Filed Pursuant to Rule 424(b)(2)
Registration No. 333-269628
Registration No. 333-269628
PROSPECTUS SUPPLEMENT
(to Prospectus dated February 7, 2023)
$300,000,000
7.100% Notes due 2029
We are offering $300,000,000 in aggregate principal amount of 7.100% notes due 2029, which we refer to as the Notes. The Notes will mature on February 15, 2029. We will pay interest on the Notes on February 15 and August 15 of each year, beginning February 15, 2024. We may redeem the Notes at our option, in whole or in part, at any time and from time to time, at the redemption price discussed under the caption “Description of the Notes—Optional Redemption” in this prospectus supplement. In addition, holders of the Notes can require us to repurchase the Notes at 100% of their principal amount upon the occurrence of a Change of Control Repurchase Event (as defined herein). The Notes will be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
The Notes will be our direct, unsecured obligation and rank pari passu, or equal in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by us. As of June 30, 2023, we had approximately $1,785.0 million of principal debt outstanding of which $650.0 million was unsecured and unsubordinated indebtedness, $335.0 million was secured indebtedness of our consolidated subsidiaries and $800.0 million was secured indebtedness of Oaktree Specialty Lending Corporation. None of our current indebtedness will be subordinated to the Notes.
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 were formed in late 2007 and operate 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 of 1940, as amended. 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. 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.
An investment in the Notes involves certain risks, including, among other things, the risk of leverage and risks relating to investments in securities of small, private and developing businesses. You should review carefully the risks and uncertainties, including the risk of leverage, described in the section titled “Risk Factors” beginning on page S‑11 of this prospectus supplement, page 5 of the accompanying prospectus or otherwise included in or incorporated by reference herein or the accompanying prospectus and in any free writing prospectuses we have authorized for use in connection with a specific offering, and under similar headings in the other documents that are incorporated by reference into this prospectus supplement and the accompanying prospectus before investing in our securities.
This prospectus supplement, the accompanying prospectus, any free writing prospectus and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus contain important information about us that a prospective investor should know before investing in the Notes. Please read this prospectus supplement, the accompanying prospectus, any free writing prospectus and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus before investing and keep them for future reference. We file periodic reports, current reports, proxy statements and other information with the Securities and Exchange Commission. You may obtain this information free of charge or make an investor inquiry by contacting us at 333 South Grand Ave., 28th Floor, Los Angeles, CA 90071 or by calling us collect at (213) 830‑6300 or on our website at oaktreespecialtylending.com. Except for the documents incorporated by reference into this prospectus supplement or the accompanying prospectus, information on our website is not incorporated into or a part of this prospectus supplement or the accompanying prospectus. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per Note | Total | |||||||
| Public offering price(1) |
98.837 | % | $ | 296,511,000 | ||||
| Underwriting discount (sales load) |
1.000 | % | $ | 3,000,000 | ||||
| Proceeds to us before expenses(2) |
97.837 | % | $ | 293,511,000 | ||||
| (1) | The public offering price set forth above does not include accrued interest, if any. Interest on the Notes will accrue from August 15, 2023 and must be paid by the purchaser if the Notes are delivered after August 15, 2023. |
| (2) | Before deducting estimated offering expenses of $0.8 million payable by us in connection with this offering. See “Underwriting”. |
THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Delivery of the Notes in book-entry form through The Depository Trust Company will be made on or about August 15, 2023.
Joint Book-Running Managers
| BofA Securities |
RBC Capital Markets | J.P. Morgan | SMBC Nikko |
Co-Managers
| ING | BNP PARIBAS | CIBC Capital Markets | Citigroup | |||
| Keefe, Bruyette & Woods A Stifel Company |
Barclays | Deutsche Bank Securities | Goldman Sachs & Co. LLC | |||
| Morgan Stanley & Co. LLC | Wells Fargo Securities | CIT Capital Securities | B. Riley Securities | |||
| Citizens Capital Markets | Hovde Group | Jefferies | Oppenheimer & Co., Inc. | |||
| R. Seelaus & Co., LLC | ||||||
Prospectus Supplement dated August 8, 2023
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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ABOUT THIS PROSPECTUS SUPPLEMENT
You should rely only on the information contained in this prospectus supplement, the accompanying prospectus, any free writing prospectus, and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus, or any other information to which we have referred you when considering whether to purchase any securities offered by this prospectus supplement. We have not, and the underwriters have not, authorized any other person to provide you with different or additional information from that contained in this prospectus supplement, the accompanying prospectus, or any free writing prospectus. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. The information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus is accurate as of their respective dates. Our financial condition, results of operations and prospects may have changed since that date. To the extent required by law, we will amend or supplement the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus to reflect any material changes to such information subsequent to the date of this prospectus supplement and the accompanying prospectus and prior to the completion of this offering.
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PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights some of the information contained elsewhere in or incorporated by reference into this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider. You should review the more detailed information contained elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus before making a decision to invest in our securities, and especially the information set forth under the heading “Risk Factors” in this prospectus supplement, the accompanying prospectus and any document incorporated by reference into this prospectus supplement or the accompanying prospectus, including our Annual Report on Form 10‑K for the fiscal year ended September 30, 2022 and our Quarterly Report on Form 10‑Q for the fiscal quarter ended June 30, 2023.
Unless otherwise noted, the terms:
| • | “we,” “us” and “our” refer to Oaktree Specialty Lending Corporation; |
| • | “Oaktree” and “our Adviser” refer to Oaktree Fund Advisors, LLC, our external investment adviser; |
| • | “Oaktree Administrator” refers to Oaktree Fund Administration, LLC, our administrator; |
| • | “Syndicated Credit Facility” refers to our senior secured revolving credit facility, as amended and/or restated from time to time, 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; |
| • | “OSI2 Citibank Facility” refers to our revolving credit facility, as amended and/or restated from time to time, with OSI 2 Senior Lending SPV, LLC, our wholly-owned and consolidated subsidiary, as the borrower, the Company, as collateral manager and seller, each of lenders from time to time party thereto Citibank, N.A., as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent; |
| • | “2025 Notes” refers to our 3.500% unsecured notes issued in February 2020 in an aggregate principal amount of $300.0 million that mature on February 25, 2025; and |
| • | “2027 Notes” refers to our 2.700% unsecured notes issued in May 2021 in an aggregate principal amount of $350.0 million that mature on January 15, 2027. |
Oaktree Specialty Lending Corporation
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 were formed in late 2007 and currently operate 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 of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or net realized capital gains that we distribute to our stockholders if we meet certain source‑of‑income, income distribution and asset diversification requirements.
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We are externally managed by Oaktree pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement, between us and Oaktree. Oaktree is an affiliate of Oaktree Capital Management, L.P., or OCM, our external investment adviser from October 17, 2017 through May 3, 2020. Oaktree Administrator, a subsidiary of OCM, provides certain administrative and other services necessary for us to operate.
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 our Adviser’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.
Our Adviser 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.
As of June 30, 2023, 207.7% of net assets at fair value, or $3.1 billion, was invested in 156 portfolio companies, including (i) $140.6 million in subordinated notes and limited liability company, or LLC, equity interests of Senior Loan Fund JV I, LLC, or SLF JV I, a joint venture through which the Company and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation, co‑invest in senior secured loans of middle-market companies and other corporate debt securities and (ii) $49.6 million in subordinated notes and LLC equity interests of OCSI Glick JV LLC, together with SLF JV I, the JVs, a joint venture through which the Company and GF Equity Funding 2014 LLC co‑invest primarily in senior secured loans of middle-market companies. As of June 30, 2023, 4.8% of net assets at fair value, or $72.7 million, was invested in cash and cash equivalents (including $13.0 million of restricted cash). As of June 30, 2023, 88.5% of the Company’s portfolio at fair value consisted of senior secured debt investments and 6.8% consisted of subordinated debt investments, including the debt investments in the JVs. The weighted average annual yield of our debt investments at fair value as of June 30, 2023, including our share of the return on our debt investments in the JVs, was approximately 12.3%. The weighted average annual yield of our debt investments is determined before the payment of, and therefore does not take into account, our expenses and the payment by an investor of any stockholder transaction expenses, and does not represent the return on investment for our stockholders.
We are permitted to, and expect to continue to, finance our investments through borrowings. However, as a Business Development Company, subject to certain limited exceptions, we are only allowed to borrow amounts in accordance with the current asset coverage requirements in the Investment Company Act. Our target debt to equity ratio is 0.90x to 1.25x (i.e., one dollar of equity for each $0.90 to $1.25 of debt outstanding) as we plan to continue to opportunistically deploy capital into the markets. As of June 30, 2023, our net debt to equity ratio was 1.14x (i.e., one dollar of equity for each $1.14 of debt outstanding). 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. The reduced asset coverage requirements permit us to double the maximum amount of leverage that we are permitted to incur by reducing the asset coverage requirements applicable to us from 200% to 150%. 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.
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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.
Our Adviser
We are externally managed and advised by Oaktree, a registered investment adviser under the Investment Advisers Act of 1940, as amended. Oaktree, subject to the overall supervision of our Board of Directors, manages our day‑to‑day operations, and provides investment advisory services to us pursuant to the Investment Advisory Agreement.
Our Adviser is an affiliate of OCM, a leading global investment management firm headquartered in Los Angeles, California, focused on less efficient markets and alternative investments. A number of the senior executives and investment professionals of our Adviser and its affiliates have been investing together for over 35 years and have generated impressive investment performance through multiple market cycles. Our Adviser and its affiliates emphasize an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high-yield debt and senior loans), control investing, real estate, convertible securities and listed equities.
In 2019, Brookfield Corporation (f/k/a Brookfield Asset Management Inc.), which we refer to as “Brookfield,” acquired a majority economic interest in Oaktree Capital Group, LLC, or OCG, which together with certain related transactions resulted in Brookfield owning a majority economic interest in the business of Oaktree and its affiliates. Oaktree and its affiliates operate as an independent business within Brookfield, with their own product offerings and investment, marketing and support teams. Brookfield is a leading global alternative asset manager with over a 100 year history and over $825 billion of assets under management (inclusive of Oaktree and its affiliates) across a broad portfolio of real estate, infrastructure, renewable power, credit and private equity assets. OCG’s founders, senior management and current and former employee-unitholders of OCG are able to sell their remaining OCG units to Brookfield over time pursuant to an agreed upon liquidity schedule and approach to valuing such units at the time of liquidation. Pursuant to this liquidity schedule, the earliest year in which Brookfield could own 100% of the OCG business is 2029.
The primary firm-wide goal of our Adviser and OCM is to achieve attractive returns while bearing less than commensurate risk. Our Adviser believes that it can achieve this goal by taking advantage of market inefficiencies in which financial markets and their participants fail to accurately value assets or fail to make available to companies the capital that they reasonably require.
Our Adviser and its affiliates believe that their defining characteristic is adherence to the highest professional standards, which has yielded several important benefits. First and foremost, this characteristic has allowed our Adviser and its affiliates to attract and retain an extremely talented group of investment professionals, or the Investment Professionals, as well as accounting, valuation, legal, compliance and other administrative professionals. As of June 30, 2023, our Adviser and its affiliates had more than 1,100 professionals in 20 cities and 15 countries, including a deep and broad credit platform drawing from more than 375 highly experienced Investment Professionals with significant origination, structuring and underwriting expertise. Specifically, the Strategic Credit group that is primarily responsible for implementing our investment strategy consists of 35 Investment Professionals (including eight members of the Sourcing & Origination team, which is a shared resource) led by Armen Panossian, our Chief Executive Officer and Chief Investment Officer, who focus on the investment strategy employed by our Adviser and certain of its affiliates. Second, it has permitted the investment team to build strong relationships with brokers, banks and other market participants. These institutional relationships have been instrumental in strengthening access to trading opportunities, to
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understanding the current market, and to executing the investment team’s investment strategies. OCM aims to attract, motivate and retain talented employees (both Investment Professionals and accounting, valuation, legal, compliance and other administrative professionals) by making them active participants in, and beneficiaries of, the platform’s success. In addition to competitive base salaries, all OCM employees share in the discretionary bonus pool. An employee’s participation in the bonus pool is based on the overall success of our Adviser and its affiliates and the individual employee’s performance and level of responsibility.
Our Adviser and its affiliates provide discretionary investment management services to other managed accounts and investment funds, which may have overlapping investment objectives and strategies with our own and, accordingly, may invest in asset classes similar to those targeted by us. The activities of such managed accounts and investment funds may raise actual or potential conflicts of interest.
Strategic Credit
Our Adviser’s affiliates officially launched the Strategic Credit strategy in early 2013 as a step‑out from the Distressed Debt strategy, to capture attractive investment opportunities that appear to offer too little return for distressed debt investors, but may pose too much uncertainty for high-yield bond creditors. The strategy seeks to achieve an attractive total return by investing in public and private revenue-generating, performing debt.
Strategic Credit focuses on U.S. and non‑U.S. investment opportunities that arise from pricing inefficiencies that occur in the primary and secondary markets or from the financing needs of healthy companies with limited access to traditional lenders or public markets. Typical investments will be in high yield bonds and senior secured loans for borrowers that are in need of direct loans, rescue financings, or other capital solutions or that have had challenged or unsuccessful primary offerings.
The Investment Professionals employ a fundamental, value-driven opportunistic approach to credit investing, which seeks to benefit from the resources, relationships and proprietary information of our Adviser’s global investment platform.
Our Administrator
We entered into an administration agreement, as amended from time to time, or the Administration Agreement, with Oaktree Administrator, a Delaware limited liability company and a wholly owned subsidiary of OCM. The principal executive offices of Oaktree Administrator are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071. Pursuant to the Administration Agreement, Oaktree Administrator provides services to us, and we reimburse Oaktree Administrator for costs and expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement and providing personnel and facilities thereunder.
Corporate Information
Our principal executive offices are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, and our telephone number is (213) 830‑6300. Our corporate website is located at www.oaktreespecialtylending.com. Except for the documents incorporated by reference into this prospectus supplement or the accompanying prospectus, information on our website is not incorporated into or a part of this prospectus supplement or the accompanying prospectus.
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SPECIFIC TERMS OF THE NOTES AND THE OFFERING
This section outlines certain legal and financial terms of the Notes. You should read this section together with the more detailed description of the Notes under the heading “Description of the Notes” in this prospectus supplement before investing in the Notes.
| Issuer | Oaktree Specialty Lending Corporation | |
| Title of the Securities | 7.100% Notes due 2029 | |
| Initial Aggregate Principal Amount Being Offered | $300,000,000 | |
| Initial Public Offering Price | 98.837% of the aggregate principal amount of Notes | |
| Interest Rate | 7.100% | |
| Yield to Maturity | 7.361% | |
| Trade Date | August 8, 2023 | |
| Issue Date | August 15, 2023 | |
| Maturity Date | February 15, 2029 | |
| Interest Payment Dates | Each February 15 and August 15, commencing February 15, 2024. If an interest payment date falls on a non‑business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment. | |
| Ranking of Notes | The Notes will be our direct, general unsecured obligations and will rank: | |
| • senior in right of payment to all of our future indebtedness or other obligations that are expressly subordinated, or junior, in right of payment to the Notes; | ||
| • pari passu, or equal, in right of payment with all of our existing and future unsecured indebtedness or other obligations that are not so subordinated, including our 2025 Notes and 2027 Notes, of which an aggregate of $650.0 million in aggregate principal amount was outstanding as of June 30, 2023; | ||
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| • effectively subordinated to any of our secured indebtedness or other obligations (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness, including borrowings under our Syndicated Credit Facility, of which $800.0 million was outstanding as of June 30, 2023; and | ||
| • structurally subordinated, or junior, to all future indebtedness and other obligations (including trade payables) incurred by our subsidiaries, financing vehicles or similar, including borrowings under the OSI2 Citibank Facility, of which $335.0 million was outstanding as of June 30, 2023. | ||
| As of June 30, 2023, we had approximately $1,785.0 million of principal debt outstanding of which $650.0 million was unsecured and unsubordinated indebtedness, $335.0 million was secured indebtedness of our consolidated subsidiaries and $800.0 million was secured indebtedness of Oaktree Specialty Lending Corporation. As of August 4, 2023, we had $1,758.0 million of principal debt outstanding of which $650.0 million was unsecured and unsubordinated indebtedness, $328.0 million was secured indebtedness of our consolidated subsidiaries and $780.0 million was secured indebtedness of Oaktree Specialty Lending Corporation. See “Capitalization” in this prospectus supplement. | ||
| Denominations | We will issue the Notes in denominations of $2,000 and integral multiples of $1,000 in excess thereof. | |
| Optional Redemption | Prior to January 15, 2029 (one month prior to the maturity date of the Notes), or the Par Call Date, we may redeem the Notes at our option, in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the Notes matured on the Par Call Date) on a semi-annual basis (assuming a 360‑day year consisting of twelve 30‑day months) at the Treasury Rate plus 50 basis points less (b) interest accrued to the date of redemption, and (2) 100% of the principal | |
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| amount of the Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to the redemption date. On or after the Par Call Date, we may redeem the Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest thereon to the redemption date. Any exercise of our option to redeem the Notes will be done in compliance with the Investment Company Act. | ||
| Sinking Fund | The Notes will not be subject to any sinking fund. A sinking fund is a reserve fund accumulated over a period of time for the retirement of debt. | |
| Offer to Purchase upon a Change of Control Repurchase Event |
If a Change of Control Repurchase Event (as described under “Description of the Notes”) occurs prior to maturity, unless we have exercised our right to redeem the Notes in full, holders will have the right, at their option, to require us to repurchase for cash some or all of the Notes at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. | |
| Full Defeasance | If there is a change in U.S. tax law or we obtain an U.S. Internal Revenue Service, or IRS, ruling described herein, the Notes will be subject to “defeasance” or “full defeasance” by us, which means that, if we put in place certain arrangements for you to be repaid and subject to the satisfaction of certain conditions, we can legally release ourselves from all payment and other obligations on the Notes. | |
| Covenant Defeasance | Under current U.S. tax law and the indenture (as defined under “Description of the Notes”), the Notes are subject to covenant defeasance by us, which means that, subject to the satisfaction of certain conditions, we will be released from some of the restrictive covenants in the indenture. | |
| Form of Notes | The Notes will be represented by global securities that will be deposited and registered in the name of The Depository Trust Company, or DTC, or its nominee. This means that, except in limited circumstances, you will not receive certificates for | |
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| the Notes. Beneficial interests in the Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the Notes through either DTC, if they are a participant, or indirectly through organizations that are participants in DTC. | ||
| Trustee, Paying Agent and Registrar | Deutsche Bank Trust Company Americas | |
| Events of Default | If an event of default (as described under “Description of the Notes”) on the Notes occurs, the principal amount of the Notes, plus accrued and unpaid interest, may be declared immediately due and payable, subject to conditions set forth in the indenture. These amounts automatically become due and payable in the case of certain types of bankruptcy or insolvency events involving us. | |
| Other Covenants | In addition to the covenants described in the accompanying prospectus, the following covenants apply to the Notes: | |
| • We agree that for the period of time during which the Notes are outstanding, we will not violate, whether or not we are subject thereto, 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 us by the Securities and Exchange Commission, or the SEC. | ||
| • If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable | ||
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| United States generally accepted accounting principles, or GAAP. | ||
| No Established Trading Market | The Notes are a new issue of securities with no established trading market. The Notes will not be listed on any securities exchange or quoted on any automated dealer quotation system. Although the underwriters have informed us that they currently intend to make a market in the Notes, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue any such market making activities at any time without notice. See “Underwriting”. Accordingly, we cannot assure you that a liquid market for the Notes will develop or be maintained. | |
| Governing Law | The Notes and the indenture will be governed by and construed in accordance with the laws of the State of New York. | |
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RISK FACTORS
Investing in the Notes involves substantial risks. You should carefully consider the following risks in addition to the risk factors incorporated by reference herein from our most recent Annual Report on Form 10‑K and the other information contained in this prospectus supplement and the risk factors and other information contained in or incorporated by reference into the accompanying prospectus or any free writing prospectus before acquiring any Notes. The occurrence of any of these risks could materially and adversely affect our business, prospects, financial condition, results of operations and cash flow and might cause you to lose all or part of your investment in the Notes. The risks described in these documents are not the only risks we face, and there may be additional risks that we do not presently know of or that we currently consider not likely to have a significant impact. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our business or our financial performance.
Risks Related to the Notes
The Notes will be unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.
The Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes will be effectively subordinated to any secured indebtedness we or our subsidiaries have outstanding as of the date of this prospectus supplement or that we or our subsidiaries may incur in the future (or any indebtedness that is initially unsecured in respect of which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of June 30, 2023, we had $800.0 million of outstanding borrowings under the Syndicated Credit Facility, all of which is secured and thus effectively senior to the Notes.
The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The Notes are obligations exclusively of Oaktree Specialty Lending Corporation and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. The assets of such subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the Notes. As of June 30, 2023, our subsidiaries had $335.0 million of outstanding borrowings under the OSI2 Citibank Facility, all of which is structurally senior to the Notes.
Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims are effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise.
In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.
The indenture governing the Notes will contain limited protection for holders of the Notes.
The indenture governing the Notes will offer limited protection to holders of the Notes. The terms of the indenture and the Notes will not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a
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party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on an investment in the Notes. In particular, the terms of the indenture and the Notes will not place any restrictions on our or our subsidiaries’ ability to:
| • | issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the Investment Company Act as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions, whether or not we continue to be subject to such provisions of the Investment Company Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC; |
| • | pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes; |
| • | sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); |
| • | enter into transactions with affiliates; |
| • | create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; |
| • | make investments; or |
| • | create restrictions on the payment of dividends or other amounts to us from our subsidiaries. |
Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity other than as described under “Description of the Notes—Events of Default”.
Our ability to recapitalize, incur additional debt and take a number of other actions are not limited by the terms of the Notes and may have important consequences for holders of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.
Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.
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Our amount of debt outstanding may increase as a result of this offering. Our current indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.
The use of debt could have significant consequences on our future operations, including:
| • | making it more difficult for us to meet our payment and other obligations under the Notes and our other outstanding debt; |
| • | resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our financing arrangements, which event of default could result in substantially all of our debt becoming immediately due and payable; |
| • | reducing the availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; |
| • | subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our financing arrangements; and |
| • | limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy. |
Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.
Our ability to meet our payment and other obligations under our financing arrangements depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us under our financing arrangements or otherwise, in an amount sufficient to enable us to meet our payment obligations under the Notes and our other debt and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, including the Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Notes and our other debt.
If an active trading market does not develop for the Notes, you may not be able to resell them.
The Notes are a new issue of debt securities and there currently is no trading market for the Notes. We do not intend to apply for listing of the Notes on any securities exchange or for quotation of the Notes on any automated dealer quotation system. If no active trading market develops, you may not be able to resell the Notes at their fair market value or at all. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. The underwriters have advised us that they currently intend to make a market in the Notes after the offering, but they are not obligated to do so. Such underwriters may discontinue any market-making in the Notes at any time at their sole discretion. In addition, any market-making activity will be subject to limits imposed by law. Accordingly, we cannot assure you that a liquid trading market will develop for the Notes, that you will be able to sell the Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
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If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any default under the agreements governing our indebtedness, including the Syndicated Credit Facility, the OSI2 Citibank Facility, the 2025 Notes and the 2027 Notes, or other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Syndicated Credit Facility and the OSI2 Citibank Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under the Syndicated Credit Facility and the OSI2 Citibank Facility or the required holders of the 2025 Notes or the 2027 Notes or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Syndicated Credit Facility, the OSI2 Citibank Facility, the 2025 Notes or the 2027 Notes or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Syndicated Credit Facility or the OSI2 Citibank Facility, could proceed against the collateral securing the debt. Because the Syndicated Credit Facility and the OSI2 Citibank Facility have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. In the event holders of any debt securities we have outstanding exercise their rights to accelerate following a cross-default, those holders would be entitled to receive the principal amount of their investment, subject to any subordination arrangements that may be in place. We cannot assure you that we will have sufficient liquidity to be able to repay such amounts, in which case we would be in default under the accelerated debt and holders would have the ability to sue us to recover amounts then owing.
A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, or change in the debt markets, could cause the liquidity or market value of the Notes to decline significantly.
Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of Notes of any changes in our credit ratings.
An increase in market interest rates could result in a decrease in the market value of the Notes.
The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the Notes. In general, as market interest rates rise, debt securities bearing interest at fixed rates of interest decline in value. Consequently, if you purchase Notes bearing interest at fixed rates and market interest rates increase, the market values of those Notes may decline. We cannot predict the future level of market interest rates.
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The optional redemption provision may materially adversely affect your return on the Notes.
The Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option. We may choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes. In this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the Notes being redeemed.
We may not be able to repurchase the Notes upon a Change of Control Repurchase Event.
We may not be able to repurchase the Notes upon a Change of Control Repurchase Event because we may not have sufficient funds. Upon a Change of Control Repurchase Event, holders of the Notes may require us to repurchase for cash some or all of the Notes at a repurchase price equal to 100% of the aggregate principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. Our failure to purchase such tendered Notes upon the occurrence of such Change of Control Repurchase Event would cause an event of default under the indenture governing the Notes and a cross-default under the agreements governing certain of our other indebtedness, which may result in the acceleration of such indebtedness requiring us to repay that indebtedness immediately.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus supplement and the accompanying prospectus constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained this prospectus supplement and the accompanying prospectus may include statements as to:
| • | our future operating results and distribution projections; |
| • | the ability of 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 prospectus supplement and the accompanying prospectus, 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 this prospectus supplement and the accompanying prospectus. 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 and RICs; |
| • | the ability to realize the anticipated benefits of the OSI2 Merger; and |
| • | other considerations that may be disclosed from time to time in our publicly disseminated documents and filings. |
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We have based the forward-looking statements included in this prospectus supplement and the accompanying prospectus on information available to us on the date of this prospectus supplement and the accompanying prospectus, as appropriate, and we assume no obligation to update any such forward-looking statements, except as required by law. 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. The forward-looking statements contained in this prospectus supplement and the accompanying prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and the forward looking statements contained in our periodic reports are excluded from the safe-harbor protection provided by Section 21E of the Exchange Act.
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USE OF PROCEEDS
The net proceeds from our sale of the $300.0 million aggregate principal amount of Notes in this offering at an offering price of 98.837% will be $292.7 million, after deducting the underwriting discount of $3.0 million payable by us and estimated offering expenses of approximately $0.8 million payable by us.
We intend to use the net proceeds from this offering to reduce our outstanding debt under the Syndicated Credit Facility and/or the OSI2 Citibank Facility and for general corporate purposes. As of June 30, 2023, we had (i) $800.0 million outstanding under the Syndicated Credit Facility, which bore interest at a weighted average interest rate of 6.584% for the nine months ended June 30, 2023; and (ii) $335.0 million outstanding under the OSI2 Citibank Facility, which bore interest at a weighted average interest rate of 7.275% for the period from January 23, 2023 to June 30, 2023.
We may reborrow under the Syndicated Credit Facility or the OSI2 Citibank Facility to make investments in accordance with our investment objective and strategies described in this prospectus supplement or the accompanying prospectus or general corporate purposes.
Affiliates of certain underwriters are lenders under the Syndicated Credit Facility and the OSI2 Citibank Facility. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent the proceeds are used to pay down a portion of our existing indebtedness under the Syndicated Credit Facility and/or the OSI2 Citibank Facility.
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2023:
| • | on an actual basis; and |
| • | on an as adjusted basis to reflect the sale of $300.0 million aggregate principal amount of Notes in this offering at an offering price of 98.837%, after deducting the underwriting discount of $3.0 million payable by us and estimated offering expenses of approximately $0.8 million payable by us, and the application of the net proceeds from the offering as described under “Use of Proceeds.” |
| As of June 30, 2023 (amounts in thousands) |
||||||||
| Actual | As Adjusted | |||||||
| Cash, cash equivalents and restricted cash |
$ | 72,660 | $ | 72,660 | ||||
| Long-term debt: |
||||||||
| Syndicated Credit Facility payable |
800,000 | 507,289 | ||||||
| OSI2 Citibank Facility payable |
335,000 | 335,000 | ||||||
| Unsecured notes (net of $3,909 unamortized financing costs) |
605,066 | 605,066 | ||||||
| Notes offered hereby |
— | 292,711 | ||||||
| |
|
|
|
|||||
| Total long-term debt |
1,740,066 | 1,740,066 | ||||||
| Net assets: |
||||||||
| Common stock, $0.01 par value (250,000 shares authorized; 77,080 shares issued and outstanding) | 771 | 771 | ||||||
| Additional paid‑in‑capital |
2,163,528 | 2,163,528 | ||||||
| Accumulated overdistributed earnings |
(654,858) | (654,858 | ) | |||||
| |
|
|
|
|||||
| Total net assets |
1,509,441 | 1,509,441 | ||||||
| |
|
|
|
|||||
| Total long-term debt and total net assets |
$ | 3,249,507 | $ | 3,249,507 | ||||
| |
|
|
|
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DESCRIPTION OF THE NOTES
The following description of the particular terms of the 7.100% Notes due 2029 supplements and, to the extent inconsistent therewith, replaces the description of the general terms and provisions of the debt securities set forth in the accompanying prospectus.
We will issue the Notes under a base indenture (the “base indenture”) between us and Deutsche Bank Trust Company Americas, as trustee (the “trustee”), dated as of April 30, 2012, as supplemented by the seventh supplemental indenture between us and the trustee, to be dated as of August 15, 2023 (the “supplemental indenture”). As used in this section, all references to the indenture mean the base indenture as supplemented by the supplemental indenture. The terms of the Notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended.
The following description is a summary of the material provisions of the Notes and the indenture and does not purport to be complete. This summary is subject to and is qualified by reference to all the provisions of the Notes and the indenture, including the definitions of certain terms used in the indenture. We urge you to read these documents because they, and not this description, define your rights as a holder of the Notes.
For purposes of this description, references to “we,” “our” and “us” refer only to the Oaktree Specialty Lending Corporation and not to any of its current or future subsidiaries and references to “subsidiaries” refer only to consolidated subsidiaries of and exclude any investments held by Oaktree Specialty Lending Corporation in the ordinary course of business which are not, under GAAP, consolidated on the financial statements of Oaktree Specialty Lending Corporation and its subsidiaries.
General
The Notes:
| • | will be our direct, general unsecured, unsubordinated obligations; |
| • | will initially be issued in an aggregate principal amount of $300.0 million; |
| • | will mature on February 15, 2029, unless earlier redeemed or repurchased, as discussed below; |
| • | will bear cash interest from August 15, 2023, at an annual rate of 7.100% payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024; |
| • | will be subject to redemption at our option as described in this prospectus supplement under “—Optional Redemption;” |
| • | will be subject to repurchase by us at the option of the holders following a Change of Control Repurchase Event (as defined in this prospectus supplement under “—Offer to Repurchase Upon a Change of Control Repurchase Event”), at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the date of repurchase; |
| • | will be issued in denominations of $2,000 and integral multiples of $1,000 thereof; and |
| • | will be represented by one or more registered Notes in global form, but in certain limited circumstances may be represented by Notes in definitive form. See “—Book-Entry, Settlement and Clearance” in this prospectus supplement. |
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Subject to compliance with covenants regarding the asset coverage requirement of the Investment Company Act, the indenture does not limit the amount of debt that may be issued by us or our subsidiaries under the indenture or otherwise. The indenture does not contain any financial covenants and does not restrict us from paying dividends or distributions or issuing or repurchasing our other securities. Other than restrictions described under “—Offer to Repurchase Upon a Change of Control Repurchase Event” and “—Covenants—Merger, Consolidation or Sale of Assets” below, the indenture does not contain any covenants or other provisions designed to afford holders of the Notes protection in the event of a highly leveraged transaction involving us or in the event of a decline in our credit rating as the result of a takeover, recapitalization, highly leveraged transaction or similar restructuring involving us that could adversely affect such holders.
We may, without the consent of the holders, issue additional Notes under the indenture with the same terms (except for the issue date, public offering price, and, if applicable, the initial interest payment date) as the Notes offered hereby in an unlimited aggregate principal amount; provided that, if such additional Notes are not fungible with the Notes offered hereby (or any other tranche of additional Notes) for U.S. federal income tax purposes, then such additional Notes will have different CUSIP numbers from the Notes offered hereby (and any such other tranche of additional Notes).
We do not intend to list the Notes on any securities exchange or any automated dealer quotation system.
Payments on the Notes; Paying Agent and Registrar; Transfer and Exchange
We will pay the principal of, and interest on, the Notes in global form registered in the name of or held by DTC or its nominee in immediately available funds to DTC or its nominee, as the case may be, as the registered holder of such Global Note (as defined below).
Payment of principal of (and premium, if any) and any such interest on the Notes will be made at the corporate trust office of the trustee as paying agent, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at our option payment of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the security register.
A holder of Notes may transfer or exchange Notes at the office of the security registrar in accordance with the indenture. The security registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents. No service charge will be imposed by us, the trustee or the security registrar for any registration of transfer or exchange of Notes, but we or the trustee may require a holder to pay a sum sufficient to cover any transfer tax or other similar governmental charge required by law or permitted by the indenture.
The registered holder of a Note will be treated as its owner for all purposes.
Interest
The Notes will bear cash interest at a rate of 7.100% per year until maturity. Interest on the Notes will accrue from August 15, 2023 or from the most recent date on which interest has been paid or duly provided for. Interest will be payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024.
Interest will be paid to the person in whose name a Note is registered at 5:00 p.m. New York City time (the “close of business”) on February 1 or August 1, as the case may be, immediately preceding the relevant interest payment date. Interest on the Notes will be computed on the basis of a 360‑day year composed of twelve 30‑day months.
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If any interest payment date, redemption date, the maturity date or any earlier required repurchase date upon a Change of Control Repurchase Event (defined below) of a Note falls on a day that is not a business day, the required payment will be made on the next succeeding business day and no interest on such payment will accrue in respect of the delay. The term “business day” means, with respect to any Note, any day other than a Saturday, a Sunday or a day on which banking institutions in New York or the city in which the corporate trust office of the trustee is located are authorized or obligated by law or executive order to close.
Ranking
The Notes will be our direct, general unsecured obligations that rank senior in right of payment to all of our future indebtedness or obligations that are expressly subordinated, or junior, in right of payment to the Notes. The Notes rank equally in right of payment with all of our existing and future unsecured liabilities that are not so subordinated. The Notes will rank effectively junior to any of our secured indebtedness or other obligations (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness. The Notes will rank structurally junior to all future indebtedness or other obligations (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure secured debt will be available to pay obligations on the Notes only after all indebtedness under such secured debt has been repaid in full from such assets. We advise you that there may not be sufficient assets remaining to pay amounts due on any or all the Notes then outstanding.
As of June 30, 2023, we had approximately $1,785.0 million of principal debt outstanding of which $650.0 million was unsecured and unsubordinated indebtedness, $335.0 million was secured indebtedness of our consolidated subsidiaries and $800.0 million was secured indebtedness of Oaktree Specialty Lending Corporation. After giving effect to the issuance of the Notes and the application of proceeds therefrom as described under “Use of Proceeds”, our total indebtedness would have been approximately $1,792.3 million outstanding as of June 30, 2023. See “Capitalization” in this prospectus supplement.
As of August 4, 2023, we had $1,758.0 million of principal debt outstanding of which $650.0 million was unsecured and unsubordinated indebtedness, $328.0 million was secured indebtedness of our consolidated subsidiaries and $780.0 million was secured indebtedness of Oaktree Specialty Lending Corporation.
Optional Redemption
Prior to the Par Call Date, we may redeem the Notes at our option, in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the Notes matured on the Par Call Date) on a semi-annual basis (assuming a 360‑day year consisting of twelve 30‑day months) at the Treasury Rate plus 50 basis points less (b) interest accrued to the date of redemption, and (2) 100% of the principal amount of the Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to the redemption date.
On or after the Par Call Date, we may redeem the Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest thereon to the redemption date.
“Treasury Rate” means, with respect to any redemption date, the yield determined by us in accordance with the following two paragraphs.
The Treasury Rate shall be determined by us after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System),
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on the third business day preceding the redemption date based upon the yield or yields for the most recent day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily)—H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities—Treasury constant maturities—Nominal” (or any successor caption or heading) (“H.15 TCM”). In determining the Treasury Rate, we shall select, as applicable: (1) the yield for the Treasury constant maturity on H.15 exactly equal to the period from the redemption date to the Par Call Date (the “Remaining Life”); or (2) if there is no such Treasury constant maturity on H. 15 exactly equal to the Remaining Life, the two yields—one yield corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H. 15 immediately longer than the Remaining Life—and shall interpolate to the Par Call Date on a straight-line basis (using the actual number of days) using such yields and rounding the result to three decimal places; or (3) if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury constant maturity on H. 15 closest to the Remaining Life. For purposes of this paragraph, the applicable Treasury constant maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant maturity from the redemption date.
If on the third business day preceding the redemption date H.15 TCM or any successor designation or publication is no longer published, we shall calculate the Treasury Rate based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second business day preceding such redemption date of the United States Treasury security maturing on, or with a maturity that is closest to, the Par Call Date, as applicable. If there is no United States Treasury security maturing on the Par Call Date but there are two or more United States Treasury securities with a maturity date equally distant from the Par Call Date, one with a maturity date preceding the Par Call Date and one with a maturity date following the Par Call Date, we shall select the United States Treasury security with a maturity date preceding the Par Call Date. If there are two or more United States Treasury securities maturing on the Par Call Date or two or more United States Treasury securities meeting the criteria of the preceding sentence, we shall select from among these two or more United States Treasury securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury security, and rounded to three decimal places.
Our actions and determinations in determining the redemption price shall be conclusive and binding for all purposes, absent manifest error.
Notice of any redemption will be mailed or electronically delivered (or otherwise transmitted in accordance with the depositary’s procedures) at least 10 days but not more than 60 days before the redemption date to each holder of Notes to be redeemed.
In the case of a partial redemption, selection of the Notes for redemption will be made pro rata, by lot or by such other method as the trustee in its sole discretion deems appropriate and fair. No Notes of a principal amount of $2,000 or less will be redeemed in part. If any note is to be redeemed in part only, the notice of redemption that relates to the Note will state the portion of the principal amount of the Note to be redeemed. A new Note in a principal amount equal to the unredeemed portion of the Note will be issued in the name of the holder of the Note upon surrender for cancellation of the original Note. For so long as the Notes are held by DTC (or another depositary), the redemption of the Notes shall be done in accordance with the policies and procedures of the depositary.
Unless we default in payment of the redemption price, on and after the redemption date interest will cease to accrue on the Notes or portions thereof called for redemption.
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Offer to Repurchase Upon a Change of Control Repurchase Event
If a Change of Control Repurchase Event occurs, unless we have exercised our right to redeem the Notes in full, we will make an offer to each holder of Notes to repurchase all or any part (in minimum denominations of $2,000 and integral multiples of $1,000 principal amount in excess thereof) of that holder’s Notes at a repurchase price in cash equal to 100% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to, but not including, the date of purchase. Within 30 days following any Change of Control Repurchase Event or, at our option, prior to any Change of Control, but after the public announcement of the Change of Control, we will mail a notice to each holder describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and offering to repurchase Notes on the payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice. We will comply with the requirements of Rule 14e‑1 promulgated under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Notes, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control Repurchase Event provisions of the Notes by virtue of such conflict.
On the Change of Control Repurchase Event payment date, subject to extension if necessary to comply with the provisions of the Investment Company Act and the rules and regulations promulgated thereunder, we will, to the extent lawful:
| (1) | accept for payment all Notes or portions of Notes properly tendered pursuant to our offer; |
| (2) | deposit with the paying agent an amount equal to the aggregate purchase price in respect of all Notes or portions of Notes properly tendered; and |
| (3) | deliver or cause to be delivered to the trustee the Notes properly accepted, together with an officers’ certificate stating the aggregate principal amount of Notes being purchased by us. |
The paying agent will promptly remit to each holder of Notes properly tendered the purchase price for the Notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new Note equal in principal amount to any unpurchased portion of any Notes surrendered; provided that each new Note will be in a minimum principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.
We will not be required to make an offer to repurchase the Notes upon a Change of Control Repurchase Event if a third party makes an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by us and such third party purchases all Notes properly tendered and not withdrawn under its offer.
The source of funds that will be required to repurchase Notes in the event of a Change of Control Repurchase Event will be our available cash or cash generated from our operations or other potential sources, including funds provided by a purchaser in the Change of Control transaction, borrowings, sales of assets or sales of equity. We cannot assure you that sufficient funds from such sources will be available at the time of any Change of Control Repurchase Event to make required repurchases of Notes tendered. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources” in our most recent Quarterly Report on Form 10‑Q for the quarter ended June 30, 2023 and incorporated by reference herein, as well as any amendments reflected in subsequent filings with the SEC. Before
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making any such repurchase of the Notes, we would also have to comply with certain requirements under the Syndicated Credit Facility to the extent any such requirements remain in effect at such time, or otherwise obtain consent from the lenders under the Syndicated Credit Facility. Our future financing arrangements may contain similar restrictions and provisions. If the holders of the Notes exercise their right to require us to repurchase Notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our future financing arrangements, even if the Change of Control Repurchase Event itself would not cause a default. It is possible that we will not have sufficient funds at the time of the Change of Control Repurchase Event to make the required repurchase of the Notes and/or our other debt. See “Risk Factors—Risks Related to the Notes—We may not be able to repurchase the Notes upon a Change of Control Repurchase Event” in this prospectus supplement for more information.
The definition of “Change of Control” includes a phrase relating to the direct or indirect sale, transfer, conveyance or other disposition of “all or substantially all” of our properties or assets and those of our subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise, established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase the Notes as a result of a sale, transfer, conveyance or other disposition of less than all of our assets and the assets of our subsidiaries taken as a whole to another person or group may be uncertain.
For purposes of the Notes:
“Below Investment Grade Rating Event” means the Notes are downgraded below Investment Grade by both Rating Agencies on any date from the date of the public notice of an arrangement that results in a Change of Control until the end of the 60‑day period following public notice of the occurrence of a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by either of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).
“Change of Control” means the occurrence of any of the following:
| (1) | the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation) in one or a series of related transactions, of all or substantially all of the assets of Oaktree Specialty Lending Corporation and its Controlled Subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act), other than to any Permitted Holders; provided that, for the avoidance of doubt, a pledge of assets pursuant to any secured debt instrument of Oaktree Specialty Lending Corporation or its Controlled Subsidiaries shall not be deemed to be any such sale, lease, transfer, conveyance or disposition; |
| (2) | the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than any Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d‑3 and 13d‑5 promulgated under the Exchange Act), directly or indirectly, of more than 50% of the outstanding Voting Stock of Oaktree Specialty Lending Corporation, measured by voting power rather than number of shares; or |
| (3) | the approval by Oaktree Specialty Lending Corporation’s stockholders of any plan or proposal relating to the liquidation or dissolution of Oaktree Specialty Lending Corporation. |
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“Change of Control Repurchase Event” means the occurrence of a Change of Control and a Below Investment Grade Rating Event.
“Controlled Subsidiary” means any subsidiary of Oaktree Specialty Lending Corporation, 50% or more of the outstanding equity interests of which are owned by Oaktree Specialty Lending Corporation and its direct or indirect subsidiaries and of which Oaktree Specialty Lending Corporation possesses, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting equity interests, by agreement or otherwise.
“Fitch” means Fitch Ratings, Inc., also known as Fitch Ratings, or any successor thereto.
“Investment Grade” means a rating of BBB‑ or better by Fitch (or its equivalent under any successor rating categories of Fitch) and Baa3 or better by Moody’s (or its equivalent under any successor rating categories of Moody’s) (or, in each case, if such Rating Agency ceases to rate the Notes for reasons outside of our control, the equivalent investment grade credit rating from any Rating Agency selected by us as a replacement Rating Agency).
“Moody’s” means Moody’s Investor Services, Inc. or any successor thereto.
“Permitted Holders” means (i) us, (ii) one or more of our Controlled Subsidiaries and (iii) the Adviser, Brookfield Asset Management Inc., any affiliate of the Adviser or Brookfield Asset Management Inc. or any entity that is managed or advised by the Adviser or Brookfield Asset Management Inc. or any of their affiliates.
“Rating Agency” means:
| (1) | each of Fitch and Moody’s; and |
| (2) | if either of Fitch or Moody’s ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of our control, a “nationally recognized statistical rating organization” as defined in Section 3(a)(62) of the Exchange Act selected by us as a replacement agency for Fitch or Moody’s, or both, as the case may be. |
“Voting Stock” as applied to stock of any person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
Covenants
In addition to the covenants described in the base indenture, the following covenants shall apply to the Notes. To the extent of any conflict or inconsistency between the base indenture and the following covenants, the following covenants shall govern:
Merger, Consolidation or Sale of Assets
The indenture will provide that we will not merge or consolidate with or into any other person (other than a merger of a wholly owned subsidiary into us), or sell, transfer, lease, convey or otherwise dispose of all or substantially all our property (provided that, for the avoidance of doubt, a pledge of assets pursuant to any secured debt instrument of Oaktree Specialty Lending Corporation or its Controlled Subsidiaries shall not be deemed to be any such sale, transfer, lease, conveyance or disposition) in any one transaction or series of related transactions unless:
| • | we are the surviving person, or the Surviving Person, or the Surviving Person (if other than us) formed by such merger or consolidation or to which such sale, transfer, lease, conveyance or |
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| disposition is made shall be a corporation or limited liability company organized and existing under the laws of the United States of America or any state or territory thereof; |
| • | the Surviving Person (if other than us) expressly assumes, by supplemental indenture, executed and delivered to the trustee by such Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Notes outstanding, and the due and punctual performance and observance of all the covenants and conditions of the indenture to be performed by us; |
| • | immediately after giving effect to such transaction or series of related transactions, no default or event of default shall have occurred and be continuing; and |
| • | we shall deliver, or cause to be delivered, to the trustee, an officers’ certificate and an opinion of counsel, each stating that such transaction and the supplemental indenture, if any, in respect thereto, comply with this covenant and that all conditions precedent in the indenture relating to such transaction have been complied with. |
For the purposes of this covenant, the sale, transfer, lease, conveyance or other disposition of all the property of one or more of our subsidiaries, which property, if held by us instead of such subsidiaries, would constitute all or substantially all of our property on a consolidated basis, shall be deemed to be the transfer of all or substantially all of our property.
Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the properties or assets of a person. As a result, it may be unclear as to whether the merger, consolidation or sale of assets covenant would apply to a particular transaction as described above absent a decision by a court of competent jurisdiction. Although these types of transactions may be permitted under the indenture, certain of the foregoing transactions could constitute a Change of Control that results in a Change of Control Repurchase Event permitting each holder to require us to repurchase the Notes of such holder as described above.
An assumption by any person of obligations under the Notes and the indenture might be deemed for U.S. federal income tax purposes to be an exchange of the Notes for new Notes by the holders thereof, resulting in recognition of gain or loss for such purposes and possibly other adverse tax consequences to the holders. Holders are urged to consult their own tax advisors regarding the tax consequences of such an assumption.
Other Covenants
| • | We agree that for the period of time during which the Notes are outstanding, we will not violate, whether or not we are subject to, Section 18(a)(1)(A) of the Investment Company Act as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions, as such obligations may be amended or superseded, giving effect to any exemptive relief granted to us by the SEC. |
| • | If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with GAAP, as applicable. |
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The trustee shall not be obligated to monitor or confirm, on a continuing basis or otherwise, our or any other person’s compliance with the covenants described above or with respect to any reports or other documents delivered to it pursuant to the indenture.
Events of Default
Each of the following is an event of default:
| (1) | default in the payment of any interest upon any Note when due and payable and the default continues for a period of 30 days; |
| (2) | default in the payment of the principal of (or premium, if any, on) any Note when it becomes due and payable at its maturity including upon any redemption date or required repurchase date; |
| (3) | default by us in the performance, or breach, of any covenant or agreement in the indenture or the Notes (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in the indenture specifically dealt with or which has expressly been included in the indenture solely for the benefit of a series of securities other than the Notes), and continuance of such default or breach for a period of 60 consecutive days after there has been given, by registered or certified mail, to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the Notes, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” under the indenture; |
| (4) | default by us or any of our significant subsidiaries, as defined in Article 1, Rule 1‑02 of Regulation S‑X promulgated under the Exchange Act (but excluding any subsidiary which is (a) a non‑recourse or limited recourse subsidiary, (b) a bankruptcy remote special purpose vehicle or (c) is not consolidated with Oaktree Specialty Lending Corporation for purposes of GAAP), with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $100 million in the aggregate of us and/or any such subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, unless, in either case, such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within a period of 30 calendar days after written notice of such failure is given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding; |
| (5) | pursuant to Section 18(a)(1)(C)(ii) and Section 61 of the Investment Company Act, or any successor provisions, on the last business day of each of 24 consecutive calendar months, any class of securities shall have an asset coverage (as such term is used in the Investment Company Act and the rules and regulations promulgated thereunder) of less than 100% giving effect to any amendments to such provisions of the Investment Company Act or any exemptive relief granted to us by the SEC; or |
| (6) | certain events of bankruptcy, insolvency, or reorganization involving us occur and remain undischarged or unstayed for a period of 90 days. |
If an event of default occurs and is continuing, then and in every such case (other than an event of default specified in item (6) above) the trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare the entire principal amount of Notes to be due and immediately payable, by a notice in writing to us (and to the trustee if given by the holders), and upon any such declaration such principal or specified portion thereof shall become immediately due and payable. Notwithstanding the foregoing, in the case of the events of bankruptcy, insolvency or reorganization described in item (6) above, 100% of the principal of and accrued and unpaid interest on the Notes will automatically become due and payable.
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At any time after a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the trustee, the holders of a majority in principal amount of the outstanding Notes, by written notice to us and the trustee, may rescind and annul such declaration and its consequences if (i) we have paid or deposited with the trustee a sum sufficient to pay all overdue installments of interest, if any, on all outstanding Notes, the principal of (and premium, if any, on) all outstanding Notes that have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Notes, to the extent that payment of such interest is lawful interest upon overdue installments of interest at the rate or rates borne by or provided for in such Notes, and all sums paid or advanced by the trustee and the reasonable compensation, expenses, disbursements and advances of the trustee, its agents and counsel, and (ii) all events of default with respect to the Notes, other than the nonpayment of the principal of (or premium, if any, on) or interest on such Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon.
No holder of Notes will have any right to institute any proceeding, judicial or otherwise, with respect to the indenture, or for the appointment of a receiver or trustee, or for any other remedy under the indenture, unless:
| (i) | such holder has previously given written notice to the trustee of a continuing event of default with respect to the Notes; |
| (ii) | the holders of not less than 25% in principal amount of the outstanding Notes shall have made written request to the trustee to institute proceedings in respect of such event of default; |
| (iii) | such holder or holders have offered to the trustee reasonable indemnity, security, or both, against the costs, expenses and liabilities to be incurred in compliance with such request; |
| (iv) | the trustee for 60 days after its receipt of such notice, request and offer of indemnity, security or both has failed to institute any such proceeding; and |
| (v) | no direction inconsistent with such written request has been given to the trustee during such 60‑day period by the holders of a majority in principal amount of the outstanding Notes. |
Notwithstanding any other provision in the indenture, the holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any, on) and interest, if any, on such Note on the stated maturity or maturity expressed in such Note (or, in the case of redemption, on the redemption date or, in the case of repayment at the option of the holders, on the repayment date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such holder.
The trustee shall be under no obligation to exercise any of the rights or powers vested in it by the indenture at the request or direction of any of the holders of the Notes unless such holders shall have offered to the trustee security and/or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. Subject to the foregoing, the holders of a majority in principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to the Notes, provided that (i) such direction shall not be in conflict with any rule of law or with the indenture, (ii) the trustee may take any other action deemed proper by the trustee that is not inconsistent with such direction and (iii) the trustee need not take any action that it determines in good faith may involve it in personal liability or be unjustly prejudicial to the holders of Notes not consenting.
The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of all of the Notes waive any past default under the indenture with respect to the Notes and its consequences, except a default (i) in the payment of (or premium, if any, on) or interest, if any, on any Note, or (ii) in respect of a covenant or provision of the indenture which cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist,
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and any event of default arising therefrom shall be deemed to have been cured, for every purpose, but no such waiver shall extend to any subsequent or other default or event of default or impair any right consequent thereto.
We are required to deliver to the trustee, within 120 days after the end of each fiscal year, an officers’ certificate stating that to the knowledge of the signers whether we are in default in the performance of any of the terms, provisions or conditions of the indenture.
Within 90 days after the occurrence of any default under the indenture with respect to the Notes, the trustee shall transmit notice of such default known to the trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any, on) or interest, if any, on any Note, the trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors of the trustee in good faith determines that withholding of such notice is in the interest of the holders of the Notes.
Satisfaction and Discharge
We may satisfy and discharge our obligations under the indenture by delivering to the security registrar for cancellation all outstanding Notes or by depositing with the trustee or delivering to the holders, as applicable, after the Notes have become due and payable, or otherwise, moneys sufficient to pay all of the outstanding Notes and paying all other sums payable under the indenture by us. Such discharge is subject to terms contained in the indenture.
Defeasance
In addition, the Notes are subject to defeasance and covenant defeasance, in each case, in accordance with the terms of the indenture. “Covenant defeasance” refers to our ability, under current U.S. federal tax law and the indenture, to be released from some of the restrictive covenants in the indenture if certain conditions are satisfied. See “Description of Debt Securities—Defeasance—Covenant Defeasance” in the accompanying prospectus for more information. “Defeasance” or “full defeasance” refers to our ability, if there is a change in U.S. federal tax law or if we obtain an IRS ruling, to legally release ourselves from all payment and other obligations on the Notes if we put in place certain arrangements for you to be repaid. See “Description of Debt Securities—Defeasance—Full Defeasance” in the accompanying prospectus for more information.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, incorporator or stockholder of ours, as such, will have any liability for any obligations of ours under the indenture or the Notes or for any claim based on, in respect of, or by reason of, such obligations or their creation. By accepting any Note, each holder of the Notes will be deemed to waive and release all such liability, and such waiver and release are part of the consideration for the issuance of the Notes.
Trustee
Deutsche Bank Trust Company Americas is the trustee, security registrar and paying agent. Deutsche Bank Trust Company Americas, in each of its capacities, including without limitation as trustee, security registrar and paying agent, assumes no responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained in this prospectus supplement and accompanying prospectus or the related documents or for any failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information, or for any information provided to it by us, including but not limited to settlement amounts and any other information.
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Governing Law
The indenture provides that it and the Notes shall be governed by and construed in accordance with the laws of the State of New York.
Book-Entry, Settlement and Clearance
Global Notes
The Notes will be initially issued in the form of one or more registered Notes in global form, without interest coupons, or the Global Notes. Upon issuance, each of the Global Notes will be deposited with the trustee as custodian for DTC and registered in the name of Cede & Co., as nominee of DTC.
Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC, or the DTC participants, or persons who hold interests through DTC participants. We expect that under procedures established by DTC:
| • | upon deposit of a Global Note with DTC’s custodian, DTC will credit portions of the principal amount of the Global Note to the accounts of the DTC participants designated by the underwriters; and |
| • | ownership of beneficial interests in a Global Note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the Global Note). |
Beneficial interests in Global Notes may not be exchanged for Notes in physical, certificated form except in the limited circumstances described below.
Book-Entry Procedures for Global Notes
All interests in the Global Notes will be subject to the operations and procedures of DTC. We provide the following summary of those operations and procedures solely for the convenience of investors. The operations and procedures of DTC are controlled by that settlement system and may be changed at any time. Neither we nor the underwriters are responsible for those operations or procedures.
DTC has advised us that it is:
| • | a limited purpose trust company organized under the laws of the State of New York; |
| • | a “banking organization” within the meaning of the New York State Banking Law; |
| • | a member of the Federal Reserve System; |
| • | a “clearing corporation” within the meaning of the Uniform Commercial Code; and |
| • | a “clearing agency” registered under Section 17A of the Exchange Act. |
DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTC’s participants include securities brokers and dealers, including the underwriters; banks and trust companies; clearing corporations and other organizations. Indirect access to DTC’s system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.
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So long as DTC’s nominee is the registered owner of a Global Note, that nominee will be considered the sole owner or holder of the Notes represented by that Global Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note:
| • | will not be entitled to have Notes represented by the Global Note registered in their names; |
| • | will not receive or be entitled to receive physical, certificated Notes; and |
| • | will not be considered the owners or holders of the Notes under the indenture for any purpose, including with respect to receiving notices or the giving of any direction, instruction or approval to the trustee under the indenture. |
As a result, each investor who owns a beneficial interest in a Global Note must rely on the procedures of DTC to exercise any rights of a holder of Notes under the indenture (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).
Payments of principal and interest with respect to the Notes represented by a Global Note will be made by the trustee to DTC’s nominee as the registered holder of the Global Note. Neither we nor the trustee will have any responsibility or liability for the payment of amounts to owners of beneficial interests in a Global Note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.
Payments by participants and indirect participants in DTC to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC.
Transfers between participants in DTC will be effected under DTC’s procedures and will be settled in same‑day funds.
Cross-market transfers of beneficial interests in Global Notes between DTC participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected within DTC through the DTC participants that are acting as depositaries for Euroclear and Clearstream. To deliver or receive an interest in a Global Note held in a Euroclear or Clearstream account, an investor must send transfer instructions to Euroclear or Clearstream, as the case may be, under the rules and procedures of that system and within the established deadlines of that system. If the transaction meets its settlement requirements, Euroclear or Clearstream, as the case may be, will send instructions to its DTC depositary to take action to effect final settlement by delivering or receiving interests in the relevant Global Notes in DTC, and making or receiving payment under normal procedures for same‑day funds settlement applicable to DTC. Euroclear and Clearstream participants may not deliver instructions directly to the DTC depositaries that are acting for Euroclear or Clearstream.
Because the settlement of cross-market transfers takes place during New York business hours, DTC participants may employ their usual procedures for sending securities to the applicable DTC participants acting as depositaries for Euroclear and Clearstream. The sale proceeds will be available to the DTC participant seller on the settlement date. Thus, to a DTC participant, a cross-market transaction will settle no differently from a trade between two DTC participants. Because of time zone differences, the securities account of a Euroclear or Clearstream participant that purchases an interest in a Global Note from a DTC participant will be credited on the business day for Euroclear or Clearstream immediately following the DTC settlement date. Cash received in Euroclear or Clearstream from the sale of an interest in a Global Note to a DTC participant will be reflected in the account of the Euroclear of Clearstream participant the following business day, and receipt of the cash proceeds in the Euroclear or Clearstream participant’s account will be back-valued to the date on which settlement occurs in New York. DTC, Euroclear and Clearstream have agreed to the above procedures to facilitate transfers of interests in the Global Notes among participants in those settlement systems. However, the settlement systems are not obligated to perform these procedures and may discontinue or change these
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procedures at any time. Neither we nor the trustee will have any responsibility or liability for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to, or payments made on account of, beneficial ownership interests in Global Notes.
Certificated Notes
Notes in physical, certificated form will be issued and delivered to each person that DTC identifies as a beneficial owner of the related Notes only if:
| • | DTC notifies us at any time that it is unwilling or unable to continue as depositary for the Global Notes and a successor depositary is not appointed within 90 days; |
| • | DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days; or |
| • | an event of default with respect to the Notes has occurred and is continuing and such beneficial owner requests that its Notes be issued in physical, certificated form. |
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of certain material U.S. federal income tax considerations under the Code related to the acquisition, ownership, and disposition of the Notes.
This discussion does not purport to be a complete description of all of the tax considerations relating thereto. In particular, we have not described certain considerations that may be relevant to certain types of investors subject to special treatment under U.S. federal income tax laws, including investors subject to the alternative minimum tax, tax‑exempt organizations or governmental organizations, insurance companies, investors that are treated as partnerships for U.S. federal income tax purposes, S corporations, brokers or dealers in securities, traders in securities that elect to use a mark‑to‑market method of accounting for securities holdings, pension plans and trusts, banks or financial institutions, a person that holds the notes as part of a straddle or a hedging or conversion transaction, real estate investment trusts, regulated investment companies, U.S. persons with a functional currency that is not the U.S. dollar, non‑U.S. Holders (as defined below) engaged in a trade or business in the United States or who are present in the United States for 183 days or more in the taxable year, persons who have ceased to be U.S. citizens or to be taxed as residents of the United States, controlled foreign corporations, or CFCs, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax. This discussion does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. This discussion is limited to investors that hold the Notes as capital assets (within the meaning of the Code), and does not address owners of an investor. This discussion is limited to persons purchasing the Notes for cash in this offering and at their initial offering price. This discussion also does not address the U.S. federal income tax consequences to beneficial owners of the Notes that are subject to the special tax accounting rules under Section 451(b) of the Code. This discussion is based upon the Code, its legislative history, existing and proposed U.S. Treasury regulations, published rulings and court decisions, each as of the date of this prospectus supplement and all of which are subject to change or differing interpretations, possibly retroactively, which could affect the continuing validity of this discussion. We have not sought, and will not seek any ruling from the IRS regarding the offering pursuant to this prospectus supplement and the accompanying prospectus unless expressly stated therein, and this discussion is not binding on the IRS. Accordingly, there can be no assurance that the IRS would not assert, and that a court would not sustain, a position contrary to any of the tax consequences discussed herein.
If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds the Notes, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partner and the partnership and certain determinations made at the partner level. Prospective beneficial owners of the Notes that are partnerships or partners in such partnerships are urged to consult their tax advisors with respect to the purchase, ownership and disposition of the Notes.
Tax matters are very complicated and the tax consequences to an investor of an investment in the Notes will depend on the facts of such investor’s particular situation. Investors are strongly encouraged to consult their tax advisors regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of the notes, as well as the effect of state, local and foreign tax laws and the effect of any possible changes in tax laws.
Tax Consequences to U.S. Holders of the Notes
The following is a summary of certain material U.S. federal income tax consequences that will apply to a “U.S. Holder” of the Notes. As used herein, the term “U.S. Holder” means a beneficial owner of a Note that is for U.S. federal income tax purposes:
| • | an individual who is (or is treated as) a citizen or resident of the United States; |
| • | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; |
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| • | a trust if a court is able to exercise primary supervision over its administration and one or more U.S. persons (as defined in the Code) have the authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes; or |
| • | an estate, the income of which is subject to U.S. federal income taxation regardless of its source. |
If you are not a U.S. Holder, this section does not apply to you. If you are a Non‑U.S. Holder, as defined below, please see “—Tax Consequences to Non‑U.S. Holders of Notes” below.
Payments of Stated Interest. The following discussion assumes that the Notes will be issued with no original issue discount or a de minimis amount of original issue discount for U.S. federal income tax purposes. Stated interest paid on a Note will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is received in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.
Sale, Exchange, Redemption, Retirement or Other Taxable Disposition of the Notes. Upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the amount realized on the disposition and the U.S. Holder’s tax basis in the Note (other than amounts attributable to accrued but unpaid stated interest, which will be taxed as interest income to the extent not previously so taxed, offset by any acquisition premium). A U.S. Holder’s tax basis in a Note generally will be equal to the cost of the Note to such U.S. Holder less any principal payments received by such U.S. Holder.
Gain or loss recognized on the sale, exchange, redemption, retirement or other taxable disposition of a Note generally will be capital gain or loss and will be long-term capital gain or loss if at the time of the disposition the note has been held for more than one year. Under current law, long-term capital gains recognized by non‑corporate U.S. Holders generally are subject to reduced tax rates. The deductibility of capital losses is subject to limitations.
A U.S. Holder that sells a note between interest payment dates will be required to treat as ordinary interest income an amount equal to interest that has accrued through the date of sale that has not been previously included in income.
Net Investment Income Tax. An additional 3.8% surtax generally is applicable in respect of the net investment income of non‑corporate U.S. Holders (other than certain trusts) on the lesser of (i) the U.S. Holder’s “net investment income” for a taxable year and (ii) the excess of the U.S. Holder’s modified adjusted gross income for the taxable year over $200,000 ($250,000 in the case of joint filers). “Net investment income” as defined for this purpose generally includes interest payments and gain recognized from the sale or other taxable disposition of the Notes.
Backup Withholding and Information Reporting. We may be required to withhold, for U.S. federal income taxes, a portion of all taxable distributions payable to U.S. Holders (i) who fail to provide us with their correct taxpayer identification numbers, or TINs, or who otherwise fail to make required certifications or (ii) with respect to whom the IRS notifies us that this U.S. Holder is subject to backup withholding. Certain U.S. Holders specified in the Code and the Treasury regulations promulgated thereunder are exempt from backup withholding but may be required to provide documentation to establish their exempt status. Backup withholding is not an additional tax. Any amounts withheld will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability if the appropriate information is timely provided to the IRS. Failure by a U.S. Holder to furnish a certified TIN to us could subject the U.S. Holder to a penalty imposed by the IRS.
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Tax Consequences to Non‑U.S. Holders of the Notes
The following is a summary of certain material U.S. federal income tax consequences that will apply to you if you are a “Non‑U.S. Holder” of the Notes. As used herein, the term “Non‑U.S. Holder” means a beneficial owner of a Note that is not a U.S. Holder or a partnership (or an entity or arrangement treated as a partnership) for U.S. federal income tax purposes.
If you are not a Non‑U.S. Holder, this section does not apply to you.
Payments on the Notes. The following discussion assumes that the Notes will be issued with no original issue discount or a de minimis amount of original issue discount for U.S. federal income tax purposes. Subject to the discussion below concerning backup withholding and withholding and information reporting on foreign financial accounts, payments of principal and interest on the Notes to any Non‑U.S. Holder will generally not be subject to U.S. federal withholding tax, provided that:
| • | the Non‑U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock that are entitled to vote; |
| • | the Non‑U.S. Holder is not a CFC related, directly or indirectly, to us through stock ownership; |
| • | the Non‑U.S. holder is not a bank that received such Note on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; and |
| • | the U.S. payor of the interest (including us, or any intermediary who pays the interest on our behalf) does not have actual knowledge or reason to know that a holder (or such holder’s beneficial owner) is a United States person and such holder certifies to the U.S. payor under penalties of perjury on a properly executed IRS Form W‑8BEN or W‑8BEN‑E that such holder is not (or, in the case of a Non‑U.S. Holder that is an estate or trust, such forms certifying that the beneficiary of the estate or trust is not) a “U.S. person” (as defined in the Code). |
The requirements set forth in the bulleted clauses above are known as the “Portfolio Interest Exception.”
If a Non‑U.S. Holder cannot satisfy the requirements of the Portfolio Interest Exception, payments of interest made to such Non‑U.S. Holder will be subject to U.S. federal withholding tax at a 30% rate unless the beneficial owner of the note provides us or our agent, as the case may be, with a properly executed:
| • | IRS Form W‑8BEN or W‑8BEN‑E (or applicable successor form), depending on the Non‑U.S. Holder’s status claiming, under penalties of perjury, an exemption from, or reduction in, the U.S. federal withholding tax rate under a tax treaty (a “Treaty Rate”), or |
| • | IRS Form W‑8ECI (or applicable successor form) stating that interest paid on the note is not subject to the U.S. federal withholding tax because it is effectively connected with a U.S. trade or business of the beneficial owner (in which case such interest will be subject to U.S. federal income tax rates on a net income basis as described below). |
The certification requirement described above also may require a Non‑U.S. Holder that provides an IRS form or that claims a Treaty Rate to provide its U.S. taxpayer identification number.
Each Non‑U.S. Holder is urged to consult its tax advisor about the specific methods for satisfying these requirements. A claim for exemption will not serve to avoid withholding if an applicable withholding agent has actual knowledge or reason to know that statements on the form are false.
If interest on the notes is “effectively connected”, as that term is defined in the Code and the Treasury Regulations, with a U.S. trade or business of the Non‑U.S. Holder (and if required by an applicable treaty, attributable to a U.S. permanent establishment or fixed base of the Non‑U.S. Holder), the Non‑U.S. Holder, although exempt from the U.S. federal withholding tax described above (provided that the certification
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requirements described above are satisfied), will be subject to U.S. federal income tax on such interest on a net income basis in the same manner as if it were a U.S. Holder. In addition, if such Non‑U.S. Holder is a foreign corporation and interest on the note is effectively connected with its U.S. trade or business (and if required by applicable treaty, attributable to a U.S. permanent establishment of the Non‑U.S. Holder), such Holder may be subject to an additional branch profits tax at a rate of 30% (unless reduced by treaty) in respect of such interest. A Non‑U.S. Holder that is engaged in the conduct of a trade or business in the United States is urged to consult its tax advisors regarding the U.S. tax consequences of the ownership and disposition of the notes.
Sale, Exchange, Redemption, Retirement or Other Disposition of the Notes. Subject to the discussion below on backup withholding and withholding and information reporting on foreign financial accounts, a Non‑U.S. Holder generally will not be subject to U.S. federal income tax on gain recognized on a sale, exchange, redemption, retirement, or other disposition of Notes (except with respect to accrued and unpaid interest, which would be taxed as described above under “—Payments on the Notes”) so long as, (a) in the case of a non‑U.S. holder who is an individual, such Non‑U.S. Holder is not present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are not met or (b) the gain is effectively connected with the conduct of a United States trade or business of the Holder (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment or fixed base maintained in the United States by the Holder). If the exception under (a) applies, the Non‑U.S. Holder will be subject to tax equal to 30% on the gain realized except as provided under an applicable treaty. If the exception under (b) applies, the Non‑U.S. Holder will be subject to U.S. federal income tax as described under “—Tax Consequences to U.S. Holders of the Notes — Sale, Exchange, Redemption, Retirement or Other Taxable Disposition of the Notes” unless an applicable treaty provides otherwise, and if such holder is a corporation, it may be subject to an additional 30% branch profits tax (unless reduced by treaty).
Backup Withholding and Information Reporting. Information returns will be filed with the IRS in connection with payments on the Notes. Unless the Non‑U.S. Holder complies with certification procedures to establish that it is not a United States person, information returns may be filed with the IRS in connection with the proceeds from a sale or other disposition of the Notes and the Non‑U.S. Holder may be subject to backup withholding on payments on the Notes or on the proceeds from a sale or other disposition of the Notes. We may be required to withhold, for U.S. federal income taxes, a portion of all taxable distributions payable to stockholders (a) who fail to provide us with their correct TINs or who otherwise fail to make required certifications or (b) with respect to whom the IRS notifies us that this stockholder is subject to backup withholding. Certain stockholders specified in the Code and the U.S. Treasury regulations promulgated thereunder are exempt from backup withholding, but may be required to provide documentation to establish their exempt status. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a Non‑U.S. Holder will be allowed as a credit against the Non‑U.S. Holder’s U.S. federal income tax liability and may entitle the Non‑U.S. Holder to a refund, provided that the required information is timely furnished to the IRS. Failure by a stockholder to furnish a certified TIN to us could subject the stockholder to a penalty imposed by the IRS.
Withholding and Information Reporting on Foreign Financial Accounts. Sections 1471 through 1474 of the Code and the Treasury regulations and other published guidance promulgated thereunder, which are commonly referred to as FATCA, generally impose withholding taxes on certain types of payments, including interest, made to “foreign financial institutions” and certain other non‑U.S. entities unless additional certification, information reporting and other specified requirements are satisfied. Failure to comply with the FATCA reporting requirements could result in withholding tax being imposed on payments of interest and sales proceeds to foreign intermediaries and certain Non‑U.S. Holders. If the payee is a foreign financial institution and is subject to the certification and information reporting requirements above, it must enter into an agreement with the U.S. Department of Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts and withhold 30% on payments to non‑compliant foreign financial institutions and certain other account holders. An intergovernmental agreement between the United
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States and an applicable foreign country, or future Treasury regulations or other guidance, may modify these requirements. Accordingly, the entity through which the Notes are held will affect the determination of whether such withholding is required.
If payment of this withholding tax is made, Non‑U.S. Holders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such interest or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction, if any. We will not pay additional amounts to Non‑U.S. Holders in respect of any amounts withheld. Prospective Non‑U.S. Holders are urged to consult their tax advisors regarding the potential application of withholding under FATCA to their investment in the Notes.
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UNDERWRITING
BofA Securities, Inc., RBC Capital Markets, LLC, J.P. Morgan Securities LLC and SMBC Nikko Securities America, Inc. are acting as the representatives, or Representatives, of each of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us, the Adviser, the Administrator and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the aggregate principal amount of Notes set forth opposite its name below.
| Underwriter |
Principal Amount |
|||
| BofA Securities, Inc. |
$ | 52,500,000 | ||
| RBC Capital Markets, LLC |
34,500,000 | |||
| J.P. Morgan Securities LLC |
30,000,000 | |||
| SMBC Nikko Securities America, Inc. |
30,000,000 | |||
| ING Financial Markets LLC |
18,000,000 | |||
| BNP Paribas Securities Corp. |
13,500,000 | |||
| CIBC World Markets Corp. |
13,500,000 | |||
| Citigroup Global Markets Inc. |
13,500,000 | |||
| Keefe, Bruyette & Woods, Inc. |
10,200,000 | |||
| Barclays Capital Inc. |
9,000,000 | |||
| Deutsche Bank Securities Inc. |
9,000,000 | |||
| Goldman Sachs & Co. LLC |
9,000,000 | |||
| Morgan Stanley & Co. LLC |
9,000,000 | |||
| Wells Fargo Securities, LLC |
9,000,000 | |||
| CIT Capital Securities LLC |
6,300,000 | |||
| B. Riley Securities, Inc. |
5,700,000 | |||
| Citizens JMP Securities, LLC |
5,700,000 | |||
| Hovde Group, LLC |
5,700,000 | |||
| Jefferies LLC |
5,700,000 | |||
| Oppenheimer & Co., Inc. |
5,700,000 | |||
| R. Seelaus & Co., LLC |
4,500,000 | |||
| |
|
|||
| Total |
$ | 300,000,000 | ||
| |
|
|||
Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the Notes sold under the underwriting agreement if any of these Notes are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non‑defaulting underwriters may be increased, subject to the terms of the underwriting agreement, or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the Notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the Notes, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
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Commissions and Discounts
The following table shows the total underwriting discount that we are to pay to the underwriters in connection with this offering.
| Per Note |
Total | |||||||
| Public offering price |
98.837 | % | $ | 296,511,000 | ||||
| Underwriting discount (sales load) |
1.000 | % | $ | 3,000,000 | ||||
| Proceeds, before expenses, to us |
97.837 | % | $ | 293,511,000 | ||||
The underwriters propose to offer some of the Notes to the public at the public offering price set forth on the cover page of this prospectus supplement and may offer the Notes to certain other Financial Industry Regulatory Authority (FINRA) members at the public offering price less a concession not in excess of 0.600% of the aggregate principal amount of the Notes. The underwriters may allow, and the dealers may reallow, a discount not in excess of 0.400% of the aggregate principal amount of the Notes. After the initial offering of the Notes to the public, the public offering price and such concessions may be changed. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus supplement.
The expenses of the offering, not including the underwriting discount, are estimated at approximately $0.8 million and are payable by us.
No Sales of Similar Securities
Subject to certain exceptions, we have agreed not to sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any debt securities issued or guaranteed by us or any securities convertible into or exercisable or exchangeable for debt securities issued or guaranteed by us or file or cause to be declared effective a registration statement under the Securities Act with respect to any of the foregoing, without the consent of the Representatives, until the settlement date of this offering. This consent may be given at any time without public notice.
Listing
The Notes are a new issue of securities with no established trading market. The Notes will not be listed on any securities exchange or quoted on any automated dealer quotation system. We have been advised by the underwriters that they presently intend to make a market in the Notes after completion of this offering as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make a market in the Notes and any such market-making may be discontinued at any time in the sole discretion of such underwriters without any notice. Accordingly, no assurance can be given that an active and liquid public trading market for the Notes will develop or be maintained. If an active public trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected.
Price Stabilization, Short Positions
In connection with the offering, the underwriters may purchase and sell the Notes in the open market. These transactions may include short sales and purchases on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater principal amount of Notes than they are required to purchase in the offering. The underwriters must close out any short position by purchasing Notes in
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the open market. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Notes in the open market after pricing that could adversely affect investors who purchase in the offering.
Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of the Notes or preventing or retarding a decline in the market price of the Notes. As a result, the price of the Notes may be higher than the price that might otherwise exist in the open market.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased notes sold by or for the account of such underwriter in stabilizing or short covering transactions.
Any of these activities may cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be affected in the over‑the‑counter market or otherwise and, if commenced, may be discontinued at any time without any notice relating thereto.
Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither we nor the underwriters make any representation that the representative will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Alternative Settlement Cycle
We expect that delivery of the Notes offered hereby will be made against payment therefor on or about , 2023, which will be the fifth business day following the date of the pricing of the Notes offered hereby (such settlement being herein referred to as “T+5”). Under Rule 15c6-1 promulgated under the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes offered hereby prior to the second business day before the date of delivery hereunder will be required, by virtue of the fact that the Notes offered hereby initially will settle in T+5 business days, to specify an alternate settlement arrangement at the time of any such trade to prevent a failed settlement.
Electronic Offer, Sale and Distribution of Notes
The underwriters may make prospectuses available in electronic (PDF) format. A prospectus in electronic (PDF) format may be made available on a web site maintained by the underwriters, and the underwriters may distribute such prospectuses electronically.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us and our affiliates, for which they received or will receive customary fees and expenses, including acting as underwriters for our and our affiliates’ securities offerings.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for
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their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of ours and our affiliates (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us and our affiliates. If the underwriters or their respective affiliates have a lending relationship with us, the underwriters or their respective affiliates routinely hedge, or may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their respective affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the Notes offered hereby. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Affiliates of certain underwriters may hold our 2025 Notes or 2027 Notes. Certain of the underwriters and their affiliates were underwriters in connection with our initial public offering and our subsequent common stock offerings and debt offerings, for which they received customary fees.
Certain proceeds of this offering will be used to repay or repurchase outstanding indebtedness under the Syndicated Credit Facility and/or OSI2 Citibank Facility. Affiliates of certain of the underwriters are lenders under the Syndicated Credit Facility and/or OSI2 Citibank Facility. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent such proceeds are used to repay or repurchase outstanding indebtedness under the Syndicated Credit Facility and/or OSI2 Citibank Facility.
The principal business address of BofA Securities, Inc. is One Bryant Park, New York, NY 10036. The principal business address of RBC Capital Markets, LLC is Brookfield Place, 200 Vesey Street, 8th Floor, New York, New York 10281. The principal business address of J.P. Morgan Securities LLC is 383 Madison Avenue, New York, New York 10179. The principal business address of SMBC Nikko Securities America, Inc. is 277 Park Avenue, New York, New York 10172.
Notice to Prospective Investors in Canada
The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45‑106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31‑103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33‑105 Underwriting Conflicts (NI 33‑105), the underwriters are not required to comply with the disclosure requirements of NI 33‑105 regarding underwriter conflicts of interest in connection with this offering.
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Notice to Prospective Investors in the European Economic Area
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area, or EEA. For the purposes of this provision: (a) the expression “retail investor” means a person who is one (or more) of the following: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended or superseded, or MiFID II); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended or superseded, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended or superseded, the “Prospectus Regulation”), and (b) the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes.
Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, or the PRIIPs Regulation) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation. This prospectus supplement and the accompanying prospectus have been prepared on the basis that any offer of Notes in any member state of the EEA will be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of the Notes. Neither this prospectus supplement nor the accompanying prospectus is a prospectus for the purposes of the Prospectus Regulation.
Notice to Prospective Investors in the United Kingdom
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom. For the purposes of this provision: (a) the expression “retail investor” means a person who is one (or more) of the following: (i) a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (as amended, the “FSMA”) of the United Kingdom and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of the Prospectus Regulation as it forms part of domestic law by virtue of the EUWA (the “UK Prospectus Regulation”); and (b) the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes.
Consequently, no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the UK has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation. This prospectus supplement has been prepared on the basis that any offer of Notes in the UK will be made pursuant to an exemption under the UK Prospectus Regulation from the requirement to publish a prospectus for offers of Notes. Neither this prospectus supplement nor the accompanying prospectus is a prospectus for the purposes of the UK Prospectus Regulation.
This prospectus supplement, the accompanying prospectus and any other material in relation to the Notes are only being distributed to, and are directed only at, persons in the United Kingdom who are “qualified investors” (as defined in the UK Prospectus Regulation who are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), or (ii) high net worth entities or other persons falling within Articles 49(2)(a) to (d) of the Order, or (iii) persons to whom it would otherwise be lawful to distribute the aforementioned materials, all such persons
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together being referred to as “Relevant Persons”. The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, Relevant Persons. This prospectus supplement and the accompanying prospectus and their contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other person in the United Kingdom. Any person in the United Kingdom that is not a Relevant Person should not act or rely on this prospectus supplement and the accompanying prospectus or their contents. The Notes are not being offered to the public in the United Kingdom.
In addition, in the United Kingdom, each underwriter has represented and agreed the Notes may not be offered other than by an underwriter that: has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to us; and has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
Notice to Prospective Investors in Japan
The Notes offered by this prospectus supplement have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the “FIEA”). The Notes offered by this prospectus supplement may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice to Prospective Investors in Hong Kong
The Notes may not be offered or sold in Hong Kong by means of any document (except for Notes which are “structured product” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “Securities and Futures Ordinance”)) other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (the “Companies (Winding Up and Miscellaneous Provisions) Ordinance”), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the Notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance and any rules made thereunder.
Notice to Prospective Investors in Singapore
Each of the underwriters has acknowledged that this prospectus supplement has not been and will not be registered as a prospectus with the Monetary Authority of Singapore (the “MAS”). Accordingly, each of the underwriters has represented, warranted and undertaken that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell the Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus supplement or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or
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indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
| (a) | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
| (b) | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:
| (i) | to an institutional investor or to a relevant person (as defined in Section 275(2) of the SFA) or to any person arising from an offer referred to in Section 275(1A), or Section 276(4)(i)(B) of the SFA; |
| (ii) | where no consideration is or will be given for the transfer; |
| (iii) | where the transfer is by operation of law; |
| (iv) | as specified in Section 276(7) of the SFA; or |
| (v) | as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
Singapore Securities and Futures Act Product Classification
Solely for the purposes of the underwriters’ obligations pursuant to Sections 309B(1)(a) and 309B(1)(c) of the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”), they have determined, and hereby notify all relevant persons (as defined in Section 309A of the SFA) that the Notes are “prescribed capital markets products” (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products) and MAS Notice FAA-N16: Notice on Recommendations on Investment Products.
Notice to Residents of the People’s Republic of China
The underwriters have been advised that the offer of the Notes is not an offer of securities within the meaning of the People’s Republic of China (“PRC”) securities laws or other pertinent laws and regulations of the PRC, and the Notes are not being offered or sold and may not be offered or sold, directly or indirectly, in the PRC (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by the securities laws of the PRC.
Notice to Prospective Investors in South Korea
The Notes may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for re‑offering or resale, directly or indirectly, in South Korea or to any resident of South Korea except pursuant to the applicable laws and regulations of South Korea, including the Financial Investment Services and Capital Markets Act (the “FSCMA”) and the Foreign Exchange Transaction Law and the decrees and regulations thereunder (the “FETL”). Furthermore, the purchasers of the Notes comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with their purchase.
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Each underwriter has advised us that it has not offered, sold or delivered the Notes, directly or indirectly, or offered or sold the Notes to any person for re‑offering or resale, directly or indirectly, in South Korea or to any resident of South Korea and will not offer, sell or deliver the Notes, directly or indirectly, or offer or sell the Notes to any person for re‑offering or resale, directly or indirectly, in South Korea or to any resident of South Korea, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FSCMA, the FETL and other relevant laws and regulations of South Korea.
Notice to Prospective Investors in Taiwan
The Notes have not been and will not be registered with the Financial Supervisory Commission of Taiwan, the Republic of China (“Taiwan”), pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in any manner which would constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or would otherwise require registration with or the approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer or sell the Notes in Taiwan.
Notice to Prospective Investors in Switzerland
Neither this prospectus supplement nor any other offering or marketing material relating to the Notes constitutes a prospectus as such term is understood pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other regulated trading facility in Switzerland, and neither this prospectus supplement nor any other offering or marketing material relating to the Notes may be publicly distributed or otherwise made publicly available in Switzerland.
Notice to Prospectus Investors in Israel
No action has been, or will be, taken in Israel that would permit an offering of the Notes or a distribution of this prospectus supplement and the accompanying prospectus to the public in Israel. In particular, neither the prospectus supplement nor the accompanying prospectus has been reviewed or approved by the Israel Securities Authority. The Notes are being offered to a limited number of qualified investors listed on the first addendum of the Securities Law (a “Qualified Investor”), in all cases under the circumstances that will fall within the private placement exemption of the Israeli Securities Law of 1968 (“Securities Law”). This prospectus supplement and the accompanying prospectus may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Any investor in the Notes shall be required to declare in writing prior to such purchase that it qualifies as a Qualified Investor, agrees to be deemed a Qualified Investor, and is aware of the consequences of being classified as a Qualified Investor, that it will comply with the guidelines of the Israel Securities Authority with respect to the sale or offer of securities to Qualified Investors (including those published on September 21, 2014), and that it is purchasing the Notes for its own benefit and on its own account and not with the aim or intention of distributing or offering the Notes to other parties. Nothing in this prospectus supplement or the accompanying prospectus should be considered “investment advice”, or “investment marketing” as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law of 1995. Any investor who purchases the Notes shall be required to declare in writing that it has the knowledge, expertise and experience in financial and business matters so as to be capable of evaluating the risks and merits of an investment in the Notes, without relying on any of the materials provided.
Notice to Prospectus Investors in Saudi Arabia
This prospectus supplement and the accompanying prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Rules on the Offer of Securities and Continuing Obligations as issued by the board of the Saudi Arabian Capital Market Authority (“CMA”) pursuant to resolution number 3‑123‑2017 dated 9/4/1439H (corresponding to 27/12/2017G) as amended by resolution
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number 1‑104‑2019 dated 01/02/1441H (corresponding to 30/09/2019G), as amended. The CMA does not make any representation as to the accuracy or completeness of this prospectus supplement and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this prospectus supplement. Prospective purchasers of the Notes offered hereby should conduct their own due diligence on the accuracy of the information relating to the Notes. If you do not understand the contents of this prospectus supplement and the accompanying prospectus, you should consult an authorized financial advisor.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus supplement and the accompanying prospectus relate to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus supplement and the accompanying prospectus are intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. They must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement, the accompanying prospectus or any other associated documents nor taken steps to verify the information set forth herein and has no responsibility for the prospectus supplement or the accompanying prospectus. The Notes to which this prospectus supplement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Notes offered should conduct their own due diligence on the Notes. If you do not understand the contents of this prospectus supplement and the accompanying prospectus you should consult an authorized financial advisor.
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LEGAL MATTERS
The validity of the Notes offered hereby and certain legal matters for us in connection with the offering will be passed upon for us by Kirkland & Ellis LLP, Washington, D.C. Certain legal matters in connection with the offering will be passed upon for the underwriters by Dechert LLP, Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus supplement is part of a registration statement that we have filed with the SEC. We are allowed to “incorporate by reference” the information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus supplement, and later information that we file with the SEC will automatically update and supersede this information.
We previously filed the following documents with the SEC, and such filings are incorporated by reference into this prospectus supplement:
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We also incorporate by reference into this prospectus additional documents that we may file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the filing of this prospectus supplement until all of the securities offered by this prospectus supplement have been sold or we otherwise terminate the offering of these securities; provided, however, that information “furnished” under Item 2.02 or Item 7.01 of Form 8‑K or other information “furnished” to the SEC which is not deemed filed is not incorporated by reference in this prospectus supplement and the accompanying prospectus. Information that we subsequently file with the SEC will automatically update and may supersede information in this prospectus supplement, the accompanying prospectus and information previously filed with the SEC.
These filings may also be accessed on our website at www.oaktreespecialtylending.com. Except for documents incorporated by reference into this prospectus supplement and the accompanying prospectus, information contained on our website is not incorporated by reference into this prospectus supplement. You may
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also request a copy of these filings (other than exhibits, unless the exhibits are specifically incorporated by reference into these documents) at no cost by writing, emailing or calling Investor Relations at the following address and telephone number:
Investor Relations
Oaktree Specialty Lending Corporation
1301 Avenue of the Americas, 34th Floor
New York, NY 10019
(212) 284‑1900
ocsl‑ir@oaktreecapital.com
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Oaktree Specialty Lending Corporation
Common Stock
Debt Securities
Warrants
Subscription Rights
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 were formed in late 2007 and operate 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, of 1940, as amended. 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. 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.
Oaktree Fund Advisors, LLC, or Oaktree, serves as our investment adviser. Oaktree Fund Administration, LLC, or Oaktree Administrator, serves as our administrator. Oaktree is an affiliate of, and Oaktree Administrator is a subsidiary of, Oaktree Capital Management, L.P., a leading global investment management firm headquartered in Los Angeles, California, focused on less efficient markets and alternative investments.
We may offer, from time to time in one or more offerings, shares of our common stock, debt securities, warrants representing rights to purchase common stock or debt securities or subscription rights to purchase common stock, which we refer to, collectively, as the “securities.” We may offer our securities in certain amounts, at prices and on terms to be disclosed in one or more supplements to this prospectus. You should read this prospectus, the applicable prospectus supplement and any free writing prospectuses carefully before you invest in our securities.
Our securities may be offered directly to one or more purchasers, including existing stockholders in a rights offering, through agents designated from time to time by us, or to or through underwriters or dealers. The prospectus supplement relating to an offering will identify any agents or underwriters involved in the sale of our securities, and will disclose any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See “Plan of Distribution.” We may not sell any of our securities through agents, underwriters or dealers without delivery of a prospectus supplement describing the method and terms of the offering of such securities.
Our common stock is traded on the Nasdaq Global Select Market under the symbol “OCSL.” On February 2, 2023 and December 30, 2022, the last reported sale price of our common stock on the Nasdaq Global Select Market was $20.43 and $20.61 per share, respectively. We determine the net asset value per share of our common stock on a quarterly basis. Our net asset value per share of our common stock as of December 31, 2022 was $19.63. Figures for periods prior to January 23, 2023 have been retrospectively adjusted to give effect to the 1-for-3 reverse stock split completed on January 20, 2023 and effective at the commencement of trading on January 23, 2023.
An investment in our securities involves certain risks, including, among other things, the risk of leverage and risks relating to investments in securities of small, private and developing businesses. Shares of closed-end investment companies frequently trade at a discount to their net asset value per share. If our shares trade at a discount to their net asset value, this will likely increase the risk of loss to purchasers of our common stock. You should review carefully the risks and uncertainties, including the risk of leverage and dilution, described in the section titled “Risk Factors” beginning on page 5 of this prospectus or otherwise incorporated by reference herein and included in, or incorporated by reference into, the applicable prospectus supplement and in any free writing prospectuses we have authorized for use in connection with a specific offering, and under similar headings in the other documents that are incorporated by reference into this prospectus before investing in our securities.
This prospectus and any accompanying prospectus supplement contain important information about us that a prospective investor should know before investing in our securities. Please read this prospectus and any accompanying prospectus supplement before investing and keep them for future reference. We file periodic reports, current reports, proxy statements and other information with the Securities and Exchange Commission. This information is available free of charge by contacting us at 333 South Grand Ave., 28th Floor, Los Angeles, CA 90071 or by calling us collect at (213) 830-6300 or on our website at oaktreespecialtylending.com. Except for the documents incorporated by reference into this prospectus, information on our website is not incorporated into or a part of this prospectus or any related prospectus supplement. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus may not be used to consummate sales of securities unless accompanied by a prospectus supplement.
Prospectus dated February 7, 2023
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| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| CUSTODIAN, TRANSFER AND DISTRIBUTION PAYING AGENT AND REGISTRAR |
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ABOUT THIS PROSPECTUS
This prospectus is part of an automatic registration statement that we have filed with the Securities and Exchange Commission, or SEC, using the “shelf” registration process. Under the shelf registration process, we may offer our securities, from time to time, in one or more offerings or series, on terms to be determined at the time of the offering. This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained or incorporated by reference in this prospectus. Please carefully read this prospectus, any accompanying prospectus supplement, any free writing prospectus and the documents incorporated by reference in this prospectus and any accompanying prospectus supplement before you make an investment decision.
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained or incorporated by reference in this prospectus or any accompanying supplement to this prospectus. You must not rely on any unauthorized information or representations not contained or incorporated by reference in this prospectus or any accompanying prospectus supplement as if we had authorized it. This prospectus and any accompanying prospectus supplement do not constitute an offer to sell or a solicitation of any offer to buy any security other than the registered securities to which they relate, nor do they constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The information contained or incorporated by reference in this prospectus and any accompanying prospectus supplement is accurate as of their respective dates. Our financial condition, results of operations and prospects may have changed since that date. To the extent required by law, we will amend or supplement the information contained or incorporated by reference in this prospectus and any accompanying prospectus supplement to reflect any material changes to such information subsequent to the date of the prospectus and any accompanying prospectus supplement and prior to the completion of any offering pursuant to the prospectus and any accompanying prospectus supplement.
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PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read the entire prospectus carefully, including the section entitled “Risk Factors” before making a decision to invest in our securities.
Unless otherwise noted, the terms:
| • | “we,” “us” and “our” refer to Oaktree Specialty Lending Corporation; |
| • | “Oaktree” and “our Adviser” refer to Oaktree Fund Advisors, LLC, our external investment adviser; |
| • | “Oaktree Administrator” refers to Oaktree Fund Administration, LLC, our administrator; |
| • | “Syndicated Facility” refers to our senior secured revolving credit facility, as amended and/or restated from time to time, 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; |
| • | “Citibank Facility” refers to our revolving credit facility, as amended and/or restated from time to time, with OCSL Senior Funding II LLC (formerly OCSI Senior Funding II LLC), our 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; |
| • | “OSI2 Citibank Facility” refers to our revolving credit facility, as amended and/or restated from time to time, with OSI 2 Senior Lending SPV, LLC, our wholly-owned and consolidated subsidiary, as the borrower, the Company, as collateral manager and seller, each of lenders from time to time party thereto Citibank, N.A., as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent; |
| • | “2025 Notes” refers to our 3.500% unsecured notes issued in February 2020 in an aggregate principal amount of $300.0 million that mature on February 25, 2025; and |
| • | “2027 Notes” refers to our 2.700% unsecured notes issued in May 2021 in an aggregate principal amount of $350.0 million that mature on January 15, 2027. |
Oaktree Specialty Lending Corporation
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 were formed in late 2007 and currently operate 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 of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or net realized capital gains that we distribute to our stockholders if we meet certain source-of-income, income distribution and asset diversification requirements.
We are externally managed by Oaktree pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement, between us and Oaktree. Oaktree is an affiliate of Oaktree Capital Management, L.P., or OCM, our external investment adviser from October 17, 2017 through May 3, 2020. Oaktree Administrator, a subsidiary of OCM, provides certain administrative and other services necessary for us to operate.
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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. 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 our Adviser’s credit and structuring expertise, including throughout the COVID-19 pandemic. 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.
Our Adviser is generally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. We expect our portfolio to include a mix of first and second lien loans, including asset backed loans, unitranche loans, mezzanine loans, unsecured loans, bonds, preferred equity and certain equity co-investments. Our portfolio may also include certain structured finance and other non-traditional structures. 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.
Our portfolio totaled $2.6 billion at fair value as of December 31, 2022 and was composed of 156 portfolio companies. These included debt investments in 142 companies, equity investments in 42 companies, and our investments in 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. 30 of our equity investments were in companies in which we also had a debt investment. At fair value, 94.8% of our portfolio consisted of debt investments, including our debt investments in SLF JV I and Glick JV, and 86.3% of our portfolio consisted of senior secured loans as of December 31, 2022. The weighted average annual yield of our debt investments at fair value as of December 31, 2022, including the return on our debt investments in SLF JV I and Glick JV, was approximately 11.6%, including 10.3% representing cash payments. The weighted average annual yield of our debt investments is determined before the payment of, and therefore does not take into account, our expenses and the payment by an investor of any stockholder transaction expenses, and does not represent the return on investment for our stockholders.
We are permitted to, and expect to continue to, finance our investments through borrowings. However, as a Business Development Company, subject to certain limited exceptions, we are currently only allowed to borrow amounts in accordance with the asset coverage requirements in the Investment Company Act. At a special meeting of 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 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.
On March 19, 2021, we acquired Oaktree Strategic Income Corporation, or OCSI, pursuant to that certain Agreement and Plan of 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
2
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.
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. As a result of the OSI2 Merger, we issued an aggregate of 15,860,200 shares of our common stock to former OSI2 stockholders.
Our Adviser
We are externally managed and advised by Oaktree, a registered investment adviser under the Investment Advisers Act of 1940, as amended. The principal executive offices of Oaktree are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071. Oaktree, subject to the overall supervision of our Board of Directors, manages our day-to-day operations, and provides investment advisory services to us pursuant to the Investment Advisory Agreement.
Our Adviser is an affiliate of OCM, a leading global investment management firm headquartered in Los Angeles, California, focused on less efficient markets and alternative investments. A number of the senior executives and investment professionals of our Adviser and its affiliates have been investing together for over 35 years and have generated impressive investment performance through multiple market cycles. Our Adviser and its affiliates emphasize an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high-yield debt and senior loans), control investing, real estate, convertible securities and listed equities.
In 2019, Brookfield Corporation (f/k/a Brookfield Asset Management Inc.), which we refer to as “Brookfield,” acquired a majority economic interest in Oaktree Capital Group, LLC, or OCG, which together with certain related transactions resulted in Brookfield owning a majority economic interest in the business of Oaktree and its affiliates. Oaktree and its affiliates operate as an independent business within Brookfield, with their own product offerings and investment, marketing and support teams. Brookfield is a leading global alternative asset manager with over a 100 year history and over $750 billion of assets under management (inclusive of Oaktree and its affiliates) across a broad portfolio of real estate, infrastructure, renewable power, credit and private equity assets. OCG’s founders, senior management and current and former employee-unitholders of OCG are able to sell their remaining OCG units to Brookfield over time pursuant to an agreed upon liquidity schedule and approach to valuing such units at the time of liquidation. Pursuant to this liquidity schedule, the earliest year in which Brookfield could own 100% of the OCG business is 2029.
The primary firm-wide goal of our Adviser and OCM is to achieve attractive returns while bearing less than commensurate risk. Our Adviser believes that it can achieve this goal by taking advantage of market inefficiencies in which financial markets and their participants fail to accurately value assets or fail to make available to companies the capital that they reasonably require.
Our Adviser and its affiliates believe that their defining characteristic is adherence to the highest professional standards, which has yielded several important benefits. First and foremost, this characteristic has allowed our Adviser and its affiliates to attract and retain an extremely talented group of investment professionals, or the Investment Professionals, as well as accounting, valuation, legal, compliance and other administrative professionals. As of December 31, 2022, our Adviser and its affiliates had more than 1,150 professionals in 20 cities and 14 countries, including a deep and broad credit platform drawing from more than 350 highly experienced investment professionals with significant origination, structuring and underwriting expertise. Specifically, the Strategic Credit group that is primarily responsible for implementing our investment
3
strategy consists of 24 Investment Professionals led by Armen Panossian, our Chief Executive Officer and Chief Investment Officer, who focus on the investment strategy employed by our Adviser and certain of its affiliates. Second, it has permitted the investment team to build strong relationships with brokers, banks and other market participants. These institutional relationships have been instrumental in strengthening access to trading opportunities, to understanding the current market, and to executing the investment team’s investment strategies. OCM aims to attract, motivate and retain talented employees (both Investment Professionals and accounting, valuation, legal, compliance and other administrative professionals) by making them active participants in, and beneficiaries of, the platform’s success. In addition to competitive base salaries, all OCM employees share in the discretionary bonus pool. An employee’s participation in the bonus pool is based on the overall success of our Adviser and its affiliates and the individual employee’s performance and level of responsibility.
Our Adviser and its affiliates provide discretionary investment management services to other managed accounts and investment funds, which may have overlapping investment objectives and strategies with our own and, accordingly, may invest in asset classes similar to those targeted by us. The activities of such managed accounts and investment funds may raise actual or potential conflicts of interest.
Strategic Credit
Our Adviser’s affiliates officially launched the Strategic Credit strategy in early 2013 as a step-out from the Distressed Debt strategy, to capture attractive investment opportunities that appear to offer too little return for distressed debt investors, but may pose too much uncertainty for high-yield bond creditors. The strategy seeks to achieve an attractive total return by investing in public and private revenue-generating, performing debt.
Strategic Credit focuses on U.S. and non-U.S. investment opportunities that arise from pricing inefficiencies that occur in the primary and secondary markets or from the financing needs of healthy companies with limited access to traditional lenders or public markets. Typical investments will be in high yield bonds and senior secured loans for borrowers that are in need of direct loans, rescue financings, or other capital solutions or that have had challenged or unsuccessful primary offerings.
The Investment Professionals employ a fundamental, value-driven opportunistic approach to credit investing, which seeks to benefit from the resources, relationships and proprietary information of our Adviser’s global investment platform.
Our Administrator
We entered into an administration agreement, as amended from time to time, or the Administration Agreement, with Oaktree Administrator. The principal executive offices of Oaktree Administrator are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071. Pursuant to the Administration Agreement, Oaktree Administrator provides services to us, and we reimburse Oaktree Administrator for costs and expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement and providing personnel and facilities thereunder.
Corporate Information
Our principal executive offices are located at 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, and our telephone number is (213) 830-6300. Our corporate website is located at www.oaktreespecialtylending.com. Except for the documents incorporated by reference into this prospectus, information on our website is not incorporated into or a part of this prospectus or any related prospectus supplement.
4
FEES AND EXPENSES
Information under the caption “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Fees and Expenses” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 is incorporated by reference herein.
RISK FACTORS
An investment in any securities offered pursuant to this prospectus and any accompanying prospectus supplement involves substantial risks. You should carefully consider the risk factors incorporated by reference herein from our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 and our subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and the other information contained in this prospectus, as updated, amended or superseded by our subsequent filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the risk factors and other information contained in any accompanying prospectus supplement or free writing prospectus before acquiring any of such securities. The occurrence of any of these risks could materially and adversely affect our business, prospects, financial condition, results of operations and cash flow and might cause you to lose all or part of your investment in the offered securities. The risks described in these documents are not the only risks we face, and there may be additional risks that we do not presently know of or that we currently consider not likely to have a significant impact. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our business or our financial performance.
5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and any accompanying prospectus supplement constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this prospectus and any accompanying prospectus supplement may include statements as to:
| • | our future operating results and distribution projections; |
| • | the ability of 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 party. |
In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this prospectus, and any accompanying prospectus supplement, 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 this prospectus and any accompanying prospectus supplement.
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 and RICs; |
| • | the ability to realize the benefits of the OSI2 Merger; 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 prospectus and will base the forward-looking statements included in any accompanying prospectus supplement on information available to us on the date of this prospectus and any accompanying prospectus supplement, as appropriate, and we assume no obligation to update any such forward-looking statements, except as required by law. 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. The forward-looking statements contained in this prospectus and any accompanying prospectus supplement are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and the forward looking statements contained in our periodic reports are excluded from the safe-harbor protection provided by Section 21E of the Exchange Act.
6
USE OF PROCEEDS
We intend to use substantially all of the net proceeds from selling our securities to make investments in accordance with our investment objective and strategies described in this prospectus or any prospectus supplement and for general corporate purposes. We may also use a portion of the net proceeds to reduce any of our outstanding borrowings, including borrowings under the Syndicated Facility, the Citibank Facility and the OSI2 Citibank Facility and to redeem or repurchase the 2025 Notes and the 2027 Notes.
We anticipate that substantially all of the net proceeds from any offering of our securities will be used as described above within three to six months of such offering. Pending such use, we will invest the net proceeds primarily in high quality, short-term debt securities consistent with our business development company election and our election to be taxed as a RIC. Our ability to achieve our investment objective may be limited to the extent that the net proceeds from an offering, pending full investment, are held in interest-bearing deposits or other short-term instruments. The prospectus supplement relating to an offering will more fully identify the use of proceeds from any offering.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 and our Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 are incorporated by reference herein.
7
PRICE RANGE OF COMMON STOCK
The following table sets forth, for each fiscal quarter during the last two fiscal years and the current fiscal year, the Company’s net asset value, or NAV, per share (where it has been determined), the range of high and low sales prices of the Company’s common stock as reported on The Nasdaq Global Select Market and the premium (discount) of such sales price to the Company’s NAV per share. Figures for periods prior to January 23, 2023 have been retrospectively adjusted to give effect to the 1-for-3 reverse stock split completed on January 20, 2023 and effective at the commencement of trading on January 23, 2023.
| Sales Price | Premium (Discount) of High Sales Price to NAV (2) |
Premium (Discount) of Low Sales Price to NAV (2) |
||||||||||||||||||
| NAV (1) | High | Low | ||||||||||||||||||
| Year ended September 30, 2021 |
||||||||||||||||||||
| First quarter |
$ | 20.54 | $ | 16.98 | $ | 13.56 | (17.3 | )% | (34.0 | )% | ||||||||||
| Second quarter |
$ | 21.27 | $ | 19.08 | $ | 16.41 | (10.3 | )% | (22.8 | )% | ||||||||||
| Third quarter |
$ | 21.66 | $ | 20.76 | $ | 18.57 | (4.2 | )% | (14.3 | )% | ||||||||||
| Fourth quarter |
$ | 21.84 | $ | 22.20 | $ | 19.74 | 1.6 | % | (9.6 | )% | ||||||||||
| Year ended September 30, 2022 |
||||||||||||||||||||
| First quarter |
$ | 22.03 | $ | 22.86 | $ | 21.09 | 3.8 | % | (4.3 | )% | ||||||||||
| Second quarter |
$ | 21.78 | $ | 23.43 | $ | 21.39 | 7.6 | % | (1.8 | )% | ||||||||||
| Third quarter |
$ | 20.67 | $ | 22.83 | $ | 18.60 | 10.4 | % | (10.0 | )% | ||||||||||
| Fourth quarter |
$ | 20.38 | $ | 21.75 | $ | 17.61 | 6.7 | % | (13.6 | )% | ||||||||||
| Year ending September 30, 2023 |
||||||||||||||||||||
| First quarter |
$ | 19.63 | $ | 21.69 | $ | 17.59 | 10.5 | % | (10.4 | )% | ||||||||||
| Second quarter (through February 2, 2023) |
* | $ | 21.48 | $ | 19.80 | * | * | |||||||||||||
| * | Not determinable at the time of filing. |
| (1) | NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period. |
| (2) | Calculated as the respective high or low sales price less NAV per share, divided by NAV per share. |
SENIOR SECURITIES
The information contained under the caption “Item 8. Consolidated Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 11 – Senior Securities” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 is incorporated by reference herein.
BUSINESS
The information contained under the caption “Item 1. Business” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 is incorporated by reference herein.
8
PORTFOLIO COMPANIES
The following table sets forth certain information as of December 31, 2022, for each portfolio company in which we had a debt or equity investment. Our only formal relationships with our portfolio companies are the managerial assistance ancillary to our investments and the board observation or participation rights we may receive. For example, certain of our officers may serve as members of the boards of certain of our portfolio companies.
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Control Investments | (8)(9) | |||||||||||||||||||||||||
| C5 Technology Holdings, LLC 850 W. Jackson Boulevard Chicago, IL 60607 |
Data Processing & Outsourced Services | |||||||||||||||||||||||||
| 829 Common Units | 82.90% | — | — | (15) | ||||||||||||||||||||||
| 34,984,460.37 Preferred Units | 34,984 | 27,638 | (15) | |||||||||||||||||||||||
| 34,984 | 27,638 | |||||||||||||||||||||||||
|
|
|
|
|
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| Dominion Diagnostics, LLC 211 Circuit Drive North Kingstown, RI 02852 |
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 | 69.24% | 15,222 | 4,227 | (15) | ||||||||||||||||||||||
| 29,519 | 18,524 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| OCSI Glick JV LLC | Multi-Sector Holdings | (14) | ||||||||||||||||||||||||
| 333 South Grand Avenue, 28th Floor Los Angeles, CA 90071 |
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 | 87.50% | — | — | (11)(16)(19) | ||||||||||||||||||||||
| 49,961 | 49,536 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Senior Loan Fund JV I, LLC | Multi-Sector Holdings | (14) | ||||||||||||||||||||||||
| 333 South Grand Avenue, 28th Floor Los Angeles, CA 90071 |
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 | 87.50% | 54,791 | 24,108 | (11)(12)(16)(19) | ||||||||||||||||||||||
| 167,447 | 136,764 | |||||||||||||||||||||||||
|
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|
|
|
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| Affiliate Investments | (17) | |||||||||||||||||||||||||
| Assembled Brands Capital LLC | Specialized Finance | |||||||||||||||||||||||||
| 76 Greene Street New York, NY 10012 |
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 | 7.77% | 764 | 354 | (15) | ||||||||||||||||||||||
| 1,019,168.80 Preferred Units, 6% | 1,019 | 1,243 | (15) | |||||||||||||||||||||||
| 70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | — | — | (15) | |||||||||||||||||||||||
| 23,247 | 22,849 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
9
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Caregiver Services, Inc. | Health Care Services | |||||||||||||||||||||||||
| 10451 N.W. 117th Avenue, Suite 110 Miami, FL 33178 |
1,080,399 shares of Series A Preferred Stock, 10% | 1,080 | 324 | (15) | ||||||||||||||||||||||
| 1,080 | 324 | |||||||||||||||||||||||||
|
|
|
|
|
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| Non-Control/Non-Affiliate Investments | (18) | |||||||||||||||||||||||||
| 107 Fair Street LLC 175 Broadway, Floor 1 Paterson, NJ 07505 |
Real Estate Operating Companies | |||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||
|
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|
|
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| 112-126 Van Houten Real22 LLC | Biotechnology | |||||||||||||||||||||||||
| 175 Broadway, Floor 1 Paterson, NJ 07505 |
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 | |||||||||||||||||||||||||
|
|
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|
|
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| A.T. Holdings II Ltd. | Biotechnology | |||||||||||||||||||||||||
| 4-1 Kioicho Chiyoda-ku Tokyo, 102-0094 Japan |
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 | |||||||||||||||||||||||||
| Biopôle, route de la Corniche 3 B 1066 Epalinges Switzerland |
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 | |||||||||||||||||||||||||
| 6818 A Patterson Pass Road Livermore, CA 94550 |
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 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Accupac, Inc. | Personal Products | |||||||||||||||||||||||||
| 1501 Industrial Boulevard Mainland, PA 19451 |
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 | |||||||||||||||||||||||||
| 53 State Street, 10th Floor Boston, MA 02109 |
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 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
10
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| ADB Companies, LLC 18777 US Highway 66 Pacific, MO 63069 |
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 | |||||||||||||||||||||||||
| Biopôle route de la Corniche 3B 1066 Epalinges Switzerland |
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 $8.297) expiration 8/15/2032 | 174 | 50 | (11)(15) | |||||||||||||||||||||||
| 6,405 | 6,289 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Aden & Anais Merger Sub, Inc. 20 Jay Street, Suite 600 Brooklyn, NY 11201 |
Apparel, Accessories & Luxury Goods | |||||||||||||||||||||||||
| 51,645 Common Units in Aden & Anais Holdings, Inc. | 5.25% | 5,165 | — | (15) | ||||||||||||||||||||||
| 5,165 | — | |||||||||||||||||||||||||
|
|
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|
|
|||||||||||||||||||||||
| AI Sirona (Luxembourg) Acquisition S.a.r.l. | Pharmaceuticals | |||||||||||||||||||||||||
| 5 Rue des Capucins L-1313, Luxembourg | Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/2026 | 9.15% | € | 24,838 | 27,775 | 24,255 | (6)(11)(15) | |||||||||||||||||||
| 27,775 | 24,255 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| AIP RD Buyer Corp. | Distributors | |||||||||||||||||||||||||
| 8280 Montgomery Road, Suite 101 Cincinnati, OH 45236 |
Second Lien Term Loan, SOFR+7.75% cash due 12/23/2029 | 12.17% | 14,414 | 14,163 | 13,960 | (6)(15) | ||||||||||||||||||||
| 14,410 Common Units in RD Holding LP | 0.34% | 1,352 | 1,528 | (15) | ||||||||||||||||||||||
| 15,515 | 15,488 | |||||||||||||||||||||||||
|
|
|
|
|
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11
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| AirStrip Technologies, Inc. | Application Software | |||||||||||||||||||||||||
| 335 East Sonterra Boulevard, Suite 200 San Antonio, TX 78258 |
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/2025 | 90 | — | (15) | ||||||||||||||||||||||
| 90 | — | |||||||||||||||||||||||||
|
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|
|
|
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| All Web Leads, Inc. | Advertising | |||||||||||||||||||||||||
| 7300 Room 2222 Building 2, Suite 100 Austin, TX 78730 |
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 | |||||||||||||||||||||||||
| 16 Rue Du General Alain De Boissieu Paris, Île-de-France, 75015 France |
Fixed Rate Bond, 5.50% cash due 10/15/2029 | 4,050 | 3,533 | 3,095 | (11) | |||||||||||||||||||||
| 3,533 | 3,095 | |||||||||||||||||||||||||
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|
|||||||||||||||||||||||
| Alto Pharmacy Holdings, Inc. | Health Care Technology | |||||||||||||||||||||||||
| 645 Harrison Street, #200 San Francisco, California 94107 |
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 $15.46) expiration date 10/14/2032 | 642 | 629 | (15) | |||||||||||||||||||||||
| 8,546 | 8,559 | |||||||||||||||||||||||||
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|||||||||||||||||||||||
| Alvogen Pharma US, Inc. | Pharmaceuticals | |||||||||||||||||||||||||
| 1440 Main Street, Suite 310 Waltham, MA 02451 |
First Lien Term Loan, SOFR+7.50% cash due 6/30/2025 | 12.23% | 12,968 | 12,711 | 12,903 | (6)(15) | ||||||||||||||||||||
| 12,711 | 12,903 | |||||||||||||||||||||||||
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12
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Alvotech Holdings S.A. | Biotechnology | (13) | ||||||||||||||||||||||||
| Saemundargata 15-19 101 Reykjavik, Iceland |
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 11/16/20 26 |
25,612 | 25,264 | 25,128 | (11)(15) | ||||||||||||||||||||||
| 587,930 Common Shares in Alvotech SA | 0.29% | 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 $0.01) expiration 12/31/2027 | — | 4,081 | (11)(15) | |||||||||||||||||||||||
| 56,855 | 61,770 | |||||||||||||||||||||||||
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|
|||||||||||||||||||||||
| American Auto Auction Group, LLC | Consumer Finance | |||||||||||||||||||||||||
| 10333 N. Meridian Street, Suite 200 Indianapolis, IN 46290 |
Second Lien Term Loan, SOFR+8.75% cash due 1/2/2029 | 13.33% | 14,760 | 14,503 | 11,439 | (6)(15) | ||||||||||||||||||||
| 14,503 | 11,439 | |||||||||||||||||||||||||
|
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|
|||||||||||||||||||||||
| American Tire Distributors, Inc. | Distributors | |||||||||||||||||||||||||
| 12200 Herbert Wayne Ct, Suite 150 Huntersville, NC 28078 |
First Lien Term Loan, LIBOR+6.25% cash due 10/20/2028 | 10.61% | 9,870 | 9,747 | 9,081 | (6) | ||||||||||||||||||||
| 9,747 | 9,081 | |||||||||||||||||||||||||
|
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|
|
|||||||||||||||||||||||
| AMMC CLO 27 | Multi-Sector Holdings | |||||||||||||||||||||||||
| 301 E. Fourth St. Cincinnati, OH 45202 |
Class E Notes, SOFR+8.89% cash due 1/20/2036 | 13.49% | 2,275 | 2,037 | 2,087 | (6)(11) | ||||||||||||||||||||
| 2,037 | 2,087 | |||||||||||||||||||||||||
|
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|||||||||||||||||||||||
| Amplify Finco Pty Ltd. | Movies & Entertainment | |||||||||||||||||||||||||
| World Square Shopping Center Shop 9.28c, Lower Ground Floor Sydney, NSW 2000 Australia |
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 8.98% | 15,181 | 14,014 | 14,637 | (6)(11)(15) | ||||||||||||||||||||
| Second Lien Term Loan, LIBOR+8.00% cash due 11/26/2027 | 12.73% | 12,500 | 12,188 | 11,833 | (6)(11)(15) | |||||||||||||||||||||
| 26,202 | 26,470 | |||||||||||||||||||||||||
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13
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Anastasia Parent, LLC | Personal Products | |||||||||||||||||||||||||
| 4638 E. Shelby Drive Memphis, TN 38118 |
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 | |||||||||||||||||||||||||
| 485 Lexington Avenue, 10th Floor New York, NY 10017 |
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 | |||||||||||||||||||||||||
| 11100 NE 8th Street, Suite 600 Bellevue, WA 98004 |
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. 4931 North 300 W Provo, UT 84604 |
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 | |||||||||||||||||||||||||
| 1 Minster Court Mincing Lane London, EC3R 7AA United Kingdom |
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 | |||||||||||||||||||||||||
|
|
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|
|
|||||||||||||||||||||||
| Associated Asphalt Partners, LLC | Construction Materials | |||||||||||||||||||||||||
| 110 Franklin Road, 9th Floor Roanoke, VA 24011 |
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 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
14
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Astra Acquisition Corp. | Application Software | |||||||||||||||||||||||||
| 5201 Congress Avenue Boca Raton, FL 33487 |
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 | |||||||||||||||||||||||||
| 311 Arsenal Street Watertown, MA 02472 |
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 | |||||||||||||||||||||||||
| 1001 Main Street, Suite 600 Buffalo, NY 14203 |
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 $0.4955) expiration date 6/19/2027 | 973 | 7 | (11)(15) | |||||||||||||||||||||||
| 21,768 | 20,692 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Aurora Lux Finco S.À.R.L. | Airport Services | |||||||||||||||||||||||||
| Rue de Bitbourg 19 1273 Luxembourg Luxembourg |
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 10.32% | 22,368 | 22,050 | 21,274 | (6)(11)(15) | ||||||||||||||||||||
| 22,050 | 21,274 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Avalara, Inc. | Application Software | |||||||||||||||||||||||||
| 255 South King St., Suite 1800 Seattle, WA 98104 |
First Lien Term Loan, SOFR+7.25% cash due 10/19/2028 | 11.83% | 41,467 | 40,466 | 40,430 | (6)(15) | ||||||||||||||||||||
| First Lien Revolver, SOFR+7.25% cash due 10/19/2028 | — | (100) | (104) | (6)(15)(19) | ||||||||||||||||||||||
| 40,366 | 40,326 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| The Avery | Real Estate Operating Companies | |||||||||||||||||||||||||
| 333 South Grand Avenue, Suite 4450 Los Angeles, CA 90071 |
First Lien Term Loan in T8 Urban Condo Owner, LLC, LIBOR+7.30% cash due 2/17/2023 | 11.69% | 15,301 | 15,279 | 15,391 | (6)(15) | ||||||||||||||||||||
| Subordinated Debt in T8 Senior Mezz LLC, LIBOR+12.50% cash due 2/17/2023 | 17.24% | 3,706 | 3,701 | 3,733 | (6)(15) | |||||||||||||||||||||
| 18,980 | 19,124 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
15
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| BAART Programs, Inc. | Health Care Services | |||||||||||||||||||||||||
| 1720 Lakepointe Drive, Suite 117 Lewisville, TX 75057 |
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 | |||||||||||||||||||||||||
| 2034 E Factory Road Dakota, IL 61018 |
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 | |||||||||||||||||||||||||
| 555 Long Wharf Drive, 12th Floor New Haven, CT 06511 |
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 $20.04) expiration date 4/19/2029 | 125 | 275 | (11)(15) | |||||||||||||||||||||||
| 7,741 | 7,735 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Blackhawk Network Holdings, Inc. | Data Processing & Outsourced Services | |||||||||||||||||||||||||
| 6220 Stoneridge Mall Road Pleasanton, CA 94588 |
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026 | 10.94% | 30,625 | 30,300 | 26,391 | (6) | ||||||||||||||||||||
| 30,300 | 26,391 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
16
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Blumenthal Temecula, LLC | Automotive Retail | |||||||||||||||||||||||||
| 40910 Temecula Center Drive Temecula, CA 92591 |
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 | 2.60% | 298 | 379 | (15) | ||||||||||||||||||||||
| 5,869 | 5,898 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Cadence Aerospace, LLC | Aerospace & Defense | |||||||||||||||||||||||||
| 610 Newport Center Drive, Suite 950 Newport Beach, CA 92660 |
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 | |||||||||||||||||||||||||
| P.O. Box 302 Provo, UT 84603 |
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 | |||||||||||||||||||||||||
| 4830 North Loop 1604W, Suite 111 San Antonio, TX 78249 |
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 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Condor Merger Sub Inc. | Systems Software | |||||||||||||||||||||||||
| 6220 America Center Drive San Jose, CA 95002 |
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 | |||||||||||||||||||||||||
| 209 W. 2nd Street, Box 282 Forth Worth, TX 76102 |
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 | |||||||||||||||||||||||||
|
|
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|
|
|||||||||||||||||||||||
17
| Name and Address of |
Principal Business |
Title of Securities |
Percentage of Ownership Interest* |
Cash Interest Rate |
Principal ($ in thousands unless otherwise indicated) (7) |
Cost ($ in thousands) |
Fair Value ($ in thousands) |
Notes | ||||||||||||||||||
| Convergeone Holdings, Inc. | IT Consulting & Other Services | |||||||||||||||||||||||||
| 10900 Nesbitt Avenue South Bloomington, MN 55437 |
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 |
|||||||||||||||||||||||||
| 989 East Hillsdale Boulevard, Suite 400 Foster City, CA 94404 |
517,851 Shares of Series D Preferred Stock | 605 | 894 | (15) | ||||||||||||||||||||||
| 605 | 894 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| CorEvitas, LLC | Health Care Technology | |||||||||||||||||||||||||
| 1440 Main Street, Suite 310 Waltham, MA 02451 |
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. | 0.78% | 690 | 2,340 | (15) | ||||||||||||||||||||||
| 14,506 | 15,945 | |||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| Covetrus, Inc. | Health Care Distributors | |||||||||||||||||||||||||
| 7 Custom House Street Portland, ME 04101 |
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 | |||||||||||||||||||||||||
| 10622 W 6400 North Cedar City, UT 84721 |
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 | |||||||||||||||||||||||||
|
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|
|||||||||||||||||||||||
| Cuppa Bidco BV Weena 455 Rotterdam 3013 AL Netherlands |
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 | |||||||||||||||||||||||||
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