Q2 2026 Oaktree Specialty Lending Corp Earnings Call

May 5, 2026

Operator: Welcome, and thank you for joining Oaktree Specialty Lending Corporation's Q2 fiscal quarter 2026 conference call. After the speaker's remarks, there will be a question and answer session. Today's conference call is being recorded. I'll now turn the call over to Alison Mermey, OCSL's Head of Investor Relations.

Operator: Welcome, and thank you for joining Oaktree Specialty Lending Corporation's Q2 Fiscal 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Today's conference call is being recorded. I'll now turn the call over to Alison Mermey, OCSL's Head of Investor Relations.

Speaker #2: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad.

Speaker #2: If you would like to withdraw your question, press star 1 again. Today's conference call is being recorded. I'll now turn the call over to Allison Murmay, OCSL's Head of Investor Relations.

Speaker #2: Thank you, Operator. Our second quarter 2026 earnings release which we issued this morning along with the accompanying slide presentation can be accessed on the Investors section of our website.

Alison Mermey: Thank you, operator. Our Q2 2026 earnings release, which we issued this morning, along with the accompanying slide presentation, can be accessed on the investors section of our website, oaktreespecialtylending.com. Before we begin, I want to remind you that the comments on today's call include forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statement. Please refer to the relevant SEC filings for a discussion of these factors in further detail. Oaktree undertakes no duty to update or revise any forward-looking statements. I'd also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in an Oaktree Fund.

Speaker #2: Oaktree Specialty Lending.com. Before we begin, I want to remind you that the comments on today's call include forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance.

Speaker #2: Actual results could differ materially from those implied or expressed in the forward-looking statement. Please refer to the relevant SEC filings for a discussion of these factors in further detail.

Alison Mermey: Actual results could differ materially from those implied or expressed in the forward-looking statement. Please refer to the relevant SEC filings for a discussion of these factors in further detail. Oaktree undertakes no duty to update or revise any forward-looking statements. I'd also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in an Oaktree Fund.

Speaker #2: Oaktree undertakes no duty to update or revise any forward-looking statement. I'd also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in an Oaktree fund.

Speaker #2: Investors and others should note that OCSL uses the Investors section of its corporate website to announce material information. The company encourages investors, the media, and others to review information that it shares on its website.

Alison Mermey: Investors and others should note that OCSL uses the investors section of its corporate website to announce material information. The company encourages investors, the media, and others to review information that it shares on its website. Now I'll turn the call over to Matt Pendo, President of OCSL. Matt.

Speaker #2: Now I'll turn the call over to Matt Pendo, President of OCSL. Matt?

Speaker #3: Thank you, Allison, and good morning, everyone. I will begin with an overview of our second quarter fiscal 2026 results after which Armen Panossian, our CEO and Co-Chief Investment Officer, will share his perspective on the market environment.

Matt Pendo: Thank you, Alison, and good morning, everyone. I will begin with an overview of our Q2 fiscal 2026 results, after which Armen Panossian, our CEO and Co-Chief Investment Officer, will share his perspective on the market environment. Raghav Khanna, our Co-Chief Investment Officer, will then cover portfolio activity, and Christopher McKown, our CFO and Treasurer, will close with a review of our financial results before we open the call for questions. Despite external noise around private credit and BDCs, our team remained focused on reducing non-accruals and positioning our balance sheet for flexibility. As of 31 March 2026, non-accruals were 2.6% of the total debt portfolio measured at fair value, down from 3.1% last quarter and 4.6% one year ago. As an update post-quarter, in April, we sold two legacy non-accrual positions, Dominion Diagnostics and All Web Leads.

Speaker #3: Raghav Khanna, our Co-Chief Investment Officer, will then cover portfolio activity, and Chris McKown, our CFO and Treasurer, will close with a review of our financial results before we open the call for questions.

Speaker #3: Despite external noise around private credit and BDCs, our team remained focused on reducing non-accruals and positioning our balance sheet for flexibility. As the March 31, 2026 non-accruals were 2.6% of the total debt portfolio measured at fair value, down from 3.1% last quarter and 4.6% one year ago.

Matt Pendo: Despite external noise around private credit and BDCs, our team remained focused on reducing non-accruals and positioning our balance sheet for flexibility. As of 31 March 2026, non-accruals were 2.6% of the total debt portfolio measured at fair value, down from 3.1% last quarter and 4.6% one year ago. As an update post-quarter, in April, we sold two legacy non-accrual positions, Dominion Diagnostics and All Web Leads.

Speaker #3: As an update post-quarter, in April, we sold two legacy non-accrual positions: Dominion Diagnostics and AllWeb Leads. We expect to make further progress reducing non-accruals and realizing cash proceeds that we can deploy into performing assets over the coming months.

Matt Pendo: We expect to make further progress reducing non-accruals and realizing cash proceeds that we can deploy into performing assets over the coming months. Managing our balance sheet is a high priority as we position OCSL for a more attractive investment environment. During the quarter, we sold a portion of our liquid credit positions at cost, a strategic decision to build dry powder, maintain leverage below the midpoint of our target range, and rotate out of lower yielding public credit. We ended Q2 with available liquidity of $671 million, up $100 million from last quarter, and net leverage of 1.04x, down from 1.07x last quarter. Turning to financial highlights.

Speaker #3: OCSL for a more attractive investment environment. During the quarter, we sold a portion of our liquid credit positions at cost, a strategic decision to build dry powder, maintain leverage below the midpoint of our target range, and rotate out of lower-yielding public credit.

Speaker #3: We ended the second quarter with available liquidity of $671,100,000 from last quarter, and net leverage of 1.04 times down from 1.07 share was $15.69 as of March 31, 2026, compared to $16.30 as of December 31, 2025.

Matt Pendo: We ended Q2 with available liquidity of $671 million, up $100 million from last quarter, and net leverage of 1.04x, down from 1.07x last quarter. Turning to financial highlights.

Matt Pendo: Net asset value per share was $15.69 as of 31 March 2026, compared to $16.30 as of 31 December 2025. The decline was driven primarily by unrealized mark-to-market write-downs of software loans during the quarter. The fair value of our performing software loans declined by approximately 310 basis points, largely consistent with movements in broadly syndicated software loans. Importantly, we believe that these markdowns generally are not indications of deteriorating fundamentals in the underlying portfolio companies, but rather reflecting the repricing of risk in the broader markets. Adjusted net investment income from the quarter was $33.7 million, or $0.38 per share, as compared with $36.1 million or $0.41 per share in the prior quarter.

Speaker #3: The decline was driven primarily by unrealized mark-to-market write-downs of software loans during the quarter. The fair value of our performing software loans declined by approximately $310 basis points, largely consistent with movements in broadly syndicated software loans.

Matt Pendo: The fair value of our performing software loans declined by approximately 310 basis points, largely consistent with movements in broadly syndicated software loans. Importantly, we believe that these markdowns generally are not indications of deteriorating fundamentals in the underlying portfolio companies, but rather reflecting the repricing of risk in the broader markets. Adjusted net investment income from the quarter was $33.7 million, or $0.38 per share, as compared with $36.1 million or $0.41 per share in the prior quarter.

Speaker #3: Importantly, we believe that these mark-downs generally are not indications of deteriorating fundamentals in the underlying portfolio companies but rather reflecting the repricing of risk in the broader markets.

Speaker #3: Adjusted net investment income from the quarter was $33.7 million, or $0.38 per share, as compared with $36.1 million, or $0.41 per share, in the prior quarter.

Speaker #3: The decrease reflected lower reference rates lower non-recurring income, and ending leverage below the midpoint of our target range. For the quarter, our board declared a total cash dividend of $34 per share, due to our conservative use of leverage we have adjusted our base dividend to $0.30 per share while maintaining our supplemental dividend at 50% of excess adjusted net investment income above our base dividend.

Matt Pendo: The decrease reflected lower reference rates, lower non-recurring income, and ending leverage below the midpoint of our target range. For the quarter, our board declared a total cash dividend of $0.34 per share. Due to our conservative use of leverage, we have adjusted our base dividend to $0.30 per share while maintaining our supplemental dividend at 50% of excess adjusted net investment income above our base dividend. The dividends are payable on 30 June 2026 to stockholders of record as of 15 June 2026. With that, I'll turn the call over to Armen to share his perspective on the market environment and what we see ahead.

Speaker #3: The dividends are payable on June 30, 2026. The stockholders of record as of June 15, 2026. With that, I'll turn the call over to Armen to share his perspective on the market environment and what we see ahead.

Matt Pendo: The dividends are payable on 30 June 2026 to stockholders of record as of 15 June 2026. With that, I'll turn the call over to Armen to share his perspective on the market environment and what we see ahead.

Speaker #4: Thank you, Matt. It was an eventful quarter for private credit. We believe the volatility that we are seeing reflects a period of recalibration rather than a systemic issue.

Armen Panossian: Thank you, Matt. It was an eventful quarter for private credit. We believe the volatility that we are seeing reflects a period of recalibration rather than a systemic issue. Rising impairments, questions surrounding valuations, the use of leverage, liquidity mismatches, software exposure in an AI-driven world, and refinancing risks are all part of the current dialogue surrounding private credit. This may help explain, at least in part, why market sentiment may appear more negative than borrower performance alone would suggest, as the confluence of concerns weigh on investor confidence. The current debate around private credit risks may conflate a range of distinct factors and lead to overly broad conclusions. It is important to differentiate between the fundamentally sound concept of private credit, namely tailored non-bank lending, from specific challenges affecting certain segments of the market. Direct lending or making private loans to finance mid-size buyouts isn't inherently flawed.

Speaker #4: Rising impairments, questions surrounding valuations, the use of leverage, liquidity mismatches, software exposure in an AI-driven world, and refinancing risks are all part of the current dialogue surrounding private credit.

Speaker #4: This may help explain at least in part why market sentiment may appear more negative than borrower performance alone would suggest. As the confluence of concerns weigh on investor confidence.

Armen Panossian: This may help explain, at least in part, why market sentiment may appear more negative than borrower performance alone would suggest, as the confluence of concerns weigh on investor confidence. The current debate around private credit risks may conflate a range of distinct factors and lead to overly broad conclusions. It is important to differentiate between the fundamentally sound concept of private credit, namely tailored non-bank lending, from specific challenges affecting certain segments of the market.

Speaker #4: The current debate around private credit risks may conflate a range of distinct factors and lead to overly broad conclusions. It is important to differentiate between the fundamentally sound concept of private credit—namely, tailored non-bank lending—from specific challenges affecting certain segments of the market.

Armen Panossian: Direct lending or making private loans to finance mid-size buyouts isn't inherently flawed.

Speaker #4: Direct lending, or making private loans to finance mid-sized buyouts, isn't inherently flawed. The question for any manager is whether their portfolio assets and liabilities were built to handle a market correction.

Armen Panossian: The question for any manager is whether their portfolio assets and liabilities were built to handle a market correction. At Oaktree, we have more than three decades of experience investing in sub-investment-grade credit and navigating market cycles. This moment is familiar to us. For example, in 2020, OCSL's positioning was the result of deliberate choices we made well before the COVID-related market dislocation arrived. By late 2019, we had cleaned up the legacy portfolio that was acquired from the prior advisor, reduced leverage, and built liquidity in the fund. When dislocation arrived in March 2020, we had the dry powder and the conviction to go on offense. In 2020, we deployed nearly $1 billion of capital and produced nearly an 11% total economic return in a year when many managers retrenched. Today, OCSL is executing with a similar mindset.

Speaker #4: At Oaktree, we have more than three decades of experience investing in sub-investment-grade credit and navigating market cycles. This moment is familiar to us. For example, in 2020, OCSL's positioning was the result of deliberate choices we made well before the COVID-related market dislocation arrived.

Speaker #4: By late 2019, we had cleaned up the legacy portfolio that was acquired from the prior advisor, reduced leverage, and built liquidity in the fund.

Armen Panossian: By late 2019, we had cleaned up the legacy portfolio that was acquired from the prior advisor, reduced leverage, and built liquidity in the fund. When dislocation arrived in March 2020, we had the dry powder and the conviction to go on offense. In 2020, we deployed nearly $1 billion of capital and produced nearly an 11% total economic return in a year when many managers retrenched. Today, OCSL is executing with a similar mindset.

Speaker #4: When dislocation arrived in March 2020, we had the dry powder and the conviction to go on offense. In 2020, we deployed nearly $1 billion of capital and produced nearly an 11% total economic return in a year when many managers retrenched.

Speaker #4: Today, OCSL is executing with a similar mindset. We continue to make progress toward turning around underperforming assets, operating below the midpoint of our leverage target, remaining disciplined in deployment, and maintaining strong liquidity.

Armen Panossian: We continue to make progress toward turning around underperforming assets, operating below the midpoint of our leverage target, remaining disciplined in deployment, and maintaining strong liquidity. We did not predict the current environment, but we prepared to invest into it. Market volatility increased this quarter, and AI-related concerns and geopolitical unrest resulted in wider spreads across public liquid credit markets. At the same time, elevated net redemptions in non-traded BDCs prompted many managers to reassess their cost of capital and liquidity positions, pushing private credit into a phase of price discovery. Towards quarter end, market conditions stabilized, and the private credit deal pipeline began to rebuild. We are encouraged that spreads on new private credit investments have widened to SOFR plus 500 to 550 basis points, approximately 50 to 100 basis points above the 2025 tights, and supports improved forward returns.

Speaker #4: We did not predict the current environment, but we prepared to invest into it. Market volatility increased this quarter, and AI-related concerns and geopolitical unrest resulted in wider spreads across public, liquid, credit markets.

Speaker #4: At the same time, elevated net redemptions in non-traded BDCs prompted many managers to reassess their cost of capital and liquidity positions, pushing private credit into a phase of price discovery.

Armen Panossian: At the same time, elevated net redemptions in non-traded BDCs prompted many managers to reassess their cost of capital and liquidity positions, pushing private credit into a phase of price discovery. Towards quarter end, market conditions stabilized, and the private credit deal pipeline began to rebuild. We are encouraged that spreads on new private credit investments have widened to SOFR plus 500 to 550 basis points, approximately 50 to 100 basis points above the 2025 tights, and supports improved forward returns.

Speaker #4: Towards quarter end, market conditions stabilized, and the private credit deal pipeline began to rebuild. We are encouraged that spreads on new private credit investments have widened to sofa plus 500 to 550 basis points.

Speaker #4: Approximately 50 to 100 basis points above the 2025 tights. And supports improved forward returns. We are also seeing modest improvements in documentation and more lender-friendly structures.

Armen Panossian: We are also seeing modest improvements in documentation and more lender-friendly structures. While markets have rebounded from their lows, we expect continued volatility and increasing dispersion over the coming quarters. Our view is that secondary private transactions, whether through partial or full portfolio sales, will reshape the private credit landscape as certain market participants look to optimize their asset portfolio or satisfy liquidity demands. We believe Oaktree is well-positioned to evaluate and potentially capitalize on all opportunities. Our global platform is a meaningful advantage in this environment. We evaluate private credit alongside liquid credit, distressed debt, asset-backed finance, and increasingly, the Brookfield ecosystem. That ability to compare relative value across credit, and now equity, informs both our risk management and deployment decisions in ways a single strategy manager can't replicate. Together, we will have a fully integrated information network across asset classes, industries, geographies, and public and private markets.

Speaker #4: While markets have rebounded from their lows, we expect continued volatility and increasing dispersion over the coming quarters. Our view is that secondary private transactions, whether through partial or full portfolio sales, will reshape the private credit landscape as certain market participants look to optimize their asset portfolio or satisfy liquidity demands.

Speaker #4: We believe Oaktree is well positioned to evaluate and potentially capitalize on all opportunities. Our global platform is a meaningful advantage in this environment. We evaluate private credit alongside liquid credit, distressed debt, asset-backed finance, and increasingly the Brookfield ecosystem.

Armen Panossian: We believe Oaktree is well-positioned to evaluate and potentially capitalize on all opportunities. Our global platform is a meaningful advantage in this environment. We evaluate private credit alongside liquid credit, distressed debt, asset-backed finance, and increasingly, the Brookfield ecosystem. That ability to compare relative value across credit, and now equity, informs both our risk management and deployment decisions in ways a single strategy manager can't replicate.

Speaker #4: That ability to compare relative value across credit and now equity informs both our risk management and deployment decisions in ways a single strategy manager can't replicate.

Speaker #4: Together, we will have a fully integrated information network across asset classes, industries, geographies, and public and private markets. We are already tracking dozens of emerging opportunities in real time, sharing notes across teams, and identifying dislocations.

Armen Panossian: Together, we will have a fully integrated information network across asset classes, industries, geographies, and public and private markets.

Armen Panossian: We are already tracking dozens of emerging opportunities in real time, sharing notes across teams, and identifying dislocations. The breadth of our combined relationships with sponsors, companies, and advisors will give us access to deal flow that many lenders do not see and allows us to be selective. Disciplined underwriting, selectivity, and active portfolio management will remain the critical drivers of long-term performance. Now, I will turn the call over to Raghav for a detailed review of our portfolio and investment activity.

Speaker #4: The breadth of our combined relationships with sponsors, companies, and advisors will give us access to deal flow that many lenders do not see, and allows us to be selective.

Speaker #4: Disciplined underwriting, selectivity, and active portfolio management will remain the critical drivers of long-term performance. Now, I will turn the call over to Raghav for a detailed review of our portfolio and investment activity.

Speaker #4: Thanks, Armen. As Matt and Armen mentioned, investment activity was measured in the second quarter, as we kept our focus on controlling risk and maintaining balance sheet flexibility.

Raghav Khanna: Thanks, Armen. As Matt and Armen mentioned, investment activity was measured in Q2 as we kept our focus on controlling risk and maintaining balance sheet flexibility. During the quarter, we sold certain liquid credit positions at cost to build dry powder. We also saw a healthy pace of private portfolio prepayments. Proceeds from prepayments, exits, and other paydowns and sales were $334 million, up from $179 million in the previous quarter and $279 million last year. A notable prepayment was Mindbody, an ARR software loan. Despite the challenging market backdrop for software, we exited Mindbody at par through a refinancing to a competitor. This leaves us with only 1 ARR loan in the portfolio, representing 76 basis points of fair value, down from total ARR exposure of 214 basis points last quarter.

Speaker #4: During the quarter, we sold certain liquid credit positions at cost to build dry powder. We also saw a healthy pace of private portfolio prepayments.

Speaker #4: Proceeds from prepayments exits and other paydowns and sales were $334 million, up from $179 million in the previous quarter and $279 million last year.

Speaker #4: A notable prepayment was MindBody, an ARR software loan. Despite the challenging market backdrop for software, we exited MindBody at par through a refinancing to a competitor.

Raghav Khanna: A notable prepayment was Mindbody, an ARR software loan. Despite the challenging market backdrop for software, we exited Mindbody at par through a refinancing to a competitor. This leaves us with only 1 ARR loan in the portfolio, representing 76 basis points of fair value, down from total ARR exposure of 214 basis points last quarter.

Speaker #4: This leaves us with only one ARR loan in the portfolio, representing 76 basis points of fair value, down from total ARR exposure of 214 basis points last quarter.

Speaker #4: Our limited exposure to ARR structures is an example of how we deliberately stayed underinvested in an area of private credit where we believed stress could emerge.

Raghav Khanna: Our limited exposure to ARR structures is an example of how we deliberately stayed underinvested in an area of private credit where we believed stress could emerge. New investment commitments in the quarter totaled $204 million, down 36% from the prior quarter. Deal activity slowed due to software sector volatility and escalating geopolitical tensions. As Armen mentioned, our deal pipeline began to rebuild towards the end of March and into early April. We are encouraged that new private credit deals are pricing with wider spreads and structured with better lender protections. The weighted average yield on new debt investments was 9.2%, 50 basis points higher than the December quarter. An example of a new private deal from Q2 is Jonah Energy, a highly structured loan to a heavy asset, low obsolescence or HALO company.

Speaker #4: New investment commitments in the quarter totaled $204 million, down 36% from the prior quarter. Deal activity slowed due to software sector volatility and escalating geopolitical tensions.

Speaker #4: As Armen mentioned, our deal pipeline began to rebuild towards the end of March and into early April. We are encouraged that new private credit deals are pricing with wider spreads and structured with better lender protections.

Raghav Khanna: We are encouraged that new private credit deals are pricing with wider spreads and structured with better lender protections. The weighted average yield on new debt investments was 9.2%, 50 basis points higher than the December quarter. An example of a new private deal from Q2 is Jonah Energy, a highly structured loan to a heavy asset, low obsolescence or HALO company.

Speaker #4: The weighted average yield on new debt investments was 9.2%, 50 basis points higher than the December quarter. An example of a new private deal from the second quarter is Jonah Energy.

Speaker #4: A highly structured loan to a heavy asset, low obsolescence, or halo company. The company is a Denver-based independent oil and gas developer with producing assets in six states.

Raghav Khanna: The company is a Denver-based independent oil and gas developer with producing assets in 6 states. In January, Jonah signed a purchase agreement to acquire Grit Oil & Gas, an upstream oil and gas operator located in the Eagle Ford Basin in Texas. While the deal was originally contemplated by the asset-backed finance market, Jonah prioritized speed of execution to capitalize on oil price appreciation driven by the conflict in Iran. As a result, the company shifted to direct lending and partnered with Oaktree to leverage our flexibility and ability to move quickly. Oaktree Funds participated in approximately $200 million, or one-third of the first lien term loan to support the acquisition. The first lien term loan was priced at SOFR plus 600 with mandatory amortization, favorable excess cash flow sweeps, and multiple maintenance covenants.

Speaker #4: In January, Jonah signed a purchase agreement to acquire Grit Oil and Gas, an upstream oil and gas operator located in the Eagle Ford Basin in Texas.

Speaker #4: While the deal was originally contemplated by the asset-backed finance market, Jonah prioritized speed of execution to capitalize on oil price appreciation driven by the conflict in Iran.

Speaker #4: As a result, the company shifted to direct lending and partnered with Oaktree to leverage our flexibility and ability to move quickly. Oaktree funds participated in approximately $200 million, or one-third, of the first-lien term loan to support the acquisition.

Raghav Khanna: As a result, the company shifted to direct lending and partnered with Oaktree to leverage our flexibility and ability to move quickly. Oaktree Funds participated in approximately $200 million, or one-third of the first lien term loan to support the acquisition. The first lien term loan was priced at SOFR plus 600 with mandatory amortization, favorable excess cash flow sweeps, and multiple maintenance covenants.

Speaker #4: The first-lean term loan was priced at sofa plus 600, with mandatory amortization favorable excess cash flow sweeps, and multiple maintenance covenants. This transaction reflects the strength of Oaktree's broader platform.

Raghav Khanna: This transaction reflects the strength of Oaktree's broader platform, deep advisor relationships, the ability to partner across strategy, and to be opportunistic in a volatile market environment. Turning to our software exposure. Based on GICS industry group classification, software represents 21% of the portfolio at fair value across 29 issuers. That is down approximately 140 basis points from last quarter, primarily reflecting the exit of Mindbody. Taking a broad and conservative classification for software and technology, we estimate exposure is approximately 26% of the portfolio, including certain investments in healthcare technology, interactive media, and services. As outlined on page 8 of the earnings presentation, we apply a 7-factor business resilience framework supplemented by operating KPIs and financial metrics. Each investment is scored and categorized into high, medium, and low AI risk buckets.

Speaker #4: Deep advisor relationships, the ability to partner across strategy, and to be opportunistic in the volatile market environment. Turning to our software exposure, based on GIG's industry group classification, software represents 21% of the portfolio at fair value, across 29 issuers.

Speaker #4: That is down approximately 140 basis points from last quarter primarily reflecting the exit of MindBody. Taking a broad and conservative classification for software and technology, we estimate exposure is approximately 26% of the portfolio.

Raghav Khanna: Taking a broad and conservative classification for software and technology, we estimate exposure is approximately 26% of the portfolio, including certain investments in healthcare technology, interactive media, and services. As outlined on page 8 of the earnings presentation, we apply a 7-factor business resilience framework supplemented by operating KPIs and financial metrics. Each investment is scored and categorized into high, medium, and low AI risk buckets.

Speaker #4: Including certain investments in healthcare technology, interactive media, and services. As outlined on page 8 of the earnings presentation, we apply a seven-factor business resilience framework, supplemented by operating KPIs and financial metrics.

Speaker #4: Each investment is scored and categorized into high, medium, and low AI risk buckets. Within a performing debt portfolio, two investments representing 2.9% of fair value are classified as having high AI risk.

Raghav Khanna: Within a performing debt portfolio, 2 investments representing 2.9% of fair value are classified as having high AI risk. These companies have a weighted average LTM EBITDA of approximately $96 million, which was generally stable from the prior quarter. LTVs increased to high 50%, up from low 40% last quarter, reflecting multiple compression in public market comparables. For issuers in the medium and low AI risk categories, weighted average LTM EBITDA is approximately $385 million. LTVs are around high 40s to low 50s percentage, which we view as reasonable despite recent multiple compression. For many of these companies, we see AI as a potential tailwind, with management teams and sponsors actively exploring ways to leverage the technology to enhance margins and strengthen competitive positioning.

Speaker #4: These companies have a weighted average LTM EBITDA of approximately 96 million dollars. Which was generally stable from the prior quarter. LTVs increased to high 50%, up from low 40% last quarter.

Speaker #4: Reflecting multiple compression in public market comparables. For issuers in the medium and low AI risk categories, weighted average LTM EBITDA is approximately 385 million.

Speaker #4: LTVs are around high 40s to low 50s, percentage, which we view as reasonable despite recent multiple compression. For many of these companies, we see AI as a potential tailwind, with management teams and sponsors actively exploring ways to leverage the technology to enhance margins and strengthen competitive positioning.

Raghav Khanna: LTVs are around high 40s to low 50s percentage, which we view as reasonable despite recent multiple compression. For many of these companies, we see AI as a potential tailwind, with management teams and sponsors actively exploring ways to leverage the technology to enhance margins and strengthen competitive positioning.

Speaker #4: Excluding non-accruals, the weighted average mark on our software portfolio was 96 as of March 31st, 2026. Down approximately 310 basis points from last quarter.

Raghav Khanna: Excluding non-accruals, the weighted average mark on our software portfolio was 96 as of 31 March 2026, down approximately 310 basis points from last quarter. These markdowns largely reflect the repricing of risk and corresponding spread widening across liquid credit. Our private credit software marks were consistent with levels seen in the broadly syndicated loan market. In most cases, these markdowns do not suggest deterioration in underlying company performance. Moving to our non-accruals. At quarter end, 10 investments were on non-accrual, representing 2.6% of the total debt portfolio at fair value, down 50 basis points from December 2025, and down 200 basis points from March 2025. In March, we restructured Astra after it emerged from Chapter 11 and exited the position shortly after quarter end, modestly below our mark.

Speaker #4: These markdowns largely reflect the repricing of risk and corresponding spread widening across liquid credit. Our private credit software marks were consistent with levels seen in the Broadly Syndicated Loan Market.

Speaker #4: In most cases, these markdowns do not suggest deterioration in underlying company performance. Moving to our non-accruals, at quarter end, 10 investments were on non-accrual, representing 2.6% of the total debt portfolio at fair value.

Raghav Khanna: Moving to our non-accruals. At quarter end, 10 investments were on non-accrual, representing 2.6% of the total debt portfolio at fair value, down 50 basis points from December 2025, and down 200 basis points from March 2025. In March, we restructured Astra after it emerged from Chapter 11 and exited the position shortly after quarter end, modestly below our mark.

Speaker #4: Down 50 basis points from December 2025, and down 200 basis points from March 2025. In March, we restructured Astra after it emerged from Chapter 11 and exited the position shortly after quarter end.

Speaker #4: Modestly below our mark. The decision was driven by our preference for reallocating our resources and capital toward better risk-adjusted opportunities. We also continue to make progress on Avery, where we have seen an uptick in condo sales and units under escrow.

Raghav Khanna: The decision was driven by our preference for reallocating our resources and capital toward better risk-adjusted opportunities. We also continued to make progress on The Avery, where we have seen an uptick in condo sales and units under escrow. During the quarter, 12 units were sold or placed under contract, compared to a full-year underwriting assumption of 6 unit sales. The Avery's 31 March valuation assumes only a portion of the units under contract close, although we are cautiously optimistic that we will close more units in the future. After quarter end, we sold Dominion and All Web Leads, two legacy non-accrual positions acquired from the prior BDC manager. On Dominion, we received $7 million of cash proceeds versus a mark of $5 million as of 31 December.

Speaker #4: During the quarter, 12 units were sold or placed under contract. Compared to a full year underwriting assumption of 6 unit sales. Avery's March 31st valuation assumes only a portion of the units under contract close, although we are cautiously optimistic that we will close more units in the future.

Speaker #4: After quarter end, we sold Dominion and all WebLeads, two legacy non-accrual positions acquired from the prior BDC manager. On Dominion, we received $7 million of cash proceeds versus a mark of $5 million as of December 31st.

Raghav Khanna: After quarter end, we sold Dominion and All Web Leads, two legacy non-accrual positions acquired from the prior BDC manager. On Dominion, we received $7 million of cash proceeds versus a mark of $5 million as of 31 December.

Speaker #4: For the March quarter, we moved the first out to accrual status marked the first out to par and wrote up the second out modestly.

Raghav Khanna: For the Q1, we moved the first out to accrual status, marked the first out to par, and wrote up the second out modestly. All Web Leads sold to a strategic buyer with an AI-focused value creation angle at a price in line with our 31 March mark. We received approximately 20% of the 31 March mark in cash at close, with the remainder of the consideration coming via a seller note and equity, positioning us to potentially recover more than the 31 March mark over time. As legacy non-accrual investments, Dominion and All Web Leads demonstrate our patient, disciplined, and active approach to portfolio management. We continue to work on realizing proceeds from other non-accruals and equity positions in a way that optimizes outcomes for OCSL shareholders.

Speaker #4: All web leads stole to a strategic buyer with an AI-focused value creation angle at a price in line with our March 31st mark. We received approximately 20% of the March 31st mark in cash at close, with the remainder of the consideration coming via a seller note and equity.

Speaker #4: Positioning us to potentially recover more than the March 31st mark over time. As legacy non-accrual investments Dominion and all web leads demonstrate our patient, disciplined, and active approach to portfolio management.

Raghav Khanna: As legacy non-accrual investments, Dominion and All Web Leads demonstrate our patient, disciplined, and active approach to portfolio management. We continue to work on realizing proceeds from other non-accruals and equity positions in a way that optimizes outcomes for OCSL shareholders.

Speaker #4: We continue to work on realizing proceeds from other non-accruals and equity positions, in a way that optimizes outcomes for OCSL shareholders. Looking at total portfolio metrics as of March 31st, 84% of total portfolio investments at fair value were first-lean senior secured debt, and the weighted average yield on debt investments was 9.3%.

Raghav Khanna: Looking at total portfolio metrics as of March 31, 84% of total portfolio investments at fair value were first lien senior secured debt, and the weighted average yield on debt investments was 9.3%, stable quarter-over-quarter. The portfolio remains well-diversified, with the average position representing 0.7% of our debt portfolio at fair value and no single position exceeding 2% of fair value. The median EBITDA for portfolio companies was approximately $182 million, a slight decrease from the prior quarter due to exits on large cap deals. Portfolio company weighted average leverage and interest coverage ratios were 5.2x and 2.1x, respectively, consistent with the last quarter. We remain focused on managing our existing portfolio and resolving challenged credits while maintaining flexibility to capitalize on new investment opportunities ahead.

Speaker #4: Stable quarter over quarter. The portfolio remains well-diversified with the average position representing 0.7% of our debt portfolio at fair value, and no single position exceeding 2% of fair value.

Speaker #4: The median EBITDA for portfolio companies was approximately 182 million dollars. A slight decrease from the prior quarter due to exits on large cap deals.

Speaker #4: Portfolio company weighted average leverage and increased coverage ratios were 5.2 times and 2.1 times, respectively. Consistent with the last quarter. We remain focused on managing our existing portfolio and resolving challenged credits.

Raghav Khanna: Portfolio company weighted average leverage and interest coverage ratios were 5.2x and 2.1x, respectively, consistent with the last quarter. We remain focused on managing our existing portfolio and resolving challenged credits while maintaining flexibility to capitalize on new investment opportunities ahead.

Speaker #4: While maintaining flexibility to capitalize on new investment opportunities ahead. And with that, I'll turn the call over to Chris to review our financial results.

Raghav Khanna: With that, I'll turn the call over to Chris to review our financial results.

Speaker #5: Thank you, Raghav. In our second fiscal quarter ended March 31, 2026, adjusted total investment income was $69.7 million, a decrease compared to $74.5 million in the prior quarter.

Christopher McKown: Thank you, Raghav. In our Q2 ended 31 March 2026, adjusted total investment income was $69.7 million, a decrease compared to $74.5 million in the prior quarter. The decrease was primarily due to lower reference rates and lower non-recurring income attributable to lower prepayment and exit fees. Net expenses decreased by 6% compared to the prior quarter, primarily reflecting a reduction in Part I incentive fees as a result of our total return hurdle. We delivered adjusted net investment income of $33.7 million, or $0.38 per share, compared to $36.1 million, or $0.41 per share in the prior quarter. These results reflected lower total investment income, partially offset by lower interest expense and lower Part I incentive fees.

Chris McKown: Thank you, Raghav. In our Q2 ended 31 March 2026, adjusted total investment income was $69.7 million, a decrease compared to $74.5 million in the prior quarter. The decrease was primarily due to lower reference rates and lower non-recurring income attributable to lower prepayment and exit fees. Net expenses decreased by 6% compared to the prior quarter, primarily reflecting a reduction in Part I incentive fees as a result of our total return hurdle.

Speaker #5: The decrease was primarily due to lower reference rates and lower non-recurring income attributable to lower prepayment and exit fees. Net expenses decreased by 6% compared to the prior quarter, primarily reflecting a reduction in part one incentive fees as a result of our total return hurdle.

Speaker #5: We delivered adjusted net investment income of $33.7 million, or $0.38 per share, compared to $36.1 million, or $0.41 per share in the prior quarter.

Chris McKown: We delivered adjusted net investment income of $33.7 million, or $0.38 per share, compared to $36.1 million, or $0.41 per share in the prior quarter. These results reflected lower total investment income, partially offset by lower interest expense and lower Part I incentive fees.

Speaker #5: These results reflected lower total investment income partially offset by lower interest expense and lower part one incentive fees. NAV per share was $15.69, down from $16.30 last quarter.

Christopher McKown: NAV per share was $15.69, down from $16.30 last Q. The drivers of NAV were about evenly split between write-downs and certain non-accruals, mark-to-market volatility in quoted names, and spread widening on private credit marks. OCSL continues to be prudent around the use of payment in kind income, with PIK representing approximately 5.5% of adjusted total investment income during the Q. This is down from 6.3% last Q due to the sale of athenahealth PIK Preferred at our mark. Approximately two-thirds of our PIK income relates to investments that were structured with the option to PIK at origination. Our net leverage ratio at Q-end was 1.04x, down from 1.07x last Q, and total debt outstanding was $1.5 billion.

Chris McKown: NAV per share was $15.69, down from $16.30 last Q. The drivers of NAV were about evenly split between write-downs and certain non-accruals, mark-to-market volatility in quoted names, and spread widening on private credit marks. OCSL continues to be prudent around the use of payment in kind income, with PIK representing approximately 5.5% of adjusted total investment income during the Q. This is down from 6.3% last Q due to the sale of athenahealth PIK Preferred at our mark.

Speaker #5: The drivers of NAV were about evenly split between write-downs in certain non-accruals, mark-to-market volatility in quoted names, and spread widening on private credit marks.

Speaker #5: OCSL continues to be prudent around the use of payment in-kind income. With PIC representing approximately 5.5% of adjusted total investment income during the quarter.

Speaker #5: This is down from 6.3% last quarter due to the sale of Athena Health PIC preferred at our mark. Approximately two-thirds of our PIC income relates to investments that were structured with the option to PIC at origination.

Chris McKown: Approximately two-thirds of our PIK income relates to investments that were structured with the option to PIK at origination. Our net leverage ratio at Q-end was 1.04x, down from 1.07x last Q, and total debt outstanding was $1.5 billion.

Speaker #5: Our net leverage ratio at quarter end was 1.04 times, down from 1.07 times last quarter, and total debt outstanding was 1.5 billion dollars. The decreased leverage mirrors portfolio rotation and asset sales during the period.

Christopher McKown: The decreased leverage mirrors portfolio rotation and asset sales during the period. Our long-term target leverage ratio of 0.9x to 1.25x remains unchanged, although our plan is to run leverage towards the mid to low end of that range. As of 31 March, the weighted average interest rate on debt outstanding was 5.9%, down from 6.1% in the prior quarter, primarily driven by lower reference rates. Unsecured debt represented 64% of total debt at quarter end, up from the prior quarter.

Chris McKown: The decreased leverage mirrors portfolio rotation and asset sales during the period. Our long-term target leverage ratio of 0.9x to 1.25x remains unchanged, although our plan is to run leverage towards the mid to low end of that range. As of 31 March, the weighted average interest rate on debt outstanding was 5.9%, down from 6.1% in the prior quarter, primarily driven by lower reference rates. Unsecured debt represented 64% of total debt at quarter end, up from the prior quarter.

Speaker #5: Our long-term target leverage ratio of 0.9 times to 1.25 times remains unchanged. Although our plan is to run leverage towards the mid to low end of that range.

Speaker #5: As of March 31st, the weighted average interest rate on debt outstanding was 5.9%, down from 6.1% in the prior quarter, primarily driven by lower reference rates.

Speaker #5: Unsecured debt represented 64% of total debt at quarter end, up from the prior quarter. We have ample dry powder to take advantage of market opportunities with liquidity of approximately 671 million dollars, including 51 million of cash on hand and 620 million of undrawn capacity under our credit facility.

Christopher McKown: We have ample dry powder to take advantage of market opportunities with liquidity of approximately $671 million, including $51 million of cash on hand and $620 million of undrawn capacity under our credit facility, up from $576 million of total liquidity at the end of December. Unfunded commitments, including those related to joint ventures, were approximately $250 million. Turning to our joint ventures, together, the JVs held approximately $521 million of investments across 130 portfolio companies and generated aggregate returns on equity of approximately 10% during the quarter. Leverage at the JVs was 1.9x, up modestly from last quarter. With that, I'll turn the call back to the operator for Q&A.

Chris McKown: We have ample dry powder to take advantage of market opportunities with liquidity of approximately $671 million, including $51 million of cash on hand and $620 million of undrawn capacity under our credit facility, up from $576 million of total liquidity at the end of December. Unfunded commitments, including those related to joint ventures, were approximately $250 million.

Speaker #5: Up from 576 million dollars of total liquidity at the end of December. Unfunded commitments including those related to joint ventures were approximately 250 million dollars.

Speaker #5: Turning to our joint ventures, together the JVs held approximately 521 million dollars of investments across 130 portfolio companies, and generated aggregate returns on equity of approximately 10% during the quarter.

Chris McKown: Turning to our joint ventures, together, the JVs held approximately $521 million of investments across 130 portfolio companies and generated aggregate returns on equity of approximately 10% during the quarter. Leverage at the JVs was 1.9x, up modestly from last quarter. With that, I'll turn the call back to the operator for Q&A.

Speaker #5: Leverage at the JVs was 1.9 times, up modestly from last quarter. With that, I'll turn the call back to the operator for Q&A.

Speaker #6: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Rick Shane with JPMorgan.

Operator: At this time, if you would like to ask a question, press star then the number one on your telephone keypad. And your first question comes from the line of Rick Shane with JP Morgan. Please go ahead.

Speaker #6: Please go ahead.

Speaker #7: Hey, guys. Thanks for taking my question this morning. Look, when we sort of calculate the implied return to the dividend of about 8.6% of book, that equates to about 5% spread to three-month base rates.

Rick Shane: Hey, guys. Thanks for taking my question this morning. Look, when we sort of calculate the implied return to the dividend of about 8.6% of book, that equates to about 5% spread to 3-month base rates. As we think about your business model over the long term, where would you put that return, you know, base rate plus 5% in sort of your cycle? Is that a trough in the cycle? Is that a realistic long-term objective? Help us understand sort of what the return profile as a function of base rate should be.

Speaker #7: As we think about your business model over the long term, where would you put that return base rate plus 5% in sort of your cycle?

Speaker #7: Is that a trough in the cycle? Is that a realistic long-term objective? Help us understand, sort of, what the return profile as a function of base rate should be.

Raghav Khanna: Hey, it's Raghav. I can start, and then, you know, Chris and Brett can chime in. You know, as I'm sure, you know, there's really two levers that we're playing with. The first is what is the unlevered asset yield? Again, probably no surprise given the enormous amounts of capital that's been raised in direct lending, in perpetual BDC vehicles in particular. I would say that market direct lending spreads probably dropped out in December at, in the mid to maybe high 400s. Since then, we have seen, I wouldn't call it a dramatic yet repricing, but certainly a significant enough repricing of risk where regular way direct lending deals.

Speaker #8: Hey, it's Raghav. I can start, and then Chris and Brett can chime in. So, as I'm sure you know, there are really two levers that we're playing with.

Speaker #8: The first is what is the unlevered asset yield? Again, probably no surprise given the enormous amounts of capital that's been raised in direct lending, in perpetual BDC vehicles in particular.

Speaker #8: I would say that market direct lending spreads probably troughed out in December in the mid to maybe high 400s. Since then, we have seen I wouldn't call it a dramatic yet repricing, but certainly a significant enough repricing of risk where regular way direct lending deals, so probably the lowest returning deals that we see in our pipeline, these are firstly in deals to private equity sponsors, are in the low to mid 500s.

Raghav Khanna: Since then, we have seen, I wouldn't call it a dramatic yet repricing, but certainly a significant enough repricing of risk where regular way direct lending deals.

Raghav Khanna: Probably the lowest returning deals that we see in our pipeline, these are our first lien deals to private equity sponsors, are in the low to mid 500s, certainly have improved by 50 to 75 basis points. I would say, more on a forward basis, if you look at the SOFR curve, you know, thanks to the war in the Middle East and the ensuing inflation expectations going up, the SOFR curve is probably 50 to 60 basis points higher than where it dropped out pre the Middle East situation. That's number 2. Away from sponsor deals, I would say, we do a mix of, you know, obviously both sponsored, non-sponsored deals. We do corporate lending as well as asset-backed deals, US, Europe.

Speaker #8: So certainly have improved by 50 to 75 basis points. I would say more on a forward basis, if you look at the sofa curve, thanks to the war in the Middle East and the ensuing inflation expectations going up, the sofa curve is probably 50 to 60 basis points higher than where it troughed out pre the Middle East situation.

Speaker #8: So that's number two. Away from sponsor deals, I would say we do a mix of, obviously, both sponsor and non-sponsor deals. We do corporate lending as well as asset-backed deals.

Raghav Khanna: That's number 2. Away from sponsor deals, I would say, we do a mix of, you know, obviously both sponsored, non-sponsored deals. We do corporate lending as well as asset-backed deals, US, Europe.

Speaker #8: U.S., Europe. On a blended basis, I would say that when you mix it all together, low 500s for sponsor deals, low 600s to 700s in some of the more interesting areas of lending that we're seeing, which are less commoditized.

Raghav Khanna: On a blended basis, I would say that when you mix it all together, low 500s for sponsored deals. Low 600s to 700s in some of the more interesting areas of lending that we're seeing, which are less commoditized. Our pipeline is in the high 500s on a spread basis and, you know, just under 600 call it including OID. You put it all together on a forward basis, obviously the portfolio in the ground will churn over time. On a forward basis, I would say that spreads on new deals are far more attractive, at least 100 basis points more attractive than they were even 3 months ago. Second, the SOFR curve is certainly helping on the asset side. The third piece is leverage.

Speaker #8: Our pipeline is in the high 500s on a spread basis, and just under 600, call it including OID, so you put it all together.

Speaker #8: On a forward basis, obviously the portfolio and the ground will churn over time. But on a forward basis, I would say that spreads on new deals are far more attractive at least 100 basis points more attractive than they were even three months ago.

Raghav Khanna: On a forward basis, I would say that spreads on new deals are far more attractive, at least 100 basis points more attractive than they were even 3 months ago. Second, the SOFR curve is certainly helping on the asset side. The third piece is leverage.

Speaker #8: Second, the sofa curve is certainly helping. On the asset side. And then the third piece is leverage. We took the decision to sell a number of names out of our public book that has a near-term cost, obviously, as you can imagine, which is you have less income-producing assets.

Raghav Khanna: You know, we took the decision to sell a number of names out of our public book. That has a near-term cost, obviously, as you can imagine, which is you have less income-producing assets. Your ROE declines as a result. That's a cost. The benefit is that, you know, as we're seeing our private pipeline reprice higher, we actually have a lot of liquidity to invest in that pipeline. For us, the opportunity is not theoretical. You know, over time, I do suspect that we will maybe gradually increase leverage if this pipeline opportunity continues and, you know, hopefully expand. Both on the unlevered asset yield side, I think that is getting better. Second, you know, to finance that pipeline, I do expect leverage will go up slowly, and both of those should help ROE.

Speaker #8: Your ROE declines as a result. That's a cost. The benefit is that as we're seeing our private pipeline reprice higher, we actually have a lot of liquidity to invest in that pipeline.

Speaker #8: So for us, the opportunity is not theoretical. And so over time, I do suspect that we will maybe gradually increase leverage if this pipeline opportunity continues.

Raghav Khanna: You know, over time, I do suspect that we will maybe gradually increase leverage if this pipeline opportunity continues and, you know, hopefully expand. Both on the unlevered asset yield side, I think that is getting better. Second, you know, to finance that pipeline, I do expect leverage will go up slowly, and both of those should help ROE.

Speaker #8: And hopefully expand. So both on the unlevered asset yield side, I think that is getting better. And then second, to finance that pipeline, I do expect leverage will go up slowly.

Speaker #8: And both of those should help ROE.

Speaker #7: Got it. And then one quick follow-up. There's been a lot of conversation about the markets improving, since December, and the empirical thing that we all want to run through our model is the widening of spreads.

Rick Shane: Got it. Then one quick follow-up. You know, there's been a lot of conversation about the markets improving since December, and the empirical thing that we all wanna run through our model is the widening of spreads. What's interesting is every time a company makes that comment, they follow it with better protections, better covenants. Obviously, that's not something that we can plug into a model, but it's also something I'm not necessarily sure we fully understand. Can you just give us a couple of examples of how deal protections are improving so, you know, we can think about that?

Speaker #7: But what's interesting is every time a company makes that comment, they follow it with better protections, better covenants. Obviously, that's not something that we can plug into a model.

Speaker #7: But it's also something I'm not necessarily sure we fully understand. Can you just give us a couple of examples of how deal protections are improving?

Rick Shane: Can you just give us a couple of examples of how deal protections are improving so, you know, we can think about that?

Speaker #7: So we can think about that.

Speaker #8: Yeah. I mean, the big picture, technical in the market is if you look at just the unlisted and perpetual BDC space, that part of the asset class really became the marginal dollar of that was setting price and risk.

Raghav Khanna: Yeah. I mean, you know, like the big picture, you know, technical in the market is if you look at just the unlisted and perpetual BDC space, you know, that part of the asset class, you know, really became the marginal dollar of that was setting price and risk. That space raised $110 billion in 2025. You know, not sure what the numbers are gonna be, but they're more likely to be negative this year with net outflows than positive. You know, it's not a huge part of the market. Like, BDCs together, you know, public and private, are about 25% of the private credit market. Not huge. From a stock perspective, they're not huge. From a flow perspective, they were very large.

Speaker #8: That space raised 110 billion dollars in 2025. And I'm not sure what the numbers are going to be, but they're more likely to be negative this year, with net outflows than positive.

Speaker #8: So that's a pretty—it's not a huge part of the market. BDCs together, public and private, are about 25% of the private credit market.

Raghav Khanna: Like, BDCs together, you know, public and private, are about 25% of the private credit market. Not huge. From a stock perspective, they're not huge. From a flow perspective, they were very large.

Speaker #8: Not huge. But from a stock perspective, they're not huge. From a flow perspective, they were very large. And we suspect that that's the one change that is driving both pricing improvements in new deals, but also the non-economic terms you talked about.

Raghav Khanna: You know, we suspect that that's the one change that is driving both pricing improvements in new deals, but also the non-economic terms you talked about. What are those improvements we're seeing? One is, you know, PIK requests on new deals have declined to, I don't wanna say zero, but let's say close to zero. That's just going away. Second is, again, you're right, hard to see, but I'm sure you're familiar with the concept of adjusted EBITDA, which, you know, I would say in the go-go days, leading up to Q4 2025, adjusted EBITDA was getting more and more unrealistic versus, you know, what we call cash EBITDA and the true cash earnings profile of the borrowers. That is getting better now again.

Speaker #8: So what are those improvements we're seeing? So one is PIC requests on new deals have declined to I don't want to say zero, but let's say close to zero.

Speaker #8: So that's just going—is going away. Second is, again, you're right, hard to see, but I'm sure you're familiar with the concept of adjusted EBITDA, which I would say in the go-go days leading up to Q4 2025, adjusted EBITDA was getting more and more unrealistic versus what we call cash EBITDA and the true cash earnings profile of the borrowers.

Raghav Khanna: That's just going away. Second is, again, you're right, hard to see, but I'm sure you're familiar with the concept of adjusted EBITDA, which, you know, I would say in the go-go days, leading up to Q4 2025, adjusted EBITDA was getting more and more unrealistic versus, you know, what we call cash EBITDA and the true cash earnings profile of the borrowers. That is getting better now again.

Speaker #8: That is getting better now, again. So that's two. Three is LME protections, which is there's always been a push and pull between borrowers and lenders.

Raghav Khanna: That's two. Three is LME protection, which is, you know, there's always been like a push and pull between borrowers and lenders. I would say, you know, certainly borrowers had probably more leverage in 2025 than lenders did. Those are also getting better. The fourth thing I would say is I wouldn't say the maintenance covenant is coming back, especially for larger deals in any kind of a meaningful way. The direction of travel is the right direction, which is even in some large cap deals that we have in our pipeline, which we describe as, you know, over $100 million of EBITDA, we are starting to see the maintenance covenant come back.

Speaker #8: I would say certainly borrowers had probably more leverage in 2025 than lenders did. Those are also getting better. And then the fourth thing I would say is the I wouldn't say the maintenance covenant is coming back, especially for larger deals in any kind of a meaningful way.

Speaker #8: But the direction of travel is the right direction, which is, even in some large-cap deals that we have in our pipeline—which we describe as over $100 million of EBITDA—we are starting to see the maintenance covenant come back.

Raghav Khanna: The direction of travel is the right direction, which is even in some large cap deals that we have in our pipeline, which we describe as, you know, over $100 million of EBITDA, we are starting to see the maintenance covenant come back.

Speaker #8: So all of those are marginal improvements, but they're all going the right direction.

Raghav Khanna: All of those are like marginal improvements, but they're all going the right direction.

Speaker #7: Got it. I appreciate the answers to both questions. Very helpful. Thank you, guys.

Rick Shane: Got it. I appreciate the answers to both questions. Very helpful. Thank you, guys.

Speaker #9: Again, if you would like to ask a question, press star, followed by the number one on your telephone keypad. And there are no further questions at this time.

Operator: Again, if you would like to ask a question, press star followed by 1 on your telephone keypad. There are no further questions at this time. I will now turn the call back over to Alison Mermey for closing remarks.

Speaker #9: I will now turn the call back over to Alison Murray for closing remarks.

Speaker #1: Thank you all for joining us on today's call. Please feel free to reach out to me and the team with any questions you may have.

Alison Mermey: Thank you all for joining us on today's call. Please feel free to reach out to me and the team with any questions you may have. Have a great day.

Speaker #1: Have a great day.

Operator: Ladies and gentlemen, this concludes today's call. You may now disconnect.