• Oaktree Specialty Lending Corporation Announces Third Fiscal Quarter 2019 Financial Results and Declares Distribution of $0.095 Per Share

    Source: Nasdaq GlobeNewswire / 07 Aug 2019 06:00:35   America/New_York

    LOS ANGELES, Aug. 07, 2019 (GLOBE NEWSWIRE) -- 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 June 30, 2019.

    Financial Highlights for the Quarter Ended June 30, 2019

    • Total investment income of $36.7 million ($0.26 per share), down from $38.2 million ($0.27 per share) for the second fiscal quarter of 2019, primarily reflecting lower original issue discount ("OID") accretion, partially offset by the call protection and prepayment fees earned in connection with the exit of two investments.
       
    • Net investment income of $16.6 million ($0.12 per share), down from $17.7 million ($0.13 per share) for the second fiscal quarter of 2019, primarily reflecting lower investment income, partially offset by lower operating expenses.
       
    • Net asset value ("NAV") per share of $6.60, up from $6.55 for the second fiscal quarter of 2019, primarily driven by income earned in excess of dividends paid and net appreciation on investments.
       
    • Originated $66.8 million of new investment commitments and received $138.3 million of proceeds from prepayments, exits, other paydowns and sales.
       
    • A quarterly distribution was declared of $0.095 per share, payable on September 30, 2019 to stockholders of record on September 13, 2019.

    Edgar Lee, Chief Executive Officer and Chief Investment Officer, said, “The third quarter was highlighted by continued strong financial results and portfolio performance. NAV increased for the sixth consecutive quarter to $6.60 per share, an 11% increase over the same period one year ago, and net investment income remained solid at $0.12 per share. We made further progress in reducing risk in the portfolio, successfully exiting $27 million of non-core investments, while adding $67 million of new investments that are consistent with our late-cycle investment approach. Importantly, with leverage of only 0.58x and $330 million of dry powder, we are well capitalized and have ample capacity to invest in new opportunities.”

    Distribution Declaration

    The Board of Directors declared a quarterly distribution of $0.095 per share, payable on September 30, 2019 to stockholders of record on September 13, 2019.

    Distributions are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company’s stockholders.

    Results of Operations

      For the three months ended
    ($ in thousands, except per share data) June 30, 2019 March 31, 2019 June 30, 2018
    Operating results:      
    Interest income $32,910  $34,309  $26,634 
    PIK interest income 1,198  2,280  1,457 
    Fee income 1,826  1,132  2,425 
    Dividend income 735  523  1,331 
    Total investment income 36,669  38,244  31,847 
    Net expenses 20,061  20,535  17,417 
    Net investment income 16,608  17,709  14,430 
    Net realized and unrealized gains (losses), net of taxes 3,378  46,776  9,822 
    Net increase (decrease) in net assets resulting from operations $19,986  $64,485  $24,252 
    Net investment income per common share $0.12  $0.13  $0.10 
    Net realized and unrealized gains (losses), net of taxes per common share $0.02  $0.33  $0.07 
    Earnings (loss) per common share — basic and diluted $0.14  $0.46  $0.17 


      As of
    ($ in thousands, except per share data and ratios) June 30, 2019 March 31, 2019 September 30, 2018
    Select balance sheet and other data:      
    Investment portfolio at fair value $1,455,031  $1,504,888  $1,491,201 
    Total debt outstanding 537,278  592,178  637,213 
    Net assets 930,050  923,456  858,035 
    Net asset value per share 6.60  6.55  6.09 
    Total leverage 0.58x  0.64x  0.75x 

    Total investment income for the quarter ended June 30, 2019 was $36.7 million and included $32.9 million of interest income from portfolio investments, $1.2 million of payment-in-kind ("PIK") interest income, $1.8 million of fee income and $0.7 million of dividend income. Total investment income was lower as compared to the quarter ended March 31, 2019, primarily due to lower OID accretion, partially offset by the call protection and prepayment fees earned in connection with the exit of two investments during the quarter. PIK interest income represented 3.3% of total investment income for the quarter ended June 30, 2019.

    Net expenses for the quarter totaled $20.1 million, down from the quarter ended March 31, 2019. The decrease in net expenses was primarily driven by lower interest expense as a result of a lower level of borrowings during the quarter, partially offset by higher accrued capital gains incentive fees (net of fees waived). The capital gains incentive fees are required to be accrued under U.S. GAAP, but payment is not contractually due under the terms of the investment advisory agreement, unless and until realized capital gains exceed realized capital losses and unrealized capital depreciation on a cumulative basis.

    Net realized and unrealized gains, net of taxes, were $3.4 million, primarily reflecting unrealized appreciation on certain debt and equity investments.

    Portfolio and Investment Activity

      As of
    ($ in thousands) June 30, 2019 March 31, 2019 June 30, 2018
    Investments at fair value $1,455,031  $1,504,888  $1,520,518 
    Number of portfolio companies 105  110  116 
    Average portfolio company debt size $15,400  $15,000  $14,500 
           
    Asset class:      
    Senior secured debt 79.7% 78.9% 76.0%
    Unsecured debt 7.0% 8.0% 10.9%
    Equity 4.3% 4.2% 3.8%
    SLF JV I 8.8% 8.4% 8.7%
    Limited partnership interests 0.2% 0.5% 0.6%
           
    Non-accrual debt investments:      
    Non-accrual investments at fair value $86,796  $85,854  $67,131 
    Non-accrual investments as a percentage of debt investments 6.4% 6.1% 4.6%
    Number of investments on non-accrual 5  6  8 
           
    Interest rate type:      
    Percentage floating-rate 88.5% 86.3% 82.9%
    Percentage fixed-rate 11.5% 13.7% 17.1%
           
    Yields:      
    Weighted average yield on debt investments (1) 8.7% 9.0% 8.8%
    Cash component of weighted average yield on debt investments 8.0% 8.3% 8.5%
    Weighted average yield on total portfolio investments (2) 8.2% 8.3% 8.4%
           
    Investment activity:      
    New investment commitments $66,800  $100,000  $379,800 
    New funded investment activity (3) $74,100  $111,100  $389,000 
    Proceeds from prepayments, exits, other paydowns and sales $138,300  $120,700  $280,700 
    Net new investments (4) $(64,200) $(9,600) $108,300 
    Number of new investment commitments in new portfolio companies 3  5  24 
    Number of new investment commitments in existing portfolio companies 4  1  4 
    Number of portfolio company exits 8  4  28 

     __________

    (1)Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments, including the Company's share of the return on debt investments in the SLF JV I.

    (2)Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments and dividend income, including the Company's share of the return on debt investments in the SLF JV I.

    (3)New funded investment activity includes drawdowns on existing revolver commitments.

    (4)Net new investments consists of new funded investment activity less proceeds from prepayments, exits, other paydowns and sales.
       

    As of June 30, 2019, the fair value of the investment portfolio was $1.5 billion and was comprised of investments in 105 companies. These included debt investments in 82 companies, the investment in Senior Loan Fund JV I, LLC (“SLF JV I”) and equity investments in 35 companies, including in SLF JV I and two private equity funds. Thirteen of these equity investments were in companies in which Oaktree Specialty Lending also had a debt investment.

    At fair value, 93.4% of the Company's portfolio as of June 30, 2019 consisted of debt investments, including 54.0% of first liens, 25.8% of second liens and 13.6% of unsecured debt investments, including the debt investments in SLF JV I.

    As of June 30, 2019, there were five investments on which the Company had stopped accruing cash and/or PIK interest or OID income that, in the aggregate, represented 10.5% of the Company's debt portfolio at cost and 6.4% at fair value. During the three months ended June 30, 2019, the Company exited one investment which was on non-accrual status.

    As of June 30, 2019, SLF JV I had $348.7 million in assets, including senior secured loans to 51 portfolio companies.  The joint venture generated income of $2.3 million for Oaktree Specialty Lending during the quarter ended June 30, 2019. During the quarter ended June 30, 2019, SLF JV I increased the size of its senior revolving credit facility from $200 million to $250 million. As of June 30, 2019, SLF JV I had $62.9 million of undrawn capacity on its senior revolving credit facility.

    The Company intends to rotate out of approximately $273 million, at fair value, of investments it has identified as non-core investments. It will also seek to redeploy non-income generating investments comprised of equity investments, limited partnership interests and loans currently on non-accrual status into proprietary investments with higher yields. Certain additional information on such categorization and the portfolio composition is included in investor presentations that the Company files with the Securities and Exchange Commission ("SEC").

    Liquidity and Capital Resources

    As of June 30, 2019, the Company had $5.6 million of cash and cash equivalents, total principal value of debt outstanding of $542.6 million and $330.2 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 June 30, 2019.

    As of June 30, 2019, the Company’s total leverage ratio was 0.58x debt-to-equity.

    Conference Call Information

    Oaktree Specialty Lending will host a conference call to discuss its third fiscal quarter 2019 results at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time on August 7, 2019. 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 10133101, 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 and our quarterly reports on Form 10-Q. 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 Corporation
    Michael Mosticchio
    (212) 284-1900
    ocsl-ir@oaktreecapital.com

    Media Relations:
    Financial Profiles, Inc.
    Moira Conlon
    (310) 478-2700
    mediainquiries@oaktreecapital.com

    Oaktree Specialty Lending Corporation
    Consolidated Statements of Assets and Liabilities
    (in thousands, except per share amounts)

     June 30, 2019
    (unaudited)
     March 31, 2019
    (unaudited)
     September 30,
    2018
      ASSETS     
    Investments at fair value:     
    Control investments (cost June 30, 2019: $190,181; cost March 31, 2019: $211,964;
     cost September 30, 2018: $213,470)
    $175,052  $193,416  $196,874 
    Affiliate investments (cost June 30, 2019: $5,064; cost March 31, 2019: $3,678;
     cost September 30, 2018: $1,080)
    5,964  4,578  2,161 
    Non-control/Non-affiliate investments (cost June 30, 2019: $1,337,252; cost March 31, 2019:
     $1,390,882; cost September 30, 2018: $1,392,383)
    1,274,015  1,306,894  1,292,166 
    Total investments at fair value (cost June 30, 2019: $1,532,497; cost March 31, 2019:
     $1,606,524; cost September 30, 2018: $1,606,933)
    1,455,031  1,504,888  1,491,201 
    Cash and cash equivalents5,637  12,815  13,380 
    Restricted cash  337  109 
    Interest, dividends and fees receivable13,156  9,822  10,272 
    Due from portfolio companies1,850  1,407  1,357 
    Receivables from unsettled transactions4  1,818  26,760 
    Deferred financing costs6,759  6,848  5,209 
    Derivative assets at fair value  563  162 
    Other assets2,579  2,819  3,008 
    Total assets$1,485,016  $1,541,317  $1,551,458 
          
      LIABILITIES AND NET ASSETS     
    Liabilities:     
    Accounts payable, accrued expenses and other liabilities$1,078  $1,505  $3,581 
    Base management fee and incentive fee payable9,987  8,922  8,223 
    Due to affiliate3,431  1,940  3,274 
    Interest payable2,267  2,117  3,365 
    Payable to syndication partners  586  109 
    Payables from unsettled transactions  9,900  37,236 
    Derivative liability at fair value206     
    Deferred tax liability719  713  422 
    Credit facility payable369,825  424,825  241,000 
    Unsecured notes payable (net of $2,808, $2,908 and $3,483 of unamortized financing costs
     as of June 30, 2019, March 31, 2019 and September 30, 2018, respectively)
    158,442  158,342  386,485 
    Secured borrowings at fair value (proceeds June 30, 2019: $11,502; proceeds March 31, 2019:
     $11,502; proceeds September 30, 2018: $12,314)
    9,011  9,011  9,728 
    Total liabilities554,966  617,861  693,423 
    Commitments and contingencies     
    Net assets:     
    Common stock, $0.01 par value per share, 250,000 shares authorized; 140,961 shares issued
     and outstanding as of June 30, 2019, March 31, 2019 and September 30, 2018
    1,409  1,409  1,409 
    Additional paid-in-capital1,492,739  1,492,739  1,492,739 
    Accumulated overdistributed earnings(564,098) (570,692) (636,113)
    Total net assets (equivalent to $6.60, $6.55 and $6.09 per common share as of June 30, 2019, March 31, 2019
     and September 30, 2018, respectively)
    930,050  923,456  858,035 
    Total liabilities and net assets$1,485,016  $1,541,317  $1,551,458 

    Oaktree Specialty Lending Corporation
    Consolidated Statements of Operations
    (in thousands, except per share amounts)
    (unaudited)

     Three months ended
    June 30, 2019
     Three months ended
    March 31, 2019
     Three months ended
    June 30, 2018
     Nine months ended
    June 30, 2019
     Nine months ended
    June 30, 2018
    Interest income:         
    Control investments$2,859  $2,852  $2,737  $9,050  $9,011 
    Affiliate investments70  22  161  105  2,027 
    Non-control/Non-affiliate investments29,850  31,231  23,629  93,248  71,727 
    Interest on cash and cash equivalents131  204  107  605  440 
    Total interest income32,910  34,309  26,634  103,008  83,205 
    PIK interest income:         
    Control investments    1,045  67  3,446 
    Affiliate investments    52    416 
    Non-control/Non-affiliate investments1,198  2,280  360  4,243  1,408 
    Total PIK interest income1,198  2,280  1,457  4,310  5,270 
    Fee income:         
    Control investments6  7  697  19  945 
    Affiliate investments5  5    14  48 
    Non-control/Non-affiliate investments1,815  1,120  1,728  4,127  6,405 
    Total fee income1,826  1,132  2,425  4,160  7,398 
    Dividend income:         
    Control investments735  523  1,331  1,711  4,629 
    Total dividend income735  523  1,331  1,711  4,629 
    Total investment income36,669  38,244  31,847  113,189  100,502 
    Expenses:         
    Base management fee5,548  5,731  5,909  16,847  16,885 
    Part I incentive fee3,787  3,813  2,733  11,328  6,810 
    Part II incentive fee607  8,170    10,597   
    Professional fees721  499  924  2,186  4,837 
    Directors fees143  142  154  428  507 
    Interest expense7,592  8,970  8,291  25,466  26,405 
    Administrator expense384  406  466  1,553  1,351 
    General and administrative expenses645  705  488  1,981  2,326 
    Total expenses19,427  28,436  18,965  70,386  59,121 
    Fees waived634  (7,901) (1,548) (8,831) (1,634)
    Net expenses20,061  20,535  17,417  61,555  57,487 
    Net investment income16,608  17,709  14,430  51,634  43,015 
    Unrealized appreciation (depreciation):         
    Control investments3,419  3,868  97,000  1,467  89,825 
    Affiliate investments  (181) 72  (181) (2,159)
    Non-control/Non-affiliate investments20,744  17,108  1,810  37,068  (34,696)
    Secured borrowings  (76) 377  (95) 2,440 
    Foreign currency forward contracts(768) 753    (367)  
    Net unrealized appreciation (depreciation)23,395  21,472  99,259  37,892  55,410 
    Realized gains (losses):         
    Control investments    (91,470)   (91,470)
    Affiliate investments        2,048 
    Non-control/Non-affiliate investments(21,112) 25,899  2,033  21,548  4,548 
    Foreign currency forward contracts1,268  (686)   1,783   
    Net realized gains (losses)(19,844) 25,213  (89,437) 23,331  (84,874)
    Redemption premium on unsecured notes payable        (120)
    Provision for income tax (expense) benefit(173) 91    (668)  
    Net realized and unrealized gains (losses), net of taxes3,378  46,776  9,822  60,555  (29,584)
    Net increase (decrease) in net assets resulting from operations$19,986  $64,485  $24,252  $112,189  $13,431 
    Net investment income per common share — basic and diluted$0.12  $0.13  $0.10  $0.37  $0.31 
    Earnings (loss) per common share — basic and diluted$0.14  $0.46  $0.17  $0.80  $0.10 
    Weighted average common shares outstanding — basic and diluted140,961  140,961  140,961  140,961  140,961 

     

    Primary Logo

Share on,