Q2 2025 Oaktree Specialty Lending Corporation Earnings Call
[music].
Welcome and thank you for joining Oaktree specialty lending Corporation second fiscal quarter 2025 conference call.
Speaker Change: Todays conference call has been recorded at this time all participants are in a listen only mode, but will be promoted for a question and answer session. Following the prepared remarks.
Speaker Change: Before we begin I want to remind you that comments on todays call include forward looking statements, reflecting current views with respect to among other things future operating results and financial performance.
Speaker Change: Actual results could differ materially from those implied or expressed in the forward looking statements.
Speaker Change: Please refer to the relevant S E C filings for a discussion of these factors in further detail oaktree.
Speaker Change: <unk> undertakes no duty to update or revise any forward looking statement.
Speaker Change: I'd also like to remind you that nothing on this call constitute an offer to sell or sortation of an offer to purchase any interest in oaktree fun.
Speaker Change: Investors and others should note that all CSL uses the investors section of its corporate website to announce material information.
Speaker Change: The company encourages investors the media and that does to review the information that is shared on its website.
Corey: Now I would like to introduce cloud Corey or CSL head of investors.
Speaker Change: Who will host today's conference call. Mr. Corey you may begin.
Corey: Thank you operator, our second quarter earnings release, which we issued this morning, along with the accompanying slide presentation can be accessed on the investors section of our website oaktree specialty lending dot com joining.
Speaker Change: Joining me on the call today is Armen <unk>, Chief Executive Officer, and co Chief Investment Officer, Matt <unk>, President and Chris Mcgowan, Chief Financial Officer and Treasurer.
Speaker Change: I'll now turn the call over to Matt to provide an overview of our performance during the quarter and a couple of updates with regard to our capital structure map.
Speaker Change: Thanks, Clark and thank you to everyone for joining today.
Speaker Change: Adjusted net investment income was $39 million or <unk> 45 per share compared to $45 million or 54 cents per share in the first quarter.
Speaker Change: Our net asset value was $16 75 per share.
Speaker Change: First is $17.63 in the prior quarter.
Speaker Change: These results reflect ongoing challenges with a few portfolio company investments, which we have been and continue to work towards restructuring or exiting.
Speaker Change: We moved several of these investments to nonaccrual and cause additional write downs as a result investments on non accrual status increased to four 6% and seven 6% a fair about fair market value and cost respectively.
Speaker Change: This compares to three 9% and five 1% in the first quarter.
Speaker Change: On the positive side, we made progress in resolving several investments on non accrual, including exiting our loan position and SVP singer, where we received proceeds totaling $5 $7 million, which was consistent with our mark as of December 31.
Speaker Change: We've also seen some increased sales activity and Avery a luxury mixed use building in San Francisco sales picked up in the second half of calendar year 2024, and that trend has continued thus far into 2025.
Speaker Change: Proceeds from sales go to repaying our loan.
Speaker Change: Enabling us to redeploy capital into new income generating investments during the last quarter, we received proceeds totaling 10% of our cost basis, and we expect to receive additional repayments next quarter.
Speaker Change: In addition in April we received nearly $100 million from repayments on debt investments all of which were realized in small premiums as compared to our March 31 valuation.
Speaker Change: Now turning to our dividend.
Speaker Change: In line with our new dividend policy, we announced last quarter. Our board approved a base dividend of <unk> 40 per share and a variable supplemental dividend of <unk> <unk> per share for the second quarter.
Speaker Change: With regard to our balance sheet, we successfully issued new unsecured bonds that mature in 2033 finance our existing bonds that matured in February 2025. Additionally.
Speaker Change: Additionally, shortly after quarter end, we successfully amended our senior secured revolving credit facility.
Speaker Change: Sending its maturity and reducing the interest rate from silver plus 2% to a range of soap or plus 175% to $1 87, 5%.
Speaker Change: We appreciate the support of our Bank group and believe that lower interest expense and associated fees will have a favorable impact on our net investment income.
Speaker Change: With these positive changes to our capital structure and our leverage at its lowest level in over three years, we have ample dry powder for new investments as we navigate this volatile period.
Speaker Change: Before I turn it over to arm and I want to remind you about the meaningful steps, we took to more closely align our interests with shareholders earlier. This year, we amended our incentive fee structure by implementing a total return hurdle and Oaktree purchased $100 million in Ocs L shares at a meaningful premium to the share price, which provide us with additional capital to.
Speaker Change: Deploy into our pipeline.
Speaker Change: Also in July of last year, we reduced our management fee to 1% on all assets. We believe these actions demonstrate our commitment to shareholders and to enhancing the long term earnings power of the portfolio.
Arm: Now I'll turn it over to arm and provide more detail on non accruals and our investment activities.
Arm: Thanks, Matt I'll start with additions to our non accruals two companies were added to nonaccrual status during the quarter. The first was the mosaic company's designer distributor and retailer of specialty wallet mosaic tile floor tile and slabs.
Arm: Mosaiq offerings, three distinct business segments, and the sponsor had initiated cell processes for all three.
Arm: Unfortunately, each of these segments are expected to be impacted by tariffs, which affected the sponsor's efforts to sell to.
Arm: Two of those processes were paused during the quarter the sale of a third segment closed shortly after quarter end, resulting in a meaningful cash pay down of approximately 50% of our total position.
Arm: Pro forma for the repayment, we took a conservative approach and valuing the remaining assets leading to a marked out of approximately 76% on the unsold portion.
Arm: Despite being placed on non accrual the material cash recovery reflects progress in our efforts to manage and resolve the position we are.
Arm: We're actively working to sell the remaining two business segments.
Arm: The second edition was <unk>, a manufacturer of a hybrid material that combines glass and plastic for medical use in diagnostic tubes vials and syringes are prior position and the company was restructured in August of 2023.
Arm: In this quarter, we placed a restructured loan on non accrual due to the company's continued cash needs markdown alone by about 69% at quarter end. The company recently signed a new contract and is pursuing several other opportunities in license agreements. We remain focused on supporting the company in the strategic initiatives.
Arm: Although it's not new to our non accrual list dialyzer is another investment where we took a significant markdown you place the company's first lien term loan on nonaccrual in the December quarter, given the company's ongoing cash needs. We continue to be actively engaged with management and other stakeholders to evaluate the best path forward, but unfortunately.
Arm: <unk> the situation is not materially improved in this quarter, we mark the loan down by about 76%.
Arm: While we are clearly not pleased with how S. I O two and dialogues Ive tried to these two positions now represents less than 1% of the portfolio at fair value.
Arm: Turning now to investment activity for the quarter, we committed $407 million of capital across 32 investments consisting of 24, new borrowers and eight existing borrowers. This compares to 13 investments totaling $198 million in commitments last quarter to.
Arm: The weighted average yield on our new debt investments was nine 5% versus nine 6% in the prior quarter.
Arm: Increasing portfolio diversification remains a focus as we took the number of physicians to 150 to 136 last quarter.
Arm: We continue to emphasize investments at the top of the capital structure and consistent with the first quarter approximately 84% of the portfolio was invested in senior secured loans, including 81% in first lien loans.
Arm: To mitigate risk in the current environment, we are prioritizing investments in larger more diversified businesses.
Arm: Financial and operational ability to withstand uncertain times as of March 31, the median EBITDA of our portfolio companies was approximately $158 million $16 million increase from the prior quarter.
Arm: The leverage in our portfolio of companies was steady at five four times well below overall middle market leverage levels.
Arm: The portfolio's weighted average interest coverage based on current base rates declined slightly to one eight times compared to two one times last quarter.
Arm: Looking at our second quarter originations I'd like to highlight two noteworthy loans, we've made to vantiv to barracuda.
Arm: The health care sector remains a strong focus for us given its critical need and sustainable outlook.
Arm: <unk> is a global leader in the development and manufacturing of capital equipment and consumables for both acute and chronic dialysis therapies as a recognized innovator vantiv holds the number one position in the non clinical peritoneal dialysis market Manning approximately 73% market share.
Arm: This financing facilitated Carlyle group's acquisition event structure. It is a $2 5 billion first lien term loan and a $450 million revolving credit facility.
Arm: We provided $425 million of the term loan, which carries a coupon of sofa plus 5%.
Arm: All with $77 million of the revolving credit facility.
Arm: <unk> was allocated $61 million of the total deal.
Arm: We also like service providers with recurring cash flow models and made an investment barracuda provider of cloud enabled middle data and network cyber security solutions for middle market and small to mid sized businesses.
Arm: This financing sits alongside the companies.
Arm: Syndicated first lien and second lien term loans and proceeds were used to bolster the company's liquidity position.
Arm: <unk> led this transaction and provided $100 million.
Arm: The totaled $200 million terminal price that sofa, plus six 5% those CSL receiving $15 $5 million.
Arm: We believe these transactions highlight the strength of Oaktree fuel sourcing platform and our capacity to participate in larger scale opportunities.
Vantages, we believe set us apart from other market participants.
Arm: I'll now turn to an overview of exiting repayment activity during the quarter.
Arm: <unk> slowed in the second quarter totaling $279 million, primarily driven by fewer sales within our liquid portfolio. As you may recall from our remarks last quarter. We took advantage of strength in the public credit markets late last year and sold certain investments that we believe were fully valid.
Chris: Now I will turn the call over to Chris to discuss our financial results in more detail.
Chris: Thank you Armen.
Chris: Our second fiscal quarter, ending March 31, 2025, we delivered adjusted net investment income of $38 7 million.
Chris: <unk> 45 per share.
Chris: As compared to $44 $7 million or <unk> 54 per share in the prior quarter.
Chris: The decrease was primarily driven by lower total investment income, partially offset by reduced interest expense and part one incentive fees during the quarter.
Chris: Adjusted total investment income in the quarter declined $9 9 million compared to the prior quarter, primarily due to a decrease in interest income, resulting from a smaller average investment portfolio the impact of placing new investments on nonaccrual status and declining reference rates.
Chris: Net expenses declined $3 8 million from the prior quarter, driven by a $2 $4 million decrease in interest expense due to lower outstanding borrowings and lower reference rates on our floating rate liabilities and a $1 $5 million decrease in part one incentive fees net of fees waived reflecting the impact of the <unk>.
Chris: Total return hurdle.
Chris: Now moving to our balance sheet.
Chris: Our net leverage ratio at quarter end was <unk> 93 times down from 1.03 times last quarter.
Chris: As of March 31, total debt outstanding was $1 $47 billion and had a weighted average interest rate of six 7%, including the effect of our interest rate swap agreements.
Chris: This is up from last quarter, primarily reflecting the impact of refinancing our three 5% fixed rate bonds that matured in February with new bonds that mature in 2030.
Chris: In connection with issuing the new bonds, we entered into an interest rate swap agreement translating to a coupon it's sofa plus to one 9%.
Chris: Unsecured debt represented 65% of total debt at quarter end up from about 59% last quarter.
Chris: We have plenty of dry powder to fund investment commitments with liquidity of approximately $1 1 billion.
Chris: This includes $98 million of cash and $1 billion of Undrawn capacity on our credit facilities. Following the recent amendment that Matt described earlier.
Chris: Unfunded commitments, excluding those related to the joint ventures were $273 million, approximately 252 million of which can be drawn immediately as the remaining $21 million is subject to portfolio companies meeting certain milestones before the funds can be drawn.
Chris: Our target leverage range remains unchanged at 0.9 times to 125 times. We are currently at the low end of that range due to a combination of successful investment exits oaktree, it's $100 million equity investment in the March quarter, and our prudent approach to deploying capital given market volatility.
Chris: Turning now to our joint ventures.
Chris: Together the JV is currently hold $440 million of investments primarily in broadly syndicated loans spread across 54 portfolio companies.
Chris: During the second fiscal quarter. The JV is again generated attractive annualized Roe.
Chris: Were approximately 10, 6% in aggregate.
Chris: Leverage at the JV was one three times up slightly from last quarter and.
Chris: In addition, we received a $700000 dividend from the Kemper JV.
Speaker Change: With that I would like to turn the call back to <unk> to provide some color on the market environment.
Speaker Change: Thanks, Chris before opening the call up to questions I'll provide some brief commentary on the market environment.
Speaker Change: Since the end of the second quarter, we have experienced some of the most volatile public market conditions since the pandemic March 2020.
Speaker Change: There is significant uncertainty surrounding the trade environment, including what new tariffs may arise potential retaliatory measures from other countries and how long these policies will remain in place despite.
Speaker Change: Despite the wide range of potential outcomes. We believe we can make the following observations with some uncertainty.
Speaker Change: Despite an optimistic outlook for a pickup in M&A activity earlier. This year activity has been slow and is likely to remain that way until we have more clarity around the economic outlook.
Speaker Change: We expect many lenders moving more cautious around capital deployment as they focus on the health of existing portfolio companies.
Speaker Change: In this environment companies that were one supported by easy credit and low interest rates are now grappling with tightening liquidity rising borrowing cost and disrupted supply chains, driven by global trade upheavals.
Speaker Change: It will be a couple of quarters before tariffs rolled through the supply chain and impact portfolio company performance. So it's too early to assess the real impact now.
Speaker Change: That said well in advance of the actual tariff announcements you were considering their potential impact on existing and prospective investors. This heightened focus.
Speaker Change: <unk> factored into our underwriting and risk evaluation, and we are proactively selling investments within our liquid portfolio that we perceive to have more exposure to negative impacts from tariffs.
Speaker Change: We are also focused on further diversifying our portfolio by selectively investing in companies. We believe are well positioned to deliver attractive returns given market uncertainty caused by tariffs as well as inflation and high interest rates.
Speaker Change: Recently, there has also been an uptick in demand for capital solutions, a rescue financing, which could benefit managers like oaktree and have significant experience and expertise in this area.
Speaker Change: <unk> in periods of market volatility our firm wide DNA has enabled us to capitalize on opportunities while others are sidelined and we have the dry powder to do so again if appropriate opportunities.
Speaker Change: In closing, 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.
Speaker Change: We appreciate your participation on our call today and now we will take your questions. Operator, Please open the line.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Anytime you question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Finian O'shea with Wells Fargo. Please go ahead.
Finian O'shea: Hey, everyone. Good morning.
Speaker Change: First question did.
Do you lean into.
Speaker Change: Any any liquid market structured finance or syndicated.
Speaker Change: Syndicated loans in April.
Armen: Hey fin its armen.
Armen: We we were a little active but not very because we were then and continue to be concerned that the tariff situation is not resolved and so what happened in April was yes. It started off with a sell off in high yield bonds senior loans.
Armen: To a lesser extent in structured credit.
Armen: But there's been a rebound.
Armen: In the back half of April and so we've taken more of a measured approach.
Armen: Given that recovery.
Armen: It was helpful.
Armen: Second higher level question on Herman you mentioned.
Armen: Remaining focused on the larger and diversified businesses I think that's been the language or narrative for awhile can you hit on like high level how.
Speaker Change: Successfully <unk>, Matt are you out there finding adequate.
Armen:
Armen: Issuers that fixed fit within your box on a credit and structure perspective for direct lending.
Armen: Or is this a challenge and then sort of part B there.
Armen: The losses experienced or whats the sort of overlap or are they the company or are they generally.
Armen: Smaller EBITDA or do they overlap with that sort of core focus thanks.
Armen: Good question so.
Armen: Terms of size than the market ebbs and flows so late last year.
Armen: When the markets.
Armen: We're pretty strong in wide open from a banking perspective.
Armen: We saw spreads tightening in broadly syndicated loans, we saw spreads tightening and high yield bonds.
Armen: And we saw new issuance and senior loans creation of close.
Armen: And we saw tightening in direct lending as well and in the larger borrower segment.
Armen: We found that the borrowers found that they can get better pricing and looser.
Armen: Legal terms from the broadly syndicated loan market versus direct lending. So it was I would say it felt a little bit more challenging or the trend did not feel so great for the.
Armen: Ultra large capped at 100 $150 million plus EBITDA category for new deals what didn't feel so great in the back half or the fourth quarter fourth calendar quarter of last year.
With some of the volatility we've been seeing in the.
Armen: And the markets, though in the last month month and a half.
Armen: We are seeing a pullback in new issuance activity from the banks and so we are seeing.
Armen: A return of some larger borrowers.
Armen: Into the direct lending market post Liberation day.
Armen: And so the pipeline from that perspective, as I would say on the margin better.
Armen: For issuing direct loans to very large borrowers with that said M&A deal volume.
Armen: Is not as robust as we would like it to be overall as a market.
Armen: Now the reason for that is in the fourth quarter. After a president Trump was elected there was I would say some positive.
Armen: Feelings about where the market would go.
And where rates would go the president Trump generally at that time was considered to be somebody who would lean on lower rates would lean on deregulation.
Armen: And those would be good things for deal flow and the transaction of sponsor to sponsor <unk>.
Armen: No. So there was a lot of activity at least in terms of discussions late last year and early this year as to 2025 issuance is going to be very strong in M&A volumes will be strong, but the tariff.
Armen: Announcements have thrown a wrench in that and it just seems like private equity sponsors generally are reticent to do deals.
Armen: Pending kind of what's going to happen with these tariffs because it leans on higher rates.
Armen: On more inflation.
Armen: And all of that is sort of bad for valuation multiples.
Armen: So there is a I think.
Armen: Somewhat of a pause happening right now.
Armen: In two respects one is private equity sponsors doing new deals and two corporate borrowers that have some level of tariff related exposure I E.
Armen: Part of their supply chain runs through a non U S.
Armen: Market or are they part of their sales go to a non U S market.
Armen: We're seeing that.
Armen: There is a pause in building up a inventory a pause in capex spending.
Armen: Given that backdrop I would expect as I.
Armen: I would expect to see.
Armen: See continued sort of reservations around deal activity.
Armen: For a few months at least so that's kind of the current condition.
Armen: Condition around.
Armen: Youll flow large cap.
Armen: But.
Armen: The deals that are getting done so high quality businesses that are somewhat insulated from tariff impacts that are still being that'll be owed and there have been some announcements in the last few weeks.
Armen: So deals are happening.
Armen: Lots of rate those deals are getting done more frequently in the direct lending market rather than the broadly syndicated loan market. So we are engaged in those situations.
Armen: Our pipeline for the quarter, so far for this quarter that we're in so far is actually pretty good.
Armen: Just given some of that pullback from the banks. So we feel good about that condition.
Armen: To answer your second question about the markdowns no look the markdowns are not in large cap sponsor lending.
The.
Armen: The markdowns Unfortunately.
Armen: It's been the same names for a few quarters now for a couple of years now.
Armen: <unk> on performance and I.
Armen: I don't there isn't anything thematic about them, but other than.
Armen: Mid last year with pleural site, which was a very large LBO that.
Armen: <unk> had some issues.
Armen: I think we've discussed in the past and has been pretty well known in the market.
Armen: Other than that one situation of the rest of them are sort of idiosyncratic situations where.
Armen: Businesses have not executed the way they should have in the case of Sio to a business that was doing incredibly well during COVID-19 took a lot of that profitability and spent it on new R&D that didn't pan out. Unfortunately.
Armen: So.
Armen: It's that's not really a <unk>.
Armen: Large cap issue or a big versus small business issue. It's a it's a deal where the execution around that technology.
Armen: <unk> did not meet expectations.
Speaker Change: Okay. Thank you.
Armen: Thank you.
Speaker Change: The next question comes from Melissa Wedel with JP Morgan. Please go ahead.
Melissa Wedel: Good morning, Thanks for taking my questions.
Speaker Change: Really trying to discern sort of run rate NII, given the markdowns on our portfolio and.
Speaker Change: The changes in non accruals it seems like with some stabilizing base rates this could be.
Speaker Change: Sort of what we could expect in the end that given no changes in base rates. This could be a run rate level NII is that.
Speaker Change: Fair to say or.
Speaker Change: Are you seeing other things happening in the portfolio that could impact that.
Speaker Change: Hey, Melissa it's Chris Thanks for the question.
Speaker Change: It has started.
Speaker Change: No Matt wants to chime in please feel free.
Speaker Change: I think a couple of things we're focused on and we mentioned in our prepared remarks.
Speaker Change: <unk>.
Speaker Change: Yeah in the quarter.
Speaker Change: Nine three times net leverage.
Speaker Change: Definitely kind of the low end of our range and where we are.
Speaker Change: Operating normally.
Speaker Change: Our average portfolio.
Speaker Change: Throughout the quarter was lower versus the prior quarter.
Yeah.
Speaker Change: Darren mentioned.
Speaker Change: Patient around around deployment.
Speaker Change: Time.
Speaker Change: You know we are mindful.
Speaker Change: Lowering our leverage range.
Speaker Change: We've been operating.
Speaker Change: And then I think the other focus.
Ed: Ed mentioned in his comments just around.
Ed: We're working through some of these.
Ed: Congratulations on non accruals turning those into.
Ed: Cash producing assets.
Ed: That's definitely a continued focus of ours.
Speaker Change: And I think Ms. Smith of the the other area continue to focus on is the Jv's.
Ed: And yeah.
Speaker Change: Putting more assets and they're running leverage.
Ed: Higher there.
Ed: The investments in N V S. L. So those are.
Ed: Relative to <unk>.
Ed: Relatively more easy to deploy there then and some of the private assets.
Ed: Second a little bit longer so that's just the other point I'd make.
Ed: Sure.
Ed: I mean to that point on leverage and then deploying within the joint ventures.
Yeah, I mean, obviously.
Ed: This quarter.
Ed: It seems very very different from from even the March quarter. When we look at sort of the repayment levels that you've seen in our portfolio and as prepayments and exits over the last three quarters, they've been pretty sizable should we be expecting any slowing of repayment activity.
Ed: And during this period of volatility or would you expect that to remain pretty elevated.
Ed: Yeah.
Ed: Melissa This is arvind I can take a crack at that so.
Ed: Couple of things.
Ed: In terms of liquid credits.
Ed: In the back half of last year, especially the fourth quarter as the markets were pretty tight we actually grew.
Ed: Or just generally a net seller of liquid credit and so we actually de Levered. The JV is as a result of that.
Ed: I think given the volatility.
In the last four to six weeks in the public markets and our anticipation of further volatility in those markets given what I would expect would be a challenging tariff backdrop for awhile.
Ed: I would expect that we will find some opportunities to deploy into the joint ventures and increase their leverage again, we're looking for good deals that are good companies that are trading discounted.
Ed: And we don't think it's there yet they trade it off two three maybe three five points.
Ed: In late March and into April and they've recovered maybe half of that point move.
Ed: And so and if you look at high yield bonds. The spreads had widened to $4 35, or 40 ish during that timeframe. They are now back to sort of $3 75.
Ed: They are pretty volatile low quite sort of up and down but we think that as performance starts to show up in the second calendar quarter this year and into the third.
Ed: There's probably going to be volatility in the public credit and equity markets that we think could we could take advantage of for the JV in the case of private credit.
Ed: We actually have had some exits.
Ed: Since the end of the quarter.
Ed: And so I think we those are more idiosyncratic.
Ed: Not really reflective of necessarily a tightening credit story. It was just situations that resolved.
Ed: So I think our repayments.
Ed: For the quarter are not going to be.
Ed: Immaterial I think there will be up for the quarter ended June I think there'll still be.
Ed: Significant enough.
Ed: But but again.
Ed: But yes, I think your your instinct is correct that if the markets are volatile. That's generally speaking repayments refinancings should slow down and I would expect to see that over the coming quarters as well.
Speaker Change: Thanks very much.
Speaker Change: Thank you.
Speaker Change: Again, if you have a question. These press Star then one.
Paul Johnson: The next question comes from Paul Johnson with <unk>. Please go ahead.
Paul Johnson: Thank you thanks for taking my questions.
Speaker Change: Just on the kind of run rate question of income.
Speaker Change: Looking at the portfolio yield this quarter I think it was down 50 basis points or so.
Speaker Change: So if I take a quick average you can just kind of the debt portfolio yield.
Speaker Change: Quarter over quarter, it looks like it's down a little over 100 basis points. So I'm just curious like is there any kind of.
Speaker Change: One time stuff that's flowing through there.
Speaker Change: You know that would ease this yield I guess that we have today reflective of kind of what you think the portfolio should generate going forward.
Speaker Change: Okay.
Speaker Change: Chris.
Speaker Change: Appreciate the question.
Speaker Change: Yeah, I think a couple of facts I think looking at the quarter on quarter decline and.
Speaker Change: Interest income.
Speaker Change: Part of that is.
Speaker Change: Reference rate decline.
Speaker Change: In the December quarter.
Speaker Change: Great.
Speaker Change: For about half the book based on 930 base rates.
Speaker Change: So as those.
Reset at the end of December and in light of the right person, having the fourth calendar quarter that played through.
Speaker Change: In the March quarter.
Speaker Change: So that's part of it and.
Speaker Change: As far as the core.
Speaker Change: Quarter declining yield.
Speaker Change: And one 7% reported last quarter.
Speaker Change: 10, 2% this quarter.
Speaker Change: No.
Speaker Change: Majority of that.
Speaker Change: 30 bps was due to the impact of the new non accruals.
Speaker Change: Yeah.
Speaker Change: And a little bit.
Speaker Change: Oh, the lingering timing with respect to reference rate reset.
Speaker Change: And.
Speaker Change: Also some spread compression a quarter on quarter.
Speaker Change: So I do think that debt.
Speaker Change: Well right now.
Speaker Change: Yeah.
Speaker Change: A decent run rate.
Speaker Change: On the book.
Speaker Change: Okay. Thank you for that.
Speaker Change: Than you.
Speaker Change: Partly answered my question here, but on the JV the 10, 6% Roe.
Speaker Change: Is that a net Roe.
Speaker Change: As opposed to like an operating ROE on.
Speaker Change: On the JV.
Speaker Change: That's looking at the NII.
Speaker Change: <unk>.
Speaker Change: Agitating the NII.
Uh huh.
Speaker Change: Coupon interest on the subordinated note.
Speaker Change: Okay.
Speaker Change: Pretty close to what you're generating on on the balance sheet. So I. It sounds like you may find some opportunities to increase leverage there and put some investments into the to the JV. So with leverage I guess, what do you think you could potentially get the.
Speaker Change: The JV too in terms of an ROE overtime.
Speaker Change: Right.
Speaker Change: And on the.
Speaker Change: The opportunity set I mean, certainly.
Speaker Change: Getting back up into the <unk>.
Speaker Change: Policy.
Speaker Change: 11%, 12% contacts they think.
Speaker Change: Achievable.
Speaker Change: But it will ultimately depend on the opportunities that we're seeing there.
Speaker Change: I appreciate it that's all for me.
Speaker Change: Thank you. This concludes our question and answer session I would like to turn the conference back over to Clive <unk> for any closing remarks.
Clive: Thank you operator, and thank you all for joining us on today's call a replay of the earnings call will be available in approximately one hour.
Speaker Change: You can access that.
Speaker Change: On the investors section of <unk> website.
Speaker Change: Please feel free to reach out to me and team with any questions. You may have thanks again for your participation and support.
Speaker Change: This.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Welcome and thank you for joining Oaktree specialty lending Corporation second fiscal quarter 2025 conference call.
Speaker Change: Todays conference call has been recorded at.
Speaker Change: At this time all participants are in a listen only mode, but will be promoted for a question and answer session. Following the prepared remarks.
Speaker Change: Before we begin I want to remind you that comments on today's call include forward looking statements reflect current views with respect to among other things future operating results and financial performance.
Speaker Change: Actual results could differ materially from those implied or expressed in the forward looking statements.
Speaker Change: Please refer to the relevant S E.