Oaktree Specialty Lending Corporation (NASDAQ: OCSL) (“Oaktree
Specialty Lending” or the “Company”), a specialty finance company,
today announced its unaudited financial results for the fiscal
quarter ended September 30, 2018.
Fourth Fiscal Quarter 2018 Highlights
- Total investment income of $38.2 million
($0.27 per share), up from $31.8 million ($0.23 per share) for the
third fiscal quarter of 2018;
- Net investment income of $17.0 million ($0.12
per share), up from $14.4 million ($0.10 per share) for the third
fiscal quarter of 2018;
- Net asset value ("NAV") per share of $6.09, up
from $5.95 for the third fiscal quarter of 2018;
- Originated $228.4 million of new investment
commitments and received $267.5 million of proceeds from
prepayments, exits, other paydowns and sales; and
- A quarterly dividend was declared of $0.095
per share, payable on December 28, 2018 to stockholders of record
on December 17, 2018.
Management Commentary
Edgar Lee, Chief Executive Officer and Chief Investment Officer
of Oaktree Specialty Lending said, “The fourth quarter completed a
strong year for OCSL, highlighted by solid earnings growth and
improved credit performance, including delivering the third
consecutive quarter of increased NAV per share. Since we began
managing OCSL a year ago, we have made significant progress in
reducing credit risk in the portfolio and stabilizing NAV.
During the fiscal year, we reduced non-core investments by $569
million while adding over $1.0 billion of new investments that are
consistent with Oaktree’s investment philosophy. Core investments
now represent 76 percent of our portfolio, up from 37 percent as of
September 30, 2017. Given our substantial progress to date, we
believe we are well positioned to further enhance our return on
equity and deliver value to our shareholders in 2019.”
Portfolio and Investment Activity
As of September 30, 2018, the fair value of the Company's
investment portfolio was $1.5 billion and was comprised of
investments in 113 companies. These included debt investments in 86
companies, the investments in Senior Loan Fund JV I, LLC (“SLF JV
I”) and equity investments in 40 companies, including in SLF JV I
and 2 private equity funds. Fourteen of the equity investments were
in companies in which Oaktree Specialty Lending also had a debt
investment.
At fair value, 95.0% of the Company's portfolio as of
September 30, 2018 consisted of debt investments, including
48.4% of first lien loans, 27.0% of second lien loans and 19.6% of
unsecured debt investments, including the debt investments in SLF
JV I.
As of September 30, 2018, SLF JV I had $314.2 million in
assets, including senior secured loans to 40 portfolio
companies. The joint venture generated income of $3.1 million
for Oaktree Specialty Lending during the quarter ended
September 30, 2018.
The weighted average yield on the Company's debt investments as
of September 30, 2018, including the return on the Company's
mezzanine note investments in SLF JV I, was 8.4%.
As of September 30, 2018, $1.2 billion of the Company's
debt investments, or 83.2% of the total debt portfolio, at fair
value, had floating interest rates.
During the quarter ended September 30, 2018, the Company
originated $228.4 million of investment commitments, including
investments in 13 new and three existing portfolio companies, and
funded $218.4 million of investments across new and existing
portfolio companies.
During the quarter, the Company received $267.5 million of
proceeds from various prepayments, exits, other paydowns and sales
and exited 18 investments.
Results of Operations
Total investment income for the quarter ended September 30,
2018 was $38.2 million, including $35.3 million of cash interest
income from portfolio investments, $0.5 million of payment-in-kind
("PIK") interest income, $2.0 million of fee income and $0.4
million of dividend income. PIK interest income, net of PIK
collected in cash, represented 1.1% of total investment income for
the quarter ended September 30, 2018. Total investment income
increased $6.4 million from the quarter ended June 30, 2018, which
was primarily attributable to the acceleration of interest income
and prepayments fees earned in connection with the exit of a
certain investment.
Net expenses for the quarter were $21.2 million, an increase of
$3.8 million from the quarter ended June 30, 2018. The increase in
net expenses was due primarily to an increase in Part I incentive
fees (net of fees waived) resulting from higher investment earnings
during the quarter, and an increase in interest expense, which was
attributable to higher levels of outstanding debt during the
quarter.
Net realized and unrealized gain before taxes on the Company's
investment portfolio for the quarter ended September 30, 2018
was $16.9 million.
Liquidity and Capital Resources
As of September 30, 2018, the Company had $13.5 million of
cash and cash equivalents (including restricted cash), total
principal value of debt outstanding of $643.4 million and $359.0
million of undrawn capacity on its credit facility, subject to
borrowing base and other limitations. The weighted average interest
rate on debt outstanding was 5.1% as of September 30,
2018.
As of September 30, 2018, the Company’s total leverage
ratio was 0.75x debt-to-equity.
Distribution Declaration
The Company's Board of Directors declared a quarterly
distribution of $0.095 per share, payable on December 28, 2018 to
stockholders of record on December 17, 2018.
Distributions are paid primarily from distributable (taxable)
income. To the extent taxable earnings for a fiscal taxable year
fall below the total amount of dividend distributions for that
fiscal year, a portion of those distributions may be deemed a
return of capital to the Company’s stockholders.
Portfolio Asset Quality
As of September 30, 2018, there were eight investments on
which the Company had stopped accruing cash and/or PIK interest or
original issue discount ("OID") income that, in the aggregate,
represented 14.5% of the Company's debt portfolio at cost and 7.0%
at fair value.
($ in
thousands) |
|
Non-Accrual -
Debt Investments |
As of September 30, 2018 |
|
As of September 30, 2017 |
|
Non-Accrual Investments
at Fair Value |
$ |
98,760 |
|
$ |
67,015 |
|
Non-Accrual
Investments/Total Debt Investments at Fair Value |
7.0 |
% |
4.7 |
% |
|
|
|
|
|
Oaktree Specialty Lending
CorporationConsolidated Statements of Assets and
Liabilities(in thousands, except per share
amounts)
|
September 30,2018 |
|
June 30, 2018(unaudited) |
|
September 30, 2017 |
ASSETS |
|
|
|
|
|
Investments at
fair value: |
|
|
|
|
|
Control investments
(cost September 30, 2018: $213,470; cost June 30, 2018: $266,097;
cost September 30, 2017: $444,826) |
$ |
196,874 |
|
|
$ |
223,421 |
|
|
$ |
305,271 |
|
Affiliate investments
(cost September 30, 2018: $1,080; cost June 30, 2018: $1,080; cost
September 30, 2017: $33,743) |
2,161 |
|
|
2,161 |
|
|
36,983 |
|
Non-control/Non-affiliate investments (cost September 30, 2018:
$1,392,383; cost June 30, 2018: $1,416,632; cost September 30,
2017: $1,279,096) |
1,292,166 |
|
|
1,294,936 |
|
|
1,199,501 |
|
Total
investments at fair value (cost September 30, 2018: $1,606,933;
cost June 30, 2018: $1,683,809; cost September 30, 2017:
$1,757,665) |
1,491,201 |
|
|
1,520,518 |
|
|
1,541,755 |
|
Cash and cash
equivalents |
13,380 |
|
|
56,615 |
|
|
53,018 |
|
Restricted cash |
109 |
|
|
499 |
|
|
6,895 |
|
Interest, dividends and
fees receivable |
10,272 |
|
|
8,102 |
|
|
6,892 |
|
Due from portfolio
companies |
1,357 |
|
|
15,757 |
|
|
5,670 |
|
Receivables from
unsettled transactions |
26,760 |
|
|
22,538 |
|
|
— |
|
Deferred financing
costs |
5,209 |
|
|
5,620 |
|
|
1,304 |
|
Derivative asset at
fair value |
162 |
|
|
— |
|
|
— |
|
Other assets |
3,008 |
|
|
3,108 |
|
|
514 |
|
Total
assets |
$ |
1,551,458 |
|
|
$ |
1,632,757 |
|
|
$ |
1,616,048 |
|
|
|
|
|
|
|
LIABILITIES AND NET ASSETS |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
Accounts
payable, accrued expenses and other liabilities |
$ |
3,581 |
|
|
$ |
2,714 |
|
|
$ |
2,417 |
|
Base
management fee and Part I incentive fee payable |
8,223 |
|
|
7,094 |
|
|
6,750 |
|
Due to
affiliate |
3,274 |
|
|
4,230 |
|
|
1,815 |
|
Interest
payable |
3,365 |
|
|
6,338 |
|
|
3,167 |
|
Amounts
payable to syndication partners |
109 |
|
|
301 |
|
|
1 |
|
Director
fees payable |
— |
|
|
— |
|
|
184 |
|
Payables
from unsettled transactions |
37,236 |
|
|
166,903 |
|
|
58,691 |
|
Deferred
tax liability |
422 |
|
|
— |
|
|
— |
|
Credit
facilities payable |
241,000 |
|
|
211,000 |
|
|
255,995 |
|
Unsecured
notes payable (net of $3,483, $3,851 and $4,737 of unamortized
financing costs as of September 30, 2018, June 30, 2018 and
September 30, 2017, respectively) |
386,485 |
|
|
386,132 |
|
|
406,115 |
|
Secured
borrowings at fair value (proceeds September 30, 2018: $12,314;
proceeds June 30, 2018: $12,623; proceeds September 30, 2017:
$13,489) |
9,728 |
|
|
9,950 |
|
|
13,256 |
|
Total
liabilities |
693,423 |
|
|
794,662 |
|
|
748,391 |
|
Commitments and
contingencies |
|
|
|
|
|
Net
assets: |
|
|
|
|
|
Common
stock, $0.01 par value, 250,000 shares authorized; 140,961
shares issued and outstanding as of September 30, 2018, June 30,
2018 and September 30, 2017 |
1,409 |
|
|
1,409 |
|
|
1,409 |
|
Additional paid-in-capital |
1,492,739 |
|
|
1,579,278 |
|
|
1,579,278 |
|
Accumulated overdistributed earnings |
(636,113 |
) |
|
(742,592 |
) |
|
(713,030 |
) |
Total net
assets (equivalent to $6.09, $5.95 and $6.16 per common share as of
September 30, 2018, June 30, 2018 and September 30, 2017,
respectively) |
858,035 |
|
|
838,095 |
|
|
867,657 |
|
Total
liabilities and net assets |
$ |
1,551,458 |
|
|
$ |
1,632,757 |
|
|
$ |
1,616,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oaktree Specialty Lending
CorporationConsolidated Statements of
Operations(in thousands, except per share
amounts)
|
|
Three months ended September 30,
2018(unaudited) |
|
Three months ended June 30,
2018(unaudited) |
|
Three months ended September 30,
2017(unaudited) |
|
Year ended September 30, 2018 |
|
Year ended September 30, 2017 |
Interest
income: |
|
|
|
|
|
|
|
|
|
|
Control investments |
|
$ |
3,687 |
|
|
$ |
2,737 |
|
|
$ |
3,126 |
|
|
$ |
12,698 |
|
|
$ |
14,230 |
|
Affiliate
investments |
|
— |
|
|
161 |
|
|
978 |
|
|
2,027 |
|
|
3,939 |
|
Non-control/Non-affiliate investments |
|
31,496 |
|
|
23,629 |
|
|
26,935 |
|
|
103,223 |
|
|
133,344 |
|
Interest
on cash and cash equivalents |
|
123 |
|
|
107 |
|
|
313 |
|
|
563 |
|
|
810 |
|
Total interest income |
|
35,306 |
|
|
26,634 |
|
|
31,352 |
|
|
118,511 |
|
|
152,323 |
|
PIK interest
income: |
|
|
|
|
|
|
|
|
|
|
Control
investments |
|
— |
|
|
1,045 |
|
|
1,186 |
|
|
3,446 |
|
|
6,631 |
|
Affiliate
investments |
|
— |
|
|
52 |
|
|
196 |
|
|
416 |
|
|
788 |
|
Non-control/Non-affiliate investments |
|
499 |
|
|
360 |
|
|
746 |
|
|
1,907 |
|
|
3,674 |
|
Total PIK interest income |
|
499 |
|
|
1,457 |
|
|
2,128 |
|
|
5,769 |
|
|
11,093 |
|
Fee
income: |
|
|
|
|
|
|
|
|
|
|
Control
investments |
|
6 |
|
|
697 |
|
|
315 |
|
|
951 |
|
|
1,244 |
|
Affiliate
investments |
|
— |
|
|
— |
|
|
12 |
|
|
48 |
|
|
753 |
|
Non-control/Non-affiliate investments |
|
2,028 |
|
|
1,728 |
|
|
1,355 |
|
|
8,433 |
|
|
8,510 |
|
Total fee income |
|
2,034 |
|
|
2,425 |
|
|
1,682 |
|
|
9,432 |
|
|
10,507 |
|
Dividend and
other income: |
|
|
|
|
|
|
|
|
|
|
Control
investments |
|
381 |
|
|
1,331 |
|
|
570 |
|
|
5,010 |
|
|
3,954 |
|
Non-control/Non-affiliate investments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
87 |
|
Total dividend and other income |
|
381 |
|
|
1,331 |
|
|
570 |
|
|
5,010 |
|
|
4,041 |
|
Total
investment income |
|
38,220 |
|
|
31,847 |
|
|
35,732 |
|
|
138,722 |
|
|
177,964 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
Base
management fee |
|
5,767 |
|
|
5,909 |
|
|
6,808 |
|
|
22,652 |
|
|
31,369 |
|
Part I
incentive fee |
|
3,675 |
|
|
2,733 |
|
|
— |
|
|
10,485 |
|
|
10,713 |
|
Professional fees |
|
859 |
|
|
924 |
|
|
1,964 |
|
|
5,696 |
|
|
5,703 |
|
Directors
fees |
|
143 |
|
|
154 |
|
|
277 |
|
|
650 |
|
|
872 |
|
Interest
expense |
|
9,323 |
|
|
8,291 |
|
|
12,772 |
|
|
35,728 |
|
|
49,935 |
|
Administrator expense |
|
336 |
|
|
466 |
|
|
660 |
|
|
1,687 |
|
|
2,217 |
|
General
and administrative expenses |
|
794 |
|
|
488 |
|
|
1,845 |
|
|
3,120 |
|
|
5,999 |
|
Loss on
legal settlements |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3 |
|
Total
expenses |
|
20,897 |
|
|
18,965 |
|
|
24,326 |
|
|
80,018 |
|
|
106,811 |
|
Fees
waived |
|
292 |
|
|
(1,548 |
) |
|
(58 |
) |
|
(1,342 |
) |
|
(240 |
) |
Insurance
recoveries |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,259 |
) |
Net expenses |
|
21,189 |
|
|
17,417 |
|
|
24,268 |
|
|
78,676 |
|
|
105,312 |
|
Net investment
income |
|
17,031 |
|
|
14,430 |
|
|
11,464 |
|
|
60,046 |
|
|
72,652 |
|
Unrealized
appreciation (depreciation) on investments and foreign
currency: |
|
|
|
|
|
|
|
|
|
|
Control
investments |
|
26,081 |
|
|
97,000 |
|
|
(83,359 |
) |
|
115,906 |
|
|
(71,329 |
) |
Affiliate
investments |
|
— |
|
|
72 |
|
|
(73 |
) |
|
(2,159 |
) |
|
(1,574 |
) |
Non-control/Non-affiliate investments |
|
21,039 |
|
|
1,810 |
|
|
(33,008 |
) |
|
(13,657 |
) |
|
(24,640 |
) |
Foreign
currency forward contracts |
|
162 |
|
|
— |
|
|
— |
|
|
162 |
|
|
— |
|
Net unrealized
appreciation (depreciation) on investments and foreign
currency |
|
47,282 |
|
|
98,882 |
|
|
(116,440 |
) |
|
100,252 |
|
|
(97,543 |
) |
Net unrealized
(appreciation) depreciation on secured borrowings |
|
(87 |
) |
|
377 |
|
|
— |
|
|
2,353 |
|
|
(296 |
) |
Realized gain
(loss) on investments, secured borrowings and foreign
currency: |
|
|
|
|
|
|
|
|
|
|
Control
investments |
|
(31,331 |
) |
|
(91,470 |
) |
|
(728 |
) |
|
(122,801 |
) |
|
(59,722 |
) |
Affiliate
investments |
|
— |
|
|
— |
|
|
— |
|
|
2,048 |
|
|
— |
|
Non-control/Non-affiliate investments |
|
1,494 |
|
|
2,033 |
|
|
(19,765 |
) |
|
6,042 |
|
|
(112,060 |
) |
Foreign
currency forward contracts |
|
(436 |
) |
|
— |
|
|
— |
|
|
(436 |
) |
|
— |
|
Net realized
losses on investments, secured borrowings and foreign
currency |
|
(30,273 |
) |
|
(89,437 |
) |
|
(20,493 |
) |
|
(115,147 |
) |
|
(171,782 |
) |
Redemption
premium on unsecured notes payable |
|
— |
|
|
— |
|
|
— |
|
|
(120 |
) |
|
— |
|
Provision for
income taxes |
|
(622 |
) |
|
— |
|
|
— |
|
|
(622 |
) |
|
— |
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
33,331 |
|
|
$ |
24,252 |
|
|
$ |
(125,469 |
) |
|
$ |
46,762 |
|
|
$ |
(196,969 |
) |
Net investment
income per common share — basic and diluted |
|
$ |
0.12 |
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
|
$ |
0.43 |
|
|
$ |
0.51 |
|
Earnings (loss)
per common share — basic and diluted |
|
$ |
0.24 |
|
|
$ |
0.17 |
|
|
$ |
(0.89 |
) |
|
$ |
0.33 |
|
|
$ |
(1.39 |
) |
Weighted average common
shares outstanding — basic and diluted |
|
140,961 |
|
|
140,961 |
|
|
140,961 |
|
|
140,961 |
|
|
141,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call Information
Oaktree Specialty Lending will host a conference call to discuss
its fourth fiscal quarter 2018 results at 11:00 a.m. Eastern Time /
8:00 a.m. Pacific Time on November 29, 2018. The conference call
may be accessed by dialing (877) 507-3275 (U.S. callers) or +1
(412) 317-5238 (non-U.S. callers), participant password “Oaktree
Specialty Lending.” During the earnings conference call, Oaktree
Specialty Lending intends to refer to an investor presentation that
will be available on the Investors section of the Oaktree Specialty
Lending website, www.oaktreespecialtylending.com. Alternatively, a
live webcast of the conference call can be accessed on Oaktree
Specialty Lending’s website.
For those individuals unable to listen to the live broadcast of
the conference call, a replay will be available on Oaktree
Specialty Lending’s website, or by dialing (877) 344-7529 (U.S.
callers) or +1 (412) 317-0088 (non-U.S. callers), access code
10125435, beginning approximately one hour after the broadcast.
About Oaktree Specialty Lending Corporation
Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is a
specialty finance company dedicated to providing customized
one-stop credit solutions to companies with limited access to
public or syndicated capital markets. The firm seeks to generate
current income and capital appreciation by providing companies with
flexible and innovative financing solutions including first and
second lien loans, unsecured and mezzanine loans, and preferred
equity. The company is regulated as a business development company
under the Investment Company Act of 1940, as amended. Oaktree
Specialty Lending is managed by Oaktree Capital Management, L.P.
For additional information, please visit Oaktree Specialty
Lending's website at www.oaktreespecialtylending.com.
Forward-Looking Statements
Some of the statements in this press release constitute
forward-looking statements because they relate to future events or
our future performance or financial condition. The forward-looking
statements may include statements as to: our future operating
results and distribution projections; our business prospects and
the prospects of our portfolio companies; and the impact of the
investments that we expect to make. 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 press
release 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 “Risk Factors” and elsewhere in our annual report on
Form 10-K. Other factors that could cause actual results to differ
materially include: changes in the economy, financial markets and
political environment; risks associated with possible disruption in
our operations or the economy generally due to terrorism or natural
disasters; 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; 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
presentation on information available to us on the date of this
presentation, 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 SEC, including annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.
Contacts
Investor Relations:Oaktree Specialty Lending CorporationMichael
Mosticchio(212) 284-1900ocsl-ir@oaktreecapital.com
Media Relations:Financial Profiles, Inc.Moira Conlon(310)
478-2700mediainquiries@oaktreecapital.com
Oaktree Specialty Lending (NASDAQ:OCSL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Oaktree Specialty Lending (NASDAQ:OCSL)
Historical Stock Chart
From Apr 2023 to Apr 2024