of common stock, preferred stock, warrants, limited partnership interests or LLC equity interests. These instruments generally do not produce a current return but are held for potential investment appreciation and capital gain.
During the three months ended December 31, 2022 and 2021, the Company recorded net realized gains (losses) of $(3.2) million and $9.3 million, respectively. During the three months ended December 31, 2022 and 2021, the Company recorded net unrealized depreciation of $23.0 million and $4.6 million, respectively.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The composition of the Company's investments as of December 31, 2022 and September 30, 2022 at cost and fair value was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | September 30, 2022 |
| | | Cost | | Fair Value | | Cost | | Fair Value |
| Investments in debt securities | | $ | 2,428,251 | | | $ | 2,343,380 | | | $ | 2,294,392 | | | $ | 2,223,329 | |
| Investments in equity securities | | 132,355 | | | 113,190 | | | 127,596 | | | 103,534 | |
| Debt investments in the JVs | | 162,617 | | | 162,192 | | | 146,444 | | | 146,533 | |
| Equity investments in the JVs | | 54,791 | | | 24,108 | | | 49,322 | | | 20,715 | |
| Total | | $ | 2,778,014 | | | $ | 2,642,870 | | | $ | 2,617,754 | | | $ | 2,494,111 | |
The following table presents the composition of the Company's debt investments as of December 31, 2022 and September 30, 2022 at fixed rates and floating rates: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | September 30, 2022 |
| | | Fair Value | | % of Debt
Portfolio | | Fair Value | | % of Debt
Portfolio |
| Floating rate debt securities, including the debt investments in the JVs | | $ | 2,188,193 | | | 87.33 | % | | $ | 2,049,644 | | | 86.49 | % |
| Fixed rate debt securities | | 317,379 | | | 12.67 | | | 320,218 | | | 13.51 | |
| Total | | $ | 2,505,572 | | | 100.00 | % | | $ | 2,369,862 | | | 100.00 | % |
The following table presents the financial instruments carried at fair value as of December 31, 2022 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Measured at Net Asset Value (a) | | Total |
| Investments in debt securities (senior secured) | | $ | — | | | $ | 233,393 | | | $ | 2,047,842 | | | $ | — | | | $ | 2,281,235 | |
| Investments in debt securities (subordinated, including the debt investments in the JVs) | | — | | | 44,706 | | | 179,631 | | | — | | | 224,337 | |
| Investments in equity securities (preferred) | | — | | | — | | | 80,625 | | | — | | | 80,625 | |
| Investments in equity securities (common and warrants, including LLC equity interests of the JVs) | | 5,923 | | | — | | | 26,642 | | | 24,108 | | | 56,673 | |
| Total investments at fair value | | 5,923 | | | 278,099 | | | 2,334,740 | | | 24,108 | | | 2,642,870 | |
Cash equivalents | | 3,421 | | | — | | | — | | | — | | | 3,421 | |
Total assets at fair value | | $ | 9,344 | | | $ | 278,099 | | | $ | 2,334,740 | | | $ | 24,108 | | | $ | 2,646,291 | |
| Derivative liability | | $ | — | | | $ | 44,139 | | | $ | — | | | $ | — | | | $ | 44,139 | |
| Total liabilities at fair value | | $ | — | | | $ | 44,139 | | | $ | — | | | $ | — | | | $ | 44,139 | |
__________
(a)In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table presents the financial instruments carried at fair value as of September 30, 2022 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Measured at Net Asset Value (a) | | Total |
| Investments in debt securities (senior secured) | | $ | — | | | $ | 255,803 | | | $ | 1,910,606 | | | $ | — | | | $ | 2,166,409 | |
| Investments in debt securities (subordinated, including the debt investments in the JVs) | | — | | | 44,065 | | | 159,388 | | | — | | | 203,453 | |
| Investments in equity securities (preferred) | | — | | | — | | | 79,523 | | | — | | | 79,523 | |
| Investments in equity securities (common and warrants, including LLC equity interests of the JVs) | | 4,053 | | | — | | | 19,958 | | | 20,715 | | | 44,726 | |
| Total investments at fair value | | 4,053 | | | 299,868 | | | 2,169,475 | | | 20,715 | | | 2,494,111 | |
Cash equivalents | | 5,261 | | | — | | | — | | | — | | | 5,261 | |
| Derivative assets | | — | | | 6,789 | | | — | | | — | | | 6,789 | |
Total assets at fair value | | $ | 9,314 | | | $ | 306,657 | | | $ | 2,169,475 | | | $ | 20,715 | | | $ | 2,506,161 | |
| Derivative liability | | $ | — | | | $ | 41,969 | | | $ | — | | | $ | — | | | $ | 41,969 | |
| Total liabilities at fair value | | $ | — | | | $ | 41,969 | | | $ | — | | | $ | — | | | $ | 41,969 | |
__________
(a)In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically have both unobservable or Level 3 components and observable components (i.e. components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology. Transfers between levels are recognized at the beginning of the reporting period.
The following table provides a roll-forward in the changes in fair value from September 30, 2022 to December 31, 2022 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investments |
| | Senior Secured Debt | | Subordinated
Debt (including debt investments in the JVs) | | Preferred
Equity | | Common
Equity and Warrants | | Total |
| Fair value as of September 30, 2022 | | $ | 1,910,606 | | | $ | 159,388 | | | $ | 79,523 | | | $ | 19,958 | | | $ | 2,169,475 | |
| Purchases | | 177,599 | | | 21,104 | | | 2,579 | | | 2,181 | | | 203,463 | |
| Sales and repayments | | (55,885) | | | (699) | | | — | | | (48) | | | (56,632) | |
| Transfers in (a) | | 19,075 | | | — | | | — | | | — | | | 19,075 | |
| Capitalized PIK interest income | | 5,763 | | | 6 | | | — | | | — | | | 5,769 | |
| Accretion of OID | | 4,114 | | | 398 | | | — | | | — | | | 4,512 | |
| Net unrealized appreciation (depreciation) | | (12,271) | | | (566) | | | (1,477) | | | 4,505 | | | (9,809) | |
| Net realized gains (losses) | | (1,159) | | | — | | | — | | | 46 | | | (1,113) | |
| Fair value as of December 31, 2022 | | $ | 2,047,842 | | | $ | 179,631 | | | $ | 80,625 | | | $ | 26,642 | | | $ | 2,334,740 | |
| Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of December 31, 2022 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended December 31, 2022 | | $ | (12,398) | | | $ | (566) | | | $ | (1,477) | | | $ | 4,505 | | | $ | (9,936) | |
__________
(a) There was a transfer into Level 3 from Level 2 for an investment during the three months ended December 31, 2022 as a result of a change in the number of market quotes available and/or a change in market liquidity.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table provides a roll-forward in the changes in fair value from September 30, 2021 to December 31, 2021 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investments |
| | Senior Secured Debt | | Subordinated
Debt (including debt investments in the JVs) | | Preferred
Equity | | Common
Equity and Warrants | | Total |
| Fair value as of September 30, 2021 | | $ | 1,878,536 | | | $ | 176,317 | | | $ | 63,565 | | | $ | 43,163 | | | $ | 2,161,581 | |
| Purchases | | 191,087 | | | 3,589 | | | 979 | | | 1,441 | | | 197,096 | |
| Sales and repayments | | (131,946) | | | (20,185) | | | — | | | (6,503) | | | (158,634) | |
| Transfers in (a) | | 3,178 | | | — | | | — | | | — | | | 3,178 | |
| Transfers out (a) | | (17,070) | | | — | | | — | | | — | | | (17,070) | |
| Capitalized PIK interest income | | 6,172 | | | 313 | | | — | | | — | | | 6,485 | |
| Accretion of OID | | 5,378 | | | 819 | | | — | | | — | | | 6,197 | |
| Net unrealized appreciation (depreciation) | | (9,877) | | | 516 | | | 1,006 | | | 6,636 | | | (1,719) | |
| Net realized gains (losses) | | 8,638 | | | — | | | — | | | (2,795) | | | 5,843 | |
| Fair value as of December 31, 2021 | | $ | 1,934,096 | | | $ | 161,369 | | | $ | 65,550 | | | $ | 41,942 | | | $ | 2,202,957 | |
| Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of December 31, 2021 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended December 31, 2021 | | $ | (717) | | | $ | 368 | | | $ | 1,006 | | | $ | 1,139 | | | $ | 1,796 | |
__________
(a) There were transfers into/out of Level 3 from/to Level 2 for certain investments during the three months ended December 31, 2021 as a result of a change in the number of market quotes available and/or a change in market liquidity.
Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset | | Fair Value | | Valuation Technique | | Unobservable Input | | Range | | Weighted
Average (a) |
Senior Secured Debt | | $ | 1,692,264 | | | Market Yield | | Market Yield | | (b) | 9.0% | - | 33.0% | | 14.0% |
| | 14,297 | | | Enterprise Value | | EBITDA Multiple | | (c) | 5.0x | - | 7.0x | | 6.0x |
| | 38,581 | | | Transaction Precedent | | Transaction Price | | (d) | N/A | - | N/A | | N/A |
| | 302,700 | | | Broker Quotations | | Broker Quoted Price | | (e) | N/A | - | N/A | | N/A |
Subordinated Debt | | 13,706 | | | Market Yield | | Market Yield | | (b) | 10.0% | - | 20.0% | | 11.4% |
| | 3,733 | | | Broker Quotations | | Broker Quoted Price | | (e) | N/A | - | N/A | | N/A |
| Debt Investments in the JVs | | 162,192 | | | Enterprise Value | | N/A | | (f) | N/A | - | N/A | | N/A |
| Preferred & Common Equity | | 30,226 | | | Enterprise Value | | Revenue Multiple | | (c) | 0.1x | - | 4.3x | | 0.5x |
| | 73,822 | | | Enterprise Value | | EBITDA Multiple | | (c) | 3.0x | - | 20.0x | | 14.6x |
| | 1,600 | | | Enterprise Value | | Asset Multiple | | (c) | 0.9x | - | 1.1x | | 1.0x |
| | 1,619 | | | Transaction Precedent | | Transaction Price | | (d) | N/A | - | N/A | | N/A |
| Total | | $ | 2,334,740 | | | | | | | | | | | | |
__________
(a)Weighted averages are calculated based on fair value of investments.
(b)Used when market participants would take into account market yield when pricing the investment.
(c)Used when market participants would use such multiples when pricing the investment.
(d)Used when there is an observable transaction or pending event for the investment.
(e)Oaktree generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated.
(f)Oaktree determined the value of its subordinated notes of each JV based on the total assets less the total liabilities senior to the subordinated notes held at such JV in an amount not exceeding par under the EV technique.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset | | Fair Value | | Valuation Technique | | Unobservable Input | | Range | | Weighted
Average (a) |
Senior Secured Debt | | $ | 1,599,148 | | | Market Yield | | Market Yield | | (b) | 9.0% | - | 30.0% | | 13.7% |
| | 14,333 | | | Enterprise Value | | EBITDA Multiple | | (c) | 5.0x | - | 7.0x | | 6.0x |
| | 297,125 | | | Broker Quotations | | Broker Quoted Price | | (e) | N/A | - | N/A | | N/A |
Subordinated Debt | | 12,855 | | | Market Yield | | Market Yield | | (b) | 10.0% | - | 19.0% | | 13.8% |
| Debt Investments in the JVs | | 146,533 | | | Enterprise Value | | N/A | | (f) | N/A | - | N/A | | N/A |
| Preferred & Common Equity | | 61,693 | | | Enterprise Value | | Revenue Multiple | | (c) | 0.4x | - | 10.1x | | 4.3x |
| | 36,913 | | | Enterprise Value | | EBITDA Multiple | | (c) | 3.0x | - | 20.0x | | 11.4x |
| | 3 | | | Enterprise Value | | Asset Multiple | | (c) | 0.9x | - | 1.1x | | 1.0x |
| | 872 | | | Transaction Precedent | | Transaction Price | | (d) | N/A | - | N/A | | N/A |
| Total | | $ | 2,169,475 | | | | | | | | | | | | |
__________ (a)Weighted averages are calculated based on fair value of investments.
(b)Used when market participants would take into account market yield when pricing the investment.
(c)Used when market participants would use such multiples when pricing the investment.
(d)Used when there is an observable transaction or pending event for the investment.
(e)Oaktree generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated.
(f)Oaktree determined the value of its subordinated notes of each JV based on the total assets less the total liabilities senior to the subordinated notes held at such JV in an amount not exceeding par under the EV technique.
Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
Under the EV technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities is the earnings before interest, taxes, depreciation and amortization ("EBITDA"), revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of December 31, 2022 and the level of each financial liability within the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying
Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Syndicated Facility payable | | $ | 695,000 | | | $ | 695,000 | | | $ | — | | | $ | — | | | $ | 695,000 | |
Citibank Facility payable | | 165,000 | | | 165,000 | | | — | | | — | | | 165,000 | |
| 2025 Notes payable (carrying value is net of unamortized financing costs and unaccreted discount) | | 297,303 | | | 286,734 | | | — | | | 286,734 | | | — | |
| 2027 Notes payable (carrying value is net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment) | | 306,321 | | | 296,835 | | | — | | | 296,835 | | | — | |
| Total | | $ | 1,463,624 | | | $ | 1,443,569 | | | $ | — | | | $ | 583,569 | | | $ | 860,000 | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of September 30, 2022 and the level of each financial liability within the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying
Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Syndicated Facility payable | | $ | 540,000 | | | $ | 540,000 | | | $ | — | | | $ | — | | | $ | 540,000 | |
Citibank Facility payable | | 160,000 | | | 160,000 | | | — | | | — | | | 160,000 | |
| 2025 Notes payable (carrying value is net of unamortized financing costs and unaccreted discount) | | 296,991 | | | 283,077 | | | — | | | 283,077 | | | — | |
| 2027 Notes payable (carrying value is net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment) | | 304,052 | | | 294,028 | | | — | | | 294,028 | | | — | |
| Total | | $ | 1,301,043 | | | $ | 1,277,105 | | | $ | — | | | $ | 577,105 | | | $ | 700,000 | |
The principal values of the credit facilities payable approximate fair value due to their variable interest rates and are included in Level 3 of the hierarchy. Oaktree used market quotes as of the valuation date to estimate the fair value of the Company's 3.500% notes due 2025 (the "2025 Notes") and 2.700% notes due 2027 (the "2027 Notes"), which are included in Level 2 of the hierarchy.
Portfolio Composition
Summaries of the composition of the Company's portfolio at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets are shown in the following tables:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | September 30, 2022 |
| Cost: | | | | % of Total Investments | | | | % of Total Investments |
| Senior secured debt | | $ | 2,359,295 | | | 84.94 | % | | $ | 2,227,245 | | | 85.08 | % |
| Debt investments in the JVs | | 162,617 | | | 5.85 | % | | 146,444 | | | 5.59 | % |
| Preferred equity | | 87,878 | | | 3.16 | % | | 85,300 | | | 3.26 | % |
| Subordinated debt | | 68,956 | | | 2.48 | % | | 67,147 | | | 2.57 | % |
| LLC equity interests of the JVs | | 54,791 | | | 1.97 | % | | 49,322 | | | 1.88 | % |
| Common equity and warrants | | 44,477 | | | 1.60 | % | | 42,296 | | | 1.62 | % |
| Total | | $ | 2,778,014 | | | 100.00 | % | | $ | 2,617,754 | | | 100.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | September 30, 2022 |
| Fair Value: | | | | % of Total Investments | | % of Net Assets | | | | % of Total Investments | | % of Net Assets |
| Senior secured debt | | $ | 2,281,235 | | | 86.32 | % | | 189.78 | % | | $ | 2,166,409 | | | 86.86 | % | | 173.93 | % |
| Debt investments in the JVs | | 162,192 | | | 6.14 | % | | 13.49 | % | | 146,533 | | | 5.88 | % | | 11.77 | % |
| Preferred equity | | 80,625 | | | 3.05 | % | | 6.71 | % | | 79,523 | | | 3.19 | % | | 6.38 | % |
| Subordinated debt | | 62,145 | | | 2.35 | % | | 5.17 | % | | 56,920 | | | 2.28 | % | | 4.57 | % |
| Common equity and warrants | | 32,565 | | | 1.23 | % | | 2.71 | % | | 24,011 | | | 0.96 | % | | 1.93 | % |
| LLC equity interests of the JVs | | 24,108 | | | 0.91 | % | | 2.01 | % | | 20,715 | | | 0.83 | % | | 1.66 | % |
| Total | | $ | 2,642,870 | | | 100.00 | % | | 219.87 | % | | $ | 2,494,111 | | | 100.00 | % | | 200.24 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business. The following tables show the composition of the Company's portfolio by geographic region at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | September 30, 2022 |
| Cost: | | | | % of Total Investments | | | | % of Total Investments |
| Northeast | | $ | 772,197 | | | 27.78 | % | | $ | 747,420 | | | 28.55 | % |
| Midwest | | 403,393 | | | 14.52 | % | | 373,236 | | | 14.26 | % |
| Southeast | | 397,717 | | | 14.32 | % | | 356,041 | | | 13.60 | % |
| West | | 351,871 | | | 12.67 | % | | 358,306 | | | 13.69 | % |
| International | | 350,510 | | | 12.62 | % | | 301,242 | | | 11.51 | % |
| Southwest | | 204,143 | | | 7.35 | % | | 221,308 | | | 8.45 | % |
| South | | 164,094 | | | 5.91 | % | | 168,819 | | | 6.45 | % |
| Northwest | | 134,089 | | | 4.83 | % | | 91,382 | | | 3.49 | % |
| Total | | $ | 2,778,014 | | | 100.00 | % | | $ | 2,617,754 | | | 100.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 | | September 30, 2022 |
| Fair Value: | | | | % of Total Investments | | % of Net Assets | | | | % of Total Investments | | % of Net Assets |
| Northeast | | $ | 716,827 | | | 27.12 | % | | 59.63 | % | | $ | 696,368 | | | 27.93 | % | | 55.90 | % |
| Midwest | | 384,219 | | | 14.54 | % | | 31.97 | % | | 356,934 | | | 14.31 | % | | 28.66 | % |
| Southeast | | 380,276 | | | 14.39 | % | | 31.64 | % | | 344,567 | | | 13.82 | % | | 27.66 | % |
| International | | 342,447 | | | 12.96 | % | | 28.49 | % | | 279,646 | | | 11.21 | % | | 22.45 | % |
| West | | 330,698 | | | 12.51 | % | | 27.51 | % | | 345,251 | | | 13.84 | % | | 27.72 | % |
| Southwest | | 195,818 | | | 7.41 | % | | 16.29 | % | | 214,984 | | | 8.62 | % | | 17.26 | % |
| South | | 160,150 | | | 6.06 | % | | 13.32 | % | | 166,230 | | | 6.66 | % | | 13.35 | % |
| Northwest | | 132,435 | | | 5.01 | % | | 11.02 | % | | 90,131 | | | 3.61 | % | | 7.24 | % |
| Total | | $ | 2,642,870 | | | 100.00 | % | | 219.87 | % | | $ | 2,494,111 | | | 100.00 | % | | 200.24 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following tables show the composition of the Company's portfolio by industry at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets as of December 31, 2022 and September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Cost: | | | | % of Total Investments | | | | % of Total Investments |
| Application Software | | $ | 435,165 | | | 15.66 | % | | $ | 391,938 | | | 14.98 | % |
| Multi-Sector Holdings (1) | | 229,676 | | | 8.27 | | | 195,766 | | | 7.48 | |
| Pharmaceuticals | | 131,307 | | | 4.73 | | | 126,508 | | | 4.83 | |
| Data Processing & Outsourced Services | | 118,058 | | | 4.25 | | | 120,477 | | | 4.60 | |
| Biotechnology | | 111,745 | | | 4.02 | | | 109,960 | | | 4.20 | |
| Health Care Technology | | 110,251 | | | 3.97 | | | 100,084 | | | 3.82 | |
| Specialized Finance | | 87,523 | | | 3.15 | | | 80,864 | | | 3.09 | |
| Industrial Machinery | | 81,483 | | | 2.93 | | | 81,787 | | | 3.12 | |
| Health Care Services | | 65,732 | | | 2.37 | | | 58,674 | | | 2.24 | |
| Internet & Direct Marketing Retail | | 65,585 | | | 2.36 | | | 67,926 | | | 2.59 | |
| Aerospace & Defense | | 61,993 | | | 2.23 | | | 61,963 | | | 2.37 | |
| Construction & Engineering | | 60,828 | | | 2.19 | | | 60,996 | | | 2.33 | |
| Health Care Distributors | | 58,320 | | | 2.10 | | | 57,112 | | | 2.18 | |
| Other Diversified Financial Services | | 57,241 | | | 2.06 | | | 29,300 | | | 1.12 | |
| Personal Products | | 53,190 | | | 1.91 | | | 53,214 | | | 2.03 | |
| Automotive Retail | | 51,663 | | | 1.86 | | | 59,254 | | | 2.26 | |
| Auto Parts & Equipment | | 51,067 | | | 1.84 | | | 12,474 | | | 0.48 | |
| Real Estate Operating Companies | | 49,980 | | | 1.80 | | | 47,585 | | | 1.82 | |
| Fertilizers & Agricultural Chemicals | | 49,271 | | | 1.77 | | | 49,301 | | | 1.88 | |
| Internet Services & Infrastructure | | 49,271 | | | 1.77 | | | 54,095 | | | 2.07 | |
| Metal & Glass Containers | | 47,128 | | | 1.70 | | | 47,704 | | | 1.82 | |
| Home Improvement Retail | | 45,266 | | | 1.63 | | | 45,802 | | | 1.75 | |
| Soft Drinks | | 43,935 | | | 1.58 | | | 34,272 | | | 1.31 | |
| Airport Services | | 43,748 | | | 1.57 | | | 43,322 | | | 1.65 | |
| Leisure Facilities | | 41,182 | | | 1.48 | | | 39,768 | | | 1.52 | |
| Insurance Brokers | | 39,268 | | | 1.41 | | | 35,628 | | | 1.36 | |
| Diversified Support Services | | 38,167 | | | 1.37 | | | 37,992 | | | 1.45 | |
| Specialty Chemicals | | 37,298 | | | 1.34 | | | 37,319 | | | 1.43 | |
| Health Care Supplies | | 36,693 | | | 1.32 | | | 36,471 | | | 1.39 | |
| Real Estate Services | | 36,233 | | | 1.30 | | | 40,243 | | | 1.54 | |
| Integrated Telecommunication Services | | 34,635 | | | 1.25 | | | 34,628 | | | 1.32 | |
| Electrical Components & Equipment | | 33,813 | | | 1.22 | | | 33,814 | | | 1.29 | |
| Advertising | | 27,507 | | | 0.99 | | | 28,245 | | | 1.08 | |
| Movies & Entertainment | | 26,202 | | | 0.94 | | | 26,161 | | | 1.00 | |
| Distributors | | 25,262 | | | 0.91 | | | 25,278 | | | 0.97 | |
| Airlines | | 24,034 | | | 0.87 | | | — | | | — | |
| Health Care Equipment | | 21,838 | | | 0.79 | | | 24,353 | | | 0.93 | |
| Environmental & Facilities Services | | 21,156 | | | 0.76 | | | 20,857 | | | 0.80 | |
| Oil & Gas Storage & Transportation | | 19,934 | | | 0.72 | | | 22,290 | | | 0.85 | |
| Home Furnishings | | 19,554 | | | 0.70 | | | 19,550 | | | 0.75 | |
| Systems Software | | 14,895 | | | 0.54 | | | 14,890 | | | 0.57 | |
| Consumer Finance | | 14,503 | | | 0.52 | | | 14,492 | | | 0.55 | |
| Hotels, Resorts & Cruise Lines | | 13,943 | | | 0.50 | | | 13,960 | | | 0.53 | |
| IT Consulting & Other Services | | 11,684 | | | 0.42 | | | 11,697 | | | 0.45 | |
| Restaurants | | 9,343 | | | 0.34 | | | 9,338 | | | 0.36 | |
| Education Services | | 9,070 | | | 0.33 | | | 9,080 | | | 0.35 | |
| Cable & Satellite | | 8,012 | | | 0.29 | | | 20,716 | | | 0.79 | |
| Research & Consulting Services | | 7,848 | | | 0.28 | | | 9,187 | | | 0.35 | |
| Apparel, Accessories & Luxury Goods | | 5,165 | | | 0.19 | | | 5,165 | | | 0.20 | |
| Air Freight & Logistics | | 4,925 | | | 0.18 | | | 7,295 | | | 0.28 | |
| Integrated Oil & Gas | | 4,873 | | | 0.18 | | | 4,866 | | | 0.19 | |
| Apparel Retail | | 4,727 | | | 0.17 | | | 5,268 | | | 0.20 | |
| Food Distributors | | 4,655 | | | 0.17 | | | 4,646 | | | 0.18 | |
| Specialized REITs | | 4,334 | | | 0.16 | | | 4,318 | | | 0.16 | |
| Real Estate Development | | 4,278 | | | 0.15 | | | — | | | — | |
| Diversified Banks | | 3,515 | | | 0.13 | | | 3,515 | | | 0.13 | |
| Technology Distributors | | 3,163 | | | 0.11 | | | 3,163 | | | 0.12 | |
| Construction Materials | | 2,353 | | | 0.08 | | | 2,331 | | | 0.09 | |
| Housewares & Specialties | | 2,217 | | | 0.08 | | | 2,293 | | | 0.09 | |
| Electronic Components | | 2,095 | | | 0.08 | | | 2,092 | | | 0.08 | |
| Alternative Carriers | | 214 | | | 0.01 | | | 212 | | | 0.01 | |
| Oil & Gas Refining & Marketing | | — | | | — | | | 8,627 | | | 0.33 | |
| Trading Companies & Distributors | | — | | | — | | | 7,628 | | | 0.29 | |
| | $ | 2,778,014 | | | 100.00 | % | | $ | 2,617,754 | | | 100.00 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Fair Value: | | | | % of Total Investments | | % of Net Assets | | | | % of Total Investments | | % of Net Assets |
| Application Software | | $ | 422,862 | | | 15.95 | % | | 35.18 | % | | $ | 384,589 | | | 15.43 | % | | 30.87 | % |
| Multi-Sector Holdings (1) | | 198,904 | | | 7.53 | | | 16.55 | | | 167,248 | | | 6.71 | | | 13.43 | |
| Pharmaceuticals | | 127,414 | | | 4.82 | | | 10.60 | | | 119,511 | | | 4.79 | | | 9.59 | |
| Biotechnology | | 115,489 | | | 4.37 | | | 9.61 | | | 108,465 | | | 4.35 | | | 8.71 | |
| Data Processing & Outsourced Services | | 106,224 | | | 4.02 | | | 8.84 | | | 111,335 | | | 4.46 | | | 8.94 | |
| Health Care Technology | | 103,479 | | | 3.92 | | | 8.61 | | | 97,315 | | | 3.90 | | | 7.81 | |
| Industrial Machinery | | 79,791 | | | 3.02 | | | 6.64 | | | 81,008 | | | 3.25 | | | 6.50 | |
| Specialized Finance | | 79,751 | | | 3.02 | | | 6.63 | | | 73,087 | | | 2.93 | | | 5.87 | |
| Internet & Direct Marketing Retail | | 66,001 | | | 2.50 | | | 5.49 | | | 70,419 | | | 2.82 | | | 5.65 | |
| Aerospace & Defense | | 61,490 | | | 2.33 | | | 5.12 | | | 61,881 | | | 2.48 | | | 4.97 | |
| Construction & Engineering | | 60,938 | | | 2.31 | | | 5.07 | | | 61,188 | | | 2.45 | | | 4.91 | |
| Health Care Distributors | | 54,898 | | | 2.08 | | | 4.57 | | | 54,662 | | | 2.19 | | | 4.39 | |
| Other Diversified Financial Services | | 54,080 | | | 2.05 | | | 4.50 | | | 24,326 | | | 0.98 | | | 1.95 | |
| Fertilizers & Agricultural Chemicals | | 52,292 | | | 1.98 | | | 4.35 | | | 51,972 | | | 2.08 | | | 4.17 | |
| Health Care Services | | 51,260 | | | 1.94 | | | 4.26 | | | 45,943 | | | 1.84 | | | 3.69 | |
| Automotive Retail | | 50,681 | | | 1.92 | | | 4.22 | | | 57,629 | | | 2.31 | | | 4.63 | |
| Real Estate Operating Companies | | 50,127 | | | 1.90 | | | 4.17 | | | 48,062 | | | 1.93 | | | 3.86 | |
| Auto Parts & Equipment | | 50,015 | | | 1.89 | | | 4.16 | | | 11,469 | | | 0.46 | | | 0.92 | |
| Internet Services & Infrastructure | | 48,973 | | | 1.85 | | | 4.07 | | | 53,797 | | | 2.16 | | | 4.32 | |
| Personal Products | | 48,903 | | | 1.85 | | | 4.07 | | | 50,150 | | | 2.01 | | | 4.03 | |
| Home Improvement Retail | | 45,127 | | | 1.71 | | | 3.75 | | | 45,421 | | | 1.82 | | | 3.65 | |
| Metal & Glass Containers | | 44,763 | | | 1.69 | | | 3.72 | | | 47,599 | | | 1.91 | | | 3.82 | |
| Soft Drinks | | 44,387 | | | 1.68 | | | 3.69 | | | 33,670 | | | 1.35 | | | 2.70 | |
| Airport Services | | 43,267 | | | 1.64 | | | 3.60 | | | 42,883 | | | 1.72 | | | 3.44 | |
| Leisure Facilities | | 40,578 | | | 1.54 | | | 3.38 | | | 39,258 | | | 1.57 | | | 3.15 | |
| Insurance Brokers | | 39,057 | | | 1.48 | | | 3.25 | | | 33,081 | | | 1.33 | | | 2.66 | |
| Health Care Supplies | | 37,776 | | | 1.43 | | | 3.14 | | | 36,577 | | | 1.47 | | | 2.94 | |
| Diversified Support Services | | 35,626 | | | 1.35 | | | 2.96 | | | 36,712 | | | 1.47 | | | 2.95 | |
| Real Estate Services | | 35,621 | | | 1.35 | | | 2.96 | | | 39,573 | | | 1.59 | | | 3.18 | |
| Electrical Components & Equipment | | 32,970 | | | 1.25 | | | 2.74 | | | 32,933 | | | 1.32 | | | 2.64 | |
| Integrated Telecommunication Services | | 32,041 | | | 1.21 | | | 2.67 | | | 32,201 | | | 1.29 | | | 2.59 | |
| Specialty Chemicals | | 31,476 | | | 1.19 | | | 2.62 | | | 33,969 | | | 1.36 | | | 2.73 | |
| Movies & Entertainment | | 26,470 | | | 1.00 | | | 2.20 | | | 26,645 | | | 1.07 | | | 2.14 | |
| Advertising | | 26,022 | | | 0.98 | | | 2.16 | | | 26,948 | | | 1.08 | | | 2.16 | |
| Airlines | | 25,864 | | | 0.98 | | | 2.15 | | | — | | | — | | | — | |
| Distributors | | 24,569 | | | 0.93 | | | 2.04 | | | 24,494 | | | 0.98 | | | 1.97 | |
| Health Care Equipment | | 22,703 | | | 0.86 | | | 1.89 | | | 24,161 | | | 0.97 | | | 1.94 | |
| Environmental & Facilities Services | | 20,675 | | | 0.78 | | | 1.72 | | | 20,585 | | | 0.83 | | | 1.65 | |
| Oil & Gas Storage & Transportation | | 18,113 | | | 0.69 | | | 1.51 | | | 20,853 | | | 0.84 | | | 1.67 | |
| Home Furnishings | | 17,917 | | | 0.68 | | | 1.49 | | | 18,188 | | | 0.73 | | | 1.46 | |
| Hotels, Resorts & Cruise Lines | | 13,904 | | | 0.53 | | | 1.16 | | | 13,985 | | | 0.56 | | | 1.12 | |
| Systems Software | | 12,104 | | | 0.46 | | | 1.01 | | | 12,834 | | | 0.51 | | | 1.03 | |
| Consumer Finance | | 11,439 | | | 0.43 | | | 0.95 | | | 13,284 | | | 0.53 | | | 1.07 | |
| Education Services | | 8,938 | | | 0.34 | | | 0.74 | | | 8,582 | | | 0.34 | | | 0.69 | |
| Restaurants | | 8,610 | | | 0.33 | | | 0.72 | | | 8,692 | | | 0.35 | | | 0.70 | |
| Cable & Satellite | | 7,968 | | | 0.30 | | | 0.66 | | | 19,576 | | | 0.78 | | | 1.57 | |
| Research & Consulting Services | | 7,165 | | | 0.27 | | | 0.60 | | | 8,573 | | | 0.34 | | | 0.69 | |
| IT Consulting & Other Services | | 6,963 | | | 0.26 | | | 0.58 | | | 8,596 | | | 0.34 | | | 0.69 | |
| Integrated Oil & Gas | | 4,847 | | | 0.18 | | | 0.40 | | | 4,872 | | | 0.20 | | | 0.39 | |
| Apparel Retail | | 4,675 | | | 0.18 | | | 0.39 | | | 5,223 | | | 0.21 | | | 0.42 | |
| Real Estate Development | | 4,267 | | | 0.16 | | | 0.35 | | | — | | | — | | | — | |
| Air Freight & Logistics | | 4,191 | | | 0.16 | | | 0.35 | | | 6,405 | | | 0.26 | | | 0.51 | |
| Food Distributors | | 3,599 | | | 0.14 | | | 0.30 | | | 3,367 | | | 0.13 | | | 0.27 | |
| Diversified Banks | | 3,315 | | | 0.13 | | | 0.28 | | | 3,402 | | | 0.14 | | | 0.27 | |
| Specialized REITs | | 3,230 | | | 0.12 | | | 0.27 | | | 3,264 | | | 0.13 | | | 0.26 | |
| Technology Distributors | | 2,971 | | | 0.11 | | | 0.25 | | | 2,997 | | | 0.12 | | | 0.24 | |
| Housewares & Specialties | | 2,265 | | | 0.09 | | | 0.19 | | | 2,456 | | | 0.10 | | | 0.20 | |
| Construction Materials | | 1,928 | | | 0.07 | | | 0.16 | | | 1,934 | | | 0.08 | | | 0.16 | |
| Electronic Components | | 1,712 | | | 0.06 | | | 0.14 | | | 1,890 | | | 0.08 | | | 0.15 | |
| Alternative Carriers | | 185 | | | 0.01 | | | 0.02 | | | 201 | | | 0.01 | | | 0.02 | |
| Oil & Gas Refining & Marketing | | — | | | — | | | — | | | 8,604 | | | 0.34 | | | 0.69 | |
| Trading Companies & Distributors | | — | | | — | | | — | | | 5,567 | | | 0.22 | | | 0.45 | |
| Total | | $ | 2,642,870 | | | 100.00 | % | | 219.87 | % | | $ | 2,494,111 | | | 100.00 | % | | 200.24 | % |
___________________
(1)This industry includes the Company's investments in the JVs.
As of December 31, 2022 and September 30, 2022, the Company had no single investment that represented greater than 10% of the total investment portfolio at fair value. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, may fluctuate and in any given period can be highly concentrated among several investments.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Senior Loan Fund JV I, LLC
In May 2014, the Company entered into an LLC agreement with Kemper to form SLF JV I. The Company co-invests in senior secured loans of middle-market companies and other corporate debt securities with Kemper through its investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by the Company and one representative selected by Kemper (with approval from a representative of each required). Since the Company does not have a controlling financial interest in SLF JV I, the Company does not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to the Company and Kemper by SLF JV I. The subordinated notes issued by SLF JV I (the "SLF JV I Notes") are senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of December 31, 2022 and September 30, 2022, the Company and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Notes. SLF JV I is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch (as amended, the "SLF JV I Deutsche Bank Facility"), which permitted up to $260.0 million of borrowings (subject to borrowing base and other limitations) as of each of December 31, 2022 and September 30, 2022. Borrowings under the SLF JV I Deutsche Bank Facility are secured by all of the assets of SLF JV I Funding LLC, a special purpose financing subsidiary of SLF JV I. As of December 31, 2022, the reinvestment period of the SLF JV I Deutsche Bank Facility was scheduled to expire May 3, 2023 and the maturity date was May 3, 2028. As of December 31, 2022, borrowings under the SLF JV I Deutsche Bank Facility accrued interest at a rate equal to 3-month LIBOR plus 2.00% per annum during the reinvestment period, 3-month LIBOR plus 2.15% per annum for the first year after the reinvestment period, 3-month LIBOR plus 2.25% for the following year and 3-month LIBOR plus 2.50% thereafter, in each case with a 0.125% LIBOR floor. $226.0 million and $230.0 million of borrowings were outstanding under the SLF JV I Deutsche Bank Facility as of December 31, 2022 and September 30, 2022, respectively.
As of December 31, 2022 and September 30, 2022, SLF JV I had total assets of $409.4 million and $385.2 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 59 and 60 portfolio companies as of December 31, 2022 and September 30, 2022, respectively. The portfolio companies in SLF JV I are in industries similar to those in which the Company may invest directly. As of December 31, 2022, the Company's investment in SLF JV I consisted of LLC equity interests and SLF JV I Notes of $136.8 million in aggregate, at fair value. As of September 30, 2022, the Company's investment in SLF JV I consisted of LLC equity interests and SLF JV I Notes of $117.0 million in aggregate, at fair value.
As of December 31, 2022, the Company and Kemper had funded approximately $190.5 million to SLF JV I, of which $166.7 million was from the Company. As of September 30, 2022, the Company and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from the Company. As of December 31, 2022, the Company had aggregate commitments to fund SLF JV I of $13.1 million, of which approximately $9.8 million was to fund additional SLF JV I Notes and approximately $3.3 million was to fund LLC equity interests in SLF JV I. During the three months ended December 31, 2022, the Company contributed $16.4 million to fund additional SLF JV I Notes and approximately $5.5 million to fund additional LLC equity interests in SLF JV I. As of September 30, 2022, the Company had aggregate commitments to fund SLF JV I of $35.0 million, of which approximately $26.2 million was to fund additional SLF JV I Notes and approximately $8.8 million was to fund LLC equity interests in SLF JV I.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of December 31, 2022 and September 30, 2022:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Senior secured loans (1) | | $382,148 | | $383,194 |
| Weighted average interest rate on senior secured loans (2) | | 9.55% | | 8.33% |
| Number of borrowers in SLF JV I | | 59 | | 60 |
| Largest exposure to a single borrower (1) | | $11,337 | | $10,093 |
| Total of five largest loan exposures to borrowers (1) | | $51,990 | | $48,139 |
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
SLF JV I Portfolio as of December 31, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| Access CIG, LLC | First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025 | 7.82 | % | Diversified Support Services | $ | 10,067 | | | $ | 10,008 | | | $ | 9,883 | | |
| ADB Companies, LLC | First Lien Term Loan, SOFR+6.25% cash due 12/18/2025 | 11.34 | % | Construction & Engineering | 8,413 | | | 8,296 | | | 8,267 | | (4) |
| Altice France S.A. | First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 8.65 | % | Integrated Telecommunication Services | 2,992 | | | 2,844 | | | 2,791 | | |
| Alvogen Pharma US, Inc. | First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 12.23 | % | Pharmaceuticals | 9,150 | | | 9,060 | | | 9,104 | | (4) |
| American Rock Salt Company LLC | First Lien Term Loan, LIBOR+4.00% cash due 6/9/2028 | 8.38 | % | Diversified Metals & Mining | 1,995 | | | 1,836 | | | 1,883 | | |
| American Tire Distributors, Inc. | First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 10.61 | % | Distributors | 4,860 | | | 4,800 | | | 4,471 | | (4) |
| Amplify Finco Pty Ltd. | First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 8.98 | % | Movies & Entertainment | 7,780 | | | 7,702 | | | 7,501 | | (4) |
| Anastasia Parent, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 8.48 | % | Personal Products | 1,535 | | | 1,200 | | | 1,149 | | (4) |
| Apptio, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 1/10/2025 | 9.94 | % | Application Software | 4,615 | | | 4,584 | | | 4,523 | | (4) |
| Apptio, Inc. | First Lien Revolver, LIBOR+6.00% cash due 1/10/2025 | 9.94 | % | Application Software | 231 | | | 228 | | | 223 | | (4)(5) |
| Total Apptio, Inc. | | | | 4,846 | | | 4,812 | | | 4,746 | | |
| ASP-R-PAC Acquisition Co LLC | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2027 | 10.38 | % | Paper Packaging | 4,166 | | | 4,097 | | | 4,012 | | |
| ASP-R-PAC Acquisition Co LLC | First Lien Revolver, LIBOR+6.00% cash due 12/29/2027 | | Paper Packaging | — | | | (8) | | | (18) | | (5) |
| Total ASP-R-PAC Acquisition Co LLC | | | | 4,166 | | | 4,089 | | | 3,994 | | |
| Astra Acquisition Corp. | First Lien Term Loan, LIBOR+5.25% cash due 10/25/2028 | 9.63 | % | Application Software | 5,052 | | | 4,866 | | | 4,484 | | (4) |
| Asurion, LLC | First Lien Term Loan, SOFR+4.00% cash due 8/19/2028 | 8.68 | % | Property & Casualty Insurance | 4,988 | | | 4,752 | | | 4,463 | | |
| Asurion, LLC | Second Lien Term Loan, LIBOR+5.25% cash due 1/20/2029 | 9.63 | % | Property & Casualty Insurance | 4,346 | | | 3,995 | | | 3,404 | | |
| Total Asurion, LLC | | | | 9,334 | | | 8,747 | | | 7,867 | | |
| athenahealth Group Inc. | First Lien Term Loan, SOFR+3.50% cash due 2/15/2029 | 7.82 | % | Health Care Technology | 2,558 | | | 2,353 | | | 2,316 | | |
| athenahealth Group Inc. | First Lien Delayed Draw Term Loan, SOFR+3.50% cash due 2/15/2029 | 7.82 | % | Health Care Technology | 109 | | | 74 | | | 68 | | (5) |
| Total athenahealth Group Inc. | | | | 2,667 | | | 2,427 | | | 2,384 | | |
| Aurora Lux Finco S.À.R.L. | First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 10.32 | % | Airport Services | 6,321 | | | 6,232 | | | 6,012 | | (4) |
| BAART Programs, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 6/11/2027 | 9.07 | % | Health Care Services | 6,354 | | | 6,295 | | | 6,176 | | |
| BAART Programs, Inc. | First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/2027 | 9.73 | % | Health Care Services | 1,767 | | | 1,747 | | | 1,682 | | (4)(5) |
| Total BAART Programs, Inc. | | | | 8,121 | | | 8,042 | | | 7,858 | | |
| Blackhawk Network Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025 | 7.08 | % | Data Processing & Outsourced Services | 9,550 | | | 9,542 | | | 9,331 | | |
| Boxer Parent Company Inc. | First Lien Term Loan, LIBOR+3.75% cash due 10/2/2025 | 8.13 | % | Systems Software | 1,994 | | | 1,917 | | | 1,914 | | |
| BYJU's Alpha, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 11/24/2026 | 10.70 | % | Application Software | 7,425 | | | 7,335 | | | 5,988 | | |
| C5 Technology Holdings, LLC | 171 Common Units | | Data Processing & Outsourced Services | | | — | | | — | | (4) |
| C5 Technology Holdings, LLC | 7,193,539.63 Preferred Units | | Data Processing & Outsourced Services | | | 7,194 | | | 5,683 | | (4) |
| Total C5 Technology Holdings, LLC | | | | | | 7,194 | | | 5,683 | | |
| Cengage Learning, Inc. | First Lien Term Loan, LIBOR+4.75% cash due 7/14/2026 | 7.81 | % | Education Services | 2,992 | | | 2,734 | | | 2,698 | | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| Centerline Communications, LLC | First Lien Term Loan, SOFR+5.50% cash due 8/10/2023 | 10.43 | % | Wireless Telecommunication Services | $ | 6,345 | | | $ | 6,242 | | | $ | 6,231 | | |
| Centerline Communications, LLC | First Lien Revolver, SOFR+5.50% cash due 8/10/2027 | | Wireless Telecommunication Services | — | | | (10) | | | (10) | | (5) |
| Total Centerline Communications, LLC | | | | 6,345 | | | 6,232 | | | 6,221 | | |
| Convergeone Holdings, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026 | 9.38 | % | IT Consulting & Other Services | 7,354 | | | 7,200 | | | 4,309 | | (4) |
| Covetrus, Inc. | First Lien Term Loan, SOFR+5.00% cash due 9/20/2029 | 9.58 | % | Health Care Distributors | 5,375 | | | 5,053 | | | 5,050 | | (4) |
| Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 8.73 | % | Biotechnology | 7,800 | | | 7,726 | | | 7,644 | | |
| Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.25% cash due 12/2/2027 | 8.98 | % | Biotechnology | 997 | | | 978 | | | 975 | | |
| Total Curium Bidco S.à.r.l. | | | | 8,797 | | | 8,704 | | | 8,619 | | |
| DirecTV Financing, LLC | First Lien Term Loan, LIBOR+5.00% cash due 8/2/2027 | 9.38 | % | Cable & Satellite | 6,277 | | | 6,178 | | | 6,124 | | (4) |
| Domtar Corporation | First Lien Term Loan, LIBOR+5.50% cash due 11/30/2028 | 9.79 | % | Paper Products | 4,090 | | | 4,055 | | | 3,926 | | |
| DTI Holdco, Inc. | First Lien Term Loan, SOFR+4.75% cash due 4/26/2029 | 8.84 | % | Research & Consulting Services | 7,980 | | | 7,835 | | | 7,372 | | (4) |
| eResearch Technology, Inc. | First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027 | 8.88 | % | Application Software | 7,811 | | | 7,681 | | | 6,915 | | |
| Gibson Brands, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 8/11/2028 | 9.13 | % | Leisure Products | 7,425 | | | 7,351 | | | 5,495 | | |
| Global Medical Response, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 8.42 | % | Health Care Services | 1,260 | | | 1,246 | | | 891 | | |
| Harbor Purchaser Inc. | First Lien Term Loan, SOFR+5.25% cash due 4/9/2029 | 9.67 | % | Education Services | 7,980 | | | 7,764 | | | 7,613 | | (4) |
| Indivior Finance S.À.R.L. | First Lien Term Loan, SOFR+5.25% cash due 6/30/2026 | 10.09 | % | Pharmaceuticals | 7,388 | | | 7,282 | | | 7,277 | | |
| INW Manufacturing, LLC | First Lien Term Loan, LIBOR+5.75% cash due 3/25/2027 | 10.48 | % | Personal Products | 9,375 | | | 9,172 | | | 8,016 | | (4) |
| Iris Holding, Inc. | First Lien Term Loan, SOFR+4.75% cash due 6/28/2028 | 8.94 | % | Metal & Glass Containers | 4,988 | | | 4,630 | | | 4,548 | | |
| LABL, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 10/29/2028 | 9.38 | % | Office Services & Supplies | 2,992 | | | 2,858 | | | 2,848 | | |
| LaserAway Intermediate Holdings II, LLC | First Lien Term Loan, LIBOR+5.75% cash due 10/14/2027 | 9.76 | % | Health Care Services | 7,425 | | | 7,306 | | | 7,295 | | |
| Lightbox Intermediate, L.P. | First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026 | 9.73 | % | Real Estate Services | 11,337 | | | 11,152 | | | 10,941 | | (4) |
| LogMeIn, Inc. | First Lien Term Loan, LIBOR+4.75% cash due 8/31/2027 | 9.14 | % | Application Software | 7,840 | | | 7,736 | | | 5,080 | | |
| LTI Holdings, Inc. | First Lien Term Loan, LIBOR+3.50% cash due 9/6/2025 | 7.88 | % | Electronic Components | 7,347 | | | 7,270 | | | 7,050 | | |
| McAfee Corp. | First Lien Term Loan, SOFR+3.75% cash due 3/1/2029 | 7.97 | % | Systems Software | 1,995 | | | 1,876 | | | 1,862 | | |
| Mindbody, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 11.72 | % | Internet Services & Infrastructure | 4,668 | | | 4,636 | | | 4,566 | | (4) |
| Mindbody, Inc. | First Lien Revolver, LIBOR+8.00% cash due 2/14/2025 | | Internet Services & Infrastructure | — | | | (3) | | | (10) | | (4)(5) |
| Total Mindbody, Inc. | | | | 4,668 | | | 4,633 | | | 4,556 | | |
| MRI Software LLC | First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 10.23 | % | Application Software | 10,611 | | | 10,416 | | | 10,227 | | (4) |
| MRI Software LLC | First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | | Application Software | — | | | (3) | | | (12) | | (4)(5) |
| Total MRI Software LLC | | | | 10,611 | | | 10,413 | | | 10,215 | | |
| Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025 | 9.23 | % | Electrical Components & Equipment | 6,668 | | | 6,657 | | | 6,467 | | |
| OEConnection LLC | First Lien Term Loan, SOFR+4.00% cash due 9/25/2026 | 8.42 | % | Application Software | 7,757 | | | 7,721 | | | 7,411 | | (4) |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| Park Place Technologies, LLC | First Lien Term Loan, SOFR+5.00% cash due 11/10/2027 | 9.42 | % | Internet Services & Infrastructure | $ | 9,900 | | | $ | 9,504 | | | $ | 9,362 | | (4) |
| Planview Parent, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 12/17/2027 | 8.73 | % | Application Software | 2,435 | | | 2,294 | | | 2,274 | | |
| Planview Parent, Inc. | Second Lien Term Loan, LIBOR+7.25% cash due 12/18/2028 | 11.98 | % | Application Software | 4,503 | | | 4,435 | | | 4,041 | | (4) |
| Total Planview Parent, Inc. | | | | 6,938 | | | 6,729 | | | 6,315 | | |
| Pluralsight, LLC | First Lien Term Loan, LIBOR+8.00% cash due 4/6/2027 | 11.83 | % | Application Software | 6,796 | | | 6,698 | | | 6,626 | | (4) |
| Pluralsight, LLC | First Lien Revolver, LIBOR+8.00% cash due 4/6/2027 | | Application Software | 212 | | | 206 | | | 201 | | (4)(5) |
| Total Pluralsight, LLC | | | | 7,008 | | | 6,904 | | | 6,827 | | |
| RevSpring, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/11/2025 | 8.73 | % | Commercial Printing | 9,600 | | | 9,583 | | | 9,288 | | |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.25% cash due 4/27/2024 | 9.66 | % | Footwear | 8,179 | | | 8,173 | | | 6,339 | | |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.23% cash due 4/27/2024 | 9.64 | % | Footwear | 138 | | | 138 | | | 120 | | |
| Total SHO Holding I Corporation | | | | 8,317 | | | 8,311 | | | 6,459 | | |
| Sorenson Communications, LLC | First Lien Term Loan, LIBOR+5.50% cash due 3/17/2026 | 10.23 | % | Communications Equipment | 2,478 | | | 2,454 | | | 2,374 | | |
| Spanx, LLC | First Lien Term Loan, LIBOR+5.25% cash due 11/20/2028 | 9.64 | % | Apparel Retail | 8,910 | | | 8,760 | | | 8,699 | | (4) |
| SPX Flow, Inc. | First Lien Term Loan, SOFR+4.50% cash due 4/5/2029 | 8.92 | % | Industrial Machinery | 10,075 | | | 9,610 | | | 9,436 | | (4) |
| Supermoose Borrower, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 8.48 | % | Application Software | 7,723 | | | 7,482 | | | 6,688 | | (4) |
| Surgery Center Holdings, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 8/31/2026 | 8.05 | % | Health Care Facilities | 3,044 | | | 3,034 | | | 3,014 | | |
| TIBCO Software Inc. | First Lien Term Loan, SOFR+4.50% cash due 3/20/2029 | 9.18 | % | Application Software | 6,256 | | | 5,712 | | | 5,602 | | (4) |
| Touchstone Acquisition, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2028 | 10.38 | % | Health Care Supplies | 7,267 | | | 7,142 | | | 7,104 | | (4) |
| Veritas US Inc. | First Lien Term Loan, LIBOR+5.00% cash due 9/1/2025 | 9.73 | % | Application Software | 6,354 | | | 6,286 | | | 4,515 | | |
| Windstream Services II, LLC | First Lien Term Loan, SOFR+6.25% cash due 9/21/2027 | 10.67 | % | Integrated Telecommunication Services | 7,798 | | | 7,587 | | | 7,092 | | (4) |
| WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 12.17 | % | Aerospace & Defense | 6,000 | | | 5,974 | | | 5,055 | | (4) |
| WP CPP Holdings, LLC | First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025 | 8.17 | % | Aerospace & Defense | 1,980 | | | 1,913 | | | 1,732 | | (4) |
| Total WP CPP Holdings, LLC | | | | 7,980 | | | 7,887 | | | 6,787 | | |
| Zayo Group Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 3/9/2027 | 7.38 | % | Alternative Carriers | 2,155 | | | 2,009 | | | 1,756 | | |
| Total Portfolio Investments | | | | $ | 382,148 | | | $ | 380,682 | | | $ | 355,427 | | |
_________(1) Represents the interest rate as of December 31, 2022. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for most of the floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans may also be indexed to SOFR. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over the reference rates based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of December 31, 2022, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 4.38%, the 90-day LIBOR at 4.73%, the 30-day SOFR at 4.32%, the 90-day SOFR at 4.58% and the 180-day SOFR at 4.79%. Most loans include an interest floor, which generally ranges from 0% to 1%. SOFR based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(3) Represents the current determination of fair value as of December 31, 2022 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of December 31, 2022.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
SLF JV I Portfolio as of September 30, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| Access CIG, LLC | First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025 | 6.82 | % | Diversified Support Services | $ | 10,093 | | | $ | 10,028 | | | $ | 9,692 | | |
| ADB Companies, LLC | First Lien Term Loan, SOFR+6.25% cash due 12/18/2025 | 9.80 | % | Construction & Engineering | 8,518 | | | 8,389 | | | 8,371 | | (4) |
| Altice France S.A. | First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 6.91 | % | Integrated Telecommunication Services | 3,000 | | | 2,841 | | | 2,730 | | |
| Alvogen Pharma US, Inc. | First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 11.20 | % | Pharmaceuticals | 9,267 | | | 9,166 | | | 9,221 | | (4) |
| American Tire Distributors, Inc. | First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 9.03 | % | Distributors | 4,873 | | | 4,812 | | | 4,576 | | (4) |
| Amplify Finco Pty Ltd. | First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 7.92 | % | Movies & Entertainment | 7,800 | | | 7,722 | | | 7,527 | | (4) |
| Anastasia Parent, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 7.42 | % | Personal Products | 1,539 | | | 1,203 | | | 1,232 | | (4) |
| Apptio, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 1/10/2025 | 8.46 | % | Application Software | 4,615 | | | 4,580 | | | 4,519 | | (4) |
| Apptio, Inc. | First Lien Revolver, LIBOR+6.00% cash due 1/10/2025 | 8.46 | % | Application Software | 154 | | | 151 | | | 146 | | (4)(5) |
| Total Apptio, Inc. | | | | 4,769 | | | 4,731 | | | 4,665 | | |
| ASP-R-PAC Acquisition Co LLC | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2027 | 9.67 | % | Paper Packaging | 4,176 | | | 4,103 | | | 4,080 | | |
| ASP-R-PAC Acquisition Co LLC | First Lien Revolver, LIBOR+6.00% cash due 12/29/2027 | | Paper Packaging | — | | | (9) | | | (11) | | (5) |
| Total ASP-R-PAC Acquisition Co LLC | | | | 4,176 | | | 4,094 | | | 4,069 | | |
| Astra Acquisition Corp. | First Lien Term Loan, LIBOR+5.25% cash due 10/25/2028 | 8.37 | % | Application Software | 5,052 | | | 4,858 | | | 4,319 | | (4) |
| Asurion, LLC | First Lien Term Loan, SOFR+4.00% cash due 8/19/2028 | 7.70 | % | Property & Casualty Insurance | 5,000 | | | 4,753 | | | 4,276 | | |
| Asurion, LLC | Second Lien Term Loan, LIBOR+5.25% cash due 1/20/2029 | 8.37 | % | Property & Casualty Insurance | 4,346 | | | 3,981 | | | 3,347 | | |
| Total Asurion, LLC | | | | 9,346 | | | 8,734 | | | 7,623 | | |
| Aurora Lux Finco S.À.R.L. | First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 8.78 | % | Airport Services | 6,338 | | | 6,242 | | | 6,027 | | (4) |
| BAART Programs, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 6/11/2027 | 8.12 | % | Health Care Services | 6,371 | | | 6,311 | | | 6,148 | | |
| BAART Programs, Inc. | First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/2027 | 8.12 | % | Health Care Services | 1,771 | | | 1,751 | | | 1,664 | | (4)(5) |
| Total BAART Programs, Inc. | | | | 8,142 | | | 8,062 | | | 7,812 | | |
| Blackhawk Network Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025 | 6.03 | % | Data Processing & Outsourced Services | 9,575 | | | 9,566 | | | 8,977 | | |
| BYJU's Alpha, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 11/24/2026 | 8.98 | % | Application Software | 7,444 | | | 7,347 | | | 5,455 | | |
| C5 Technology Holdings, LLC | 171 Common Units | | Data Processing & Outsourced Services | | | — | | | — | | (4) |
| C5 Technology Holdings, LLC | 7,193,539.63 Preferred Units | | Data Processing & Outsourced Services | | | 7,194 | | | 5,683 | | (4) |
| Total C5 Technology Holdings, LLC | | | | | | 7,194 | | | 5,683 | | |
| Centerline Communications, LLC | First Lien Term Loan, SOFR+5.50% cash due 8/10/2027 | 9.12 | % | Wireless Telecommunication Services | 4,358 | | | 4,286 | | | 4,280 | | |
| Centerline Communications, LLC | First Lien Delayed Draw Term Loan, SOFR+5.50% cash due 8/10/2027 | 9.12 | % | Wireless Telecommunication Services | 449 | | | 432 | | | 413 | | (5) |
| Centerline Communications, LLC | First Lien Revolver, SOFR+5.50% cash due 8/10/2027 | | Wireless Telecommunication Services | — | | | (10) | | | (11) | | (5) |
| Total Centerline Communications, LLC | | | | 4,807 | | | 4,708 | | | 4,682 | | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| CITGO Petroleum Corp. | First Lien Term Loan, LIBOR+6.25% cash due 3/28/2024 | 9.37 | % | Oil & Gas Refining & Marketing | $ | 7,038 | | | $ | 6,967 | | | $ | 7,057 | | (4) |
| City Football Group Limited | First Lien Term Loan, LIBOR+3.50% cash due 7/21/2028 | 6.48 | % | Movies & Entertainment | 6,451 | | | 6,419 | | | 6,166 | | |
| Convergeone Holdings, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026 | 8.12 | % | IT Consulting & Other Services | 7,373 | | | 7,206 | | | 5,320 | | (4) |
| Covetrus, Inc. | First Lien Term Loan, SOFR+5.00% cash due 9/20/2029 | 7.65 | % | Health Care Distributors | 5,375 | | | 5,053 | | | 5,035 | | (4) |
| Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 7.67 | % | Biotechnology | 5,820 | | | 5,776 | | | 5,587 | | |
| Dealer Tire, LLC | First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025 | 7.37 | % | Distributors | 2,992 | | | 2,935 | | | 2,924 | | |
| Delivery Hero FinCo LLC | First Lien Term Loan, SOFR+5.75% cash due 8/12/2027 | 8.49 | % | Internet & Direct Marketing Retail | 6,035 | | | 5,876 | | | 5,756 | | (4) |
| DirecTV Financing, LLC | First Lien Term Loan, LIBOR+5.00% cash due 8/2/2027 | 8.12 | % | Cable & Satellite | 6,436 | | | 6,332 | | | 6,012 | | (4) |
| Domtar Corporation | First Lien Term Loan, LIBOR+5.50% cash due 11/30/2028 | 8.26 | % | Paper Products | 4,100 | | | 4,065 | | | 3,921 | | |
| DTI Holdco, Inc. | First Lien Term Loan, SOFR+4.75% cash due 4/26/2029 | 7.33 | % | Research & Consulting Services | 8,000 | | | 7,849 | | | 7,616 | | (4) |
| Eagle Parent Corp. | First Lien Term Loan, SOFR+4.25% cash due 4/1/2029 | 7.80 | % | Industrial Machinery | 4,478 | | | 4,373 | | | 4,367 | | |
| eResearch Technology, Inc. | First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027 | 7.62 | % | Application Software | 7,331 | | | 7,258 | | | 6,859 | | |
| Gibson Brands, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 8/11/2028 | 7.94 | % | Leisure Products | 7,444 | | | 7,369 | | | 6,029 | | |
| Global Medical Response, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025 | 7.37 | % | Health Care Services | 1,979 | | | 1,979 | | | 1,722 | | (4) |
| Global Medical Response, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 6.81 | % | Health Care Services | 2,192 | | | 2,165 | | | 1,912 | | |
| Total Global Medical Response, Inc. | | | | 4,171 | | | 4,144 | | | 3,634 | | |
| Harbor Purchaser Inc. | First Lien Term Loan, SOFR+5.25% cash due 4/9/2029 | 8.38 | % | Education Services | 8,000 | | | 7,774 | | | 7,310 | | (4) |
| Indivior Finance S.À.R.L. | First Lien Term Loan, SOFR+5.25% cash due 6/30/2026 | 8.80 | % | Pharmaceuticals | 7,406 | | | 7,293 | | | 7,286 | | |
| INW Manufacturing, LLC | First Lien Term Loan, LIBOR+5.75% cash due 3/25/2027 | 9.42 | % | Personal Products | 9,500 | | | 9,282 | | | 8,408 | | (4) |
| Iris Holding, Inc. | First Lien Term Loan, SOFR+4.75% cash due 6/28/2028 | 7.89 | % | Metal & Glass Containers | 5,000 | | | 4,624 | | | 4,610 | | |
| LaserAway Intermediate Holdings II, LLC | First Lien Term Loan, LIBOR+5.75% cash due 10/14/2027 | 8.23 | % | Health Care Services | 7,444 | | | 7,318 | | | 7,323 | | |
| Lightbox Intermediate, L.P. | First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026 | 8.67 | % | Real Estate Services | 7,367 | | | 7,315 | | | 7,109 | | (4) |
| LogMeIn, Inc. | First Lien Term Loan, LIBOR+4.75% cash due 8/31/2027 | 7.80 | % | Application Software | 7,860 | | | 7,751 | | | 5,494 | | |
| LTI Holdings, Inc. | First Lien Term Loan, LIBOR+3.25% cash due 9/6/2025 | 6.37 | % | Electronic Components | 7,366 | | | 7,282 | | | 6,835 | | |
| Mindbody, Inc. | First Lien Term Loan, LIBOR+7.00% cash 1.50% PIK due 2/14/2025 | 10.64 | % | Internet Services & Infrastructure | 4,687 | | | 4,651 | | | 4,570 | | (4) |
| Mindbody, Inc. | First Lien Revolver, LIBOR+8.00% cash due 2/14/2025 | | Internet Services & Infrastructure | — | | | (4) | | | (12) | | (4)(5) |
| Total Mindbody, Inc. | | | | 4,687 | | | 4,647 | | | 4,558 | | |
| MRI Software LLC | First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 9.17 | % | Application Software | 6,139 | | | 6,104 | | | 5,966 | | (4) |
| MRI Software LLC | First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | | Application Software | — | | | (3) | | | (10) | | (4)(5) |
| Total MRI Software LLC | | | | 6,139 | | | 6,101 | | | 5,956 | | |
| Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.75% cash due 3/31/2025 | 7.87 | % | Electrical Components & Equipment | 6,685 | | | 6,673 | | | 6,484 | | |
| OEConnection LLC | First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026 | 7.12 | % | Application Software | 7,777 | | | 7,741 | | | 7,505 | | (4) |
| Park Place Technologies, LLC | First Lien Term Loan, SOFR+5.00% cash due 11/10/2027 | 8.13 | % | Internet Services & Infrastructure | 4,925 | | | 4,781 | | | 4,687 | | (4) |
| Peloton Interactive, Inc. | First Lien Term Loan, SOFR+6.50% cash due 5/25/2027 | 8.35 | % | Leisure Products | 5,486 | | | 5,251 | | | 5,371 | | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| Planview Parent, Inc. | Second Lien Term Loan, LIBOR+7.25% cash due 12/18/2028 | 10.92 | % | Application Software | $ | 4,503 | | | $ | 4,435 | | | $ | 4,323 | | (4) |
| Pluralsight, LLC | First Lien Term Loan, LIBOR+8.00% cash due 4/6/2027 | 10.68 | % | Application Software | 6,796 | | | 6,694 | | | 6,582 | | (4) |
| Pluralsight, LLC | First Lien Revolver, LIBOR+8.00% cash due 4/6/2027 | | Application Software | — | | | (6) | | | (13) | | (4)(5) |
| Total Pluralsight, LLC | | | | 6,796 | | | 6,688 | | | 6,569 | | |
| RevSpring, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/11/2025 | 7.67 | % | Commercial Printing | 9,625 | | | 9,607 | | | 9,304 | | |
| Sabert Corporation | First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026 | 7.63 | % | Metal & Glass Containers | 2,536 | | | 2,511 | | | 2,435 | | (4) |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.25% cash due 4/27/2024 | 8.06 | % | Footwear | 8,201 | | | 8,194 | | | 7,176 | | |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.23% cash due 4/27/2024 | 8.04 | % | Footwear | 138 | | | 138 | | | 121 | | |
| Total SHO Holding I Corporation | | | | 8,339 | | | 8,332 | | | 7,297 | | |
| Sorenson Communications, LLC | First Lien Term Loan, LIBOR+5.50% cash due 3/17/2026 | 9.17 | % | Communications Equipment | 2,553 | | | 2,528 | | | 2,454 | | |
| Spanx, LLC | First Lien Term Loan, LIBOR+5.25% cash due 11/20/2028 | 8.30 | % | Apparel Retail | 8,933 | | | 8,776 | | | 8,721 | | (4) |
| SPX Flow, Inc. | First Lien Term Loan, SOFR+4.50% cash due 4/5/2029 | 7.63 | % | Industrial Machinery | 7,500 | | | 7,184 | | | 6,966 | | (4) |
| Supermoose Borrower, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 7.42 | % | Application Software | 7,743 | | | 7,479 | | | 6,827 | | (4) |
| Surgery Center Holdings, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 8/31/2026 | 6.51 | % | Health Care Facilities | 3,377 | | | 3,365 | | | 3,213 | | |
| TIBCO Software Inc. | First Lien Term Loan, SOFR+4.50% cash due 3/20/2029 | 8.15 | % | Application Software | 6,256 | | | 5,693 | | | 5,629 | | (4) |
| Touchstone Acquisition, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2028 | 9.12 | % | Health Care Supplies | 7,285 | | | 7,155 | | | 7,140 | | (4) |
| Veritas US Inc. | First Lien Term Loan, LIBOR+5.00% cash due 9/1/2025 | 8.67 | % | Application Software | 6,365 | | | 6,290 | | | 5,087 | | |
| Windstream Services II, LLC | First Lien Term Loan, LIBOR+6.25% cash due 9/21/2027 | 9.37 | % | Integrated Telecommunication Services | 7,818 | | | 7,596 | | | 7,115 | | (4) |
| WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 10.56 | % | Aerospace & Defense | 6,000 | | | 5,972 | | | 5,070 | | (4) |
| WP CPP Holdings, LLC | First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025 | 6.56 | % | Aerospace & Defense | 1,985 | | | 1,910 | | | 1,783 | | (4) |
| Total WP CPP Holdings, LLC | | | | 7,985 | | | 7,882 | | | 6,853 | | |
| Zayo Group Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 3/9/2027 | 6.12 | % | Alternative Carriers | 2,155 | | | 2,000 | | | 1,812 | | |
| Total Portfolio Investments | | | | $ | 383,194 | | | $ | 382,673 | | | $ | 359,625 | | |
_________
(1) Represents the interest rate as of September 30, 2022. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for most of the floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans may also be indexed to SOFR. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over the reference rates based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2022, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 3.12%, the 90-day LIBOR at 3.67%, the 30-day SOFR at 3.03%, the 90-day SOFR at 3.55% and the 180-day SOFR at 3.98%. Most loans include an interest floor, which generally ranges from 0% to 1%. SOFR based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(3) Represents the current determination of fair value as of September 30, 2022 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of September 30, 2022.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Both the cost and fair value of the Company's SLF JV I Notes were $112.7 million as of December 31, 2022. Both the cost and fair value of the Company's SLF JV I Notes were $96.3 million as of September 30, 2022. The Company earned interest income of $2.6 million and $2.0 million on the SLF JV I Notes for the three months ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the SLF JV I Notes bore interest at a rate of one-month LIBOR plus 7.00% per annum with a LIBOR floor of 1.00% and will mature on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by the Company were $54.8 million and $24.1 million, respectively, as of December 31, 2022, and $49.3 million and $20.7 million, respectively, as of September 30, 2022. The Company earned $1.1 million and $0.5 million in dividend income for the three months ended December 31, 2022 and December 31, 2021, respectively, with respect to its investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are generally dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of December 31, 2022 and September 30, 2022 and for the three months ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Selected Balance Sheet Information: | | | | |
Investments at fair value (cost December 31, 2022: $380,682; cost September 30, 2022: $382,673) | | $ | 355,427 | | | $ | 359,625 | |
| Cash and cash equivalents | | 39,259 | | | 14,274 | |
| Restricted cash | | 6,612 | | | 5,642 | |
| Other assets | | 8,106 | | | 5,686 | |
| Total assets | | $ | 409,404 | | | $ | 385,227 | |
| | | | |
| Senior credit facility payable | | $ | 226,000 | | | $ | 230,000 | |
SLF JV I Notes payable at fair value (proceeds December 31, 2022: $128,750; proceeds September 30, 2022: $110,000) | | 128,750 | | | 110,000 | |
| Other liabilities | | 27,094 | | | 21,539 | |
| Total liabilities | | $ | 381,844 | | | $ | 361,539 | |
| Members' equity | | 27,560 | | | 23,688 | |
| Total liabilities and members' equity | | $ | 409,404 | | | $ | 385,227 | |
| | | | | | | | | | | | | | |
| | Three months ended December 31, 2022 | | Three months ended December 31, 2021 |
| Selected Statements of Operations Information: | | | | |
| Interest income | | $ | 8,781 | | | $ | 5,423 | |
| Other income | | — | | | 11 | |
| Total investment income | | 8,781 | | | 5,434 | |
| Senior credit facility interest expense | | 3,709 | | | 1,514 | |
| SLF JV I Notes interest expense | | 2,982 | | | 2,249 | |
| Other expenses | | 69 | | | 79 | |
| Total expenses (1) | | 6,760 | | | 3,842 | |
| Net investment income | | 2,021 | | | 1,592 | |
| Net unrealized appreciation (depreciation) | | (2,207) | | | (525) | |
| Net realized gains (losses) | | (992) | | | 374 | |
| Net income (loss) | | $ | (1,178) | | | $ | 1,441 | |
__________
(1) There are no management fees or incentive fees charged at SLF JV I.
SLF JV I has elected to fair value the SLF JV I Notes issued to the Company and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option ("ASC 825"). The SLF JV I Notes are valued based on the total assets less the total liabilities senior to the SLF JV I Notes in an amount not exceeding par under the EV technique.
During the three months ended December 31, 2022, the Company sold $13.5 million of senior secured debt investments to SLF JV I for $12.9 million cash consideration, which represented the fair value at the time of sale. A loss of $0.1 million was recognized by the Company on these transactions. During the three months ended December 31, 2021, the Company sold $9.7 million of senior secured debt investments to SLF JV I for $9.7 million cash consideration, which represented the fair value at the time of sale. A gain of $0.5 million was recognized by the Company on these transactions.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
OCSI Glick JV LLC
On March 19, 2021, the Company became party to the LLC agreement of Glick JV. The Company co-invests primarily in senior secured loans of middle-market companies with GF Equity Funding through the Glick JV. The Glick JV is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by GF Equity Funding. The Glick JV is capitalized as transactions are completed, and portfolio decisions and investment decisions in respect of the Glick JV must be approved by the Glick JV investment committee, which consists of one representative selected by the Company and one representative selected by GF Equity Funding (with approval from a representative of each required). Since the Company does not have a controlling financial interest in the Glick JV, the Company does not consolidate the Glick JV.
The members provide capital to the Glick JV in exchange for LLC equity interests, and the Company and GF Debt Funding 2014 LLC ("GF Debt Funding"), an entity advised by affiliates of GF Equity Funding, provide capital to the Glick JV in exchange for subordinated notes issued by the Glick JV (the "Glick JV Notes"). As of December 31, 2022 and September 30, 2022, the Company and GF Equity Funding owned 87.5% and 12.5%, respectively, of the outstanding LLC equity interests, and the Company and GF Debt Funding owned 87.5% and 12.5%, respectively, of the Glick JV Notes. The Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act.
The Glick JV has a senior revolving credit facility with Deutsche Bank AG, New York Branch (the "Glick JV Deutsche Bank Facility"), which, as of December 31, 2022, had a reinvestment period end date and maturity date of May 3, 2023 and May 3, 2028, respectively, and permitted borrowings of up to $90.0 million (subject to borrowing base and other limitations). Borrowings under the Glick JV Deutsche Bank Facility are secured by all of the assets of the Glick JV and all of the equity interests in the Glick JV and, as of December 31, 2022, bore interest at a rate equal to 3-month LIBOR plus 2.25% per annum during the reinvestment period, 3-month LIBOR plus 2.40% for the first year after the end of the reinvestment period, 3-month LIBOR plus 2.50% for the following year and 3-month LIBOR plus 2.75% thereafter, in each case with a 0.125% LIBOR floor. $76.1 million and $82.1 million of borrowings were outstanding under the Glick JV Deutsche Bank Facility as of December 31, 2022 and September 30, 2022, respectively.
As of December 31, 2022 and September 30, 2022, the Glick JV had total assets of $137.5 million and $146.8 million, respectively. The Glick JV's portfolio consisted of middle-market and other corporate debt securities of 40 and 43 portfolio companies as of December 31, 2022 and September 30, 2022, respectively. The portfolio companies in the Glick JV are in industries similar to those in which the Company may invest directly. The Company's investment in the Glick JV consisted of LLC equity interests and Glick JV Notes of $49.5 million and $50.3 million in the aggregate at fair value as of December 31, 2022 and September 30, 2022, respectively. The Glick JV Notes are junior in right of payment to the repayment of temporary contributions made by the Company to fund investments of the Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Glick JV Notes, respectively.
As of each of December 31, 2022 and September 30, 2022, the Glick JV had total capital commitments of $100.0 million, $87.5 million of which was from the Company and the remaining $12.5 million of which was from GF Equity Funding and GF Debt Funding. Approximately $84.0 million in aggregate commitments were funded as of each of December 31, 2022 and September 30, 2022, of which $73.5 million was from the Company. As of each of December 31, 2022 and September 30, 2022, the Company had commitments to fund Glick JV Notes of $78.8 million, of which $12.4 million were unfunded. As of each of December 31, 2022 and September 30, 2022, the Company had commitments to fund LLC equity interests in the Glick JV of $8.7 million, of which $1.6 million were unfunded.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Below is a summary of the Glick JV's portfolio, followed by a listing of the individual loans in the Glick JV's portfolio as of December 31, 2022 and September 30, 2022:
| | | | | | | | | | | |
| December 31, 2022 | | September 30, 2022 |
| Senior secured loans (1) | $134,080 | | $143,225 |
| Weighted average current interest rate on senior secured loans (2) | 9.86% | | 8.52% |
| Number of borrowers in the Glick JV | 40 | | 43 |
| Largest loan exposure to a single borrower (1) | $7,476 | | $6,562 |
| Total of five largest loan exposures to borrowers (1) | $29,830 | | $28,973 |
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.
Glick JV Portfolio as of December 31, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| ADB Companies, LLC | First Lien Term Loan, SOFR+6.25% cash due 12/18/2025 | 11.34% | Construction & Engineering | $ | 4,589 | | | $ | 4,528 | | | $ | 4,510 | | (4) |
| Alvogen Pharma Inc | First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 12.23% | Pharmaceuticals | 6,479 | | | 6,413 | | | 6,447 | | (4) |
| Alvogen Pharma Inc | First Lien Term Loan, LIBOR+4.00% cash due 6/9/2028 | 8.38% | Diversified Metals & Mining | 997 | | | 918 | | | 941 | | |
| Total Alvogen Pharma Inc | | | | 7,476 | | | 7,331 | | | 7,388 | | |
| American Tire Distributors, Inc. | First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 10.61% | Distributors | 2,882 | | | 2,846 | | | 2,652 | | (4) |
| Amplify Finco Pty Ltd. | First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 8.98% | Movies & Entertainment | 2,918 | | | 2,888 | | | 2,813 | | (4) |
| Anastasia Parent, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 8.48% | Personal Products | 914 | | | 711 | | | 685 | | (4) |
| ASP-R-PAC Acquisition Co LLC | First Lien Revolver, LIBOR+6.00% cash due 12/29/2027 | | Paper Packaging | — | | | (3) | | | (8) | | (5) |
| ASP-R-PAC Acquisition Co LLC | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2027 | 10.38% | Paper Packaging | 1,729 | | | 1,701 | | | 1,666 | | |
| Total ASP-R-PAC Acquisition Co LLC | | | | 1,729 | | | 1,698 | | | 1,658 | | |
| Astra Acquisition Corp. | First Lien Term Loan, LIBOR+5.25% cash due 10/25/2028 | 9.63% | Application Software | 2,078 | | | 2,034 | | | 1,844 | | (4) |
| Asurion, LLC | First Lien Term Loan, SOFR+4.00% cash due 8/19/2028 | 8.68% | Property & Casualty Insurance | 1,995 | | | 1,901 | | | 1,785 | | |
| Asurion, LLC | Second Lien Term Loan, LIBOR+5.25% cash due 1/20/2029 | 9.63% | Property & Casualty Insurance | 2,423 | | | 2,220 | | | 1,898 | | |
| Total Asurion, LLC | | | | 4,418 | | | 4,121 | | | 3,683 | | |
| Aurora Lux Finco S.À.R.L. | First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 10.32% | Airport Services | 3,647 | | | 3,595 | | | 3,468 | | (4) |
| BAART Programs, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 6/11/2027 | 9.07% | Health Care Services | 3,389 | | | 3,357 | | | 3,294 | | |
| BAART Programs, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 6/11/2027 | 9.73% | Health Care Services | 806 | | | 798 | | | 768 | | (4)(5) |
| Total BAART Programs, Inc. | | | | 4,195 | | | 4,155 | | | 4,062 | | |
| BYJU's Alpha, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 11/24/2026 | 10.70% | Application Software | 3,960 | | | 3,912 | | | 3,193 | | |
| Covetrus, Inc. | First Lien Term Loan, SOFR+5.00% cash due 9/20/2029 | 9.58% | Health Care Distributors | 2,280 | | | 2,143 | | | 2,142 | | (4) |
| Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 8.73% | Biotechnology | 2,863 | | | 2,842 | | | 2,806 | | |
| DirecTV Financing, LLC | First Lien Term Loan, LIBOR+5.00% cash due 8/2/2027 | 9.38% | Cable & Satellite | 2,663 | | | 2,636 | | | 2,598 | | (4) |
| Domtar Corporation | First Lien Term Loan, LIBOR+5.50% cash due 11/30/2028 | 9.79% | Paper Products | 2,497 | | | 2,472 | | | 2,397 | | |
| DTI Holdco, Inc. | First Lien Term Loan, SOFR+4.75% cash due 4/26/2029 | 8.84% | Research & Consulting Services | 2,993 | | | 2,938 | | | 2,764 | | (4) |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| eResearch Technology, Inc. | First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027 | 8.88% | Application Software | $ | 2,438 | | | $ | 2,413 | | | $ | 2,158 | | |
| Gibson Brands, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 8/11/2028 | 9.13% | Leisure Products | 3,960 | | | 3,920 | | | 2,930 | | |
| Harbor Purchaser Inc. | First Lien Term Loan, SOFR+5.25% cash due 4/9/2029 | 9.67% | Education Services | 3,990 | | | 3,882 | | | 3,807 | | (4) |
| Indivior Finance S.À.R.L. | First Lien Term Loan, SOFR+5.25% cash due 6/30/2026 | 10.09% | Pharmaceuticals | 3,940 | | | 3,884 | | | 3,881 | | |
| INW Manufacturing, LLC | First Lien Term Loan, LIBOR+5.75% cash due 3/25/2027 | 10.48% | Personal Products | 2,344 | | | 2,293 | | | 2,004 | | (4) |
| Iris Holding, Inc. | First Lien Term Loan, SOFR+4.75% cash due 6/28/2028 | 8.94% | Metal & Glass Containers | 1,995 | | | 1,849 | | | 1,819 | | |
| LaserAway Intermediate Holdings II, LLC | First Lien Term Loan, LIBOR+5.75% cash due 10/14/2027 | 9.76% | Health Care Services | 3,960 | | | 3,897 | | | 3,891 | | |
| LTI Holdings, Inc. | First Lien Term Loan, LIBOR+3.50% cash due 9/6/2025 | 7.88% | Electronic Components | 1,355 | | | 1,203 | | | 1,300 | | |
| MRI Software LLC | First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | | Application Software | — | | | (1) | | | (6) | | (4)(5) |
| MRI Software LLC | First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 10.23% | Application Software | 1,642 | | | 1,629 | | | 1,583 | | (4) |
| Total MRI Software LLC | | | | 1,642 | | | 1,628 | | | 1,577 | | |
| Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025 | 9.23% | Electrical Components & Equipment | 5,239 | | | 5,230 | | | 5,082 | | |
| OEConnection LLC | First Lien Term Loan, SOFR+4.00% cash due 9/25/2026 | 8.42% | Application Software | 3,878 | | | 3,861 | | | 3,705 | | (4) |
| Planview Parent, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 12/17/2027 | 8.73% | Application Software | 688 | | | 649 | | | 643 | | |
| Planview Parent, Inc. | Second Lien Term Loan, LIBOR+7.25% cash due 12/18/2028 | 11.98% | Application Software | 2,842 | | | 2,799 | | | 2,551 | | (4) |
| Total Planview Parent, Inc. | | | | 3,530 | | | 3,448 | | | 3,194 | | |
| Pluralsight, LLC | First Lien Term Loan, LIBOR+8.00% cash due 4/6/2027 | 11.83% | Application Software | 4,465 | | | 4,401 | | | 4,354 | | (4) |
| Pluralsight, LLC | First Lien Revolver, LIBOR+8.00% cash due 4/6/2027 | 12.36% | Application Software | 158 | | | 153 | | | 150 | | (4)(5) |
| Total Pluralsight, LLC | | | | 4,623 | | | 4,554 | | | 4,504 | | |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.25% cash due 4/27/2024 | 9.66% | Footwear | 6,078 | | | 6,068 | | | 4,710 | | |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.23% cash due 4/27/2024 | 9.64% | Footwear | 102 | | | 102 | | | 89 | | |
| Total SHO Holding I Corporation | | | | 6,180 | | | 6,170 | | | 4,799 | | |
| Spanx, LLC | First Lien Term Loan, LIBOR+5.25% cash due 11/20/2028 | 9.64% | Apparel Retail | 4,950 | | | 4,867 | | | 4,833 | | (4) |
| SPX Flow, Inc. | First Lien Term Loan, SOFR+4.50% cash due 4/5/2029 | 8.92% | Industrial Machinery | 5,985 | | | 5,730 | | | 5,605 | | (4) |
| Supermoose Borrower, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 8.48% | Application Software | 2,813 | | | 2,714 | | | 2,436 | | (4) |
| Surgery Center Holdings, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 8/31/2026 | 8.05% | Health Care Facilities | 3,044 | | | 3,034 | | | 3,014 | | |
| TIBCO Software Inc. | First Lien Term Loan, SOFR+4.50% cash due 3/20/2029 | 9.18% | Application Software | 2,654 | | | 2,423 | | | 2,377 | | (4) |
| Touchstone Acquisition, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2028 | 10.38% | Health Care Supplies | 3,016 | | | 2,964 | | | 2,948 | | (4) |
| Tribe Buyer LLC | First Lien Term Loan, LIBOR+4.50% cash due 2/16/2024 | 8.88% | Human Resource & Employment Services | 1,578 | | | 1,578 | | | 987 | | |
| Windstream Services II, LLC | First Lien Term Loan, SOFR+6.25% cash due 9/21/2027 | 10.67% | Integrated Telecommunication Services | 4,874 | | | 4,742 | | | 4,433 | | (4) |
| WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 12.17% | Aerospace & Defense | 3,000 | | | 2,987 | | | 2,528 | | (4) |
| WP CPP Holdings, LLC | First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025 | 8.17% | Aerospace & Defense | 990 | | | 956 | | | 864 | | (4) |
| Total WP CPP Holdings, LLC | | | | 3,990 | | | 3,943 | | | 3,392 | | |
Total Portfolio Investments | | | | $ | 134,080 | | | $ | 131,077 | | | $ | 123,339 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
__________
(1) Represents the interest rate as of December 31, 2022. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for most of the floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans may also be indexed to SOFR. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over the reference rates based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars. As of December 31, 2022, the reference rates for the Glick JV's variable rate loans were the 30-day LIBOR at 4.38%, the 90-day LIBOR at 4.73%, the 30-day SOFR at 4.32% and the 90-day SOFR at 4.58%. Most loans include an interest floor, which generally ranges from 0% to 1%. SOFR based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(3) Represents the current determination of fair value as of December 31, 2022 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the valuation process described elsewhere herein.
(4) This investment was held by both the Company and the Glick JV as of December 31, 2022.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
Glick JV Portfolio as of September 30, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| ADB Companies, LLC | First Lien Term Loan, SOFR+6.25% cash due 12/18/2025 | 9.80% | Construction & Engineering | $ | 4,647 | | | $ | 4,579 | | | $ | 4,567 | | (4) |
| Alvogen Pharma Inc | First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 11.20% | Pharmaceuticals | 6,562 | | | 6,489 | | | 6,529 | | (4) |
| American Tire Distributors, Inc. | First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 9.03% | Distributors | 2,889 | | | 2,853 | | | 2,714 | | (4) |
| Amplify Finco Pty Ltd. | First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 7.92% | Movies & Entertainment | 2,925 | | | 2,896 | | | 2,823 | | (4) |
| Anastasia Parent, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 7.42% | Personal Products | 917 | | | 712 | | | 734 | | (4) |
| ASP-R-PAC Acquisition Co LLC | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2027 | 9.67% | Paper Packaging | 1,734 | | | 1,704 | | | 1,694 | | |
| ASP-R-PAC Acquisition Co LLC | First Lien Revolver, LIBOR+6.00% cash due 12/29/2027 | | Paper Packaging | — | | | (4) | | | (5) | | (5) |
| Total ASP-R-PAC Acquisition Co LLC | | | | 1,734 | | | 1,700 | | | 1,689 | | |
| Astra Acquisition Corp. | First Lien Term Loan, LIBOR+5.25% cash due 10/25/2028 | 8.37% | Application Software | 2,078 | | | 2,033 | | | 1,777 | | (4) |
| Asurion, LLC | First Lien Term Loan, SOFR+4.00% cash due 8/19/2028 | 7.70% | Property & Casualty Insurance | 2,000 | | | 1,901 | | | 1,711 | | |
| Asurion, LLC | Second Lien Term Loan, LIBOR+5.25% cash due 1/20/2029 | 8.37% | Property & Casualty Insurance | 2,423 | | | 2,212 | | | 1,866 | | |
| Total Asurion, LLC | | | | 4,423 | | | 4,113 | | | 3,577 | | |
| Aurora Lux Finco S.À.R.L. | First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 8.78% | Airport Services | 3,656 | | | 3,601 | | | 3,476 | | (4) |
| BAART Programs, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 6/11/2027 | 8.12% | Health Care Services | 3,398 | | | 3,366 | | | 3,279 | | |
| BAART Programs, Inc. | First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 6/11/2027 | 8.12% | Health Care Services | 808 | | | 800 | | | 760 | | (4)(5) |
| Total BAART Programs, Inc. | | | | 4,206 | | | 4,166 | | | 4,039 | | |
| BYJU's Alpha, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 11/24/2026 | 8.98% | Application Software | 3,970 | | | 3,919 | | | 2,909 | | |
| CITGO Petroleum Corp. | First Lien Term Loan, LIBOR+6.25% cash due 3/28/2024 | 9.37% | Oil & Gas Refining & Marketing | 3,519 | | | 3,484 | | | 3,529 | | (4) |
| City Football Group Limited | First Lien Term Loan, LIBOR+3.50% cash due 7/21/2028 | 6.48% | Movies & Entertainment | 2,481 | | | 2,469 | | | 2,372 | | |
| Covetrus, Inc. | First Lien Term Loan, SOFR+5.00% cash due 9/20/2029 | 7.65% | Health Care Distributors | 2,280 | | | 2,143 | | | 2,136 | | (4) |
| Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 7.67% | Biotechnology | 2,870 | | | 2,849 | | | 2,756 | | |
| DirecTV Financing, LLC | First Lien Term Loan, LIBOR+5.00% cash due 8/2/2027 | 8.12% | Cable & Satellite | 2,730 | | | 2,703 | | | 2,549 | | (4) |
| Domtar Corporation | First Lien Term Loan, LIBOR+5.50% cash due 11/30/2028 | 8.26% | Paper Products | 2,503 | | | 2,478 | | | 2,394 | | |
| DTI Holdco, Inc. | First Lien Term Loan, SOFR+4.75% cash due 4/26/2029 | 7.33% | Research & Consulting Services | 3,000 | | | 2,943 | | | 2,856 | | (4) |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
| Eagle Parent Corp. | First Lien Term Loan, SOFR+4.25% cash due 4/1/2029 | 7.80% | Industrial Machinery | $ | 2,488 | | | $ | 2,429 | | | $ | 2,426 | | |
| eResearch Technology, Inc. | First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027 | 7.62% | Application Software | 2,444 | | | 2,419 | | | 2,286 | | |
| Gibson Brands, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 8/11/2028 | 7.94% | Leisure Products | 3,970 | | | 3,930 | | | 3,216 | | |
| Harbor Purchaser Inc. | First Lien Term Loan, SOFR+5.25% cash due 4/9/2029 | 8.38% | Education Services | 4,000 | | | 3,887 | | | 3,655 | | (4) |
| Indivior Finance S.À.R.L. | First Lien Term Loan, LIBOR+5.25% cash due 6/30/2026 | 8.80% | Pharmaceuticals | 3,950 | | | 3,890 | | | 3,886 | | |
| INW Manufacturing, LLC | First Lien Term Loan, LIBOR+5.75% cash due 3/25/2027 | 9.42% | Personal Products | 2,375 | | | 2,320 | | | 2,102 | | (4) |
| Iris Holding, Inc. | First Lien Term Loan, SOFR+4.75% cash due 6/28/2028 | 7.89% | Metal & Glass Containers | 2,000 | | | 1,846 | | | 1,844 | | |
| LaserAway Intermediate Holdings II, LLC | First Lien Term Loan, LIBOR+5.75% cash due 10/14/2027 | 8.23% | Health Care Services | 3,970 | | | 3,903 | | | 3,905 | | |
| LTI Holdings, Inc. | First Lien Term Loan, LIBOR+3.25% cash due 9/6/2025 | 6.37% | Electronic Components | 1,358 | | | 1,192 | | | 1,260 | | |
| MRI Software LLC | First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 9.17% | Application Software | 1,647 | | | 1,632 | | | 1,600 | | (4) |
| MRI Software LLC | First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | | Application Software | — | | | (1) | | | (4) | | (4)(5) |
| Total MRI Software LLC | | | | 1,647 | | | 1,631 | | | 1,596 | | |
| Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.75% cash due 3/31/2025 | 7.87% | Electrical Components & Equipment | 5,252 | | | 5,243 | | | 5,095 | | |
| OEConnection LLC | First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026 | 7.12% | Application Software | 3,888 | | | 3,871 | | | 3,752 | | (4) |
| Planview Parent, Inc. | Second Lien Term Loan, LIBOR+7.25% cash due 12/18/2028 | 10.92% | Application Software | 2,842 | | | 2,799 | | | 2,728 | | (4) |
| Pluralsight, LLC | First Lien Term Loan, LIBOR+8.00% cash due 4/6/2027 | 10.68% | Application Software | 4,465 | | | 4,398 | | | 4,325 | | (4) |
| Pluralsight, LLC | First Lien Revolver, LIBOR+8.00% cash due 4/6/2027 | | Application Software | — | | | (5) | | | (10) | | (4)(5) |
| Total Pluralsight, LLC | | | | 4,465 | | | 4,393 | | | 4,315 | | |
| Sabert Corporation | First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026 | 7.63% | Metal & Glass Containers | 1,691 | | | 1,674 | | | 1,623 | | (4) |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.25% cash due 4/27/2024 | 8.06% | Footwear | 6,094 | | | 6,082 | | | 5,332 | | |
| SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.23% cash due 4/27/2024 | 8.04% | Footwear | 102 | | | 102 | | | 90 | | |
| Total SHO Holding I Corporation | | | | 6,196 | | | 6,184 | | | 5,422 | | |
| Spanx, LLC | First Lien Term Loan, LIBOR+5.25% cash due 11/20/2028 | 8.30% | Apparel Retail | 4,962 | | | 4,876 | | | 4,845 | | (4) |
| SPX Flow, Inc. | First Lien Term Loan, SOFR+4.50% cash due 4/5/2029 | 7.63% | Industrial Machinery | 6,000 | | | 5,734 | | | 5,572 | | (4) |
| Supermoose Borrower, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 7.42% | Application Software | 2,820 | | | 2,712 | | | 2,487 | | (4) |
| Surgery Center Holdings, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 8/31/2026 | 6.51% | Health Care Facilities | 3,377 | | | 3,365 | | | 3,213 | | |
| TIBCO Software Inc. | First Lien Term Loan, SOFR+4.50% cash due 3/20/2029 | 8.15% | Application Software | 2,654 | | | 2,415 | | | 2,388 | | (4) |
| Touchstone Acquisition, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 12/29/2028 | 9.12% | Health Care Supplies | 3,024 | | | 2,970 | | | 2,963 | | (4) |
| Tribe Buyer LLC | First Lien Term Loan, LIBOR+4.50% cash due 2/16/2024 | 7.62% | Human Resource & Employment Services | 1,583 | | | 1,582 | | | 1,266 | | |
| Windstream Services II, LLC | First Lien Term Loan, LIBOR+6.25% cash due 9/21/2027 | 9.37% | Integrated Telecommunication Services | 4,886 | | | 4,747 | | | 4,447 | | (4) |
| WP CPP Holdings, LLC | First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025 | 6.56% | Aerospace & Defense | 993 | | | 955 | | | 892 | | (4) |
| WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 10.56% | Aerospace & Defense | 3,000 | | | 2,986 | | | 2,534 | | (4) |
| Total WP CPP Holdings, LLC | | | | 3,993 | | | 3,941 | | | 3,426 | | |
Total Portfolio Investments | | | | $ | 143,225 | | | $ | 140,083 | | | $ | 133,144 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
__________
(1) Represents the interest rate as of September 30, 2022. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for most of the floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans may also be indexed to SOFR. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over the reference rates based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars. As of September 30, 2022, the reference rates for the Glick JV's variable rate loans were the 30-day LIBOR at 3.12%, the 90-day LIBOR at 3.67%, the 30-day SOFR at 3.03% and the 90-day SOFR at 3.55%. Most loans include an interest floor, which generally ranges from 0% to 1%. SOFR based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(3) Represents the current determination of fair value as of September 30, 2022 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the valuation process described elsewhere herein.
(4) This investment was held by both the Company and the Glick JV as of September 30, 2022.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
The cost and fair value of the Company's aggregate investment in the Glick JV was $50.0 million and $49.5 million, respectively, as of December 31, 2022. The cost and fair value of the Company's aggregate investment in the Glick JV was $50.2 million and $50.3 million, respectively, as of September 30, 2022. For the three months ended December 31, 2022 and December 31, 2021, the Company's investment in the Glick JV Notes earned interest income of $1.6 million and $1.1 million, respectively. The Company did not earn dividend income for the three months ended December 31, 2022 and December 31, 2021 with respect to its investment in the LLC equity interest of the Glick JV. As of December 31, 2022, the Glick JV Notes bore interest at a rate of one-month LIBOR plus 4.50% per annum and will mature on October 20, 2028.
Below is certain summarized financial information for the Glick JV as of December 31, 2022 and September 30, 2022 and for the three months ended December 31, 2022 and December 31, 2021:
| | | | | | | | | | | |
| December 31, 2022 | | September 30, 2022 |
| Selected Balance Sheet Information: | | | |
Investments at fair value (cost December 31, 2022: $131,077; September 30, 2022: $140,083) | $ | 123,339 | | | $ | 133,144 | |
| Cash and cash equivalents | 9,777 | | | 7,021 | |
| Restricted cash | 1,747 | | | 1,788 | |
| Other assets | 2,592 | | | 4,855 | |
| Total assets | $ | 137,455 | | | $ | 146,808 | |
| | | |
| Senior credit facility payable | $ | 76,082 | | | $ | 82,082 | |
Glick JV Notes payable at fair value (proceeds December 31, 2022: $67,485; September 30, 2022: $68,185) | 56,614 | | | 57,463 | |
| Other liabilities | 4,759 | | | 7,263 | |
| Total liabilities | $ | 137,455 | | | $ | 146,808 | |
| Members' equity | — | | | — | |
| Total liabilities and members' equity | $ | 137,455 | | | $ | 146,808 | |
| | | | | | | | | | | |
| For the three months ended December 31, 2022 | | For the three months ended December 31, 2021 |
| Selected Statements of Operations Information: | | | |
| Interest income | $ | 3,403 | | | $ | 2,160 | |
| Fee income | — | | | — | |
| Total investment income | 3,403 | | | 2,160 | |
| Senior credit facility interest expense | 1,285 | | | 510 | |
| Glick JV Notes interest expense | 1,324 | | | 818 | |
| Other expenses | 53 | | | 39 | |
| Total expenses (1) | 2,662 | | | 1,367 | |
| Net investment income | 741 | | | 793 | |
| Net unrealized appreciation (depreciation) | (651) | | | (882) | |
| Realized gain (loss) | (90) | | | 89 | |
| Net income (loss) | $ | — | | | $ | — | |
__________
(1) There are no management fees or incentive fees charged at the Glick JV.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The Glick JV has elected to fair value the Glick JV Notes issued to the Company and GF Debt Funding under ASC 825. The Glick JV Notes are valued based on the total assets less the liabilities senior to the Glick JV Notes in an amount not exceeding par under the EV technique.
During the three months ended December 31, 2022 and 2021, the Company did not sell any debt investments to the Glick JV.
Note 4. Fee Income
For the three months ended December 31, 2022 and 2021, the Company recorded total fee income of $2.0 million and $0.9 million, respectively, of which $0.2 million and $0.2 million, respectively, was recurring in nature. Recurring fee income primarily consisted of servicing fees and certain exit fees.
Note 5. Share Data and Net Assets
The share and per share information disclosed in Note 5 have been retrospectively adjusted to reflect the Company's 1-for-3 reverse stock split completed on January 20, 2023 and effective as of the commencement of trading on January 23, 2023.
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share, pursuant to ASC Topic 260-10, Earnings per Share, for the three months ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | |
| (Share amounts in thousands) | | Three months ended
December 31, 2022 | | Three months ended
December 31, 2021 |
| Earnings (loss) per common share — basic and diluted: | | | | |
| Net increase (decrease) in net assets resulting from operations | | $ | 13,172 | | | $ | 39,408 | |
| Weighted average common shares outstanding — basic and diluted | | 61,142 | | | 60,127 | |
| Earnings (loss) per common share — basic and diluted | | $ | 0.22 | | | $ | 0.66 | |
Changes in Net Assets
The following table presents the changes in net assets for the three months ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | |
| (Share amounts in thousands) | | Shares | | Par Value | | Additional paid-in-capital | | Accumulated Overdistributed Earnings | | Total Net Assets |
| Balance as of September 30, 2022 | | 61,125 | | | $ | 611 | | | $ | 1,827,721 | | | $ | (582,769) | | | $ | 1,245,563 | |
| Net investment income | | — | | | — | | — | | 38,808 | | 38,808 |
| Net unrealized appreciation (depreciation) | | — | | — | | — | | (22,982) | | (22,982) |
| Net realized gains (losses) | | — | | — | | — | | (3,203) | | (3,203) |
| (Provision) benefit for taxes on realized and unrealized gains (losses) | | — | | — | | — | | 549 | | 549 |
| Distributions to stockholders | | — | | — | | — | | (58,679) | | (58,679) |
| Issuance of common stock under dividend reinvestment plan | | 95 | | 1 | | 1,932 | | — | | 1,933 |
| Balance as of December 31, 2022 | | 61,220 | | | $ | 612 | | | $ | 1,829,653 | | | $ | (628,276) | | | $ | 1,201,989 | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table presents the changes in net assets for the three months ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | |
| | Shares | | Par Value | | Additional paid-in-capital | | Accumulated Overdistributed Earnings | | Total Net Assets |
| Balance as of September 30, 2021 | | 60,120 | | | $ | 601 | | | $ | 1,805,557 | | | $ | (493,335) | | | $ | 1,312,823 | |
| Net investment income | | — | | — | | — | | 32,295 | | 32,295 |
| Net unrealized appreciation (depreciation) | | — | | — | | — | | (4,586) | | (4,586) |
| Net realized gains (losses) | | — | | — | | — | | 9,321 | | 9,321 |
| (Provision) benefit for taxes on realized and unrealized gains (losses) | | — | | — | | — | | 2,378 | | 2,378 |
| Distributions to stockholders | | — | | — | | — | | (27,956) | | (27,956) |
| Issuance of common stock under dividend reinvestment plan | | 36 | | 1 | | 785 | | — | | 786 |
| Balance as of December 31, 2021 | | 60,156 | | | $ | 602 | | | $ | 1,806,342 | | | $ | (481,883) | | | $ | 1,325,061 | |
Distributions
Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, may be distributed to stockholders or retained for reinvestment.
The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors declares a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP with such shares issued at the greater of the most recently computed net asset value per share of common stock or 95% of the current market price per share of common stock on the payment date for such distribution. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP.
For income tax purposes, the Company estimated its distributions for the 2022 calendar year will be composed primarily of ordinary income. The character of such distributions will be appropriately reported to the Internal Revenue Service and stockholders for the 2022 calendar year. To the extent the Company’s taxable earnings for a fiscal and taxable year fall below the amount of distributions paid for the fiscal and taxable year, a portion of the total amount of the Company’s distributions for the fiscal and taxable year is deemed a return of capital for U.S. federal income tax purposes to the Company’s stockholders.
The following table reflects the distributions per share that the Company has paid, including shares issued under the DRIP, on its common stock during the three months ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distribution | | Date Declared | | Record Date | | Payment Date | | Amount
per Share | | Cash
Distribution | | DRIP Shares
Issued | | DRIP Shares
Value | | |
| Quarterly | | November 10, 2022 | | December 15, 2022 | | December 30, 2022 | | $ | 0.54 | | | $ | 32.0 | million | | 53,369 | | (1) | $ | 1.1 | million | | |
| Special | | November 10, 2022 | | December 15, 2022 | | December 30, 2022 | | $ | 0.42 | | | $ | 24.8 | million | | 41,510 | | (1) | $ | 0.8 | million | | |
| Total for the three months ended December 31, 2022 | | $ | 0.96 | | | $ | 56.8 | million | | 94,879 | | | $ | 1.9 | million | | |
| Distribution | | Date Declared | | Record Date | | Payment Date | | Amount
per Share | | Cash
Distribution | | DRIP Shares
Issued | | DRIP Shares
Value | | |
| Quarterly | | October 13, 2021 | | December 15, 2021 | | December 31, 2021 | | $ | 0.465 | | | $ | 27.2 | million | | 35,990 | | (1) | $ | 0.8 | million | | |
| Total for the three months ended December 31, 2021 | | $ | 0.465 | | | $ | 27.2 | million | | 35,990 | | | $ | 0.8 | million | | |
__________
(1) New shares were issued and distributed.
Common Stock Issuances
During the three months ended December 31, 2022 and 2021, the Company issued of 94,879 and 35,990, respectively, of shares of common stock as part of the DRIP.
On February 7, 2022, the Company entered into an equity distribution agreement by and among the Company, Oaktree, Oaktree Administrator and Keefe, Bruyette & Woods, Inc., JMP Securities LLC, Raymond James & Associates, Inc. and
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
SMBC Nikko Securities America, Inc., as placement agents, in connection with the issuance and sale by the Company of shares of common stock, having an aggregate offering price of up to $125.0 million. Sales of the common stock may be made in negotiated transactions or transactions that are deemed to be “at the market,” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Select Market or similar securities exchanges or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.
In connection with the "at the market" offering, the Company did not issue or sell any shares of common stock during the three months ended December 31, 2022.
Note 6. Borrowings
Syndicated Facility
On November 30, 2017, the Company entered into a senior secured revolving credit facility (as amended and restated, the “Syndicated Facility”) pursuant to a Senior Secured Revolving Credit Agreement with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A., BofA Securities, Inc. and MUFG Union Bank, N.A., as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. The Syndicated Facility provides that the Company may use the proceeds of the loans and issuances of letters of credit under the Syndicated Facility for general corporate purposes, including acquiring and funding leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other investments. The Syndicated Facility further allows the Company to request letters of credit from ING Capital LLC, as the issuing bank.
As of December 31, 2022, the size of the Syndicated Facility was $1.0 billion. In addition, pursuant to an "accordion" feature, the Company may increase the size of the facility to up to the greater of $1.25 billion and the Company's net worth, as defined in the facility, under certain circumstances.
As of December 31, 2022, (i) the period during which the Company may make drawings will expire on May 4, 2025 and the maturity date is May 4, 2026 and (ii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at the Company’s option) was 2.00% and (b) alternate base rate loans was 1.00%.
The Syndicated Facility is secured by substantially all of the Company’s assets (excluding, among other things, investments held in and by certain subsidiaries of the Company (including OCSL Senior Funding II LLC) or investments in certain portfolio companies of the Company) and guaranteed by certain subsidiaries of the Company. As of December 31, 2022, except for assets that were held by OCSL Senior Funding II LLC and certain immaterial subsidiaries, substantially all of the Company's assets are pledged as collateral under the Syndicated Facility.
The Syndicated Facility requires the Company to, among other things, (i) make representations and warranties regarding the collateral as well as each of the Company’s portfolio companies’ businesses, (ii) agree to certain indemnification obligations, and (iii) comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including covenants related to: (A) limitations on the incurrence of additional indebtedness and liens, (B) limitations on certain investments, (C) limitations on certain asset transfers and restricted payments, (D) maintaining a certain minimum stockholders’ equity, (E) maintaining a ratio of total assets (less total liabilities) to total indebtedness, of the Company and its subsidiaries (subject to certain exceptions), of not less than 1.50 to 1.00, (F) maintaining a ratio of consolidated EBITDA to consolidated interest expense, of the Company and its subsidiaries (subject to certain exceptions), of not less than 2.25 to 1.00, (G) maintaining a minimum liquidity and net worth, and (H) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. The Syndicated Facility also includes usual and customary default provisions such as the failure to make timely payments under the facility, the occurrence of a change in control, and the failure by the Company to materially perform under the agreements governing the facility, which, if not complied with, could accelerate repayment under the facility. As of December 31, 2022, the Company was in compliance with all financial covenants under the Syndicated Facility. In addition to the asset coverage ratio described above, borrowings under the Syndicated Facility (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that will apply different advance rates to different types of assets in the Company’s portfolio. Each loan or letter of credit originated or assumed under the Syndicated Facility is subject to the satisfaction of certain conditions.
As of December 31, 2022 and September 30, 2022, the Company had $695.0 million and $540.0 million of borrowings outstanding under the Syndicated Facility, respectively, which had a fair value of $695.0 million and $540.0 million, respectively. The Company's borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 5.849% and 2.174% for the three months ended December 31, 2022 and 2021, respectively. For the three months ended
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
December 31, 2022 and 2021, the Company recorded interest expense (inclusive of fees) of $10.0 million and $3.8 million, respectively, related to the Syndicated Facility.
Citibank Facility
On March 19, 2021, the Company became party to a revolving credit facility (as amended and/or restated from time to time, the “Citibank Facility”) with OCSL Senior Funding II LLC (formerly OCSI Senior Funding II LLC), the Company’s wholly-owned, special purpose financing subsidiary, as the borrower, the Company, as collateral manager and seller, each of the lenders from time to time party thereto, Citibank, N.A., as administrative agent, and Wells Fargo Bank, National Association, as collateral agent and custodian.
As of December 31, 2022, the Company was able to borrow up to $200 million under the Citibank Facility (subject to borrowing base and other limitations). As of December 31, 2022, the reinvestment period under the Citibank Facility was scheduled to expire on November 18, 2023 and the maturity date for the Citibank Facility was November 18, 2024.
As of December 31, 2022, borrowings under the Citibank Facility are subject to certain customary advance rates and accrue interest at a rate equal to LIBOR plus between 1.25% and 2.20% per annum on broadly syndicated loans, subject to observable market depth and pricing, and LIBOR plus 2.25% per annum on all other eligible loans during the reinvestment period. In addition, as of December 31, 2022, for the duration of the reinvestment period there is a non-usage fee payable of 0.50% per annum on the undrawn amount under the Citibank Facility. The minimum asset coverage ratio applicable to the Company under the Citibank Facility is 150% as determined in accordance with the requirements of the Investment Company Act. Borrowings under the Citibank Facility are secured by all of the assets of OCSL Senior Funding II LLC and all of the Company’s equity interests in OCSL Senior Funding II LLC. The Company may use the Citibank Facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Citibank Facility is subject to the satisfaction of certain conditions.
As of December 31, 2022 and September 30, 2022, the Company had $165.0 million and $160.0 million outstanding under the Citibank Facility, respectively, which had a fair value of $165.0 million and $160.0 million, respectively. The Company's borrowings under the Citibank Facility bore interest at a weighted average interest rate of 6.508% and 1.830% for the three months ended December 31, 2022 and 2021, respectively. For the three months ended December 31, 2022 and 2021, the Company recorded interest expense (inclusive of fees) of $2.7 million and $0.8 million, respectively, related to the Citibank Facility.
2025 Notes
On February 25, 2020, the Company issued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the 2025 Notes.
The 2025 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the fifth supplemental indenture, dated February 25, 2020 (collectively, the "2025 Notes Indenture"), between the Company and Deutsche Bank Trust Company Americas (the "Trustee"). The 2025 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2025 Notes. The 2025 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2025 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2025 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.
Interest on the 2025 Notes is paid semi-annually on February 25 and August 25 at a rate of 3.500% per annum. The 2025 Notes mature on February 25, 2025 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity at par plus a “make-whole” premium, if applicable. In addition, holders of the 2025 Notes can require the Company to repurchase the 2025 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2025 Notes Indenture. The 2025 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the three months ended December 31, 2022, the Company did not repurchase any of the 2025 Notes in the open market.
The 2025 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission ("SEC")), as well as covenants requiring the Company to provide financial information to
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
the holders of the 2025 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are subject to limitations and exceptions that are described in the 2025 Notes Indenture.
2027 Notes
On May 18, 2021, the Company issued $350.0 million in aggregate principal amount of the 2027 Notes for net proceeds of $344.8 million after deducting OID of $1.0 million, underwriting commissions and discounts of $3.5 million and offering costs of $0.7 million. The OID on the 2027 Notes is amortized based on the effective interest method over the term of the 2027 Notes.
The 2027 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the sixth supplemental indenture, dated May 18, 2021 (collectively, the "2027 Notes Indenture"), between the Company and the Trustee. The 2027 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2027 Notes. The 2027 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2027 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2027 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.
Interest on the 2027 Notes is paid semi-annually on January 15 and July 15, beginning on January 15, 2022, at a rate of 2.700% per annum. The 2027 Notes mature on January 15, 2027 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity at par plus a “make-whole” premium, if applicable. In addition, holders of the 2027 Notes can require the Company to repurchase the 2027 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2027 Notes Indenture. The 2027 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the three months ended December 31, 2022, the Company did not repurchase any of the 2027 Notes in the open market.
The 2027 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the SEC), as well as covenants requiring the Company to provide financial information to the holders of the 2027 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 2027 Notes Indenture.
In connection with the 2027 Notes, the Company entered into an interest rate swap to more closely align the interest rates of its liabilities with its investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, the Company receives a fixed interest rate of 2.700% and pays a floating interest rate of the three-month LIBOR plus 1.658% on a notional amount of $350 million. The Company designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship. See Note 12 for more information regarding the interest rate swap.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The below table presents the components of the carrying value of the 2025 Notes and the 2027 Notes as of December 31, 2022 and September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2022 | | As of September 30, 2022 |
| ($ in millions) | | 2025 Notes | | 2027 Notes | | 2025 Notes | | 2027 Notes |
| Principal | | $ | 300.0 | | | $ | 350.0 | | | $ | 300.0 | | | $ | 350.0 | |
| Unamortized financing costs | | (1.6) | | | (3.1) | | | (1.8) | | | (3.2) | |
| Unaccreted discount | | (1.1) | | | (0.7) | | | (1.2) | | | (0.7) | |
| Interest rate swap fair value adjustment | | — | | | (39.9) | | | — | | | (42.0) | |
| Net carrying value | | $ | 297.3 | | | $ | 306.3 | | | $ | 297.0 | | | $ | 304.1 | |
| Fair Value | | $ | 286.7 | | | $ | 296.8 | | | $ | 283.1 | | | $ | 294.0 | |
The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the three months ended December 31, 2022:
| | | | | | | | | | | | | | |
| ($ in millions) | | 2025 Notes | | 2027 Notes |
| Coupon interest | | $ | 2.6 | | | $ | 2.4 | |
| Amortization of financing costs and discount | | 0.3 | | | 0.2 | |
| Effect of interest rate swap | | — | | | 2.5 | |
| Total interest expense | | $ | 2.9 | | | $ | 5.1 | |
| Coupon interest rate (net of effect of interest rate swap for 2027 Notes) | | 3.500 | % | | 5.586 | % |
The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the three months ended December 31, 2021:
| | | | | | | | | | | | | | |
| ($ in millions) | | 2025 Notes | | 2027 Notes |
| Coupon interest | | $ | 2.6 | | | $ | 2.4 | |
| Amortization of financing costs and discount | | 0.3 | | | 0.2 | |
| Effect of interest rate swap | | — | | | (0.7) | |
| Total interest expense | | $ | 2.9 | | | $ | 1.9 | |
| Coupon interest rate (net of effect of interest rate swap for 2027 Notes) | | 3.500 | % | | 1.782 | % |
Note 7. Taxable/Distributable Income and Dividend Distributions
Taxable income differs from net increase (decrease) in net assets resulting from operations primarily due to: (1) unrealized appreciation (depreciation) on investments and foreign currency, as gains and losses are not included in taxable income until they are realized; (2) origination and exit fees received in connection with investments in portfolio companies; (3) organizational costs; (4) income or loss recognition on exited investments; and (5) recognition of interest income on certain loans.
As of September 30, 2022, the Company had net capital loss carryforwards of $523.7 million to offset net capital gains that will not expire, to the extent available and permitted by U.S. federal income tax law, of which $64.5 million are available to offset future short-term capital gains and $459.2 million are available to offset future long-term capital gains. A portion of such net capital loss carryfowards represented a realized loss under sections 382 and 383 of the Code, which is carried forward to future years to offset future gains subject to certain limitations.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Listed below is a reconciliation of "net increase (decrease) in net assets resulting from operations" to taxable income for the three months ended December 31, 2022 and 2021.
| | | | | | | | | | | | | | |
| | Three months ended
December 31, 2022 | | Three months ended
December 31, 2021 |
| Net increase (decrease) in net assets resulting from operations | | $ | 13,172 | | | $ | 39,408 | |
| Net unrealized (appreciation) depreciation | | 22,982 | | | 4,586 | |
| Book/tax difference due to organizational costs | | — | | | (22) | |
| Book/tax difference due to capital losses utilized | | 8,013 | | | (10,531) | |
| Other book/tax differences | | (12,910) | | | (11,171) | |
| Taxable/Distributable Income (1) | | $ | 31,257 | | | $ | 22,270 | |
__________
(1) The Company's taxable income for the three months ended December 31, 2022 is an estimate and will not be finally determined until the Company files its tax return for the fiscal year ending September 30, 2023. Therefore, the final taxable income may be different than the estimate.
The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
When assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred tax assets are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income and tax liabilities for the tax jurisdiction in which the tax asset is located. The deferred tax asset recognized by the Company, as it relates to the higher tax basis in the carrying value of certain assets compared to the book basis of those assets, will be recognized in future years by these taxable entities. Deferred tax assets are based on the amount of the tax benefit that the Company’s management has determined is more likely than not to be realized in future periods. In determining the realizability of this tax benefit, management considered numerous factors that will give rise to pre-tax income in future periods. Among these are the historical and expected future book and tax basis pre-tax income of the Company and unrealized gains in the Company’s assets at the determination date. Based on these and other factors, the Company determined that, as of December 31, 2022, $11.4 million of the $13.1 million deferred tax assets would not more likely than not be realized in future periods. As of December 31, 2022, the Company recorded a net deferred tax asset of $1.7 million on the Consolidated Statements of Assets and Liabilities.
For the three months ended December 31, 2022, the Company recognized a total benefit for income tax related to realized and unrealized losses of $0.5 million, which was primarily all current income tax benefit.
For the three months ended December 31, 2021, the Company recognized a total benefit for income tax related to realized and unrealized losses of $2.4 million, which was composed of (i) a current income tax benefit of approximately $1.4 million, and (ii) a deferred income tax benefit of approximately $1.0 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries. For the three months ended December 31, 2021, the Company recognized a provision for income tax related to net investment income of $3.3 million, which was all current income tax expense.
As of September 30, 2022, the Company's last tax year end, the components of accumulated overdistributed earnings on a tax basis were as follows:
| | | | | |
| Undistributed ordinary income, net | $ | (43,624) | |
| Net realized capital losses | 473,274 | |
| Unrealized losses, net | 153,119 | |
| Accumulated overdistributed earnings | $ | 582,769 | |
The aggregate cost of investments for U.S. federal income tax purposes was $2,654.3 million as of September 30, 2022. As of September 30, 2022, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over cost for U.S. federal income tax purposes was $466.9 million. As of September 30, 2022, the aggregate gross unrealized depreciation for all investments in which there was an excess of cost for U.S. federal income tax purposes over value was
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
$620.0 million. Net unrealized depreciation based on the aggregate cost of investments for U.S. federal income tax purposes was $153.1 million.
Note 8. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation
Realized Gains or Losses
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended December 31, 2022, the Company recorded an aggregate net realized loss of $3.2 million, which consisted of the following:
| | | | | |
| ($ in millions) | |
| Portfolio Company | Net Realized Gain (Loss) |
| Foreign currency forward contracts | $ | 4.4 | |
| Carvana Co. | (2.8) | |
| ASP Unifrax Holdings Inc. | (2.1) | |
| Global Medical Response Inc. | (1.0) | |
| Other, net | (1.7) | |
Total, net | $ | (3.2) | |
During the three months ended December 31, 2021, the Company recorded an aggregate net realized gain of $9.3 million, which consisted of the following:
| | | | | |
| ($ in millions) | |
| Portfolio Company | Net Realized Gain (Loss) |
| Foreign currency forward contracts | $ | 3.0 | |
| OmniSYS Acquisition Corporation | 2.0 | |
| First Star Speir Aviation Limited | 1.9 | |
| Other, net | 2.4 | |
Total, net | $ | 9.3 | |
Net Unrealized Appreciation or Depreciation
Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.
During the three months ended December 31, 2022 and 2021, the Company recorded net unrealized depreciation of $23.0 million and $4.6 million, respectively. For the three months ended December 31, 2022, this consisted of $18.7 million of net unrealized depreciation on debt investments and $11.0 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $3.9 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $2.8 million of net unrealized appreciation on equity investments. For the three months ended December 31, 2021, this consisted of $4.7 million of net unrealized depreciation related to exited investments (a portion of which resulted in a reclassification to realized gains), $1.8 million of net unrealized depreciation on debt investments and $0.8 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $2.8 million of net unrealized appreciation on equity investments.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 9. Concentration of Credit Risks
The Company deposits its cash with financial institutions and at times such balances may be in excess of the FDIC insurance limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.
Note 10. Related Party Transactions
As of December 31, 2022 and September 30, 2022, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $16.9 million and $15.9 million, respectively, reflecting the unpaid portion of the base management fees and incentive fees payable to Oaktree.
Investment Advisory Agreement
The Company is party to the Investment Advisory Agreement. Under the Investment Advisory Agreement, the Company pays Oaktree a fee for its services under the Investment Advisory Agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee payable to Oaktree and any incentive fees earned by Oaktree is ultimately borne by common stockholders of the Company.
From October 17, 2017 through May 3, 2020, the Company was externally managed by OCM pursuant to an investment advisory agreement. On May 4, 2020, OCM effected the novation of such investment advisory agreement to Oaktree. Immediately following such novation, the Company and Oaktree entered into a new investment advisory agreement with the same terms, including fee structure, as the investment advisory agreement with OCM. The investment advisory agreement with Oaktree was subsequently amended and restated on March 19, 2021 in connection with the closing of the OCSI Merger and on January 23, 2023 in connection with the OSI2 Merger. The term “Investment Advisory Agreement” refers collectively to the agreements with Oaktree and, prior to its novation, with OCM.
Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect from year-to-year if approved annually by the Board of Directors of the Company or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, including, in either case, approval by a majority of the directors of the Company who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Investment Advisory Agreement may also be terminated, without penalty, upon the vote of a majority of the outstanding voting securities of the Company.
Base Management Fee
Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of total gross assets, including any investment made with borrowings, but excluding cash and cash equivalents. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated. Effective May 3, 2019, the base management fee on the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents, that exceed the product of (A) 200% and (B) the Company’s net asset value will be 1.00%. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to exemptive relief the Company received from the SEC with respect to debentures issued by a small business investment company subsidiary. In connection with the OCSI Merger, Oaktree waived an aggregate of $6 million of base management fees otherwise payable to Oaktree in the two years following the closing of the OCSI Merger on March 19, 2021 at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter). In connection with the OSI2 Merger, Oaktree waived an aggregate of $9.0 million of base management fees payable to Oaktree as follows: $6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the OSI2 Merger on January 23, 2023 and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following closing of the OSI2 Merger.
For the three months ended December 31, 2022 and 2021, the base management fee incurred under the Investment Advisory Agreement was $9.2 million (net of waiver) and $9.2 million (net of waiver), respectively.
Incentive Fee
The incentive fee consists of two parts. Under the Investment Advisory Agreement, the first part of the incentive fee (the “incentive fee on income” or "Part I incentive fee") is calculated and payable quarterly in arrears based upon the “pre-incentive fee net investment income” of the Company for the immediately preceding quarter. The payment of the incentive fee on income
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.
For this purpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, other than fees for providing managerial assistance) accrued during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as OID debt, instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. In addition, pre-incentive fee net investment income does not include any amortization or accretion of any purchase premium or purchase discount to interest income resulting solely from merger-related accounting adjustments in connection with the assets acquired in the OCSI Merger or in the OSI2 Merger, in each case, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in pre-incentive fee net investment income.
Under the Investment Advisory Agreement, the calculation of the incentive fee on income for each quarter is as follows:
•No incentive fee is payable to Oaktree in any quarter in which the Company’s pre-incentive fee net investment income does not exceed the preferred return rate of 1.50% (the “preferred return”) on net assets;
•100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the preferred return but is less than or equal to 1.8182% in any fiscal quarter is payable to Oaktree. This portion of the incentive fee on income is referred to as the “catch-up” provision, and it is intended to provide Oaktree with an incentive fee of 17.5% on all of the Company’s pre-incentive fee net investment income when the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets in any fiscal quarter; and
•For any quarter in which the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets, the incentive fee on income is equal to 17.5% of the amount of the Company’s pre-incentive fee net investment income, as the preferred return and catch-up will have been achieved.
There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle.
For the three months ended December 31, 2022 and 2021, the first part of the incentive fee (incentive fee on income) incurred under the Investment Advisory Agreement was $7.7 million and $6.5 million, respectively.
Under the Investment Advisory Agreement, the second part of the incentive fee (the "capital gains incentive fee") is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date) commencing with the fiscal year ended September 30, 2019 and equals 17.5% of the Company’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each subsequent fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees under the Investment Advisory Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculations of the second part of the incentive fee. In addition, the calculation of realized capital gains, realized capital losses and unrealized capital depreciation does (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the OCSI Merger or in the OSI2 Merger, in each case, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the capital gains incentive fee, (2) include any such amounts associated with the investments acquired in the OCSI Merger for the period from October 1, 2018 to the date of closing of the OCSI Merger, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee and (3) include any such amounts associated with the investments acquired in the OSI2 Merger for the period from August 6, 2018 to the date of closing of the OSI2 Merger, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee. As of December 31, 2022, the Company paid $9.6 million of capital gains incentive fees cumulatively under the Investment Advisory Agreement (net of waivers). Part II incentive fees are contractually calculated and paid at the end of the fiscal year in accordance with the Investment Advisory Agreement, which, as described above, differs from Part II incentive fees accrued under GAAP. Hypothetically, if Part II incentive fees were calculated as of December 31, 2022 under the Investment Advisory Agreement, no Part II incentive fees would be payable.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized on a theoretical "liquidation basis." A fee so calculated and accrued would not be payable under applicable law and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts ultimately paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains incentive fee plus the aggregate cumulative unrealized capital appreciation. Any realized capital gains and losses and cumulative unrealized capital appreciation and depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the GAAP accrual. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 17.5% of such cumulative amount, less the aggregate amount of actual capital gains incentive fees payable or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future or any accrued capital gains incentive fee will become payable under the Investment Advisory Agreement. For the three months ended December 31, 2022, there were no accrued capital gains incentive fees. For the three months ended December 31, 2021, $1.8 million of accrued capital gains incentive fees were expensed. As of December 31, 2022, the total accrued capital gains incentive fee liability was zero.
Indemnification
The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of Oaktree's services under the Investment Advisory Agreement or otherwise as investment adviser.
Administrative Services
The Company is party to the Administration Agreement with Oaktree Administrator. Pursuant to the Administration Agreement, Oaktree Administrator provides administrative services to the Company necessary for the operations of the Company, which include providing office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as Oaktree Administrator, subject to review by the Company’s Board of Directors, shall from time to time deem to be necessary or useful to perform its obligations under the Administration Agreement. Oaktree Administrator may, on behalf of the Company, conduct relations and negotiate agreements with custodians, trustees, depositories, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Oaktree Administrator makes reports to the Company’s Board of Directors of its performance of obligations under the Administration Agreement and furnishes advice and recommendations with respect to such other aspects of the Company’s business and affairs, in each case, as it shall determine to be desirable or as reasonably required by the Company’s Board of Directors; provided that Oaktree Administrator shall not provide any investment advice or recommendation.
Oaktree Administrator also provides portfolio collection functions for interest income, fees and warrants and is responsible for the financial and other records that the Company is required to maintain and prepares, prints and disseminates reports to the Company’s stockholders and all other materials filed with the SEC. In addition, Oaktree Administrator assists the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Oaktree Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies.
For providing these services, facilities and personnel, the Company reimburses Oaktree Administrator the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the rent of the Company’s principal executive offices (which are located in a building owned by a Brookfield affiliate) at market rates and the Company’s allocable portion of the costs of compensation and related expenses of its Chief Financial Officer, Chief Compliance Officer, their staffs and other non-
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
investment professionals at Oaktree that perform duties for the Company. Such reimbursement is at cost, with no profit to, or markup by, Oaktree Administrator. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Administration Agreement may also be terminated, without penalty, upon the vote of a majority of the Company’s outstanding voting securities.
For the three months ended December 31, 2022 and 2021, the Company accrued administrative expenses of $0.4 million and $0.5 million, respectively, including $0.1 million and $0.1 million of general and administrative expenses, respectively.
As of December 31, 2022 and September 30, 2022, $3.3 million and $3.2 million, respectively, was included in “Due to affiliate” in the Consolidated Statements of Assets and Liabilities, reflecting the unpaid portion of administrative expenses and other reimbursable expenses payable to Oaktree Administrator.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 11. Financial Highlights
| | | | | | | | | | | | | | |
| (Share amounts in thousands) | | Three months ended
December 31, 2022 (8) | | Three months ended
December 31, 2021 (8) |
| Net asset value per share at beginning of period | | $20.38 | | $21.84 |
| Net investment income (1) | | 0.63 | | 0.54 |
| Net unrealized appreciation (depreciation) (1) | | (0.38) | | (0.08) |
| Net realized gains (losses) (1) | | (0.05) | | 0.16 |
| (Provision) benefit for taxes on realized and unrealized gains (losses) (1) | | 0.01 | | 0.04 |
| Distributions of net investment income to stockholders | | (0.96) | | (0.47) |
| Net asset value per share at end of period | | $19.63 | | $22.03 |
| Per share market value at beginning of period (7) | | $18.00 | | $21.18 |
| Per share market value at end of period (7) | | $20.61 | | $22.38 |
| Total return (2) | | 19.90% | | 7.92% |
| Common shares outstanding at beginning of period | | 61,125 | | 60,120 |
| Common shares outstanding at end of period | | 61,220 | | 60,156 |
| Net assets at beginning of period | | $1,245,563 | | $1,312,823 |
| Net assets at end of period | | $1,201,989 | | $1,325,061 |
| Average net assets (3) | | $1,241,806 | | $1,327,934 |
| Ratio of net investment income to average net assets (4) | | 12.40% | | 9.65% |
| Ratio of total expenses to average net assets (4) | | 13.11% | | 8.99% |
| Ratio of net expenses to average net assets (4) | | 12.87% | | 8.77% |
| Ratio of portfolio turnover to average investments at fair value | | 4.24% | | 9.14% |
| Weighted average outstanding debt (5) | | $1,441,326 | | $1,331,141 |
| Average debt per share (1) | | $23.57 | | $22.14 |
| Asset coverage ratio at end of period (6) | | 176.31% | | 200.81% |
__________
| | | | | |
| (1) | Calculated based upon weighted average shares outstanding for the period. |
| (2) | Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP. Total return does not include sales load. |
| (3) | Calculated based upon the weighted average net assets for the period. |
| (4) | Interim periods are annualized. |
| (5) | Calculated based upon the weighted average of principal debt outstanding for the period. |
| (6) | Based on outstanding senior securities of $1,514.4 million and $1,300.0 million as of December 31, 2022 and 2021, respectively. |
| (7) | Per share market values are adjusted to reflect the 1-for-3 reverse stock split of the Company's common stock completed on January 20, 2023 and effective as of the commencement of trading on January 23, 2023. |
| (8) | The share and per share information disclosed in this table has been retrospectively adjusted to reflect the Company's 1-for-3 reverse stock split completed on January 20, 2023 and effective as of the commencement of trading on January 23, 2023. |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 12. Derivative Instruments
The Company enters into foreign currency forward contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement (the "ISDA Master Agreement") with its derivative counterparty, JPMorgan Chase Bank, N.A. The ISDA Master Agreement permits a single net payment in the event of a default or similar event. As of December 31, 2022, no cash collateral has been pledged to cover obligations and no cash collateral has been received from the counterparty with respect to the Company's forward currency contracts.
In connection with the issuance of the 2027 Notes, the Company entered into an interest rate swap agreement with the Royal Bank of Canada pursuant to an ISDA Master Agreement. As of December 31, 2022, the Company paid $39.8 million to the Royal Bank of Canada to cover collateral obligations under the terms of the interest swap agreement, which is included in due from broker on the Consolidated Statement of Assets and Liabilities.
Certain information related to the Company’s foreign currency forward contracts is presented below as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Gross Amount of Recognized Assets | | Gross Amount of Recognized Liabilities | | Balance Sheet Location of Net Amounts |
| Foreign currency forward contract | | $ | 44,825 | | | € | 44,224 | | | 2/9/2023 | | $ | — | | | $ | (2,499) | | | Derivative liability |
| Foreign currency forward contract | | $ | 46,412 | | | £ | 39,965 | | | 2/9/2023 | | $ | — | | | $ | (1,712) | | | Derivative liability |
| | | | | | | | $ | — | | | $ | (4,211) | | | |
Certain information related to the Company’s foreign currency forward contracts is presented below as of September 30, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Gross Amount of Recognized Assets | | Gross Amount of Recognized Liabilities | | Balance Sheet Location of Net Amounts |
| Foreign currency forward contract | | $ | 43,179 | | | € | 41,444 | | | 11/10/2022 | | $ | 2,466 | | | $ | — | | | Derivative asset |
| Foreign currency forward contract | | $ | 45,692 | | | £ | 37,033 | | | 11/10/2022 | | $ | 4,323 | | | $ | — | | | Derivative asset |
| | | | | | | | $ | 6,789 | | | $ | — | | | |
Certain information related to the Company’s interest rate swap is presented below as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Notional Amount | | Maturity Date | | Gross Amount of Recognized Assets | | Gross Amount of Recognized Liabilities | | Balance Sheet Location of Net Amounts |
| Interest rate swap | | $ | 350,000 | | | 1/15/2027 | | $ | — | | | $ | 39,928 | | | Derivative liability |
| | | | | | $ | — | | | $ | 39,928 | | | |
Certain information related to the Company’s interest rate swap is presented below as of September 30, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Notional Amount | | Maturity Date | | Gross Amount of Recognized Assets | | Gross Amount of Recognized Liabilities | | Balance Sheet Location of Net Amounts |
| Interest rate swap | | $ | 350,000 | | | 1/15/2027 | | $ | — | | | $ | 41,969 | | | Derivative liability |
| | | | | | $ | — | | | $ | 41,969 | | | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 13. Commitments and Contingencies
Off-Balance Sheet Arrangements
The Company may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its portfolio companies. As of December 31, 2022, the Company's only off-balance sheet arrangements consisted of $198.9 million of unfunded commitments, which was comprised of $171.8 million to provide debt and equity financing to certain of its portfolio companies and $27.1 million to provide financing to the JVs. As of September 30, 2022, the Company's only off-balance sheet arrangements consisted of $224.2 million of unfunded commitments, which was comprised of $175.2 million to provide debt and equity financing to certain of its portfolio companies and $49.0 million to provide financing to the JVs. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, subordinated notes and LLC equity interests in the JVs, preferred stock and limited partnership interests) as of December 31, 2022 and September 30, 2022 is shown in the table below:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Delta Leasing SPV II LLC | | $ | 23,004 | | | $ | 27,187 | |
| Fairbridge Strategic Capital Funding LLC | | 15,995 | | | 22,150 | |
| OCSI Glick JV LLC | | 13,998 | | | 13,998 | |
| Senior Loan Fund JV I, LLC | | 13,125 | | | 35,000 | |
| BioXcel Therapeutics, Inc. | | 11,785 | | | 11,785 | |
| Dominion Diagnostics, LLC | | 11,148 | | | 11,148 | |
| BAART Programs, Inc. | | 7,675 | | | 8,645 | |
| iCIMs, Inc. | | 6,930 | | | 6,930 | |
| Marinus Pharmaceuticals, Inc. | | 5,734 | | | 5,734 | |
| scPharmaceuticals Inc. | | 5,212 | | | — | |
| Assembled Brands Capital LLC | | 5,035 | | | 2,008 | |
| RumbleOn, Inc. | | 4,822 | | | 4,822 | |
| MRI Software LLC | | 4,427 | | | 5,196 | |
| 107 Fair Street LLC | | 4,322 | | | — | |
| Grove Hotel Parcel Owner, LLC | | 4,293 | | | 4,293 | |
| Accupac, Inc. | | 4,197 | | | 4,605 | |
| Innocoll Pharmaceuticals Limited | | 4,195 | | | 4,195 | |
| Avalara, Inc. | | 4,147 | | | — | |
| Mindbody, Inc. | | 4,000 | | | 4,000 | |
| OTG Management, LLC | | 3,789 | | | 3,789 | |
| Mesoblast, Inc. | | 3,553 | | | 3,553 | |
| Establishment Labs Holdings Inc. | | 3,384 | | | 5,075 | |
| 112-126 Van Houten Real22 LLC | | 3,174 | | | — | |
| ADC Therapeutics SA | | 3,020 | | | 3,020 | |
| Spanx, LLC | | 2,762 | | | 2,226 | |
| PRGX Global, Inc. | | 2,518 | | | 2,518 | |
| SCP Eye Care Services, LLC | | 2,356 | | | — | |
| Relativity ODA LLC | | 2,218 | | | 2,218 | |
| Berner Food & Beverage, LLC | | 2,197 | | | 1,392 | |
| Salus Workers' Compensation, LLC | | 2,171 | | | — | |
| Pluralsight, LLC | | 1,766 | | | 3,532 | |
| Tahoe Bidco B.V. | | 1,741 | | | 1,741 | |
| CorEvitas, LLC | | 1,526 | | | 915 | |
| Coyote Buyer, LLC | | 1,333 | | | 1,333 | |
| MHE Intermediate Holdings, LLC | | 1,229 | | | 1,429 | |
| Kings Buyer, LLC | | 1,208 | | | 1,537 | |
| Liquid Environmental Solutions Corporation | | 1,115 | | | 1,115 | |
| Acquia Inc. | | 923 | | | 1,326 | |
| Apptio, Inc. | | 892 | | | 1,338 | |
| Digital.AI Software Holdings, Inc. | | 826 | | | 826 | |
| Telestream Holdings Corporation | | 528 | | | 528 | |
| GKD Index Partners, LLC | | 320 | | | 320 | |
| PFNY Holdings, LLC | | 275 | | | 1,527 | |
| Ardonagh Midco 3 PLC | | — | | | 4,372 | |
| Dialyze Holdings, LLC | | — | | | 3,431 | |
| Thrasio, LLC | | — | | | 2,578 | |
| 109 Montgomery Owner LLC | | — | | | 477 | |
| LSL Holdco, LLC | | — | | | 427 | |
| Total | | $ | 198,868 | | | $ | 224,239 | |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 14. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the Consolidated Financial Statements as of and for the three months ended December 31, 2022, except as discussed below.
Distribution Declaration
On January 27, 2023, the Company’s Board of Directors declared a quarterly distribution of $0.55 per share, payable in cash on March 31, 2023 to stockholders of record on March 15, 2023.
Investment Advisory Agreement
On January 23, 2023, in connection with the consummation of the OSI2 Merger, the Company entered into an amended and restated investment advisory agreement with Oaktree to amend and restate the prior investment advisory agreement, dated as of March 19, 2021, by and between the Company and Oaktree to (1) waive an aggregate of $9.0 million of base management fees otherwise payable to the Oaktree in the two years following the closing of the OSI2 Merger and (2) revise the calculation of the incentive fees to eliminate certain unintended consequences of the accounting treatment of the OSI2 Merger on the incentive fees payable to Oaktree. None of the other terms were changed, and the services to be provided by Oaktree and the term of the Investment Advisory Agreement remain the same.
OSI2 Merger
On January 23, 2023, the Company completed the OSI2 Merger. In accordance with the terms of the OSI2 Merger Agreement, at the effective time of the OSI2 Merger, each outstanding share of OSI2 common stock was converted into the right to receive 0.9115 shares of the Company’s common stock (with OSI2’s stockholders receiving cash in lieu of fractional shares of the Company’s common stock). As a result of the OSI2 Merger, the Company issued an aggregate of 15,860,200 shares of its common stock to former OSI2 stockholders. Following completion of the OSI2 Merger, the Company had 77,079,805 shares of common stock outstanding.
OSI2 Citibank Facility
On January 23, 2023, as a result of the consummation of the OSI2 Merger, the Company became party to the OSI2 Citibank Facility (as described below).
OSI 2 Senior Lending SPV, LLC (“OSI 2 SPV”), the Company’s wholly-owned and consolidated subsidiary, is party to a loan and security agreement dated as of July 26, 2019, which was subsequently amended on September 20, 2019, July 2, 2020, December 31, 2020, March 31, 2021 and December 2, 2022 (as amended, the “OSI2 Citibank Loan Agreement”), with the lenders from time to time party thereto and the other parties referenced below. Under the terms of the OSI2 Citibank Loan Agreement, the Company serves as the collateral manager and seller and OSI 2 SPV serves as borrower with Citibank, N.A., as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent.
The OSI2 Citibank Loan Agreement provides for a senior secured revolving credit facility (the “OSI2 Citibank Facility”) of up to $250 million (the “Citibank Maximum Commitment”) in aggregate principal amount, subject to the lesser of (i) the borrowing base, which is an amount based on advance rates that vary depending on the class of assets and the value assigned to such assets under the OSI2 Citibank Loan Agreement and (ii) the Citibank Maximum Commitment. The OSI2 Citibank Facility has a reinvestment period through May 26, 2023, during which advances may be made, and matures on January 26, 2025. Following the reinvestment period, OSI 2 SPV will be required to make certain mandatory amortization payments. Borrowings under the OSI2 Citibank Facility bear interest payable quarterly at a rate per year equal to (a) in the case of a lender that is identified as a conduit lender under the OSI2 Citibank Loan Agreement, the lesser of (i) the applicable commercial paper rate for such conduit lender and (ii) LIBOR for a three month maturity and (b) for all other lenders under the OSI2 Citibank Facility, LIBOR, plus, in each case, an applicable spread. During the reinvestment period, the applicable spread is the greater of (i) a weighted average rate of (x) 1.65% per year for broadly syndicated loans and (y) 2.25% per year for all other eligible loans and (ii) 1.85%. After the reinvestment period, the applicable spread is 3.00% per year. There is also a non-usage fee of 0.50% per year on the unused portion of the OSI2 Citibank Facility, payable quarterly; provided that if the unused portion of the OSI2 Citibank Facility is greater than 30% of the commitments under the OSI2 Citibank Facility, the non-usage fee will be based on an unused portion of 30% of the commitments under the OSI2 Citibank Facility.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The OSI2 Citibank Facility is secured by a first priority security interest in substantially all of OSI 2 SPV’s assets.
As part of the OSI2 Citibank Facility, OSI 2 SPV is subject to certain limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by OSI 2 SPV including restrictions on sector concentrations, loan size, tenor and minimum investment ratings (or estimated ratings). The OSI2 Citibank Facility also contains certain requirements relating to interest coverage, collateral quality and portfolio performance, certain violations of which could result in the acceleration of the amounts due under the OSI2 Citibank Facility.
Under the OSI2 Citibank Facility, the Company and OSI 2 SPV, as applicable, have made customary representations and warranties, and are required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar credit facilities.
OSI 2 SPV’s borrowings are non-recourse to the Company but are considered borrowings of the Company for purposes of complying with the asset coverage requirements under the Investment Company Act.
As of January 23, 2023, the Company had $225.0 million outstanding under the OSI2 Citibank Facility.
Reverse Stock Split
On January 20, 2023, the Company amended its restated certificate of incorporation, as amended and corrected, to effect a 1-for-3 reverse stock split. Immediately following completion of the reverse stock split, the Company had 61,219,605 shares of common stock outstanding.
Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Three months ended December 31, 2022
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1) | | Cash Interest Rate | | Industry | | Principal | | Net Realized Gain (Loss) | | Amount of
Interest,
Fees or
Dividends
Credited in
Income (2) | | Fair Value
as of October 1,
2022 | | Gross
Additions (3) | | Gross
Reductions (4) | | Fair Value
as of December 31, 2022 | | % of Total Net Assets |
| Control Investments | | | | | | | | | | | | | | | | | | | | |
| C5 Technology Holdings, LLC | | | | Data Processing & Outsourced Services | | | | | | | | | | | | | | | | |
829 Common Units | | | | | | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | — | % |
34,984,460.37 Preferred Units | | | | | | | | — | | | — | | | 27,638 | | | — | | | — | | | 27,638 | | | 2.3 | % |
| Dominion Diagnostics, LLC | | | | Health Care Services | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024 | | 9.73 | % | | | | $ | 14,297 | | | — | | | 331 | | | 14,333 | | | — | | | (36) | | | 14,297 | | | 1.2 | % |
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024 | | | | | | — | | | — | | | 14 | | | — | | | — | | | — | | | — | | | — | % |
30,030.8 Common Units in DD Healthcare Services Holdings, LLC | | | | | | | | — | | | — | | | 4,946 | | | — | | | (719) | | | 4,227 | | | 0.4 | % |
| OCSI Glick JV LLC (5) | | | | Multi-Sector Holdings | | | | | | | | | | | | | | | | |
Subordinated Debt, LIBOR+4.50% cash due 10/20/2028 | | 7.67 | % | | | | 59,049 | | | — | | | 1,624 | | | 50,283 | | | 380 | | | (1,127) | | | 49,536 | | | 4.1 | % |
87.5% equity interest | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % |
| Senior Loan Fund JV I, LLC (6) | | | | Multi-Sector Holdings | | | | | | | | | | | | | | | | |
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | | 10.17 | % | | | | 112,656 | | | — | | | 2,611 | | | 96,250 | | | 16,406 | | | — | | | 112,656 | | | 9.4 | % |
87.5% LLC equity interest | | | | | | | | — | | | 1,050 | | | 20,715 | | | 5,469 | | | (2,076) | | | 24,108 | | | 2.0 | % |
| Total Control Investments | | | | | | $ | 186,002 | | | $ | — | | | $ | 5,630 | | | $ | 214,165 | | | $ | 22,255 | | | $ | (3,958) | | | $ | 232,462 | | | 19.3 | % |
| | | | | | | | | | | | | | | | | | | | |
| Affiliate Investments | | | | | | | | | | | | | | | | | | | | |
| Assembled Brands Capital LLC | | | | Specialized Finance | | | | | | | | | | | | | | | | |
First Lien Revolver, LIBOR+6.75% cash due 10/17/2023 | | 11.48 | % | | | | $ | 21,464 | | | $ | — | | | $ | 646 | | | $ | 24,225 | | | $ | 55 | | | $ | (3,028) | | | $ | 21,252 | | | 1.8 | % |
1,609,201 Class A Units | | | | | | | | — | | | — | | | 370 | | | — | | | (16) | | | 354 | | | — | % |
1,019,168.80 Preferred Units, 6% | | | | | | | | — | | | — | | | 1,223 | | | 20 | | | — | | | 1,243 | | | 0.1 | % |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % |
| Caregiver Services, Inc. | | | | Health Care Services | | | | | | | | | | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | | — | | | — | | | — | | | 378 | | | — | | | (54) | | | 324 | | | — | % |
| Total Affiliate Investments | | | | | | $ | 21,464 | | | $ | — | | | $ | 646 | | | $ | 26,196 | | | $ | 75 | | | $ | (3,098) | | | $ | 23,173 | | | 1.9 | % |
| Total Control & Affiliate Investments | | | | | | $ | 207,466 | | | $ | — | | | $ | 6,276 | | | $ | 240,361 | | | $ | 22,330 | | | $ | (7,056) | | | $ | 255,635 | | | 21.2 | % |
This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________
(1)The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments.
(2)Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.
(3)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)Together with GF Equity Funding, the Company co-invests through Glick JV. Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to Glick JV must be approved by the Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).
(6)Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).
Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Three months ended December 31, 2021
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company/Type of Investment (1) | | Cash Interest Rate | | Industry | | Principal | | Net Realized Gain (Loss) | | Amount of
Interest,
Fees or
Dividends
Credited in
Income (2) | | Fair Value
as of October 1,
2021 | | Gross
Additions (3) | | Gross
Reductions (4) | | Fair Value
as of December 31, 2021 | | % of Total Net Assets |
| Control Investments | | | | | | | | | | | | | | | | | | | | |
| C5 Technology Holdings, LLC | | | | Data Processing & Outsourced Services | | | | | | | | | | | | | | | | |
829 Common Units | | | | | | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | — | % |
34,984,460.37 Preferred Units | | | | | | | | — | | | — | | | 27,638 | | | — | | | — | | | 27,638 | | | 2.1 | % |
| Dominion Diagnostics, LLC | | | | Health Care Services | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024 | | 6.00 | % | | | | $ | 23,201 | | | — | | | 430 | | | 27,381 | | | — | | | (4,180) | | | 23,201 | | | 1.8 | % |
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024 | | | | | | — | | | — | | | 14 | | | — | | | — | | | — | | | — | | | — | % |
30,030.8 Common Units in DD Healthcare Services Holdings, LLC | | | | | | | | — | | | 3,308 | | | 18,065 | | | — | | | — | | | 18,065 | | | 1.4 | % |
| First Star Speir Aviation Limited (5) | | | | Airlines | | | | | | | | | | | | | | | | |
First Lien Term Loan, 9.00% cash due 12/15/2025 | | | | | | — | | | 7,500 | | | — | | | 7,500 | | | — | | | (7,500) | | | — | | | — | % |
100% equity interest | | | | | | | | (5,632) | | | 158 | | | 698 | | | — | | | (698) | | | — | | | — | % |
| OCSI Glick JV LLC (6) | | | | Multi-Sector Holdings | | | | | | | | | | | | | | | | |
Subordinated Debt, LIBOR+4.50% cash due 10/20/2028 | | 4.58 | % | | | | 61,237 | | | — | | | 1,081 | | | 55,582 | | | 745 | | | (473) | | | 55,854 | | | 4.2 | % |
87.5% equity interest | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % |
| Senior Loan Fund JV I, LLC (7) | | | | Multi-Sector Holdings | | | | | | | | | | | | | | | | |
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | | 8.00 | % | | | | 96,250 | | | — | | | 1,967 | | | 96,250 | | | — | | | — | | | 96,250 | | | 7.3 | % |
87.5% LLC equity interest | | | | | | | | — | | | 451 | | | 37,651 | | | 810 | | | — | | | 38,461 | | | 2.9 | % |
| Total Control Investments | | | | | | $ | 180,688 | | | $ | 1,868 | | | $ | 7,409 | | | $ | 270,765 | | | $ | 1,555 | | | $ | (12,851) | | | $ | 259,469 | | | 19.6 | % |
| | | | | | | | | | | | | | | | | | | | |
| Affiliate Investments | | | | | | | | | | | | | | | | | | | | |
| Assembled Brands Capital LLC | | | | Specialized Finance | | | | | | | | | | | | | | | | |
First Lien Revolver, LIBOR+6.75% cash due 10/17/2023 | | 7.75 | % | | | | $ | 15,982 | | | $ | — | | | $ | 339 | | | $ | 15,712 | | | $ | 3,499 | | | $ | (3,487) | | | $ | 15,724 | | | 1.2 | % |
1,609,201 Class A Units | | | | | | | | — | | | — | | | 587 | | | — | | | (201) | | | 386 | | | — | % |
1,019,168.80 Preferred Units, 6% | | | | | | | | — | | | — | | | 1,152 | | | 20 | | | — | | | 1,172 | | | 0.1 | % |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % |
| Caregiver Services, Inc. | | | | Health Care Services | | | | | | | | | | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | | — | | | — | | | — | | | 838 | | | — | | | — | | | 838 | | | 0.1 | % |
| Total Affiliate Investments | | | | | | $ | 15,982 | | | $ | — | | | $ | 339 | | | $ | 18,289 | | | $ | 3,519 | | | $ | (3,688) | | | $ | 18,120 | | | 1.4 | % |
| Total Control & Affiliate Investments | | | | | | $ | 196,670 | | | $ | 1,868 | | | $ | 7,748 | | | $ | 289,054 | | | $ | 5,074 | | | $ | (16,539) | | | $ | 277,589 | | | 21.0 | % |
This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________
(1)The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments included in the Company's quarterly report on Form 10-Q for the quarter ended December 31, 2021.
(2)Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.
(3)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(6)Together with GF Equity Funding, the Company co-invests through Glick JV. Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to Glick JV must be approved by the Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).
(7)Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q.
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:
•our future operating results and distribution projections;
•the ability of Oaktree Fund Advisors, LLC, or Oaktree, to reposition our portfolio and to implement Oaktree's future plans with respect to our business;
•the ability of Oaktree and its affiliates to attract and retain highly talented professionals;
•our business prospects and the prospects of our portfolio companies;
•the impact of the investments that we expect to make;
•the ability of our portfolio companies to achieve their objectives;
•our expected financings and investments and additional leverage we may seek to incur in the future;
•the adequacy of our cash resources and working capital;
•the timing of cash flows, if any, from the operations of our portfolio companies; and
•the cost or potential outcome of any litigation to which we may be a party.
In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2022 and elsewhere in this quarterly report on Form 10-Q.
Other factors that could cause actual results to differ materially include:
•changes or potential disruptions in our operations, the economy, financial markets or political environment, including the impacts of inflation and rising interest rates;
•risks associated with possible disruption in our operations or the economy generally due to terrorism, war or other geopolitical conflict (including the current conflict between Russia and Ukraine), natural disasters or pandemics;
•future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to Business Development Companies or, regulated investment companies, or RICs;
•the ability to realize the benefits of the OSI2 Merger (as defined below); and
•other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, or the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
All dollar amounts in tables are in thousands, except share and per share amounts and as otherwise indicated.
Business Overview
We are a specialty finance company dedicated to providing customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, for U.S. federal income tax purposes.
We are externally managed by Oaktree pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement. Oaktree Fund Administration, LLC, or Oaktree Administrator, an affiliate of Oaktree, provides certain administrative and other services necessary for us to operate pursuant to an administration agreement, as amended from time to time, or the Administration Agreement.
Our 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, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. Our portfolio may also include certain structured finance and other non-traditional structures. We invest in companies that typically possess resilient business models with strong underlying fundamentals. We intend to deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree’s credit and structuring expertise. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company. Oaktree is generally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
In the current market environment, Oaktree intends to focus on the following area, in which Oaktree believes there is less competition and thus potential for greater returns, for our new investment opportunities: (1) situational lending, which we define to include directly originated loans to non-sponsor companies that are hard to understand and value using traditional underwriting techniques, (2) select sponsor lending, which we define to include financing to support leveraged buyouts of companies with specialized sponsors that have expertise in certain industries, and (3) stressed sector and rescue lending, which we define to include opportunistic private loans in industries experiencing stress or limited access to capital.
Oaktree intends to continue to rotate our portfolio into investments that are better aligned with Oaktree's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles (which we call "core investments"). Oaktree has performed a comprehensive review of our portfolio and categorized our portfolio into core investments, non-core performing investments and underperforming investments. Certain additional information on such categorization and our portfolio composition is included in investor presentations that we file with the SEC. Since an Oaktree affiliate became our investment adviser in October 2017, Oaktree and its affiliates have reduced the investments identified as non-core by approximately $800 million at fair value. Over time, Oaktree intends to rotate us out of the remaining non-core investments, which were approximately $71 million at fair value as of December 31, 2022. Oaktree periodically reviews designations of investments as core and non-core and may change such designations over time.
On March 19, 2021, we acquired Oaktree Strategic Income Corporation, or OCSI, pursuant to an agreement and plan or merger, or the OCSI Merger Agreement, dated as of October 28, 2020, by and among OCSI, us, Lion Merger Sub, Inc., our wholly-owned subsidiary, and, solely for the limited purposes set forth therein, Oaktree. Pursuant to the OCSI Merger Agreement, OCSI was merged with and into us in a two-step transaction with us as the surviving company, or the OCSI Merger.
On January 23, 2023, we acquired Oaktree Strategic Income II, Inc., or OSI2, pursuant to that certain Agreement and Plan of Merger, or the OSI2 Merger Agreement, dated as of September 14, 2022, by and among OSI2, us, Project Superior Merger Sub, Inc., a wholly-owned subsidiary of us, and, solely for the limited purposes set forth therein, Oaktree. Pursuant to the OSI2 Merger Agreement, OSI2 was merged with and into us in a two-step transaction with us as the surviving company, or the OSI2 Merger.
Business Environment and Developments
Global financial markets have experienced an increase in volatility as concerns about the impact of higher inflation, rising interest rates, a potential recession and the current conflict in Ukraine have weighed on market participants. These factors have created disruptions in supply chains and economic activity and have had a particularly adverse impact on certain companies in the energy, raw materials and transportation sectors, among others. These uncertainties can ultimately impact the overall supply and demand of the market through changing spreads, deal terms and structures and equity purchase price multiples.
We are unable to predict the full effects of these macroeconomic events or how long any further market disruptions or volatility might last. We continue to closely monitor the impact these events have on our business, industry and portfolio companies and will provide constructive solutions where necessary.
Against this uncertain macroeconomic backdrop, we believe attractive risk-adjusted returns can be achieved by making loans to middle market companies that typically possess resilient business models with strong underlying fundamentals. Given the breadth of the investment platform and decades of credit investing experience of Oaktree and its affiliates, we believe that we have the resources and experience to source, diligence and structure investments in these companies and are well placed to generate attractive returns for investors.
As of December 31, 2022, 87.3% of our debt investment portfolio (at fair value) and 87.2% of our debt investment portfolio (at cost) bore interest at floating rates. Most of our floating rate loans are indexed to the London Interbank Offered Rate, or LIBOR, and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly or monthly at the borrower’s option. Certain loans may also be indexed to the Secured Overnight Financing Rate, or SOFR, or the Sterling Overnight Index Average, or SONIA. Most U.S. dollar LIBOR rates will continue to be published through June 30, 2023. The FCA no longer compels panel banks to continue to contribute to LIBOR and the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have encouraged banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, supports replacing U.S.-dollar LIBOR with SOFR. Although there are an increasing number of issuances utilizing SOFR or SONIA, these alternative reference rates may not attain market acceptance as replacements for LIBOR. In anticipation of the cessation of LIBOR, we may need to renegotiate any credit agreements extending beyond the applicable phase out date with our prospective portfolio companies that utilize LIBOR as a factor in determining the interest rate. Certain of the loan agreements with our portfolio companies have included fallback language in the event that LIBOR becomes unavailable. This language generally provides that the administrative agent may identify a replacement reference rate, typically with the consent of (or prior consultation with) the borrower. In certain cases, the administrative agent will be required to obtain the consent of either a majority of the lenders under the facility, or the consent of each lender, prior to identifying a replacement reference rate. Certain of the loan agreements with our portfolio companies do not include any fallback language providing a mechanism for the parties to negotiate a new reference interest rate and will instead revert to the base rate in the event LIBOR ceases to exist.
Critical Accounting Estimates
Investment Valuation
We value our investments in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
•Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•Level 3 — Unobservable inputs that reflect Oaktree’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Oaktree's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of our investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
Oaktree seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If Oaktree is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set threshold, Oaktree seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the
quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, Oaktree does not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, Oaktree values such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that we are deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company’s assets and (vii) offers from third parties to buy the portfolio company. Oaktree may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. Under the EV technique, the significant unobservable input used in the fair value measurement of our investments in debt or equity securities is the EBITDA, revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, Oaktree depends on primary market data, including newly funded transactions and industry-specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. Under the market yield technique, the significant unobservable input used in the fair value measurement of our investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
Oaktree estimates the fair value of certain privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The fair value of our investments as of December 31, 2022 and September 30, 2022 was determined by Oaktree, as our valuation designee. We have and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter. As of December 31, 2022, 92.1% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms.
Certain factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to these uncertainties, Oaktree's fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments.
As of December 31, 2022, we held $2,642.9 million of investments at fair value, up from $2,494.1 million held at September 30, 2022, primarily driven by new originations outpacing the rate of repayments. As of December 31, 2022 and September 30, 2022, approximately 95.5% and 94.2%, respectively, of our total assets represented investments at fair value.
Revenue Recognition
Interest Income
Interest income, adjusted for accretion of original issue discount, or OID, is recorded on an accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations. As of each of December 31, 2022 and September 30, 2022, there were no investments on non-accrual status.
In connection with our investment in a portfolio company, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
PIK Interest Income
Our investments in debt securities may contain payment-in-kind, or PIK, interest provisions. PIK interest, which typically represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Our determination to cease accruing PIK interest is generally made well before our full write-down of a loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by us to Oaktree. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our stockholders, even though we have not yet collected the cash and may never do so.
Portfolio Composition
Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies, Senior Loan Fund JV I, LLC, or SLF JV I, a joint venture through which we and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation, or Kemper, co-invest in senior secured loans of middle-market companies and other corporate debt securities, and OCSI Glick JV LLC, or the Glick JV, a joint venture through which we and GF Equity Funding 2014 LLC, or GF Equity Funding, co-invest primarily in senior secured loans of middle-market companies. We refer to SLF JV I and the Glick JV collectively as the JVs. Our loans are typically secured by a first, second or subordinated lien on the assets of the portfolio company and generally have terms of up to ten years (but an expected average life of between three and four years).
During the three months ended December 31, 2022, we originated $250.3 million of investment commitments in 18 new and seven existing portfolio companies and funded $274.4 million of investments.
During the three months ended December 31, 2022, we received $104.4 million of proceeds from prepayments, exits, other paydowns and sales and exited 11 portfolio companies.
A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Cost: | | | | |
| Senior secured debt | | 84.94 | % | | 85.08 | % |
| Debt investments in the JVs | | 5.85 | | | 5.59 | |
| Preferred equity | | 3.16 | | | 3.26 | |
| Subordinated debt | | 2.48 | | | 2.57 | |
| LLC equity interests of the JVs | | 1.97 | | | 1.88 | |
| Common equity and warrants | | 1.60 | | | 1.62 | |
| Total | | 100.00 | % | | 100.00 | % |
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Fair value: | | | | |
| Senior secured debt | | 86.32 | % | | 86.86 | % |
| Debt investments in the JVs | | 6.14 | | | 5.88 | |
| Preferred equity | | 3.05 | | | 3.19 | |
| Subordinated debt | | 2.35 | | | 2.28 | |
| Common equity and warrants | | 1.23 | | | 0.96 | |
| LLC equity interests of the JVs | | 0.91 | | | 0.83 | |
| Total | | 100.00 | % | | 100.00 | % |
The industry composition of our portfolio at cost and fair value as a percentage of total investments was as follows:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Cost: | | | | |
| Application Software | | 15.66 | % | | 14.98 | % |
| Multi-Sector Holdings (1) | | 8.27 | | | 7.48 | |
| Pharmaceuticals | | 4.73 | | | 4.83 | |
| Data Processing & Outsourced Services | | 4.25 | | | 4.60 | |
| Biotechnology | | 4.02 | | | 4.20 | |
| Health Care Technology | | 3.97 | | | 3.82 | |
| Specialized Finance | | 3.15 | | | 3.09 | |
| Industrial Machinery | | 2.93 | | | 3.12 | |
| Health Care Services | | 2.37 | | | 2.24 | |
| Internet & Direct Marketing Retail | | 2.36 | | | 2.59 | |
| Aerospace & Defense | | 2.23 | | | 2.37 | |
| Construction & Engineering | | 2.19 | | | 2.33 | |
| Health Care Distributors | | 2.10 | | | 2.18 | |
| Other Diversified Financial Services | | 2.06 | | | 1.12 | |
| Personal Products | | 1.91 | | | 2.03 | |
| Automotive Retail | | 1.86 | | | 2.26 | |
| Auto Parts & Equipment | | 1.84 | | | 0.48 | |
| Real Estate Operating Companies | | 1.80 | | | 1.82 | |
| Fertilizers & Agricultural Chemicals | | 1.77 | | | 1.88 | |
| Internet Services & Infrastructure | | 1.77 | | | 2.07 | |
| Metal & Glass Containers | | 1.70 | | | 1.82 | |
| Home Improvement Retail | | 1.63 | | | 1.75 | |
| Soft Drinks | | 1.58 | | | 1.31 | |
| Airport Services | | 1.57 | | | 1.65 | |
| Leisure Facilities | | 1.48 | | | 1.52 | |
| Insurance Brokers | | 1.41 | | | 1.36 | |
| Diversified Support Services | | 1.37 | | | 1.45 | |
| Specialty Chemicals | | 1.34 | | | 1.43 | |
| Health Care Supplies | | 1.32 | | | 1.39 | |
| Real Estate Services | | 1.30 | | | 1.54 | |
| Integrated Telecommunication Services | | 1.25 | | | 1.32 | |
| Electrical Components & Equipment | | 1.22 | | | 1.29 | |
| Advertising | | 0.99 | | | 1.08 | |
| Movies & Entertainment | | 0.94 | | | 1.00 | |
| Distributors | | 0.91 | | | 0.97 | |
| Airlines | | 0.87 | | | — | |
| Health Care Equipment | | 0.79 | | | 0.93 | |
| Environmental & Facilities Services | | 0.76 | | | 0.80 | |
| Oil & Gas Storage & Transportation | | 0.72 | | | 0.85 | |
| Home Furnishings | | 0.70 | | | 0.75 | |
| Systems Software | | 0.54 | | | 0.57 | |
| Consumer Finance | | 0.52 | | | 0.55 | |
| Hotels, Resorts & Cruise Lines | | 0.50 | | | 0.53 | |
| IT Consulting & Other Services | | 0.42 | | | 0.45 | |
| Restaurants | | 0.34 | | | 0.36 | |
| Education Services | | 0.33 | | | 0.35 | |
| Cable & Satellite | | 0.29 | | | 0.79 | |
| Research & Consulting Services | | 0.28 | | | 0.35 | |
| Apparel, Accessories & Luxury Goods | | 0.19 | | | 0.20 | |
| Air Freight & Logistics | | 0.18 | | | 0.28 | |
| Integrated Oil & Gas | | 0.18 | | | 0.19 | |
| Apparel Retail | | 0.17 | | | 0.20 | |
| Food Distributors | | 0.17 | | | 0.18 | |
| Specialized REITs | | 0.16 | | | 0.16 | |
| Real Estate Development | | 0.15 | | | — | |
| Diversified Banks | | 0.13 | | | 0.13 | |
| Technology Distributors | | 0.11 | | | 0.12 | |
| Construction Materials | | 0.08 | | | 0.09 | |
| Housewares & Specialties | | 0.08 | | | 0.09 | |
| Electronic Components | | 0.08 | | | 0.08 | |
| Alternative Carriers | | 0.01 | | | 0.01 | |
| Oil & Gas Refining & Marketing | | — | | | 0.33 | |
| Trading Companies & Distributors | | — | | | 0.29 | |
| Total | | 100.00 | % | | 100.00 | % |
| | | | | | | | | | | | | | |
| | December 31, 2022 | | September 30, 2022 |
| Fair value: | | | | |
| Application Software | | 15.95 | % | | 15.43 | % |
| Multi-Sector Holdings (1) | | 7.53 | | | 6.71 | |
| Pharmaceuticals | | 4.82 | | | 4.79 | |
| Biotechnology | | 4.37 | | | 4.35 | |
| Data Processing & Outsourced Services | | 4.02 | | | 4.46 | |
| Health Care Technology | | 3.92 | | | 3.90 | |
| Industrial Machinery | | 3.02 | | | 3.25 | |
| Specialized Finance | | 3.02 | | | 2.93 | |
| Internet & Direct Marketing Retail | | 2.50 | | | 2.82 | |
| Aerospace & Defense | | 2.33 | | | 2.48 | |
| Construction & Engineering | | 2.31 | | | 2.45 | |
| Health Care Distributors | | 2.08 | | | 2.19 | |
| Other Diversified Financial Services | | 2.05 | | | 0.98 | |
| Fertilizers & Agricultural Chemicals | | 1.98 | | | 2.08 | |
| Health Care Services | | 1.94 | | | 1.84 | |
| Automotive Retail | | 1.92 | | | 2.31 | |
| Real Estate Operating Companies | | 1.90 | | | 1.93 | |
| Auto Parts & Equipment | | 1.89 | | | 0.46 | |
| Internet Services & Infrastructure | | 1.85 | | | 2.16 | |
| Personal Products | | 1.85 | | | 2.01 | |
| Home Improvement Retail | | 1.71 | | | 1.82 | |
| Metal & Glass Containers | | 1.69 | | | 1.91 | |
| Soft Drinks | | 1.68 | | | 1.35 | |
| Airport Services | | 1.64 | | | 1.72 | |
| Leisure Facilities | | 1.54 | | | 1.57 | |
| Insurance Brokers | | 1.48 | | | 1.33 | |
| Health Care Supplies | | 1.43 | | | 1.47 | |
| Diversified Support Services | | 1.35 | | | 1.47 | |
| Real Estate Services | | 1.35 | | | 1.59 | |
| Electrical Components & Equipment | | 1.25 | | | 1.32 | |
| Integrated Telecommunication Services | | 1.21 | | | 1.29 | |
| Specialty Chemicals | | 1.19 | | | 1.36 | |
| Movies & Entertainment | | 1.00 | | | 1.07 | |
| Advertising | | 0.98 | | | 1.08 | |
| Airlines | | 0.98 | | | — | |
| Distributors | | 0.93 | | | 0.98 | |
| Health Care Equipment | | 0.86 | | | 0.97 | |
| Environmental & Facilities Services | | 0.78 | | | 0.83 | |
| Oil & Gas Storage & Transportation | | 0.69 | | | 0.84 | |
| Home Furnishings | | 0.68 | | | 0.73 | |
| Hotels, Resorts & Cruise Lines | | 0.53 | | | 0.56 | |
| Systems Software | | 0.46 | | | 0.51 | |
| Consumer Finance | | 0.43 | | | 0.53 | |
| Education Services | | 0.34 | | | 0.34 | |
| Restaurants | | 0.33 | | | 0.35 | |
| Cable & Satellite | | 0.30 | | | 0.78 | |
| Research & Consulting Services | | 0.27 | | | 0.34 | |
| IT Consulting & Other Services | | 0.26 | | | 0.34 | |
| Integrated Oil & Gas | | 0.18 | | | 0.20 | |
| Apparel Retail | | 0.18 | | | 0.21 | |
| Real Estate Development | | 0.16 | | | — | |
| Air Freight & Logistics | | 0.16 | | | 0.26 | |
| Food Distributors | | 0.14 | | | 0.13 | |
| Diversified Banks | | 0.13 | | | 0.14 | |
| Specialized REITs | | 0.12 | | | 0.13 | |
| Technology Distributors | | 0.11 | | | 0.12 | |
| Housewares & Specialties | | 0.09 | | | 0.10 | |
| Construction Materials | | 0.07 | | | 0.08 | |
| Electronic Components | | 0.06 | | | 0.08 | |
| Alternative Carriers | | 0.01 | | | 0.01 | |
| Oil & Gas Refining & Marketing | | — | | | 0.34 | |
| Trading Companies & Distributors | | — | | | 0.22 | |
| Total | | 100.00 | % | | 100.00 | % |
___________________
(1)This industry includes our investments in the JVs.
The Joint Ventures
Senior Loan Fund JV I, LLC
In May 2014, we entered into a limited liability company, or LLC, agreement with Kemper to form SLF JV I. We co-invest in senior secured loans of middle-market companies and other corporate debt securities with Kemper through our investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by us and one representative selected by Kemper (with approval from a representative of each required). Since we do not have a controlling financial interest in SLF JV I, we do not consolidate SLF JV I. SLF JV I is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act. SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to us and Kemper by SLF JV I. The subordinated notes issued by SLF JV I are referred to as the SLF JV I Notes. The SLF JV I Notes are senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt.
As of December 31, 2022 and September 30, 2022, we and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Notes. As of December 31, 2022, we and Kemper had funded approximately $190.5 million to SLF JV I, of which $166.7 million was from us. As of September 30, 2022, we and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from us. As of December 31, 2022, we had aggregate commitments to fund SLF JV I of $13.1 million, of which approximately $9.8 million was to fund additional SLF JV I Notes and approximately $3.3 million was to fund LLC equity interests in SLF JV I. During the three months ended December 31, 2022, we contributed $16.4 million to fund additional SLF JV I Notes and approximately $5.5 million to fund additional LLC equity interests in SLF JV I. As of September 30, 2022, we had aggregate commitments to fund SLF JV I of $35.0 million, of which approximately $26.2 million was to fund additional SLF JV I Notes and approximately $8.8 million was to fund LLC equity interests in SLF JV I.
Both the cost and fair value of our SLF JV I Notes were $112.7 million as of December 31, 2022. Both the cost and fair value of our SLF JV I Notes were $96.3 million as of September 30, 2022. We earned interest income of $2.6 million and $2.0 million on the SLF JV I Notes for the three months ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the SLF JV I Notes bore interest at a rate of one-month LIBOR plus 7.00% per annum with a LIBOR floor of 1.00% and will mature on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by us was $54.8 million and $24.1 million, respectively, as of December 31, 2022, and $49.3 million and $20.7 million, respectively, as of September 30, 2022. We earned $1.1 million and $0.5 million in dividend income for the three months ended December 31, 2022 and December 31, 2021, respectively, with respect to our investment in the LLC equity interests of SLF JV I.
Below is a summary of SLF JV I's portfolio as of December 31, 2022 and September 30, 2022:
| | | | | | | | |
| December 31, 2022 | September 30, 2022 |
| Senior secured loans (1) | $382,148 | $383,194 |
| Weighted average interest rate on senior secured loans (2) | 9.55% | 8.33% |
| Number of borrowers in SLF JV I | 59 | 60 |
| Largest exposure to a single borrower (1) | $11,337 | $10,093 |
| Total of five largest loan exposures to borrowers (1) | $51,990 | $48,139 |
__________________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.
See "Note 3. Portfolio Investments" in the notes to the accompanying financial statements for more information on SLF JV I and its portfolio.
OCSI Glick JV LLC
On March 19, 2021, we became party to the LLC agreement of the Glick JV. The Glick JV invests primarily in senior secured loans of middle-market companies. We co-invest in these securities with GF Equity Funding through the Glick JV. The Glick JV is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by GF Equity Funding. All portfolio decisions and investment decisions in respect of the Glick JV must be approved by the Glick JV investment committee, consisting of one representative selected by us and one representative selected by GF Equity Funding (with approval from a representative of each required). Since we do not have a controlling financial interest in the Glick JV, we do not consolidate the Glick JV. The Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act. The Glick JV is capitalized as transactions are completed. The members provide capital to the Glick JV in exchange for LLC equity interests, and we and GF Debt Funding, an entity advised by affiliates of GF Equity Funding, provide capital to the Glick JV in exchange for subordinated notes issued by the Glick JV, or the Glick JV Notes. The Glick JV Notes are junior in right of payment to the repayment of temporary contributions made by us to fund investments of the Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Glick JV Notes, respectively.
As of December 31, 2022 and September 30, 2022, we and GF Equity Funding owned 87.5% and 12.5%, respectively, of the outstanding LLC equity interests, and we and GF Debt Funding owned 87.5% and 12.5%, respectively, of the Glick JV Notes. Approximately $84.0 million in aggregate commitments was funded as of each of December 31, 2022 and September 30, 2022, of which $73.5 million was from us. As of December 31, 2022 and September 30, 2022, we had commitments to fund Glick JV Notes of $78.8 million, of which $12.4 million was unfunded. As of each of December 31, 2022 and September 30, 2022, we had commitments to fund LLC equity interests in the Glick JV of $8.7 million, of which $1.6 million was unfunded.
The cost and fair value of our aggregate investment in the Glick JV was $50.0 million and $49.5 million, respectively, as of December 31, 2022. The cost and fair value of our aggregate investment in the Glick JV was $50.2 million and $50.3 million, respectively, as of September 30, 2022. For the three months ended December 31, 2022 and December 31, 2021, our investment in the Glick JV Notes earned interest income of $1.6 million and $1.1 million, respectively. We did not earn any dividend income for the three months ended December 31, 2022 and December 31, 2021 with respect to our investment in the LLC equity interests of the Glick JV.
Below is a summary of the Glick JV's portfolio as of December 31, 2022 and September 30, 2022:
| | | | | | | | | | | |
| December 31, 2022 | | September 30, 2022 |
| Senior secured loans (1) | $134,080 | | $143,225 |
| Weighted average current interest rate on senior secured loans (2) | 9.86% | | 8.52% |
| Number of borrowers in the Glick JV | 40 | | 43 |
| Largest loan exposure to a single borrower (1) | $7,476 | | $6,562 |
| Total of five largest loan exposures to borrowers (1) | $29,830 | | $28,973 |
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.
See "Note 3. Portfolio Investments" in the notes to the accompanying financial statements for more information on the Glick JV and its portfolio.
Discussion and Analysis of Results and Operations
Results of Operations
Net increase (decrease) in net assets resulting from operations includes net investment income, net realized gains (losses) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends and fees and net expenses. Net realized gains (losses) is the difference between the proceeds received from dispositions of investment related assets and liabilities and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment related assets and liabilities carried at fair value during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
Comparison of three months ended December 31, 2022 and December 31, 2021
Total Investment Income
Total investment income includes interest on our investments, fee income and dividend income.
Total investment income for the three months ended December 31, 2022 and 2021 was $79.2 million and $64.9 million, respectively. For the three months ended December 31, 2022, this amount consisted of $76.1 million of interest income from portfolio investments (which included $6.1 million of PIK interest), $2.0 million of fee income and $1.1 million of dividend income. For the three months ended December 31, 2021, this amount consisted of $60.1 million of interest income from portfolio investments (which included $4.7 million of PIK interest), $0.9 million of fee income and $3.9 million of dividend income. The increase of $14.2 million, or 21.9%, in our total investment income for the three months ended December 31, 2022, as compared to the three months ended December 31, 2021, was due primarily to (1) a $16.0 million increase in interest income, which was primarily driven by the impact of rising reference rates on interest income and (2) a $1.1 million increase in fee income primarily due to higher exit and amendment fees. This was partially offset by a $2.9 million decrease in dividend income.
Expenses
Net expenses (expenses net of fee waivers) for the three months ended December 31, 2022 and 2021 were $40.3 million and $29.3 million, respectively. Net expenses increased for the three months ended December 31, 2022, as compared to the three months ended December 31, 2021, by $11.0 million, or 37.3%, primarily due to (1) a $11.3 million increase in interest expense due to higher borrowings outstanding and the impact of rising reference rates and (2) a $1.2 million increase in Part I incentive fees mainly due to higher total investment income. These were partially offset by $1.8 million of lower accrued Part II incentive fees.
Net Investment Income
Primarily as a result of the $14.2 million increase in total investment income, the $11.0 million increase in net expenses and a $3.3 million decrease in the provision for taxes on net investment income, net investment income for the three months ended December 31, 2022 increased by $6.5 million compared to the three months ended December 31, 2021.
Realized Gain (Loss)
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of investments and foreign currency and the cost basis without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with our determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended December 31, 2022 and 2021, we recorded aggregate net realized gains (losses) of $(3.2) million and $9.3 million, respectively, in connection with the exits of various investments and foreign currency forward contracts. See “Note 8. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation” in the notes to the accompanying Consolidated Financial Statements for more details regarding investment realization events for the three months ended December 31, 2022 and 2021.
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation or depreciation is the net change in the fair value of our investments and foreign currency during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
During the three months ended December 31, 2022 and 2021, we recorded net unrealized depreciation of $23.0 million and $4.6 million, respectively. For the three months ended December 31, 2022, this consisted of $18.7 million of net unrealized depreciation on debt investments and $11.0 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $3.9 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $2.8 million of net unrealized appreciation on equity investments. For the three months ended December 31, 2021, this consisted of $4.7 million of net unrealized depreciation related to exited investments (a portion of which resulted in a reclassification to realized gains), $1.8 million of net unrealized depreciation on debt investments and $0.8 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $2.8 million of net unrealized appreciation on equity investments.
Financial Condition, Liquidity and Capital Resources
We have a number of alternatives available to fund our investment portfolio and our operations, including raising equity, increasing or refinancing debt and funding from operational cash flow. We generally expect to fund the growth of our investment portfolio through additional debt and equity capital, which may include securitizing a portion of our investments. We cannot assure you, however, that our efforts to grow our portfolio will be successful. For example, our common stock has generally traded at prices below net asset value for the past several years, and we may not be able to raise additional equity at prices below the then-current net asset value per share. We intend to continue to generate cash primarily from cash flows from operations, including interest earned, and future borrowings or equity offerings. We intend to fund our future distribution obligations through operating cash flow or with funds obtained through future equity and debt offerings or credit facilities, as we deem appropriate.
Our primary uses of funds are investments in our targeted asset classes and cash distributions to holders of our common stock. We may also from time to time repurchase or redeem some or all of our outstanding notes. At a special meeting of our stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us effective as of June 29, 2019. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity as compared to $1 of debt for each $1 of equity. As of December 31, 2022, we had $1,514.4 million in senior securities and our asset coverage ratio was 176.3%. During the year ended September 30, 2022, we increased our target debt to equity ratio from 0.85x to 1.0x to 0.90x to 1.25x (i.e., one dollar of equity for each $0.90 to $1.25 of debt outstanding) to provide us with increased capacity to opportunistically deploy capital into the markets. As of December 31, 2022, our net debt to equity ratio was 1.24x.
For the three months ended December 31, 2022, we experienced a net decrease in cash and cash equivalents (including restricted cash) of $7.1 million. During that period, net cash used in operating activities was $109.9 million, primarily from funding $261.4 million of investments and $10.0 million of net decrease in payables from unsettled transactions, partially offset by $108.8 million of principal payments and sale proceeds received, the cash activities related to $38.8 million of net investment income and a $16.3 million increase in due from portfolio companies. During the same period, net cash provided by financing activities was $103.3 million, primarily consisting of $160.0 million of net borrowings under the credit facilities, partially offset by $56.7 million of cash distributions paid to our stockholders.
For the three months ended December 31, 2021, we experienced a net increase in cash and cash equivalents (including restricted cash) of $14.4 million. During that period, we received $23.2 million of net cash from operating activities, primarily from $235.0 million of principal payments and sale proceeds received, $15.0 million of net increases in payables from unsettled transactions and the cash activities related to $32.3 million of net investment income, partially offset by funding $246.6 million of investments. During the same period, net cash used by financing activities was $7.5 million, primarily consisting of $27.2 million of cash distributions paid to our stockholders and $0.3 million of deferred financing costs paid, partially offset by $20.0 million of net borrowings under the credit facilities.
As of December 31, 2022, we had $19.2 million in cash and cash equivalents (including $1.9 million of restricted cash), portfolio investments (at fair value) of $2.6 billion, $37.8 million of interest, dividends and fees receivable, $6.2 million of due from portfolio companies, $340.0 million of undrawn capacity on our credit facilities (subject to borrowing base and other limitations), $12.3 million of net payables from unsettled transactions, $860.0 million of borrowings outstanding under our credit facilities and $603.6 million of unsecured notes payable (net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment).
As of September 30, 2022, we had $26.4 million in cash and cash equivalents (including $2.8 million of restricted cash), portfolio investments (at fair value) of $2.5 billion, $35.6 million of interest, dividends and fees receivable, $22.5 million of due from portfolio companies, $500.0 million of undrawn capacity on our credit facilities (subject to borrowing base and other limitations), $22.3 million of net payables from unsettled transactions, $700.0 million of borrowings outstanding under our credit facilities and $601.0 million of unsecured notes payable (net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment).
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of December 31, 2022, our only off-balance sheet arrangements consisted of $198.9 million of unfunded commitments, which was comprised of $171.8 million to provide debt and equity financing to certain of our portfolio companies and $27.1 million to provide financing to the JVs. As of September 30, 2022, our only off-balance sheet arrangements consisted of $224.2 million of unfunded commitments, which was comprised of $175.2 million to provide debt and equity financing to certain of our portfolio companies and $49.0 million to provide financing to the JVs.
As of December 31, 2022, we have analyzed cash and cash equivalents, availability under our credit facilities, the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believe our liquidity and capital resources are sufficient to take advantage of market opportunities in the current economic climate.
Contractual Obligations
The following table reflects information pertaining to our principal debt outstanding under the Syndicated Facility (as defined below), Citibank Facility (as defined below), our 3.500% notes due 2025, or the 2025 Notes, and our 2.700% notes due 2027, or the 2027 Notes:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Debt Outstanding
as of September 30, 2022 | | Debt Outstanding
as of December 31, 2022 | | Weighted average debt
outstanding for the
three months ended
December 31, 2022 | | Maximum debt
outstanding for the three months ended
December 31, 2022 |
| Syndicated Facility | | $ | 540,000 | | | $ | 695,000 | | | $ | 627,826 | | | $ | 710,000 | |
Citibank Facility | | 160,000 | | | 165,000 | | | 163,500 | | | 175,000 | |
| 2025 Notes | | 300,000 | | | 300,000 | | | 300,000 | | | 300,000 | |
| 2027 Notes | | 350,000 | | | 350,000 | | | 350,000 | | | 350,000 | |
| Total debt | | $ | 1,350,000 | | | $ | 1,510,000 | | | $ | 1,441,326 | | | |
The following table reflects our contractual obligations arising from the Syndicated Facility, Citibank Facility, 2025 Notes and 2027 Notes:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments due by period as of December 31, 2022 |
| Contractual Obligations | | Total | | Less than 1 year | | 1-3 years | | 3-5 years |
| Syndicated Facility | | $ | 695,000 | | | $ | — | | | $ | — | | | $ | 695,000 | |
| Interest due on Syndicated Facility | | 145,376 | | | 43,494 | | | 86,988 | | | 14,894 | |
| Citibank Facility | | 165,000 | | | — | | | 165,000 | | | — | |
| Interest due on Citibank Facility | | 20,573 | | | 10,915 | | | 9,658 | | | — | |
| 2025 Notes | | 300,000 | | | — | | | 300,000 | | | — | |
| Interest due on 2025 Notes | | 22,640 | | | 10,500 | | | 12,140 | | | — | |
| 2027 Notes | | 350,000 | | | — | | | — | | | 350,000 | |
| Interest due on 2027 Notes (a) | | 81,200 | | | 20,080 | | | 40,160 | | | 20,960 | |
| Total | | $ | 1,779,789 | | | $ | 84,989 | | | $ | 613,946 | | | $ | 1,080,854 | |
__________
(a) The interest due on the 2027 Notes was calculated net of the interest rate swap.
Equity Issuances
During the three months ended December 31, 2022 and 2021, we issued an aggregate of 94,879 and 35,990, respectively, shares of common stock as part of the DRIP.
On February 7, 2022, we entered into an equity distribution agreement by and among us, Oaktree, Oaktree Administrator and Keefe, Bruyette & Woods, Inc., JMP Securities LLC, Raymond James & Associates, Inc. and SMBC Nikko Securities America, Inc., as placement agents, in connection with the issuance and sale by us of shares of common stock, having an aggregate offering price of up to $125.0 million. Sales of the common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at the market,” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Select Market or similar securities exchanges or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.
In connection with the "at the market" offering, we did not issue or sell any shares of common stock during the three months ended December 31, 2022.
Distributions
The following table reflects the distributions per share that we have paid, including shares issued under our DRIP, on our common stock since October 1, 2020. The distributions per share and shares issued under our DRIP information disclosed in this table has been retrospectively adjusted to reflect our 1-for-3 reverse stock split completed on January 20, 2023 and effective as of the commencement of trading on January 23, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distribution | | Date Declared | | Record Date | | Payment Date | | Amount
per Share | | Cash
Distribution | | DRIP Shares
Issued (1) | | | | DRIP Shares
Value |
| Quarterly | | November 13, 2020 | | December 15, 2020 | | December 31, 2020 | | $ | 0.33 | | | $ 15.0 million | | 31,321 | | | | | $ 0.5 million |
| Quarterly | | January 29, 2021 | | March 15, 2021 | | March 31, 2021 | | 0.36 | | | 16.4 million | | 27,234 | | | | | 0.5 million |
| Quarterly | | April 30, 2021 | | June 15, 2021 | | June 30, 2021 | | 0.39 | | | 22.9 million | | 25,660 | | | | | 0.5 million |
| Quarterly | | July 30, 2021 | | September 15, 2021 | | September 30, 2021 | | 0.435 | | | 25.5 million | | 28,358 | | | | | 0.6 million |
| Quarterly | | October 13, 2021 | | December 15, 2021 | | December 31, 2021 | | 0.465 | | | 27.2 million | | 35,990 | | | | | 0.8 million |
| Quarterly | | January 28, 2022 | | March 15, 2022 | | March 31, 2022 | | 0.48 | | | 28.5 million | | 34,804 | | | | | 0.8 million |
| Quarterly | | April 29, 2022 | | June 15, 2022 | | June 30, 2022 | | 0.495 | | | 29.4 million | | 43,676 | | | | | 0.9 million |
| Quarterly | | July 29, 2022 | | September 15, 2022 | | September 30, 2022 | | 0.51 | | | 30.2 million | | 51,181 | | | | | 1.0 million |
| Quarterly | | November 10, 2022 | | December 15, 2022 | | December 30, 2022 | | 0.54 | | | 32.0 million | | 53,369 | | | | | 1.1 million |
| Special | | November 10, 2022 | | December 15, 2022 | | December 30, 2022 | | 0.42 | | | 24.8 million | | 41,510 | | | | | 0.8 million |
______________
(1)Shares were purchased on the open market and distributed other than with respect to the distributions paid on December 31, 2021, March 31, 2022 and December 30, 2022. New shares were issued and distributed during the quarters ended December 31, 2021, March 31, 2022 and December 31, 2022.
Indebtedness
See “Note 6. Borrowings” in the Consolidated Financial Statements for more details regarding our indebtedness.
Syndicated Facility
As of December 31, 2022, (i) the size of our senior secured revolving credit facility, or, as amended and/or restated from time to time, the Syndicated Facility, pursuant to a senior secured revolving credit agreement, with the lenders, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A., BofA Securities, Inc. and MUFG Union Bank, N.A. as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents, was $1.0 billion (with an “accordion” feature that permits us, under certain circumstances, to increase the size of the facility to up to the greater of $1.25 billion and our net worth (as defined in the Syndicated Facility) on the date of such increase), (ii) the period during which we may make drawings will expire on May 4, 2025 and the maturity date was May 4, 2026 and (iii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at our option) was 2.00% and (b) alternate base rate loans was 1.00%.
Each loan or letter of credit originated or assumed under the Syndicated Facility is subject to the satisfaction of certain conditions. Borrowings under the Syndicated Facility are subject to the facility’s various covenants and the leverage restrictions contained in the Investment Company Act. We cannot assure you that we will be able to borrow funds under the Syndicated Facility at any particular time or at all.
The following table describes significant financial covenants, as of December 31, 2022, with which we must comply under the Syndicated Facility on a quarterly basis:
| | | | | | | | | | | | | | | | | | | | |
| Financial Covenant | | Description | | Target Value | | September 30, 2022 Reported Value (1) |
| Minimum shareholders' equity | | Net assets shall not be less than the sum of (x) $600 million, plus (y) 50% of the aggregate net proceeds of all sales of equity interests after May 6, 2020
| | $610 million | | $1,246 million |
| Asset coverage ratio | | Asset coverage ratio shall not be less than the greater of 1.50:1 and the statutory test applicable to us | | 1.50:1 | | 1.89:1 |
| Interest coverage ratio | | Interest coverage ratio shall not be less than 2.25:1 | | 2.25:1 | | 4.01:1 |
| Minimum net worth | | Net worth shall not be less than $550 million | | $550 million | | $1,034 million |
___________
(1) As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Annual Report on Form 10-K for the year ended September 30, 2022. We were in compliance with all financial covenants under the Syndicated Facility based on the financial information contained in this Quarterly Report on Form 10-Q.
As of December 31, 2022 and September 30, 2022, we had $695.0 million and $540.0 million of borrowings outstanding under the Syndicated Facility, respectively, which had a fair value of $695.0 million and $540.0 million, respectively. Our borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 5.849% and 2.174% for the three months ended December 31, 2022 and 2021, respectively. For the three months ended December 31, 2022 and 2021, we recorded interest expense (inclusive of fees) of $10.0 million and $3.8 million, respectively, related to the Syndicated Facility.
Citibank Facility
On March 19, 2021, we became party to a revolving credit facility, or, as amended and/or restated from time to time, the Citibank Facility, with OCSL Senior Funding II LLC, our wholly-owned, special purpose financing subsidiary, as the borrower, us, as collateral manager and seller, each of the lenders from time to time party thereto, Citibank, N.A., as administrative agent, and Wells Fargo Bank, National Association, as collateral agent and custodian. As of December 31, 2022, we were able to borrow up to $200 million under the Citibank Facility (subject to borrowing base and other limitations). As of December 31, 2022, the reinvestment period under the Citibank Facility was scheduled to expire on November 18, 2023 and the maturity date for the Citibank Facility was November 18, 2024.
As of December 31, 2022, borrowings under the Citibank Facility are subject to certain customary advance rates and accrue interest at a rate equal to LIBOR plus between 1.25% and 2.20% per annum on broadly syndicated loans, subject to observable market depth and pricing, and LIBOR plus 2.25% per annum on all other eligible loans during the reinvestment period. In addition, as of December 31, 2022, for the duration of the reinvestment period there is a non-usage fee payable of 0.50% per annum on the undrawn amount under the Citibank Facility. The minimum asset coverage ratio applicable to us under the Citibank Facility is 150% as determined in accordance with the requirements of the Investment Company Act. Borrowings under the Citibank Facility are secured by all of the assets of OCSL Senior Funding II LLC and all of our equity interests in OCSL Senior Funding II LLC. We may use the Citibank Facility to fund a portion of our loan origination activities and for general corporate purposes. Each loan origination under the Citibank Facility is subject to the satisfaction of certain conditions.
As of December 31, 2022 and September 30, 2022, we had $165.0 million and $160.0 million outstanding under the Citibank Facility, respectively, which had a fair value of $165.0 million and $160.0 million, respectively. Our borrowings under the Citibank Facility bore interest at a weighted average interest rate of 6.508% and 1.830% for the three months ended December 31, 2022 and December 31, 2021, respectively. For the three months ended December 31, 2022 and December 31, 2021, we recorded interest expense (inclusive of fees) of $2.7 million and $0.8 million, respectively, related to the Citibank Facility.
2025 Notes
On February 25, 2020, we issued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the notes.
2027 Notes
On May 18, 2021, we issued $350.0 million in aggregate principal amount of the 2027 Notes for net proceeds of $344.8 million after deducting OID of $1.0 million, underwriting commissions and discounts of $3.5 million and offering costs of $0.7 million. The OID on the 2027 Notes is amortized based on the effective interest method over the term of the notes.
In connection with the 2027 Notes, we entered into an interest rate swap to more closely align the interest rates of our liabilities with our investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap
agreement, we receive a fixed interest rate of 2.700% and pay a floating interest rate of the three-month LIBOR plus 1.658% on a notional amount of $350 million. We designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship.
The below table presents the components of the carrying value of the 2025 Notes and the 2027 Notes as of December 31, 2022 and September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2022 | | As of September 30, 2022 |
| ($ in millions) | | 2025 Notes | | 2027 Notes | | 2025 Notes | | 2027 Notes |
| Principal | | $ | 300.0 | | | $ | 350.0 | | | $ | 300.0 | | | $ | 350.0 | |
| Unamortized financing costs | | (1.6) | | | (3.1) | | | (1.8) | | | (3.2) | |
| Unaccreted discount | | (1.1) | | | (0.7) | | | (1.2) | | | (0.7) | |
| Interest rate swap fair value adjustment | | — | | | (39.9) | | | — | | | (42.0) | |
| Net carrying value | | $ | 297.3 | | | $ | 306.3 | | | $ | 297.0 | | | $ | 304.1 | |
| Fair Value | | $ | 286.7 | | | $ | 296.8 | | | $ | 283.1 | | | $ | 294.0 | |
The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the three months ended December 31, 2022:
| | | | | | | | | | | | | | |
| ($ in millions) | | 2025 Notes | | 2027 Notes |
| Coupon interest | | $ | 2.6 | | | $ | 2.4 | |
| Amortization of financing costs and discount | | 0.3 | | | 0.2 | |
| Effect of interest rate swap | | — | | | 2.5 | |
| Total interest expense | | $ | 2.9 | | | $ | 5.1 | |
| Coupon interest rate (net of effect of interest rate swap for 2027 Notes) | | 3.500 | % | | 5.586 | % |
The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the three months ended December 31, 2021:
| | | | | | | | | | | | | | |
| ($ in millions) | | 2025 Notes | | 2027 Notes |
| Coupon interest | | $ | 2.6 | | | $ | 2.4 | |
| Amortization of financing costs and discount | | 0.3 | | | 0.2 | |
| Effect of interest rate swap | | — | | | (0.7) | |
| Total interest expense | | $ | 2.9 | | | $ | 1.9 | |
| Coupon interest rate (net of effect of interest rate swap for 2027 Notes) | | 3.500 | % | | 1.782 | % |
Regulated Investment Company Status and Distributions
We have qualified and elected to be treated as a RIC under Subchapter M of the Code for U.S. federal income tax purposes. As long as we continue to qualify as a RIC, we will not be subject to tax on our investment company taxable income (determined without regard to any deduction for dividends paid) or realized net capital gains, to the extent that such taxable income or gains is distributed, or deemed to be distributed as dividends, to stockholders on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation. Distributions declared and paid by us in a taxable year may differ from taxable income for that taxable year as such distributions may include the distribution of taxable income derived from the current taxable year or the distribution of taxable income derived from the prior taxable year carried forward into and distributed in the current taxable year. Distributions also may include returns of capital.
To maintain RIC tax treatment, we must, among other things, distribute dividends, with respect to each taxable year, of an amount at least equal to 90% of our investment company taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any), determined without regard to any deduction for dividends paid. As a RIC, we are also subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. We anticipate timely distribution of our taxable income in accordance with tax rules. We did
not incur a U.S. federal excise tax for calendar year 2021. For the calendar year 2022, we incurred $0.1 million of excise tax. We do not expect to incur a U.S. federal excise tax for calendar year 2023.
We intend to distribute at least 90% of our annual taxable income (which includes our taxable interest and fee income) to our stockholders. The covenants contained in our credit facilities may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement associated with our ability to be subject to tax as a RIC. In addition, we may retain for investment some or all of our net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal and taxable year fall below the total amount of our dividend distributions for that fiscal and taxable year, a portion of those distributions may be deemed a return of capital to our stockholders.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a Business Development Company under the Investment Company Act and due to provisions in our credit facilities and debt instruments. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
A RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder elects to receive his or her entire distribution in either cash or stock of the RIC, subject to certain limitations regarding the aggregate amount of cash to be distributed to all stockholders. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.
We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from U.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. The following table, which may be subject to change as we finalize our annual tax filings, lists the percentage of qualified net interest income and qualified short-term capital gains for the year ended September 30, 2022.
| | | | | | | | | | | |
| Year Ended | | Qualified Net Interest Income | Qualified Short-Term Capital Gains |
| September 30, 2022 | | 80.8 | % | — | |
We have adopted a DRIP that provides for the reinvestment of any distributions that we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash distribution, then our stockholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving a cash distribution. If our shares are trading at a premium to net asset value, we typically issue new shares to implement the DRIP, with such shares issued at the greater of the most recently computed net asset value per share of our common stock or 95% of the current market value per share of our common stock on the payment date for such distribution. If our shares are trading at a discount to net asset value, we typically purchase shares in the open market in connection with our obligations under the DRIP.
Related Party Transactions
We have entered into the Investment Advisory Agreement with Oaktree and the Administration Agreement with Oaktree Administrator, an affiliate of Oaktree. Mr. John B. Frank, an interested member of our Board of Directors, has an indirect pecuniary interest in Oaktree. Oaktree is a registered investment adviser under the Investment Advisers Act of 1940, as amended, that is partially and indirectly owned by Oaktree Capital Group, LLC. See “Note 10. Related Party Transactions – Investment Advisory Agreement” and “– Administrative Services” in the notes to the accompanying Consolidated Financial Statements.
Recent Developments
Distribution Declaration
On January 27, 2023, our Board of Directors declared a quarterly distribution of $0.55 per share, payable in cash on March 31, 2023 to stockholders of record on March 15, 2023.
Investment Advisory Agreement
On January 23, 2023, in connection with the consummation of the OSI2 Merger, we entered into an amended and restated investment advisory agreement with Oaktree to amend and restate the prior investment advisory agreement, dated as of March 19, 2021, by and between us and Oaktree to (1) waive an aggregate of $9.0 million of base management fees otherwise payable to the Oaktree in the two years following the closing of the OSI2 Merger and (2) revise the calculation of the incentive fees to eliminate certain unintended consequences of the accounting treatment of the OSI2 Merger on the incentive fees payable to Oaktree. None of the other terms were changed, and the services to be provided by Oaktree and the term of the Investment Advisory Agreement remain the same.
OSI2 Merger
On January 23, 2023, we completed the OSI2 Merger. In accordance with the terms of the OSI2 Merger Agreement, at the effective time of the OSI2 Merger, each outstanding share of OSI2 common stock was converted into the right to receive 0.9115 shares of our common stock (with OSI2’s stockholders receiving cash in lieu of fractional shares of our common stock). As a result of the OSI2 Merger, we issued an aggregate of 15,860,200 shares of its common stock to former OSI2 stockholders. Following completion of the OSI2 Merger, we had 77,079,805 shares of common stock outstanding.
OSI2 Citibank Facility
On January 23, 2023, as a result of the consummation of the OSI2 Merger, we became party to the OSI2 Citibank Facility (as described below).
OSI 2 Senior Lending SPV, LLC, or OSI 2 SPV, our wholly-owned and consolidated subsidiary, is party to a loan and security agreement dated as of July 26, 2019, which was subsequently amended on September 20, 2019, July 2, 2020, December 31, 2020, March 31, 2021 and December 2, 2022, or, as amended, the OSI2 Citibank Loan Agreement, with the lenders from time to time party thereto and the other parties referenced below. Under the terms of the OSI2 Citibank Loan Agreement, we serve as the collateral manager and seller and OSI 2 SPV serves as borrower with Citibank, N.A., as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent.
The OSI2 Citibank Loan Agreement provides for a senior secured revolving credit facility, or the OSI2 Citibank Facility of up to $250 million, or the Citibank Maximum Commitment, in aggregate principal amount, subject to the lesser of (i) the borrowing base, which is an amount based on advance rates that vary depending on the class of assets and the value assigned to such assets under the OSI2 Citibank Loan Agreement and (ii) the Citibank Maximum Commitment. The OSI2 Citibank Facility has a reinvestment period through May 26, 2023, during which advances may be made, and matures on January 26, 2025. Following the reinvestment period, OSI 2 SPV will be required to make certain mandatory amortization payments. Borrowings under the OSI2 Citibank Facility bear interest payable quarterly at a rate per year equal to (a) in the case of a lender that is identified as a conduit lender under the OSI2 Citibank Loan Agreement, the lesser of (i) the applicable commercial paper rate for such conduit lender and (ii) LIBOR for a three month maturity and (b) for all other lenders under the OSI2 Citibank Facility, LIBOR, plus, in each case, an applicable spread. During the reinvestment period, the applicable spread is the greater of (i) a weighted average rate of (x) 1.65% per year for broadly syndicated loans and (y) 2.25% per year for all other eligible loans and (ii) 1.85%. After the reinvestment period, the applicable spread is 3.00% per year. There is also a non-usage fee of 0.50% per year thereafter on the unused portion of the OSI2 Citibank Facility, payable quarterly; provided that if the unused portion of the OSI2 Citibank Facility is greater than 30% of the commitments under the OSI2 Citibank Facility, the non-usage fee will be based on an unused portion of 30% of the commitments under the OSI2 Citibank Facility.
The OSI2 Citibank Facility is secured by a first priority security interest in substantially all of OSI 2 SPV’s assets.
As part of the OSI2 Citibank Facility, OSI 2 SPV is subject to certain limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by OSI 2 SPV including restrictions on sector concentrations, loan size, tenor and minimum investment ratings (or estimated ratings). The OSI2 Citibank Facility also contains certain requirements relating to interest coverage, collateral quality and portfolio performance, certain violations of which could result in the acceleration of the amounts due under the OSI2 Citibank Facility.
Under the OSI2 Citibank Facility, we and OSI 2 SPV, as applicable, have made customary representations and warranties, and are required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar credit facilities.
OSI 2 SPV’s borrowings are non-recourse to us but are considered our borrowings for purposes of complying with the asset coverage requirements under the Investment Company Act.
As of January 23, 2023, we had $225.0 million outstanding under the OSI2 Citibank Facility.
Reverse Stock Split
On January 20, 2023, we amended our restated certificate of incorporation, as amended and corrected, to effect a 1-for-3 reverse stock split. Following completion of the reverse stock split, we had 61,219,605 shares of common stock outstanding.