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Financial report summary
?Risks
- Changes in interest rates may affect our cost of capital and net investment income.
- The general increase in interest rates has had the effect of increasing our net investment income, which makes it easier for our Adviser to receive incentive fees.
- A significant portion of our investment portfolio is and will continue to be recorded at fair value and, as a result, there is and will continue to be uncertainty as to the value of our portfolio investments.
- Our ability to achieve our investment objective depends on our Adviser’s ability to support our investment process; if our Adviser were to lose key personnel or they were to resign, our ability to achieve our investment objective could be significantly harmed.
- Our business model depends to a significant extent upon strong referral relationships, and the inability of the personnel associated with our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- We may face increasing competition for investment opportunities, which could reduce returns and result in losses.
- The incentive fee we pay to our Adviser relating to capital gains may be effectively greater than 17.5%.
- Our ability to enter into transactions with our affiliates is restricted.
- A failure on our part to maintain our qualification as a Business Development Company would significantly reduce our operating flexibility.
- Regulations governing our operation as a Business Development Company and RIC affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
- Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- Our sustainability initiatives, specifically relating to ESG matters, may impose additional costs and expose us to emerging areas of risk.
- We and/or our portfolio companies may be materially and adversely impacted by global climate change.
- The market’s focus on climate change may not have a positive impact on our investments.
- We may face a breach of our cyber security, which could result in adverse consequences to our operations and exposure of confidential information.
- We and our portfolio companies will be subject to regulations related to privacy, data protection and information securities, and any failure to comply with these requirements could result in fines, sanctions or other penalties, which could have a material adverse effect on our business and our reputation.
- We are subject to risks associated with artificial intelligence and machine learning technology.
- We may be unable to invest a significant portion of the net proceeds from an offering of our securities on acceptable terms within an attractive timeframe.
- We may allocate the net proceeds from an offering in ways with which you may not agree.
- Our base management fee may induce our Adviser to incur leverage.
- Our incentive fee may induce our Adviser to make speculative investments.
- There may be conflicts of interest related to obligations that Oaktree’s senior management and investment team have to Other Oaktree Funds.
- Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.
- Substantially all of our assets are subject to security interests under our credit facilities and if we default on our obligations under any such facility, we may suffer adverse consequences, including foreclosure on our assets.
- Our investments in portfolio companies may be risky, and we could lose all or parts of our investments.
- We may be exposed to higher risks with respect to our investments that include OID or PIK interest.
- If we acquire the securities and obligations of distressed or bankrupt companies, such investments may be subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.
- Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
- The lack of liquidity in our investments may adversely affect our business.
- We may not have the funds or ability to make additional investments in our portfolio companies.
- Some of our portfolio companies are highly leveraged.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- The disposition of our investments may result in contingent liabilities.
- There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
- If we make unsecured debt investments, we may lack adequate protection in the event our portfolio companies become distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event such portfolio companies default on their indebtedness.
- Our investments may include “covenant-lite” loans, which may give us fewer rights and subject us to greater risk of loss than loans with financial maintenance covenants.
- Our portfolio companies may prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.
- We may incur greater risk with respect to investments we acquire through assignments or participations of interests.
- We generally do not, and do not expect to, control our portfolio companies.
- Defaults by our portfolio companies would harm our operating results.
- Our portfolio companies may experience financial distress and our investments in such companies may be restructured.
- We may not realize gains from our equity investments.
- We are subject to certain risks associated with foreign investments.
- We may have foreign currency risks related to our investments denominated in currencies other than the U.S. dollar.
- We may expose ourselves to risks if we engage in hedging transactions.
- We are a non-diversified investment company within the meaning of the Investment Company Act, and therefore have few restrictions with respect to the proportion of our assets that may be invested in securities of a single industry or issuer.
- Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
- Shares of closed-end investment companies, including Business Development Companies, may trade at a discount to their net asset value.
- Investing in our common stock may involve an above average degree of risk.
- The market price of our common stock may fluctuate significantly.
- Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
- Certain provisions of our restated certificate of incorporation and fourth amended and restated bylaws as well as the Delaware General Corporation Law could deter takeover attempts and have an adverse impact on the price of our common stock.
- Stockholders may incur dilution if we issue securities to subscribe to, convert to or purchase shares of our common stock.
- The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
- The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries
- The indentures under which the Notes are issued contains limited protection for holders of the Notes.
- An active trading market for the Notes may not exist, which could limit your ability to sell the Notes or affect the market price of the Notes.
- If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Management Discussion
- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
- Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:
- •the impact of current global economic conditions, including those caused by inflation, a rising interest rate environment and geopolitical events or all of the foregoing.