Q1 2025 Oaktree Specialty Lending Corp Earnings Call

February 4, 2025

All participants are in listen only mode, but will be prompted for a question and answer session. Following the prepared remarks, now I would like to introduce Dan <unk> head of Investor Relations, who will host today's conference call. Mr. Kevin You may begin.

Speaker Change: Thank you operator, and thank you all for joining our call.

Speaker Change: We appreciate your support of Oaktree specialty lending Corporation.

We issued our earnings release and accompanying slide presentation, which can be accessed on the investors section of our website at Oaktree specialty lending dot com.

Speaker Change: We encourage investors the media and others to review the information posted on our website.

Speaker Change: Joining us on the call today are <unk>.

Rob O'connell: Chief Executive Officer, and co Chief Investment Officer, Rob O'connell Co Chief Investment Officer, Matt <unk>, President and Chris Mcgowan, Chief Financial Officer and Treasurer.

Rob O'connell: Before we begin I want to remind you that comments on today's call include forward looking statements, reflecting our current views with respect to our future operating results and financial performance. Our actual results could differ materially from those implied or expressed in the forward looking statements.

Rob O'connell: Please refer to our SEC filings for a discussion of these factors in further detail, we undertake no duty to update or revise any forward looking statements.

Rob O'connell: I'd also like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest of an oaktree funds.

Rob O'connell: Before we turn to our results I wanted to address the recent buyers and the impact it had on our communities.

Rob O'connell: We're heartbroken by the devastation caused by the buyers in Los Angeles, <unk> headquarters and our home since our founding in 1995.

Rob O'connell: In response to these tragic events, we deployed a variety of resources to ensure the safety and wellbeing of our employees and <unk> will continue to support the long and challenging road to recovery for them as well as the broader Los Angeles community. Despite.

Rob O'connell: Despite these challenging circumstances.

Our operations running without interruption, allowing us to continue serving our clients.

Matt: With that I would like to now turn the call over to Matt to discuss our results.

Matt: Thanks, Dane welcome everyone and thank you for joining us today I want to begin the call by discussing some of the strategic actions we took this quarter.

Matt: Best position <unk> for future success.

Matt: First on February three.

Matt: <unk> purchased for most CSL $100 million of newly issued common stock at a price of $17 63 per share.

Matt: Which is equal to or Csl's net asset value as of January 31, 2025.

Matt: This represents a 10% premium to the stock price and resulted in a nearly 7% increase to NAV.

Matt: Second we permanently amended our fee structure instituting a cap also known as a total return hurdle and the calculation of our part one incentive fee to consider capital gains and losses.

Matt: The total return hurdle includes the look back provision that commence as effective October one 2024 and will build over time to a rolling 12 quarter look back by the company's 2027 fiscal year end.

Matt: Under the new incentive fee structure.

Matt: Being $6 $2 million of part one incentive fees this quarter.

Matt: Third we amended our dividend policy to include our base dividend and a supplemental dividend.

Matt: For the upcoming quarter, our board declared a base dividend of <unk> 40 per share plus a supplemental dividend of <unk> <unk> per share, which are both payable in cash on March 31, 2025 to stockholders of record as of March 17 2025.

Matt: We generally expect that the supplemental distributions will be equal to approximately 50% of the amount by which.

Matt: Adjusted NII exceeds the base quarterly distribution of <unk> 40 per share subject to the board's approval.

Matt: Taken together, we believe these actions bring several benefit and position <unk> for future success the.

Matt: The equity raise will help grow our asset base and further diversify the portfolio.

Resulted in a nearly 7% increase to NAV.

Matt: <unk> 25 is shaping up to be a more active year than 'twenty to 'twenty four for deal flow and the equity capital plus the associated impact of leverage give us the dry powder to capitalize on the attractive opportunities within our growing pipeline.

Second we permanently amended our fee structure instituting a cap also known as a total return hurdle and the calculation of our part one incentive fee to consider capital gains and losses.

Matt: Regarding the amended fee structure, although we have voluntarily waived fees over the past three quarters, the new incentive fee structure is permanent providing the market an shows with more clarity.

Speaker Change: The total return hurdle includes a look back provision that commence as effective October one 2024 and will build over time to a rolling 12 quarter look back by the company's 2027 fiscal year end.

Matt: Lastly, the change to the dividend policy establishes the stable base dividend that we believe is sustainable through market cycles amid fluctuations in rates and spreads. In addition, we expect our approach to the supplemental dividend helped us grow NAV going forward.

Speaker Change: Under the new incentive fee structure.

Speaker Change: Being $6 $2 million of part one incentive fees this quarter.

Speaker Change: Third we amended our dividend policy to include our base dividend and a supplemental dividend.

Turning now to financial results adjusted NII was <unk> $45 million or <unk> 54 per share for the fiscal first quarter down slightly from 55 per share in the prior quarter.

Speaker Change: For the upcoming quarter, our board declared a base dividend of <unk> 40 per share plus a supplemental dividend of <unk> <unk> per share, which are both payable in cash on March 31, 2025 to stockholders of record as of March 17 2025.

Matt: Our net asset value per share declined to $17 63.

Matt: From $18 nine last quarter.

Speaker Change: We generally expect that the supplemental distributions will be equal to approximately 50% of the amount by which.

Speaker Change: I'll now turn the call over to arm is to provide more details on our portfolio and the market environment.

Speaker Change: Adjusted NII exceeds the base quarterly distribution of <unk> 40 per share subject to the board's approval.

Arm: Thanks, Matt and Hello, everyone before I cover the portfolio and our outlook on the market I wanted to add my thoughts on the changes outlined.

Speaker Change: Taken together, we believe these actions bring several benefits and position <unk> for future success the.

Arm: Our private credit platform is a core focus for Oaktree and <unk> is a critical part of our franchise.

Speaker Change: The equity raise will help grow our asset base and further diversify the portfolio, but 25 is shaping up to be a more active year than 'twenty to 'twenty four for deal flow and the equity capital plus the associated impact of leverage give us the dry powder to capitalize on the attractive opportunities within our growing pipeline.

Arm: While we acknowledge the challenge performance over recent quarters, we remain committed to OCI. So.

Arm: We believe the equity purchased by Oaktree at a significant premium to the marketplace is a clear signal of our support.

Arm: Firmly believe that the actions we've laid out today demonstrate our commitment to position <unk> for further growth and success.

Speaker Change: Guarding the amended fee structure, although we have voluntarily waived fees over the past three quarters, the new incentive fee structure is permanent providing the market an shows with more clarity.

Arm: With that said I'll begin with an overview of our portfolio activity in the quarter before addressing our view on current market conditions.

Speaker Change: Lastly, the change to the dividend policy establishes the stable base dividend that we believe is sustainable through market cycles amid fluctuations in rates and spreads. In addition, we expect our approach to the supplemental dividend helped us grow NAV going forward.

Arm: Our portfolio remains well diversified with $2 $8 billion of fair value invested across 136 companies as of December 31, 2024, and the weighted average yield on our debt investments remains healthy at 10, 7%.

Speaker Change: Turning now to financial results adjusted NII was <unk> $45 million or <unk> 54 per share for the fiscal first quarter down slightly from 55 per share in the prior quarter.

Arm: During the first quarter, we invested $198 million in five new and eight existing portfolio companies in line with our strategy to invest at the top of the capital structure, 82% of our portfolio is now in first lien position up from 78% a year ago.

Speaker Change: Our net asset value per share declined to $17 63.

Speaker Change: From $18 nine last quarter.

Arm: We remain focused on investing in larger company and strong sectors that further diversify our portfolio.

Armis: I'll now turn the call over to arm is to provide more details on our portfolio and the market environment.

Arm: In the first quarter, the median EBITDA of our portfolio companies was $142 million.

Arm: Thanks, Matt and Hello, everyone before I cover the portfolio and our outlook on the market I wanted to add my thoughts on the change as Matt outlined.

Arm: And the median leverage was five four times.

Arm: The leverage ratios for our portfolio companies increased slightly from the previous quarter, but remained below the average for middle market companies.

Arm: Our private credit platform is a core focus for Oaktree and <unk> is a critical part of our franchise.

Arm: The vast majority of our portfolio companies are performing well in the current environment with a weighted average interest coverage ratio of two one times, assuming current base rates.

Arm: While we acknowledge the challenge performance over recent quarters, we remain committed to OS yourself.

Arm: We believe the equity purchased by Oaktree at a significant premium to the marketplace is a clear signal of our support.

Arm: I will now address the credit quality of the portfolio.

In the first quarter, one investment was restructured and removed from non accrual status. However, we classified one new investment as non accrual and took further write downs on other investments.

Arm: Firmly believe that the actions we've laid out today demonstrate our commitment to position <unk> for further growth and success.

Arm: With that said I'll begin with an overview of our portfolio activity in the quarter before addressing our view on current market conditions.

Arm: As a result, the investments on nonaccrual status at quarter end were three 9% of the portfolio at fair value and five 1% at cost relatively unchanged from the prior quarter.

Arm: The New addition to the nonaccrual list. This quarter is Dominion diagnostics clinical toxicology testing company in which we hold a first lien term loan and the revolver.

Arm: Although the company continued to pay cash interest in the December quarter. It has struggled to grow EBITDA and basic liquidity challenges looking ahead. So we felt it was prudent to place it on nonaccrual.

Arm: Working closely with management to address these matters.

Arm: Although not due to our non accrual list, we placed our first lien term loan for dialogue on non accrual.

Arm: We remain focused on investing in larger company and strong sectors that further diversify our portfolio.

Arm: As a reminder, dialyzed provides hemodialysis services directly to patients in skilled nursing facilities.

Arm: In the first quarter, the median EBITDA of our portfolio companies was $142 million.

Arm: And the median leverage was five four times.

Arm: Our original investment in dialogue included a first lien term loan and words.

Arm: The leverage ratios for our portfolio companies increased slightly from the previous quarter, but remained below the average for middle market companies.

Arm: In connection with amendment activity and funding incremental amounts on the term loan we received a relatively small mezzanine loan at zero cash cost.

Arm: The vast majority of our portfolio companies are performing well in the current environment with a weighted average interest coverage ratio of two one times, assuming current base rates.

Arm: We put this smaller mezzanine loan on nonaccrual last summer as the Companys plans to achieve profitability was taking longer than originally forecast.

Arm: I will now address the credit quality of the portfolio.

Arm: Unfortunately, the situation has not materially improved and given the ongoing cash needs of the company. We placed the first lien term loan on non accrual.

Arm: In the first quarter, one investment was restructured and removed from non accrual status. However, we classified one new investment is non accrual and took further write downs on other investments.

Arm: We are in ongoing discussions with the company and are evaluating all options.

Arm: As a result, the investments on nonaccrual status at quarter end were three 9% of the portfolio at fair value and five 1% at cost relatively unchanged from the prior quarter.

Arm: Along with the investments on non accrual, we further wrote down several underperforming assets.

Arm: These write downs are concentrated in a handful of struggling investments.

Arm: We continue to monitor these names closely while taking a conservative approach to their valuation.

Arm: The New addition to the nonaccrual list. This quarter is Dominion diagnostics clinical toxicology testing company in which we hold a first lien term loan and the revolver.

Arm: Next I want to highlight some of the positive development in the portfolio.

Arm: I will begin with a discussion on thin thrive, which was removed from the nonaccrual list.

Arm: <unk> is a software company that helps health care clients manage their revenue and cash flow and was successfully restructured in November of last year.

Arm: As part of the transaction the company raised new capital extended the maturity of its revolving credit facilities and de Levered its balance sheet.

Arm: Working closely with management to address these matters.

Arm: Although not new to our non accrual list, we placed our first lien term loan for dialogue.

Arm: In addition, we continue to make progress with several other names on nonaccrual.

Arm: Non accruals as.

Arm: As a reminder, dialyzed provides hemodialysis services directly to patients in skilled nursing facilities.

Arm: For example, EBITDA trends have remained positive for all web leads and Avery successfully closed additional condo sales in 2024, including a penthouse units.

Arm: Our original investment in <unk> included a first lien term loan and warrants in connection with amendment activity and funding incremental amounts on the term loan we received a relatively small mezzanine loan at zero cash cost.

Arm: We are optimistic these positive trends in these portfolio companies will continue into the new year.

Arm: Turning to our view of the market environment.

Arm: We put this smaller mezzanine loan on nonaccrual last summer as the Companys plans to achieve profitability was taking longer than originally forecast.

Arm: Although the fed lowered rates by 50 basis points in the last quarter of 2024 and may reduce rates further in 2025.

Arm: Elevated interest rates remain a challenge for many borrowers, especially those with levered balance sheet.

Arm: Fortunately the situation has not materially improved and given the ongoing cash needs of the company. We placed the first lien term loan on non accrual.

Arm: Even with inflation beginning to subside, we do not believe interest rates are going back to ultra low levels.

Arm: We are in ongoing discussions with the company and are evaluating all options.

Arm: During the fiscal first quarter spreads continued to tighten compared to the fourth quarter.

Arm: Along with the investments on non accrual. We further wrote down several underperforming assets. These write downs are concentrated in a handful of struggling investments.

Arm: Competition between broadly syndicated loans and private credit.

Arm: Reds, lower which now seem to be stabilizing as many companies have already repriced or refinanced their debt.

Arm: We continue to monitor these names closely while taking a conservative approach to their valuation.

Arm: Next I want to highlight some of the positive developments in the portfolio.

Arm: We believe a more favorable regulatory environment and an expected increase in private equity activity will increase opportunities for M&A and ipos over the years ahead.

Arm: I will begin with a discussion on thin thrive, which was removed from the nonaccrual list.

Arm: Thin drive as a software company that helps health care clients manage their revenue and cash flow and was successfully restructured in November of last year.

Arm: This increased deal flow should help fix the supply and demand imbalance, we have seen between lenders and borrowers and the private credit space.

Arm: As part of the transaction the company raised new capital extended the maturity of its revolving credit facilities and de Levered its balance sheet.

Arm: Easing the competitive pressure that has contributed to spread compression in recent years.

Arm: The uptick in deal, making is also likely to create a strong pipeline in 2025 at.

Arm: In addition, we continue to make progress with several other names on nonaccrual.

Arm: At the same time private equity firms are sitting on over two trillion dollars of dry powder.

For example, EBITDA trends have remained positive for all web leads and Avery successfully closed additional condo sales in 2024, including a penthouse units.

Arm: Conditions for deal volume are recovering with declining rates, along with valuation gaps between buyers and sellers improving we believe all of these factors combined suggest a positive outlook for the sector in 2025.

Arm: We are optimistic these positive trends in these portfolio companies will continue into the new year.

Arm: I'll now turn the call over to Rocco to share details on our originations for the quarter.

Arm: Turning to our view of the market environment.

Arm: Although the fed lowered rates by 50 basis points in the last quarter of 2024 and may reduce rates further in 2025.

Arm: Thanks, <unk> and Hello, everyone.

Arm: It's a pleasure to join you on the call today.

Arm: Elevated interest rates remain a challenge for many borrowers, especially those with levered balance sheet.

Arm: Turning to our investment activity for the first quarter.

Arm: As Arvind mentioned, we originated $198 million of new investment commitments with a weighted average yield of nine 6%.

Arm: Even with inflation beginning to subside, we do not believe interest rates are going back to ultra low levels.

Arm: A slight decline from last quarter, given the move lower in reference rates.

Arm: During the fiscal first quarter spreads continued to tighten compared to the fourth quarter.

Arm: We are encouraged by the still healthy level of origination activity.

Arm: Competition between broadly syndicated loans and private credit.

Arm: Even at these lower yields that reflect today's more competitive environment.

Reds, lower which now seem to be stabilizing as many companies have already repriced or refinanced their debt.

Arm: We continue to see many compelling investment opportunities that meet our underwriting standards across sponsor and non sponsor companies.

Arm: We believe a more favorable regulatory environment and an expected increase in private equity activity will increase opportunities for M&A and ipos over the years ahead.

Arm: Alongside undervalued publicly traded credits.

Arm: This allows us to take a selective and relative value approach to new portfolio investments.

Arm: This increased deal flow should help fix the supply and demand imbalance, we have seen between lenders and borrowers and the private credit space.

Arm: Paydowns exits and sales in the first quarter generated $352 million.

Arm: Easing the competitive pressure that has contributed to spread compression in recent years.

Arm: Up from $338 million in the fourth quarter.

Arm: The uptick in deal, making is also likely to create a strong pipeline in 2025 at.

Arm: Primarily reflecting a higher level of refinancing activity.

Arm: At the same time private equity firms are sitting on over two trillion dollars of dry powder.

Arm: Across the broader market.

Arm: This high level of Paydowns underscores the strength of the portfolio the oaktree platform and the quality of our underwriting process.

Arm: Conditions for deal volume are recovering with declining rates, along with valuation gaps between buyers and sellers improving.

Arm: We believe all of these factors combined suggest a positive outlook for the sector in 2025.

Arm: These paydowns also reflect the success of our portfolio companies in executing their business in fiscal management plans, which include refinancing debt at more favorable terms, reducing leverage or selling their businesses.

Arm: I'll now turn the call over to Rocco to share details on our originations for the quarter.

Rocco: Thanks, <unk> and Hello, everyone.

Arm: It's a pleasure to join you on the call today.

Arm: In addition to pay Downs. We also took advantage of the recent strength in the liquid credit markets and sold certain positions at prices that we believe reflect significant value.

Rocco: Turning to our investment activity for the first quarter.

Rocco: As Arvind mentioned, we originated $198 million of new investment commitments with a weighted average yield of nine 6%.

Arm: Next I will discuss some noteworthy investments in the quarter.

Rocco: A slight decline from last quarter, given the move lower in reference rates.

Arm: With encore, a global leader in audio visual and corporate are in production services owned by Blackstone.

Rocco: We are encouraged by the still healthy level of origination activity.

Rocco: Even at these lower yields that reflect today's more competitive environment.

Arm: Encore as a preferred provider for many of the largest hotel chains around the world and as contracts with more than 200 venues across 20 countries.

Rocco: We continue to see many compelling investment opportunities that meet our underwriting standards across sponsor and non sponsor companies.

Speaker Change: <unk> participated in a $2 9 billion refinancing to improve the existing capital structure.

Rocco: Alongside undervalued publicly traded credits.

Rocco: This allows us to take a selective and relative value approach to new portfolio investments.

Speaker Change: <unk> was a co lead arranger and book runner for this deal.

Speaker Change: Which included a $2 4 billion on a term loan and $250 million revolving credit facility.

Rocco: Paydowns exits and sales in the first quarter generated $352 million.

Speaker Change: Oaktree provided $452 million of the term loan, which has a coupon of sulfur plus 5%.

Rocco: Up from $338 million in the fourth quarter.

Rocco: Primarily reflecting a higher level of refinancing activity across the broader market.

Speaker Change: And $48 million of the revolving credit facility.

Speaker Change: And <unk> was allocated $62 million of this deal.

Rocco: This high level of Paydowns underscores the strength of the portfolio the oaktree platform and the quality of our underwriting process.

Speaker Change: Next we also made an investment in <unk> technologies the.

Speaker Change: The company has an outsourced manufacturer of non discretionary consumable products for large medical and dental Oems.

Rocco: These paydowns also reflect the success of our portfolio companies in executing their business in fiscal management plans, which include refinancing debt at more favorable terms reducing leverage.

Speaker Change: This financing supported Arlington capital partners acquisition of <unk> technologies.

Speaker Change: This facility consists of a $330 million of our term loan.

Rocco: Selling their businesses.

Rocco: In addition to pay Downs. We also took advantage of the recent strength in the liquid credit markets and sold certain positions at prices that we believe reflects significant value.

Speaker Change: A $90 million delayed draw term loan and a $50 million revolving credit facility.

Speaker Change: Oaktree provided $67 million of the term loan <unk>.

Speaker Change: $18 million of the delayed draw term loan and $10 million.

Rocco: Next I will discuss some noteworthy investments in the quarter.

Speaker Change: Our revolving credit facility.

Rocco: Starting with Encore, a global leader in audio visual and corporate are in production services owned by Blackstone.

Speaker Change: The terminal has a coupon of sulfur plus 475% and.

Speaker Change: <unk> was allocated $22 million office deal.

Rocco: Encore as a preferred provider for many of our largest hotel chains around the world.

Speaker Change: Another notable origination for the quarter was a large refinancing for optimized Lee.

Rocco: Contracts with more than 200 venues across 20 countries.

Speaker Change: Which is a top player in the digital experience space that provides cloud based software to enterprise and middle market customers.

Rocco: Oaktree participated in a $2 9 billion refinancing to improve the existing capital structure.

Speaker Change: <unk> was a co leader Ranger and Bookrunner for this deal.

Speaker Change: To manage websites content and marketing campaigns.

Speaker Change: Which included a $2 4 billion on a term loan and $250 million revolving credit facility.

Speaker Change: This financing includes a $673 million term loan with a coupon of sulfur plus 5%.

Speaker Change: Oaktree provided $452 million of the term loan, which has a coupon of sulfur plus 5% and $48 million of our revolving credit facility.

Speaker Change: As well as a $100 million revolving credit facility.

Speaker Change: Well, we provided $101 million of the term loan.

Speaker Change: And <unk> was allocated $62 million of this deal.

Speaker Change: And $15 million.

Speaker Change: The revolving credit facility.

Speaker Change: Next we also made an investment in <unk> technologies.

Speaker Change: And <unk> was allocated $18 5 million of this deal.

Speaker Change: Company is an outsourced manufacturer of non discretionary consumable products for large medical and dental Oems.

Speaker Change: These transactions reflect the deal sourcing power of <unk> platform and our ability to participate in larger deals, which we believe is a competitive advantage today.

Speaker Change: This financing supported Arlington capital partners acquisition of <unk> technologies.

Speaker Change: This facility consists of a $330 million of term loan a.

Speaker Change: As <unk> just mentioned we are optimistic about continued deal flow into 2025 and.

Speaker Change: $90 million delayed draw term loan and a $50 million revolving credit facility.

Speaker Change: With the additional equity provided by Oaktree.

Speaker Change: Oaktree provided $67 million of the term loan $18 million of the delayed draw term loan and $10 million.

Speaker Change: We're well positioned to participate in these attractive opportunities.

Chris: Now I will turn the call over to Chris to discuss our financial results in more detail.

Speaker Change: The revolving credit facility.

Speaker Change: The terminal has a coupon of sulfur plus 475% and.

Chris: Thank you Rocco and our first fiscal quarter ending December 31, 2024, we reported adjusted net investment income of $44 7 million or <unk> 54 per share down slightly from $45 2 million or <unk> 55 per share in the prior quarter.

Speaker Change: And <unk> was allocated $22 million office deal.

Speaker Change: Another notable origination for the quarter was a large refinancing for optimized Lee.

Speaker Change: Which is a top player in the digital experience space that provides cloud based software to enterprise and middle market customers.

Chris: The decrease was primarily driven by lower total investment income, partially offset by reduced interest expense management fees and part one incentive fees during the quarter.

Speaker Change: To manage websites content and marketing campaigns.

Speaker Change: This financing includes a $673 million term loan with a coupon of sulfur plus 5%.

Chris: Adjusted total investment income in the quarter declined $8 million compared to the prior quarter, primarily due to a decrease in nonrecurring revenue.

Speaker Change: As well as a $100 million revolving credit facility.

Chris: A decline in reference rates and the impact of investments on non accrual status.

Speaker Change: We provided $101 million of the promo.

Chris: All told these factors resulted in a $5 $5 million decrease in interest income and a $2 $2 million decrease in fee income.

Speaker Change: And $15 million of the.

Speaker Change: The revolving credit facility.

Speaker Change: And <unk> was allocated $18 5 million of this deal.

Chris: Additionally, there was a zero point $3 million reduction in dividend income largely driven by the Kemper JV.

Speaker Change: These transactions reflect the deal sourcing power of <unk> platform and our ability to participate in larger deals, which we believe is a competitive advantage today.

Chris: As I mentioned in my remarks last quarter, our September 30 quarterly results benefited.

Chris: Benefited from larger than usual nonrecurring income, whereas our December quarter results reflect a more typical level of nonrecurring income provide some additional context nonrecurring income is generally composed of prepayment fees and OID acceleration on successful investment exits and we generally see it in the neighborhood of three to five per quarter.

Speaker Change: As <unk> just mentioned we are optimistic about continued deal flow into 2025.

Speaker Change: And <unk>.

Speaker Change: With the additional equity provided by Oaktree, we are well positioned to participate in these attractive opportunities.

Chris: Now I will turn the call over to Chris to discuss our financial results in more detail.

Chris: Our nonrecurring income for the September and December quarters was about <unk>, <unk> and <unk>, respectively.

Chris: Thank you, Rob and our first fiscal quarter ending December 31, 2024, we reported adjusted net investment income of $44 7 million or <unk> 54 per share down slightly from $45 2 million or <unk> 55 per share in the prior quarter.

Chris: Net expenses declined to $7 $7 million from the prior quarter, driven by a $6 $2 million decrease in part one incentive fees net of fees waived as a result of the newly implemented incentive fee structure that Matt described.

Chris: The decrease was primarily driven by lower total investment income, partially offset by reduced interest expense management fees and part one incentive fees during the quarter.

Chris: We also saw a $1 $5 million decline in interest expense driven by lower reference rates on our floating rate liabilities.

Chris: Now moving to our balance sheet <unk> net leverage ratio at quarter end was 1.03 times down from 1.07 times last quarter.

Chris: Adjusted total investment income in the quarter declined $8 million compared to the prior quarter, primarily due to a decrease in nonrecurring revenue.

Chris: Repayments and sales of $352 million outpaced our newly funded investments of $201 million, which resulted in a slight decline in the size of our portfolio.

Chris: Klein in reference rates and the impact of investments on non accrual status.

Chris: All told these factors resulted in a $5 $5 million decrease in interest income and a $2 $2 million decrease in fee income.

Chris: As of December 31, total debt outstanding was $1 six 1 billion and had a weighted average interest rate of six 2%, including the effects of our interest rate swap agreements. This is down from last quarter, primarily reflecting lower interest rates on our floating rate liabilities.

Chris: Additionally, there was a zero point $3 million reduction in dividend income largely driven by the Kemper JV.

Chris: As I mentioned in my remarks last quarter, our September 30 quarterly results benefited.

Chris: Unsecured debt represented.

Chris: 9% of the total debt at quarter end up from last quarter.

Chris: We have plenty of dry powder to fund investment commitments with liquidity of approximately $1 1 billion.

Chris: Including $113 million of cash and $958 million of Undrawn capacity on our credit facilities as of December 31.

Chris: Our nonrecurring income for the September and December quarters was about <unk>, <unk> and <unk>, respectively.

Chris: Unfunded commitments, excluding those related to the joint ventures were $275 million.

Chris: Net expenses declined $7 $7 million from the prior quarter, driven by a $6 $2 million decrease in part one incentive fees net of fees waived as a result of the newly implemented incentive fee structure that Matt described.

Chris: Approximately $244 million of which can be drawn immediately as the remaining $31 million is subject to portfolio companies meeting certain milestones before the funds can be drawn.

Chris: Our liquidity and purchasing power was further bolstered by the $100 million of newly issued common shares on February 3rd which will help diversify the portfolio and position us well to take advantage of what we believe will be an active deal flow environment in calendar year 2025.

Chris: We also saw a $1 $5 million decline in interest expense driven by lower reference rates on our floating rate liabilities.

Chris: Now moving to our balance sheet <unk>.

Chris: <unk> net leverage ratio at quarter end was 1.03 times down from 1.07 times last quarter.

Chris: I would also note that our leverage our target leverage ratio remains unchanged at 0.9 times to 125 times.

Repayments and sales of $352 million outpaced our newly funded investments of $201 million, which resulted in a slight decline in the size of our portfolio.

Chris: So as we add leverage to the newly issued equity we expect to generate a little over $200 million of additional purchasing power.

Chris: Turning now to our joint ventures together the Jbs currently hold $417 million of investments primarily in broadly syndicated loans spread across 44 portfolio companies.

Chris: During the first fiscal quarter, the JV again generated attractive annualized ROE, which were approximately 12% in aggregate.

Chris: Secured debt represented.

Chris: 59% of the total debt at quarter end up from last quarter.

Chris: Leverage at the JV was one two times down modestly from the last quarter and.

Chris: We have plenty of dry powder to fund investment commitments with liquidity of approximately $1 1 billion.

Chris: In addition, we received a $700000 dividend from the Kemper JV.

Chris: In closing, we made solid progress in the first quarter strengthening our portfolio, while also generating healthy levels of new originations. However, we acknowledge the current challenges within our portfolio and remain committed to working through these situations and maximizing recovery.

Chris: Including $113 million of cash and $958 million of Undrawn capacity on our credit facilities as of December 31.

Chris: Unfunded commitments, excluding those related to the joint ventures were $275 million.

Chris: Approximately $244 million of which can be drawn immediately as the remaining $31 million is subject to portfolio companies meeting certain milestones before the funds can be drawn.

Chris: In combination with the shareholder friendly measures, we implemented we believe <unk> well positioned to navigate the current market environment and to deliver attractive risk adjusted returns to our shareholders over the long term.

Chris: Our liquidity and purchasing power was further bolstered by the $100 million of newly issued common shares on February three which will help diversify the portfolio and position us well to take advantage of what we believe will be an active deal flow environment in calendar year 2025.

Chris: We appreciate your participation on our call today, and we'll now take your questions. Operator, Please open the line.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.

I would also note that our leverage our target leverage ratio remains unchanged at 0.9 times to 125 times.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Chris: So as we add leverage to the newly issued equity we expect to generate a little over $200 million of additional purchasing power.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Chris: Turning now to our joint ventures together. The JV is currently hold $417 million of investments primarily in broadly syndicated loans spread across 44 portfolio companies.

Speaker Change: And the first question will come from Finian O'shea with Wells Fargo Securities. Please go ahead.

Finian O'shea: Hey, everyone. Good morning.

Chris: During the first fiscal quarter, the JV again generated attractive annualized ROE, which were approximately 12% in aggregate <unk>.

Finian O'shea: First question on the 100 million.

Finian O'shea: This quarter equity investment any color you could give on on where that came from and then.

Chris: Average at the JV was one two times down modestly from the last quarter.

Chris: In addition, we received a $700000 dividend from the Kemper JV.

Finian O'shea: And then the future.

Finian O'shea: Plans for that I think the filing says.

Finian O'shea: That's the entity agreed not to sell until February 26.

So if that's in the plan or on the other hand, you might continue to add more going forward. Thanks.

Finian O'shea: Hey, Thanks, Thanks, Vin, it's Matt so on the last point regarding that.

Chris: In combination with the shareholder friendly measures. We implemented we believe <unk> is well positioned to navigate the current market environment and to deliver attractive risk adjusted returns to our shareholders over the long term.

Finian O'shea: The sales plan that is.

Finian O'shea: Just a standard lockup.

As of one year standard lockup, so I wouldn't read anything into that other than normally.

Chris: We appreciate your participation on our call today, and we'll now take your questions. Operator, Please open the line.

Finian O'shea: Normally we have purchases like this there's a lockup provisions so.

Finian O'shea: Basically prevents.

Chris: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.

Finian O'shea: CSL are oaktree from selling for for the next year.

Finian O'shea: And then beyond that obviously ultra has been a shareholder and CSL for a long time and hasn't sold any stock to date, so I wouldn't read too much into that part of it other than just kind of a.

Chris: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Chris: At this time, we will pause momentarily to assemble our roster.

Finian O'shea: Our standard standard lockup provision in terms of the kind of the $100 million of some color on that.

Finian O'shea: We felt just kind of given.

Speaker Change: And the first question will come from Finian O'shea with Wells Fargo Securities. Please go ahead.

Finian O'shea: The market environment, where we're seeing deployment opportunities.

Finian O'shea: Hey, everyone. Good morning.

Finian O'shea: That would be helpful.

Finian O'shea: To have let's say, some significant dry powder and equity buying power.

Finian O'shea: First question on the 100 million.

Finian O'shea: This quarter equity investment any color you could give on on where that came from and then.

Finian O'shea: And that we could combine with leverage and really deploy into the pipeline and rock environment can you talk a little bit more about the market environment, but.

Finian O'shea: And then the future.

Mark environment was.

Finian O'shea: Plans for that I think the filing says.

Finian O'shea: Terms of investing is attractive so we thought having the oaktree GP via the equity and purchase it at at NAV I just wanted to clear that the purchases at the January 31 now.

Finian O'shea: That's the entity agreed not to sell until February 26.

Finian O'shea: So if that's in the plan or on the other hand you.

Finian O'shea: You might continue to add more going forward. Thanks.

Finian O'shea: Made a ton of sense, it gives us kind of 5% to 10%.

Finian O'shea: Hey, Thanks, Thanks, Vin, it's Matt so on the last point regarding that.

Finian O'shea: Liquidity or.

Buying power for our assets.

Finian O'shea: The sales plan, that's just a standard lockup.

Finian O'shea: And just seem seem to make a lot of sense all the way around as we looked at it.

Finian O'shea: One year standard lockup, so I wouldn't read anything into that other than normally.

Finian O'shea: Okay. That's helpful. Thanks, and then maybe one for arm as an extension of that.

Finian O'shea: Normally we have purchases like this there is a lock up provision so.

Finian O'shea: Basically rents.

Finian O'shea: We heard some more language on it this quarter with.

Finian O'shea: CSL or outreach from selling for for the next year.

Finian O'shea: Market senior.

Finian O'shea: Can you sort of talk about the why.

Finian O'shea: And then beyond that obviously oaktree has been a shareholder and CSL for a long time and hasn't sold any stock to date, so I wouldn't read too much into that part of it other than just kind of a.

Finian O'shea: Behind the strategic credit groups ongoing push toward.

Finian O'shea: More of the plane direct lending large larger company more senior participations.

Finian O'shea: Our standard standard lockup provision in terms of the kind of the $100 million just some color on that.

Finian O'shea: As if that's a change in the market or your platform driving that.

Finian O'shea: We felt just kind of given the market environment, where we're seeing deployment opportunities.

Finian O'shea: And how we should think of that as the better risk adjusted opportunity.

Finian O'shea: That would be helpful.

Finian O'shea: Thanks, Dan.

Finian O'shea: To have let's say, some significant dry powder and equity buying power.

Finian O'shea: So.

Speaker Change: I don't think its a change in philosophy or what were kind of doing writ large at the firm or in the strategic credit group, we continue to have.

Finian O'shea: We could combine with leverage and really deploy into the pipeline.

Finian O'shea: Rock environment can you talk a little bit more about the market environment, but mark.

Speaker Change: The capabilities that are sort of sector focused we continue to invest in life sciences and in other sectors on a dedicated basis.

Finian O'shea: Mark environment was in terms of investing is attractive so we thought having the oaktree GP via the equity and purchase it at at NAV I just want to declare that the purchases at the January 31 now.

Speaker Change: However, I think with the rapid increase in rates and the continued sustained.

Speaker Change: Fairly high so for rates, we think that you know first lien sponsored lending that is sort of high single digit and into the low double digits represents really good value relative to other things we're seeing some.

Finian O'shea: Made a ton of sense, it gives us kind of 5% to 10%.

Finian O'shea: Additional liquidity or.

Finian O'shea: Buying power for our assets.

Finian O'shea: And just seem seem to make a lot of sense all the way around as we looked at it.

Speaker Change: Really leaning into first lien there because we don't think that.

Finian O'shea: Okay. That's helpful. Thanks, and then maybe one for <unk>.

Speaker Change: Picking up the extra returned by growing junior is usually worth it now why is that it's because when rates did go in sofa was above 5% and spreads were 6% sub 6% six 5%.

Finian O'shea: <unk> is an extension of that.

Finian O'shea: We heard some more language on it this quarter with.

Finian O'shea: Market senior.

Speaker Change: Can you sort of talk about the why.

Speaker Change: That implied first lien lending was returning something like 11%, 12% or the cost of borrowing for borrowers was 11 or 12% to go junior would mean, we would have to charge 14 or 15% of those same borrowers and private equity sponsors and frankly other borrowers that are non sponsor owned when they looked at that pricing.

Speaker Change: Behind the strategic credit groups ongoing push toward.

Speaker Change: More of the plane direct lending large larger company more senior participations.

Speaker Change: As if that's a change in the market or your platform driving that.

Speaker Change: And how we should think of that as the better risk adjusted opportunity.

Speaker Change: That's the cost of my equity anyway, I'd, rather over Oncotype then too.

Speaker Change: And then to pay you 14, 15%, 16% and so if you did want to kind of hold firm to the.

Dan: Thanks, Dan.

Speaker Change: So.

Speaker Change: I don't think its a change in philosophy or what were kind of doing writ large at the firm or in the strategic credit group, we continue to have.

Speaker Change: Junior.

Speaker Change: Positioning it usually meant some sort of inadequacy.

Speaker Change: Either in the sponsor we are in the company that causes them to want to borrow at that cost of borrowings. So we really pushed heavily into firstly, because we thought that it was.

Speaker Change: The capabilities that are sort of sector focused.

Speaker Change: We continue to invest in life sciences and in other sectors.

Speaker Change: Dedicated basis.

Speaker Change: Lower rates.

Speaker Change: However, I think with the rapid increase in rates and the continued sustained.

Speaker Change: Attractive return so on a relative basis is the best risk adjusted return we saw in the market now.

Speaker Change: Rates are going down spreads have declined we are seeing an increase in M&A deal volume, we think some junior opportunities will become more interesting as first lien lending goes to sort of 8% to 10%.

Speaker Change: Really leaning into first lien there because we don't think that.

Speaker Change: And so you know there could be some junior opportunities at 10 to 12, or maybe 10% to 13 that could be interesting.

Speaker Change: Picking up the extra returned by growing junior is usually worth it now why is that it's because when rates did go in sofa was above 5% and spreads were 6% sub 6% six 5%.

Speaker Change: But we're always.

Speaker Change: Evaluating the quality of those.

Speaker Change: Situations versus the first lien and as for now.

Speaker Change: A meaningful increase in the in the potential deal flow of junior debt or the potential deal flow of teens, returning non sponsored direct lending.

Speaker Change: Really.

Speaker Change: And a very significant way in terms of additional deal flow, we still getting sort of nine ish percent on first lien lending is pretty attractive relative to other things we could be doing.

Speaker Change: Said, you know what thats the cost of my equity anyway, I'd, rather over Oncotype then too.

Speaker Change: Great. It's helpful. Thank you so much.

Speaker Change: Thank you.

Speaker Change: And then to pay you 14, 15%, 16% and so if you did want to kind of hold firm to.

Matthew Horowitz: Our next question will come from Matthew Horowitz with Jefferies. Please go ahead.

Matthew Horowitz: Hi, everybody just a quick one.

Speaker Change: Junior.

Speaker Change: Positioning it usually meant some sort of inadequacy.

Matthew Horowitz: Upcoming debt maturity.

Maybe I missed it but can you talk about the options you're considering there.

Speaker Change: Either in the sponsor we are in the company that causes them to want to borrow at that cost of borrowing so we really pushed heavily into firstly, because we thought that it was.

Matthew Horowitz: Sure sure. So we have a bond maturity at the end of February.

Matthew Horowitz: And we're looking at really all of our options, we have plenty of liquidity existing liquidity.

Speaker Change: Lower rates.

Speaker Change: Attractive return so on a relative basis is the best risk adjusted return we saw in the market and now that the.

Matthew Horowitz: Between $1 billion of capacity on our revolver.

Matthew Horowitz: ABL facilities, we obviously have the equity we just raised and obviously as al has been a frequent and successful issuer in the unsecured market. So we will continue to look at that.

Matthew Horowitz: And really kind of post earnings has taken.

Speaker Change: And so you know there could be some junior opportunities at 10 to 12, or maybe 10 to 13 that could be interesting but.

Matthew Horowitz: All the various markets and opportunities to us and.

Speaker Change: But we're always.

Matthew Horowitz: Then.

Matthew Horowitz: Kind of take a course of action, we think makes the most sense but.

Speaker Change: Evaluating the quality of those.

Speaker Change: Situations versus the first lien and as for now.

Matthew Horowitz: Thank goodness, we have plenty of plenty liquidity to and all of our facilities. So.

Speaker Change: A meaningful increase in the in the potential deal flow of junior debt or the potential deal flow of teens, returning non sponsored direct lending.

Matthew Horowitz: We will just look at the market environment and to make them make a decision.

Matthew Horowitz: Okay, Great makes sense and then.

Just sort of a high level could you talk about what the short term and medium term goals are for the company at this point with your.

Speaker Change: Really.

Matthew Horowitz: Reset dividend and management fee structure.

Matthew Horowitz: Okay.

Matthew Horowitz: Can you be a little bit more specific about.

Speaker Change: Great. It's helpful. Thank you so much.

Matthew Horowitz: In terms of our goal.

Speaker Change: Thank you.

Matthew Horowitz: General and then if you have a specific question please feel free to follow up but.

Matthew Horowitz: Our next question will come from Matthew Horowitz with Jefferies. Please go ahead.

Matthew Horowitz: I think the general goal of the.

Speaker Change: Hi, everybody just a quick one.

Matthew Horowitz: The BDC is to cover our dividend.

Matthew Horowitz: Upcoming debt maturity.

Matthew Horowitz: In a comfortable way.

Speaker Change: Maybe I missed it but can you talk about the options you're considering there.

Matthew Horowitz: It is to grow the asset base and further diversify the portfolio.

Speaker Change: Sure sure. So we have a bond maturity at the end of February.

Matthew Horowitz: It is to take our non accrual assets in those equities that arent paying dividends and coupons and.

Speaker Change: And we're looking at really all of our options, we have plenty of liquidity existing liquidity.

Matthew Horowitz: Convert them into interest income, earning performing credit assets are working through the troubled assets.

Speaker Change: Between $1 billion of capacity on our revolver.

Matthew Horowitz: As quickly and as efficiently as we can.

Speaker Change: ABL facilities, we obviously have the equity we just raised and obviously as al has been a frequent and successful issuer in the unsecured market. So we will continue to look at that.

Matthew Horowitz: I mean that would really be the summary of it I mean, that's why we've changed the dividend in a manner where.

Matthew Horowitz: It.

Matthew Horowitz: The base dividend has kind of reset lower where we think we could comfortably cover it and any excess will both kind of add to the dividend and help improve NAV.

Speaker Change: And really kind of post earnings has taken.

Speaker Change: All the various markets and opportunities to us and.

Speaker Change: And.

Speaker Change: Kind of take a course of action, we think makes the most sense but.

Matthew Horowitz: So.

Matthew Horowitz: We decided to rollout all of these changes all at once to really.

Speaker Change: We have plenty of plenty liquidity to and all of our facilities. So.

Improve.

Speaker Change: We will just look at the market environment and to make a make a decision.

Matthew Horowitz: Both the stability of the dividend and the.

Speaker Change: Okay, Great makes sense.

Matthew Horowitz: Our ability of CSL to improve.

Speaker Change: And then.

Speaker Change: Just sort of a high level could you talk about what the short term and medium term goals are for the company at this point with your.

Matthew Horowitz: But we continue to separate and apart from that block and tackle or to.

Matthew Horowitz: To turn those.

Speaker Change: Reset dividend and management fee structure.

Matthew Horowitz: Some of the troubled assets into good assets.

Matthew Horowitz: If you have specific questions beyond that are happy to take them.

Speaker Change: Yeah.

Matthew Horowitz: Okay now that's sort of what I was looking for thanks very much.

Speaker Change: Can you be a little bit more specific about.

Speaker Change: In terms of our goal.

Matthew Horowitz: Thank you.

Speaker Change: General and then if you have a specific question please feel free to follow up but.

Matthew Horowitz: And our next question comes from Melissa <unk> with J P. Morgan. Please go ahead.

Speaker Change: I think the general goal of the.

Speaker Change: Good morning, Thanks for taking my questions.

Speaker Change: The BDC is to is to cover our dividend.

Speaker Change: In a comfortable way.

Speaker Change: When we think about the supplemental dividend level going forward can you help us better understand how much of the access earnings above the base.

Speaker Change: It is to grow the asset base and further diversify the portfolio.

Speaker Change: It is to take our non accrual assets in those equities that arent paying dividends and coupons and.

Speaker Change: Aiming to pay out versus retain.

Speaker Change: Convert them into interest income, earning performing credit assets are working through the troubled assets.

Speaker Change: Is that should we think of it half and half firstly, I or something a little bit more on that.

Yes, Melissa it's Matt Thanks for the question I would.

Speaker Change: As quickly and as efficiently as we can.

Speaker Change: Assume half and half so roughly 50% of the income above the base would be paid in a supplemental dividend.

Speaker Change: And that would really be the summary, I mean, that's why we've changed the dividend in a manner where.

Speaker Change: It.

Speaker Change: Yes.

Speaker Change: So I would use.

Speaker Change: The base dividend has kind of reset lower where we think we could comfortably cover it and any excess will both kind of after the dividend and help improve NAV.

Speaker Change: Okay.

Speaker Change: And then just looking at sort of existing cash balances.

Speaker Change: Interesting timing on the equity injection from Oaktree.

Speaker Change: So.

Speaker Change: We decided to rollout all of these changes all at once to really.

Speaker Change: Improve.

Speaker Change: Well I would think that we should be expecting some sort of multiple quarter deployment period for that so should we think of there being potentially a bit of cash drag over the next couple of quarters.

Speaker Change: Both the stability of the dividend and the.

Speaker Change: Ability of CSL to improve.

Speaker Change: But we continue to separate and apart from that block and tackle or to.

Speaker Change: To turn those.

Speaker Change: Hey, Melissa it's Rob if I can take that so we do have a pretty strong pipeline that we've been building into in anticipation of the equity raise.

Speaker Change: Some of the troubled assets into good assets.

Speaker Change: If you have specific questions beyond that are happy to take them.

Speaker Change: Okay now that that's sort of what I was looking for thanks very much.

Speaker Change: Both on the private side as well as public site. So you are right. It will take us a couple of quarters.

Speaker Change: Thank you.

Melissa <unk>: And our next question comes from Melissa <unk> with J P. Morgan. Please go ahead.

Speaker Change: But given the pipeline we have I think we can deploy the new equity plus the associated leverage fairly fairly quickly.

Melissa: Good morning, Thanks for taking my questions.

Speaker Change: Okay, and so when you think of the pipeline that's not just on a gross basis, but also in that just to clarify.

Melissa: When we think about the supplemental dividend level going forward can you help us better understand how much of the access earnings above the base youre aiming to payout versus retain.

Speaker Change: Correct, so net of anticipated repayments on the existing portfolio.

Speaker Change: Okay. Thanks, I'll hop back in the queue.

Melissa: Is that should we think of it half and half, firstly, I or something a little bit more than that.

Speaker Change: Okay and then if you have a question. Please press Star then one hour.

Melissa: Yes, Melissa it's Matt Thanks for the question I would kind of.

Speaker Change: Our next question comes from Mike would occur that's a private investor. Please go ahead.

Melissa: Assume half and half so roughly 50% of the income above the base would be paid in a supplemental dividend.

Mike: Thank you so much for taking my call.

Speaker Change: I was kind of curious I noticed in your I announced that debt.

Melissa: Yes.

Melissa: So I would use.

Mike: <unk>.

Melissa: Okay.

Mike: Bart.

Mike: Back shares at net asset value, while it's obviously available in the marketplace at give or take a point.

Melissa: And then just looking at sort of existing cash balances.

Melissa: Interesting timing on the equity injection from Oaktree.

13% discount now I'm sure that there is a reason for that but I was just kind of curious as to what that reason.

Melissa: Great.

Melissa: Well I would think that we should be expecting some sort of multiple quarter deployment period for that so should we think of there being potentially a bit of cash drag over the next couple of quarters.

Speaker Change: Sure. It's a great. It's a great question, Mike and as you as you mentioned we did.

Speaker Change: The Oaktree the manager purchased the shares at the January 31st NAV, which was at the time, roughly a 10% premium to market and.

Speaker Change: Hey, Melissa Rob if I can take that so we do have a pretty strong pipeline that we've been building into in anticipation of the equity raise.

Speaker Change: Versus by buying it in the market at a discount and the just kind of reiterating and dig a little deeper into the rationale for that so what we think is super interesting opportunity and a great way the best way to add value.

Speaker Change: Both on the private side as well as public side. So you are right. It will take us a couple of quarters.

Speaker Change: But given the pipeline we have I think we can deploy the new equity plus the associated leverage fairly fairly quickly.

Speaker Change: Okay, and so when you think of the pipeline that's not just on a gross basis, but also in that just to clarify.

Speaker Change: Zelle is to continue to invest in the in the current environment and the pipeline, we're seeing and so if we were just to them.

Speaker Change: Correct, so net of anticipated repayments on the existing portfolio.

Justin: Manager Justin.

Justin: Buy in the market doesn't create any any equity or any kind of asset growth to the BDC, whereas by investing at NAV, putting the equity and we haven't changed our leverage target. So we can borrow against that equity and deploy that into assets and grow the asset create more diversification.

Speaker Change: Okay. Thanks, I'll hop back in the queue.

Speaker Change: Okay and then if you have a question. Please press Star then one hour.

Speaker Change: Our next question comes from Mike would occur that's a private investor. Please go ahead.

Mike: Thank you so much for taking my call.

Justin: <unk>.

Mike: I was kind of curious I noticed in your I announced that debt.

Justin: And asset growth in in on the balance sheet CSL, we think that was better than than just buying and the manage of buying in the market. Even if it was at a discount so that was the rationale behind behind that.

Mike: <unk>.

Mike: Bart.

Mike: Back shares at net asset value, while it obviously available in the marketplace at give or take a point about 13% discount.

Justin: That action.

Justin: And we recognize the harm and we recognize that and us buying at NAV.

Mike: Sure that Theres, a reason for that but I was just kind of curious as to what that reason.

Justin: Versus the stock price was trading at a discount to NAV.

Speaker Change: Sure. It's a great great question, Mike and as you as you mentioned we did.

Justin: Is a great thing for shareholders.

Justin: And Thats something that <unk> felt very comfortable doing as a sign of support for <unk>.

Speaker Change: The Oaktree the manager purchased the shares at the January 31st NAV, which was at the time, roughly a 10% premium to market and.

Justin: As a sign of support for our NAV.

Speaker Change: In the BDC.

Speaker Change: And it made sense for us in that scale.

Speaker Change: To press forward and to really as Matt said deploy capital on behalf of <unk> into a very attractive market environment. So we know it's a.

Speaker Change: A very very positive thing for shareholders and Thats not something we felt very comfortable doing.

Speaker Change: <unk> is to continue to invest in the in the current environment and the pipeline, we're seeing and so if we were just to them.

Speaker Change: And it wasn't nearly as positive as being able to buy it at a discount.

Speaker Change: Manager were just to buy in the market doesn't create any any equity or any kind of asset growth to the BDC.

Speaker Change: Well, it's more positive for shareholders doing it the way we did it.

Speaker Change: There is by investing at NAV, putting the equity and we haven't changed our leverage target. So we can borrow against that equity and deploy that into assets and grow the asset create more diversification.

Matthew Horowitz: Then it is to buy at a discount and as Matt said this puts dry powder on the balance sheet of OS CSO rather than.

Matthew Horowitz: Buying existing shares from other shareholders. So we really wanted to grow the size of those CSL the deployment.

Speaker Change: And asset growth in in on the balance sheet now CSL, we think that was better than than just buying and the manage of buying in the market.

Matthew Horowitz: The.

Matthew Horowitz: Additional deployment I think that's also a good thing for the shareholders. So it's I think it's doubly good the way we did it.

Speaker Change: Even if it was at a discount so that was the rationale behind behind that.

Speaker Change: That action.

Matthew Horowitz: Okay.

Speaker Change: And we recognize the harm and we recognize that and us buying at NAV.

Matthew Horowitz: Accept that somebody that I could talk to after the call. So I get a better understanding on that.

Speaker Change: Versus the stock price was trading at a discount to NAV.

Matthew Horowitz: A pretty substantial investor in Ocs Allen, a private placement and I would just like to draw down on that a bit just to make me a little bit smarter in that area and then I do have one other question is if I understood you correctly and I Didnt read.

Speaker Change: Is a great thing for our shareholders.

Speaker Change: It's something that Oaktree felt very comfortable doing as a sign of support for <unk>.

Speaker Change: As a sign of support for our NAV.

Speaker Change: In the BDC.

Matthew Horowitz: I apologize.

Speaker Change: And it made sense for us and not scale.

Speaker Change: Paul announcement, but it sounded to me earlier on the call that you have issued more shares and ocs out.

Speaker Change: To.

Speaker Change: To press forward and to really as Matt said deploy capital on behalf of <unk> into a very attractive market environment. So we know it's a.

Speaker Change: And if so at what price where those shares issued.

Speaker Change: Sure So we issued $100 million.

Speaker Change: A very very positive thing for shareholders, that's something we felt very comfortable doing.

Speaker Change: Shares of Ocs L.

Speaker Change: Two oaktree to manager at.

Speaker Change: And it wasn't nearly as positive as it has been able to buy it at a discount.

Speaker Change: $17 63.

Speaker Change: Share, which was the net asset value at January 31, 2025.

Speaker Change: Well, it's more positive for shareholders doing it the way we did it.

Speaker Change: Then it is to buy at a discount and as Matt said this puts dry powder on the balance sheet of OS CSO rather than.

Speaker Change: And at a premium to the to the market price. So all of those are one and the same everything we're talking about as part of a single transaction.

Speaker Change: Buying existing shares from other shareholders. So we really wanted to grow the size of those CSL the deployment.

Speaker Change: We bought.

Speaker Change: That kind of behavior.

Speaker Change: Why were why are you doing that but I don't want to take up.

Speaker Change: The Ah <unk>.

Speaker Change: Time here on that call that to answer my stupidity, but its an unusual transaction.

Speaker Change: Additional deployment I think that's also a good thing for the shareholders. So it's I think it's doubly good the way we did it.

Speaker Change: Great.

Speaker Change: Okay.

Speaker Change: I would just like to draw down on that a little bit further.

Speaker Change: Accept that somebody that I could talk to after the call. So I get a better understanding on that.

Speaker Change: Hey, Mike This is Dana I'll I'll happy to give you a call. After this and we can walk through it.

Speaker Change: A pretty substantial investor in Ocs Allen, a private placement and I would just like to draw down on that a bit just to make me a little bit smarter in that area and then I do have one other question if I understood you correctly and I Didnt read.

Mike: That'd be Super Dana. Thank you so much.

Mike: Not a problem.

Melissa Wedel: And our next question comes from again, Melissa Wedel with Jpmorgan. Please go ahead.

Melissa Wedel: Thanks for the follow up I just wanted to clarify.

Speaker Change: I apologize.

Speaker Change: Paul announcement of it but it sounded to me earlier on the call that you have issued more shares and ocs out.

Melissa Wedel: With the new look back feature on the incentive fee.

Melissa Wedel: When you are incorporating the impact of any losses.

Speaker Change: And if so at what price where those shares issued.

Melissa Wedel: I think the Q indicated that's both realized and unrealized.

Sure So we issued $100 million.

Melissa Wedel: What should we be including any of the foreign currency.

Melissa Wedel: Gains and losses on there too.

Speaker Change: Shares of Ocs L.

Speaker Change: Two oaktree manager at.

Chris: Hey, Melissa it's Chris Thanks for the question.

Speaker Change: $17 63, a share.

Chris: Yes. It will include all capital gains and losses, including the foreign currency movements.

Speaker Change: Share, which was the net asset value at January 31, 2025.

Chris: I think we may have touched on it before but the foreign currency movements.

Speaker Change: And at a premium to the to the market price. So all of those are one and the same everything we're talking about as part of a single transaction.

Speaker Change: Did you see broken out or for our court foreign currency forward contracts that were using for hedging purposes. So kind of net net that foreign currency impact.

Speaker Change: When we bought.

Speaker Change: That kind of behavior.

Chris: De minimis on our results.

Speaker Change: Why why are you doing that but I don't want to take up.

Speaker Change: Yeah, Okay. Thank you.

Speaker Change: Time here on the call.

Speaker Change: With no further questions. This concludes our question and answer session I would like to turn the conference back over to tank Clements for any closing remarks.

Speaker Change: Answer my stupidity, but its an unusual transaction.

Speaker Change: Great.

Speaker Change: I would just like to draw down on that a little bit further.

Tank Clements: Thank you all for participating on our call today. Please don't hesitate to reach out you have additional questions have a great day and thank you for your continued support of OCA yourself.

Speaker Change: Hey, Mike This is Dana I'll I'll happy to give you a call. After this and we can walk through it.

Mike: That'd be Super Dana. Thank you so much.

Speaker Change: Not a problem.

Speaker Change: Right.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: And our next question comes from again, Melissa Wedel with JP Morgan. Please go ahead.

Speaker Change: Thanks for the follow up I just wanted to clarify.

Speaker Change: With the new look back feature on the incentive fee. When you are incorporating the impact of any losses I realized I think the Q indicated that both realized and unrealized.

Speaker Change: What should we be including any of the foreign currency.

Speaker Change: Gains and losses on there too.

Chris: Hey, Melissa it's Chris Thanks for the question.

Chris: Yes. It will include all capital gains and losses, including the foreign currency movements.

Chris: I think we may have touched on it before but the foreign currency movements did.

Chris: Could you see broken out or for our court foreign currency forward contracts that were using for hedging purposes. So kind of net net that foreign currency impact.

Chris: It's kind of de Minimis on our results.

Chris: Yeah, Okay. Thank you.

Speaker Change: With no further questions. This concludes our question and answer session I would like to turn the conference back over to tank Clayman for any closing remarks.

Tank Clayman: Thank you all for participating on our call today. Please don't hesitate to reach out you have additional questions have a great day and thank you for your continued support of OCA yourself.

Speaker Change: Okay.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Q1 2025 Oaktree Specialty Lending Corp Earnings Call

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