Oaktree Specialty Lending Corporation Announces First Fiscal Quarter 2019 Financial Results and Declares Distribution of $0.095 Per Share
Financial Highlights for the Quarter Ended
- Total investment income of
$38.3 million ($0.27 per share), up from$38.2 million ($0.27 per share) for the fourth fiscal quarter of 2018.
- Net investment income of
$17.3 million ($0.12 per share), up from$17.0 million ($0.12 per share) for the fourth fiscal quarter of 2018.
- Net asset value ("NAV") per share of
$6.19 , up from$6.09 for the fourth fiscal quarter of 2018.
- Originated
$231.1 million of new investment commitments and received$208.3 million of proceeds from prepayments, exits, other paydowns and sales.
- A quarterly distribution was declared of
$0.095 per share, payable onMarch 29, 2019 to stockholders of record onMarch 15, 2019 .
- Our Board of Directors approved the application of the modified asset coverage requirements under the Investment Company Act of 1940, as amended (the "1940 Act"), to the Company. As a result, the Company’s asset coverage requirements under the 1940 Act will be reduced from 200% to 150%, effective
February 1, 2020 .
Distribution Declaration
The Board of Directors declared a quarterly distribution of
Distributions are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company’s stockholders.
Results of Operations
For the three months ended | ||||||||||||
($ in thousands, expect per share data) | December 31, 2018 |
September 30, 2018 |
December 31, 2017 |
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Operating results: | ||||||||||||
Interest income | $ | 35,789 | $ | 35,306 | $ | 29,938 | ||||||
PIK interest income | 832 | 499 | 1,867 | |||||||||
Fee income | 1,202 | 2,034 | 1,031 | |||||||||
Dividend and other income | 453 | 381 | 1,040 | |||||||||
Total investment income | 38,276 | 38,220 | 33,876 | |||||||||
Net expenses | 20,959 | 21,189 | 20,554 | |||||||||
Net investment income | 17,317 | 17,031 | 13,322 | |||||||||
Net realized and unrealized gains (losses), net of taxes | 10,401 | 16,300 | (43,763 | ) | ||||||||
Net increase (decrease) in net assets resulting from operations | $ | 27,718 | $ | 33,331 | $ | (30,441 | ) | |||||
Net investment income per common share | $ | 0.12 | $ | 0.12 | $ | 0.09 | ||||||
Net realized and unrealized gains (losses), net of taxes per common share | $ | 0.08 | $ | 0.12 | $ | (0.31 | ) | |||||
Earnings (loss) per common share — basic and diluted | $ | 0.20 | $ | 0.24 | $ | (0.22 | ) |
As of | ||||||||
($ in thousands, expect per share data and ratios) | December 31, 2018 |
September 30, 2018 |
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Select balance sheet and other data: | ||||||||
Investment portfolio at fair value | $ | 1,464,885 | $ | 1,491,201 | ||||
Total debt outstanding | 607,141 | 637,213 | ||||||
Net assets | 872,362 | 858,035 | ||||||
Net asset value per share | 6.19 | 6.09 | ||||||
Total leverage | 0.70x | 0.75x | ||||||
Total investment income for the quarter ended
Net expenses for the quarter were
Net realized and unrealized gains, net of taxes on the investment portfolio for the quarter were
Portfolio and Investment Activity
As of | ||||||||||||
(Dollar amounts in thousands) | December 31, 2018 |
September 30, 2018 |
December 31, 2017 |
|||||||||
Investments at fair value | $ | 1,464,885 | $ | 1,491,201 | $ | 1,415,404 | ||||||
Number of portfolio companies | 110 | 113 | 122 | |||||||||
Average portfolio company debt size | $ | 15,000 | $ | 14,800 | $ | 14,100 | ||||||
Asset class: | ||||||||||||
Senior secured debt | 80.0 | % | 75.4 | % | 75.8 | % | ||||||
Unsecured debt | 7.8 | % | 11.0 | % | 7.0 | % | ||||||
Equity | 3.3 | % | 4.4 | % | 6.0 | % | ||||||
SLF JV I | 8.4 | % | 8.7 | % | 9.4 | % | ||||||
Limited partnership interests | 0.5 | % | 0.5 | % | 1.8 | % | ||||||
Non-accrual debt investments: | ||||||||||||
Non-accrual investments at fair value | $ | 132,355 | $ | 98,760 | $ | 41,458 | ||||||
Non-accrual investments as a percentage of debt investments | 9.6 | % | 7.0 | % | 3.2 | % | ||||||
Number of investments on non-accrual | 7 | 8 | 8 | |||||||||
Interest rate type: | ||||||||||||
Percentage floating-rate | 86.6 | % | 83.2 | % | 82.4 | % | ||||||
Percentage fixed-rate | 13.4 | % | 16.8 | % | 17.6 | % | ||||||
Yields: | ||||||||||||
Weighted average yield on debt investments (1) | 8.7 | % | 8.4 | % | 9.0 | % | ||||||
Cash component of weighted average yield on debt investments | 8.0 | % | 8.2 | % | 8.4 | % | ||||||
Weighted average yield on total portfolio investments (2) | 8.1 | % | 8.1 | % | 8.5 | % | ||||||
Investment activity: | ||||||||||||
New investment commitments | $ | 231,100 | $ | 228,400 | $ | 183,000 | ||||||
New funded investment activity (3) | $ | 162,400 | $ | 218,400 | $ | 200,200 | ||||||
Proceeds from prepayments, exits, other paydowns and sales | $ | 208,300 | $ | 267,400 | $ | 284,800 | ||||||
Net new investments (4) | $ | (45,900 | ) | $ | (49,000 | ) | $ | (84,600 | ) | |||
Number of new investment commitments in new portfolio companies | 14 | 13 | 13 | |||||||||
Number of new investment commitments in existing portfolio companies | 3 | 3 | 1 | |||||||||
Number of portfolio company exits | 14 | 18 | 17 |
__________
(1) | Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments, including our 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 our share of the return on debt investments in the SLF JV I. | |
(3) | New funded investment activity is reflected net of original issue discount and 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
At fair value, 94.4% of the Company's portfolio as of December 31, 2018 consisted of debt investments, including 52.2% of first lien loans, 27.8% of second lien loans and 14.4% of unsecured debt investments, including the debt investments in SLF JV I.
As of
As of
The Company intends to rotate out of approximately
Liquidity and Capital Resources
As of
As of
Recent Developments
At a meeting held on
Conference Call Information
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 10127865, beginning approximately one hour after the broadcast.
About
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
Contacts
Investor Relations:
(212) 284-1900
ocsl-ir@oaktreecapital.com
Media Relations:
(310) 478-2700
mediainquiries@oaktreecapital.com
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
December 31, 2018 (unaudited) |
September 30, 2018 | ||||||
ASSETS | |||||||
Investments at fair value: | |||||||
Control investments (cost December 31, 2018: $212,583; cost September 30, 2018: $213,470) | $ | 190,167 | $ | 196,874 | |||
Affiliate investments (cost December 31, 2018: $2,659; cost September 30, 2018: $1,080) | 3,740 | 2,161 | |||||
Non-control/Non-affiliate investments (cost December 31, 2018: $1,372,068; cost September 30, 2018: $1,392,383) | 1,270,978 | 1,292,166 | |||||
Total investments at fair value (cost December 31, 2018: $1,587,310; cost September 30, 2018: $1,606,933) | 1,464,885 | 1,491,201 | |||||
Cash and cash equivalents | 56,186 | 13,380 | |||||
Restricted cash | 470 | 109 | |||||
Interest, dividends and fees receivable | 9,981 | 10,272 | |||||
Due from portfolio companies | 2,122 | 1,357 | |||||
Receivables from unsettled transactions | — | 26,760 | |||||
Deferred financing costs | 4,798 | 5,209 | |||||
Derivative asset at fair value | — | 162 | |||||
Other assets | 3,082 | 3,008 | |||||
Total assets | $ | 1,541,524 | $ | 1,551,458 | |||
LIABILITIES AND NET ASSETS | |||||||
Liabilities: | |||||||
Accounts payable, accrued expenses and other liabilities | $ | 2,362 | $ | 3,581 | |||
Base management fee and incentive fee payable | 8,370 | 8,223 | |||||
Due to affiliate | 3,553 | 3,274 | |||||
Interest payable | 6,233 | 3,365 | |||||
Payable to syndication partners | 379 | 109 | |||||
Director fees payable | 68 | — | |||||
Payables from unsettled transactions | 40,309 | 37,236 | |||||
Derivative liability at fair value | 190 | — | |||||
Deferred tax liability | 557 | 422 | |||||
Credit facility payable | 211,000 | 241,000 | |||||
Unsecured notes payable (net of $3,196 and $3,483 of unamortized financing costs as of December 31, 2018 and September 30, 2018, respectively) | 386,839 | 386,485 | |||||
Secured borrowings at fair value (proceeds December 31, 2018: $11,869; proceeds September 30, 2018: $12,314) | 9,302 | 9,728 | |||||
Total liabilities | 669,162 | 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 December 31, 2018 and September 30, 2018 | 1,409 | 1,409 | |||||
Additional paid-in-capital | 1,492,739 | 1,492,739 | |||||
Accumulated overdistributed earnings | (621,786 | ) | (636,113 | ) | |||
Total net assets (equivalent to $6.19 and $6.09 per common share as of December 31, 2018 and September 30, 2018, respectively) | 872,362 | 858,035 | |||||
Total liabilities and net assets | $ | 1,541,524 | $ | 1,551,458 | |||
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three months ended December 31, 2018 (unaudited) |
Three months ended September 30, 2018 (unaudited) |
Three months ended December 31, 2017 (unaudited) |
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Interest income: | |||||||||||
Control investments | $ | 3,339 | $ | 3,687 | $ | 3,203 | |||||
Affiliate investments | 13 | — | 949 | ||||||||
Non-control/Non-affiliate investments | 32,167 | 31,496 | 25,565 | ||||||||
Interest on cash and cash equivalents | 270 | 123 | 221 | ||||||||
Total interest income | 35,789 | 35,306 | 29,938 | ||||||||
PIK interest income: | |||||||||||
Control investments | 67 | — | 1,191 | ||||||||
Affiliate investments | — | — | 176 | ||||||||
Non-control/Non-affiliate investments | 765 | 499 | 500 | ||||||||
Total PIK interest income | 832 | 499 | 1,867 | ||||||||
Fee income: | |||||||||||
Control investments | 6 | 6 | 120 | ||||||||
Affiliate investments | 4 | — | 4 | ||||||||
Non-control/Non-affiliate investments | 1,192 | 2,028 | 907 | ||||||||
Total fee income | 1,202 | 2,034 | 1,031 | ||||||||
Dividend and other income: | |||||||||||
Control investments | 453 | 381 | 1,040 | ||||||||
Total dividend and other income | 453 | 381 | 1,040 | ||||||||
Total investment income | 38,276 | 38,220 | 33,876 | ||||||||
Expenses: | |||||||||||
Base management fee | 5,568 | 5,767 | 5,590 | ||||||||
Part I incentive fee | 3,728 | 3,675 | 830 | ||||||||
Part II incentive fee | 1,820 | — | — | ||||||||
Professional fees | 966 | 859 | 2,898 | ||||||||
Directors fees | 143 | 143 | 176 | ||||||||
Interest expense | 8,904 | 9,323 | 9,584 | ||||||||
Administrator expense | 763 | 336 | 494 | ||||||||
General and administrative expenses | 631 | 794 | 1,116 | ||||||||
Total expenses | 22,523 | 20,897 | 20,688 | ||||||||
Fees waived | (1,564 | ) | 292 | (134 | ) | ||||||
Net expenses | 20,959 | 21,189 | 20,554 | ||||||||
Net investment income | 17,317 | 17,031 | 13,322 | ||||||||
Unrealized appreciation (depreciation): | |||||||||||
Control investments | (5,820 | ) | 26,081 | (1,326 | ) | ||||||
Affiliate investments | — | — | (168 | ) | |||||||
Non-control/Non-affiliate investments | (784 | ) | 21,039 | (43,633 | ) | ||||||
Secured borrowings | (19 | ) | (87 | ) | 1,655 | ||||||
Foreign currency forward contracts | (352 | ) | 162 | — | |||||||
Net unrealized appreciation (depreciation) | (6,975 | ) | 47,195 | (43,472 | ) | ||||||
Realized gains (losses): | |||||||||||
Control investments | — | (31,331 | ) | — | |||||||
Non-control/Non-affiliate investments | 16,761 | 1,494 | (291 | ) | |||||||
Foreign currency forward contracts | 1,201 | (436 | ) | — | |||||||
Net realized gains (losses) | 17,962 | (30,273 | ) | (291 | ) | ||||||
Provision for income taxes | (586 | ) | (622 | ) | — | ||||||
Net realized and unrealized gains (losses), net of taxes | 10,401 | 16,300 | (43,763 | ) | |||||||
Net increase (decrease) in net assets resulting from operations | $ | 27,718 | $ | 33,331 | $ | (30,441 | ) | ||||
Net investment income per common share — basic and diluted | $ | 0.12 | $ | 0.12 | $ | 0.09 | |||||
Earnings (loss) per common share — basic and diluted | $ | 0.20 | $ | 0.24 | $ | (0.22 | ) | ||||
Weighted average common shares outstanding — basic and diluted | 140,961 | 140,961 | 140,961 |