UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
|
| | | |
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
| | OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended DecemberMarch 31, 20172020
OR
|
| | | |
| ¨
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
| | OF THE SECURITIES EXCHANGE ACT OF 1934 | |
COMMISSION FILE NUMBER: 1-33901
Oaktree Specialty Lending Corporation
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
|
| | |
DELAWARE (State or jurisdiction of incorporation or organization) | | 26-1219283 (I.R.S. Employer Identification No.) |
| | |
333 South Grand Avenue, 28th Floor Los Angeles, CA (Address of principal executive office) | | 90071 (Zip Code) |
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(213) 830-6300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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| | | | |
| | | | |
Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
Common Stock, par value $0.01 per share | | OCSL | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods asperiod that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ¨ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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| | | | | | |
Large accelerated filer þ¨ | | Accelerated filer ¨þ | | Non-accelerated filer ¨ | | Smaller reporting company ¨ |
| | | | (Do not check if a smaller reporting company) | | |
| | | | | | |
Emerging growth company ¨
| | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ¨ NO þ
The registrant had 140,960,651 shares of common stock outstanding as of February 7, 2018.
May 5, 2020.
OAKTREE SPECIALTY LENDING CORPORATION
FORM 10-Q FOR THE QUARTER ENDED DECEMBERMARCH 31, 20172020
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
|
| |
Item 1. | Consolidated Financial Statements. |
Oaktree Specialty Lending Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
|
| | | | | | | | |
| | December 31, 2017 (unaudited) | | September 30, 2017 |
ASSETS |
Investments at fair value: | | | | |
Control investments (cost December 31, 2017: $438,415; cost September 30, 2017: $444,826) | | $ | 297,534 |
| | $ | 305,271 |
|
Affiliate investments (cost December 31, 2017: $33,397; cost September 30, 2017: $33,743) | | 36,469 |
| | 36,983 |
|
Non-control/Non-affiliate investments (cost December 31, 2017: $1,204,629; cost September 30, 2017: $1,279,096) | | 1,081,401 |
| | 1,199,501 |
|
Total investments at fair value (cost December 31, 2017: $1,676,441; cost September 30, 2017: $1,757,665) | | 1,415,404 |
| | 1,541,755 |
|
Cash and cash equivalents | | 45,435 |
| | 53,018 |
|
Restricted cash | | 319 |
| | 6,895 |
|
Interest, dividends and fees receivable | | 9,082 |
| | 6,892 |
|
Due from portfolio companies | | 5,368 |
| | 5,670 |
|
Receivables from unsettled transactions | | 8,869 |
| | — |
|
Deferred financing costs | | 6,443 |
| | 1,304 |
|
Other assets | | 3,260 |
| | 514 |
|
Total assets | | $ | 1,494,180 |
| | $ | 1,616,048 |
|
LIABILITIES AND NET ASSETS |
Liabilities: | |
| | |
Accounts payable, accrued expenses and other liabilities | | $ | 3,490 |
| | $ | 2,417 |
|
Base management fee and Part I incentive fee payable | | 6,286 |
| | 6,750 |
|
Due to affiliate | | 1,534 |
| | 1,815 |
|
Interest payable | | 6,547 |
| | 3,167 |
|
Amounts payable to syndication partners | | — |
| | 1 |
|
Director fees payable | | 176 |
| | 184 |
|
Payables from unsettled transactions | | 33,465 |
| | 58,691 |
|
Credit facilities payable | | 205,000 |
| | 255,995 |
|
Unsecured notes payable (net of $4,432 and $4,737 of unamortized financing costs as of December 31, 2017 and September 30, 2017, respectively) | | 406,486 |
| | 406,115 |
|
Secured borrowings at fair value (proceeds of $13,489 as of December 31, 2017 and September 30, 2017) | | 11,601 |
| | 13,256 |
|
Total liabilities | | 674,585 |
| | 748,391 |
|
Commitments and contingencies (Note 15) | |
| | |
Net assets: | | | | |
Common stock, $0.01 par value, 250,000 shares authorized; 140,961 shares issued and outstanding as of December 31, 2017 and September 30, 2017 | | 1,409 |
| | 1,409 |
|
Additional paid-in-capital | | 1,579,278 |
| | 1,579,278 |
|
Net unrealized depreciation on investments and secured borrowings | | (259,149 | ) | | (215,677 | ) |
Net realized loss on investments and secured borrowings | | (478,301 | ) | | (478,010 | ) |
Accumulated overdistributed net investment income | | (23,642 | ) | | (19,343 | ) |
Total net assets (equivalent to $5.81 and $6.16 per common share as of December 31, 2017 and September 30, 2017, respectively) (Note 12) | | 819,595 |
| | 867,657 |
|
Total liabilities and net assets | | $ | 1,494,180 |
| | $ | 1,616,048 |
|
|
| | | | | | | | |
| | March 31, 2020 (unaudited) | | September 30, 2019 |
ASSETS |
Investments at fair value: | | | | |
Control investments (cost March 31, 2020: $255,739; cost September 30, 2019: $224,255) | | $ | 187,267 |
| | $ | 209,178 |
|
Affiliate investments (cost March 31, 2020: $10,487; cost September 30, 2019: $8,449) | | 9,414 |
| | 9,170 |
|
Non-control/Non-affiliate investments (cost March 31, 2020: $1,362,354; cost September 30, 2019: $1,280,310) | | 1,195,506 |
| | 1,219,694 |
|
Total investments at fair value (cost March 31, 2020: $1,628,580; cost September 30, 2019: $1,513,014) | | 1,392,187 |
| | 1,438,042 |
|
Cash and cash equivalents | | 89,509 |
| | 15,406 |
|
Interest, dividends and fees receivable | | 6,217 |
| | 11,167 |
|
Due from portfolio companies | | 1,774 |
| | 2,616 |
|
Receivables from unsettled transactions | | 1,868 |
| | 4,586 |
|
Deferred financing costs | | 5,671 |
| | 6,396 |
|
Deferred offering costs | | 45 |
| | — |
|
Deferred tax asset, net | | 821 |
| | — |
|
Derivative assets at fair value | | 1,268 |
| | 490 |
|
Other assets | | 2,267 |
| | 2,335 |
|
Total assets | | $ | 1,501,627 |
| | $ | 1,481,038 |
|
LIABILITIES AND NET ASSETS |
Liabilities: | |
| | |
Accounts payable, accrued expenses and other liabilities | | $ | 1,750 |
| | $ | 1,589 |
|
Base management fee and incentive fee payable | | 8,739 |
| | 10,167 |
|
Due to affiliate | | 2,651 |
| | 2,689 |
|
Interest payable | | 1,681 |
| | 2,296 |
|
Payables from unsettled transactions | | 35,896 |
| | 59,596 |
|
Deferred tax liability | | — |
| | 704 |
|
Credit facility payable | | 404,825 |
| | 314,825 |
|
Unsecured notes payable (net of $3,645 and $2,708 of unamortized financing costs as of March 31, 2020 and September 30, 2019, respectively) | | 293,861 |
| | 158,542 |
|
Total liabilities | | 749,403 |
| | 550,408 |
|
Commitments and contingencies (Note 14) | |
| | |
Net assets: | | | | |
Common stock, $0.01 par value per share, 250,000 shares authorized; 140,961 shares issued and outstanding as of March 31, 2020 and September 30, 2019 | | 1,409 |
| | 1,409 |
|
Additional paid-in-capital | | 1,487,774 |
| | 1,487,774 |
|
Accumulated overdistributed earnings | | (736,959 | ) | | (558,553 | ) |
Total net assets (equivalent to $5.34 and $6.60 per common share as of March 31, 2020 and September 30, 2019, respectively) (Note 12) | | 752,224 |
| | 930,630 |
|
Total liabilities and net assets | | $ | 1,501,627 |
| | $ | 1,481,038 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| | | | Three months ended December 31, 2017 | | Three months ended December 31, 2016 | | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Interest income: | | | | | | | | | | | | |
Control investments | | $ | 3,203 |
| | $ | 4,445 |
| | $ | 2,393 |
| | $ | 2,852 |
| | $ | 4,944 |
| | $ | 6,191 |
|
Affiliate investments | | 949 |
| | 1,008 |
| | 138 |
| | 22 |
| | 252 |
| | 35 |
|
Non-control/Non-affiliate investments | | 25,565 |
| | 38,301 |
| | 27,149 |
| | 31,231 |
| | 52,808 |
| | 63,398 |
|
Interest on cash and cash equivalents | | 221 |
| | 119 |
| | 218 |
| | 204 |
| | 299 |
| | 474 |
|
Total interest income | | 29,938 |
| | 43,873 |
| | 29,898 |
| | 34,309 |
| | 58,303 |
| | 70,098 |
|
PIK interest income: | | | | | | | | | | | | |
Control investments | | 1,191 |
| | 1,560 |
| | — |
| | — |
| | — |
| | 67 |
|
Affiliate investments | | 176 |
| | 201 |
| |
Non-control/Non-affiliate investments | | 500 |
| | 1,076 |
| | 1,946 |
| | 2,280 |
| | 3,107 |
| | 3,045 |
|
Total PIK interest income | | 1,867 |
| | 2,837 |
| | 1,946 |
| | 2,280 |
| | 3,107 |
| | 3,112 |
|
Fee income: | | | | | | | | | | | | |
Control investments | | 120 |
| | 309 |
| | 8 |
| | 7 |
| | 14 |
| | 13 |
|
Affiliate investments | | 4 |
| | 482 |
| | 5 |
| | 5 |
| | 10 |
| | 9 |
|
Non-control/Non-affiliate investments | | 907 |
| | 2,777 |
| | 2,037 |
| | 1,120 |
| | 3,097 |
| | 2,312 |
|
Total fee income | | 1,031 |
| | 3,568 |
| | 2,050 |
| | 1,132 |
| | 3,121 |
| | 2,334 |
|
Dividend and other income: | | | | | |
Dividend income: | | | | | | | | | |
Control investments | | 1,040 |
| | 1,462 |
| | 277 |
| | 523 |
| | 600 |
| | 976 |
|
Non-control/Non-affiliate investments | | — |
| | 20 |
| |
Total dividend and other income | | 1,040 |
| | 1,482 |
| |
Total dividend income | | | 277 |
| | 523 |
| | 600 |
| | 976 |
|
Total investment income | | 33,876 |
| | 51,760 |
| | 34,171 |
| | 38,244 |
| | 65,131 |
| | 76,520 |
|
Expenses: | | | | | | | | | | | | |
Base management fee | | 5,590 |
| | 8,614 |
| | 5,295 |
| | 5,731 |
| | 10,902 |
| | 11,299 |
|
Part I incentive fee | | 830 |
| | 4,063 |
| | 3,444 |
| | 3,813 |
| | 6,432 |
| | 7,541 |
|
Part II incentive fee | | | (6,608 | ) | | 8,170 |
| | (5,557 | ) | | 9,990 |
|
Professional fees | | 2,898 |
| | 1,064 |
| | 669 |
| | 499 |
| | 1,309 |
| | 1,465 |
|
Board of Directors fees | | 176 |
| | 197 |
| |
Directors fees | | | 142 |
| | 142 |
| | 285 |
| | 285 |
|
Interest expense | | 9,584 |
| | 13,189 |
| | 7,215 |
| | 8,970 |
| | 13,750 |
| | 17,874 |
|
Administrator expense | | 494 |
| | 531 |
| | 393 |
| | 406 |
| | 821 |
| | 1,169 |
|
General and administrative expenses | | 1,116 |
| | 1,468 |
| | 780 |
| | 705 |
| | 1,312 |
| | 1,336 |
|
Loss on legal settlements | | — |
| | 3 |
| |
Total expenses | | 20,688 |
| | 29,129 |
| | 11,330 |
| | 28,436 |
| | 29,254 |
| | 50,959 |
|
Fees waived | | (134 | ) | | (61 | ) | |
Insurance recoveries | | — |
| | (602 | ) | |
Reversal of fees waived / (fees waived) | | | — |
| | (7,901 | ) | | 5,200 |
| | (9,465 | ) |
Net expenses | | 20,554 |
| | 28,466 |
| | 11,330 |
| | 20,535 |
| | 34,454 |
| | 41,494 |
|
Net investment income | | 13,322 |
| | 23,294 |
| | 22,841 |
| | 17,709 |
| | 30,677 |
| | 35,026 |
|
Unrealized appreciation (depreciation) on investments: | | | | | |
Unrealized appreciation (depreciation): | | | | | | | | | |
Control investments | | (1,326 | ) | | 1,339 |
| | (55,392 | ) | | 3,868 |
| | (53,395 | ) | | (1,952 | ) |
Affiliate investments | | (168 | ) | | 26 |
| | (1,730 | ) | | (181 | ) | | (1,794 | ) | | (181 | ) |
Non-control/Non-affiliate investments | | (43,633 | ) | | (75,721 | ) | | (108,651 | ) | | 17,108 |
| | (106,243 | ) | | 16,324 |
|
Net unrealized depreciation on investments | | (45,127 | ) | | (74,356 | ) | |
Net unrealized (appreciation) depreciation on secured borrowings | | 1,655 |
| | (84 | ) | |
Realized gain (loss) on investments and secured borrowings: | | | | | |
Secured borrowings | | | — |
| | (76 | ) | | — |
| | (95 | ) |
Foreign currency forward contracts | | | 2,240 |
| | 753 |
| | 778 |
| | 401 |
|
Net unrealized appreciation (depreciation) | | | (163,533 | ) | | 21,472 |
| | (160,654 | ) | | 14,497 |
|
Realized gains (losses): | | | | | | | | | |
Control investments | | — |
| | (23,624 | ) | | 777 |
| | — |
| | 777 |
| | — |
|
Non-control/Non-affiliate investments | | (291 | ) | | 528 |
| | (24,777 | ) | | 25,899 |
| | (20,938 | ) | | 42,660 |
|
Net realized loss on investments and secured borrowings | | (291 | ) | | (23,096 | ) | |
Net decrease in net assets resulting from operations | | $ | (30,441 | ) | | $ | (74,242 | ) | |
Net investment income per common share — basic | | $ | 0.09 |
| | $ | 0.16 |
| |
Loss per common share — basic | | $ | (0.22 | ) | | $ | (0.52 | ) | |
Weighted average common shares outstanding — basic | | 140,961 |
| | 142,853 |
| |
Net investment income per common share — diluted | | $ | 0.09 |
| | $ | 0.16 |
| |
Loss per common share — diluted (Note 5) | | $ | (0.22 | ) | | $ | (0.52 | ) | |
Weighted average common shares outstanding — diluted | | 140,961 |
| | 142,853 |
| |
Distributions per common share | | $ | 0.125 |
| | $ | 0.18 |
| |
Extinguishment of unsecured notes payable | | | (2,541 | ) | | — |
| | (2,541 | ) | | — |
|
Foreign currency forward contracts | | | 61 |
| | (686 | ) | | (490 | ) | | 515 |
|
Net realized gains (losses) | | | (26,480 | ) | | 25,213 |
| | (23,192 | ) | | 43,175 |
|
Provision for income tax (expense) benefit | | | 1,705 |
| | 91 |
| | 1,545 |
| | (495 | ) |
Net realized and unrealized gains (losses), net of taxes | | | (188,308 | ) | | 46,776 |
| | (182,301 | ) | | 57,177 |
|
Net increase (decrease) in net assets resulting from operations | | | $ | (165,467 | ) | | $ | 64,485 |
| | $ | (151,624 | ) | | $ | 92,203 |
|
Net investment income per common share — basic and diluted | | | $ | 0.16 |
| | $ | 0.13 |
| | $ | 0.22 |
| | $ | 0.25 |
|
Earnings (loss) per common share — basic and diluted (Note 5) | | | $ | (1.17 | ) | | $ | 0.46 |
| | $ | (1.08 | ) | | $ | 0.65 |
|
Weighted average common shares outstanding — basic and diluted | | | 140,961 |
| | 140,961 |
| | 140,961 |
| | 140,961 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except per share amounts)
(unaudited)
| | | | Three months ended December 31, 2017 | | Three months ended December 31, 2016 | | | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Operations: | | | | | | | | | | | | | |
Net investment income | | $ | 13,322 |
| | $ | 23,294 |
| | | $ | 22,841 |
| | $ | 17,709 |
| | $ | 30,677 |
| | $ | 35,026 |
|
Net unrealized depreciation on investments | | (45,127 | ) | | (74,356 | ) | | |
Net unrealized (appreciation) depreciation on secured borrowings | | 1,655 |
| | (84 | ) | | |
Net realized loss on investments and secured borrowings | | (291 | ) | | (23,096 | ) | | |
Net decrease in net assets resulting from operations | | (30,441 | ) | | (74,242 | ) | | |
Net unrealized appreciation (depreciation) | | | (163,533 | ) | | 21,472 |
| | (160,654 | ) | | 14,497 |
|
Net realized gains (losses) | | | (26,480 | ) | | 25,213 |
| | (23,192 | ) | | 43,175 |
|
Provision for income tax (expense) benefit
| | | 1,705 |
| | 91 |
| | 1,545 |
| | (495 | ) |
Net increase (decrease) in net assets resulting from operations | | | (165,467 | ) | | 64,485 |
| | (151,624 | ) | | 92,203 |
|
Stockholder transactions: | | | | | | | | | | | | | |
Distributions to stockholders | | (17,621 | ) | | (25,274 | ) | | | (13,391 | ) | | (13,391 | ) | | (26,782 | ) | | (26,782 | ) |
Net decrease in net assets from stockholder transactions | | (17,621 | ) | | (25,274 | ) | | |
Net increase (decrease) in net assets from stockholder transactions | | | (13,391 | ) | | (13,391 | ) | | (26,782 | ) | | (26,782 | ) |
Capital share transactions: | | | | | | | | | | | | | |
Issuance of common stock under dividend reinvestment plan | | 294 |
| | 1,250 |
| | | 506 |
| | 312 |
| | 987 |
| | 696 |
|
Repurchases of common stock under stock repurchase program | | — |
| | (12,500 | ) | | |
Repurchases of common stock under dividend reinvestment program | | (294 | ) | | (1,250 | ) | | |
Net decrease in net assets from capital share transactions | | — |
| | (12,500 | ) | | |
Total decrease in net assets | | (48,062 | ) | | (112,016 | ) | | |
Repurchases of common stock under dividend reinvestment plan | | | (506 | ) | | (312 | ) | | (987 | ) | | (696 | ) |
Net increase (decrease) in net assets from capital share transactions | | | — |
| | — |
| | — |
| | — |
|
Total increase (decrease) in net assets | | | (178,858 | ) | | 51,094 |
| | (178,406 | ) | | 65,421 |
|
Net assets at beginning of period | | 867,657 |
| | 1,142,288 |
| | | 931,082 |
| | 872,362 |
| | 930,630 |
| | 858,035 |
|
Net assets at end of period | | $ | 819,595 |
| | $ | 1,030,272 |
| | | $ | 752,224 |
| | $ | 923,456 |
| | $ | 752,224 |
| | $ | 923,456 |
|
Net asset value per common share | | $ | 5.81 |
| | $ | 7.31 |
| | | $ | 5.34 |
| | $ | 6.55 |
| | $ | 5.34 |
| | $ | 6.55 |
|
Common shares outstanding at end of period | | 140,961 |
| | 140,961 |
| | | 140,961 |
| | 140,961 |
| | 140,961 |
| | 140,961 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
| | | | | | | | | |
| | Three months ended December 31, 2017 | | Three months ended December 31, 2016 | |
Operating activities: | | | | | |
Net decrease in net assets resulting from operations | | $ | (30,441 | ) | | $ | (74,242 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | | | | | |
Net unrealized depreciation on investments | | 45,127 |
| | 74,356 |
| |
Net unrealized appreciation (depreciation) on secured borrowings | | (1,655 | ) | | 84 |
| |
Net realized loss on investments and secured borrowings | | 291 |
| | 23,096 |
| |
PIK interest income | | (1,867 | ) | | (2,837 | ) | |
Recognition of fee income | | (1,031 | ) | | (3,568 | ) | |
Accretion of original issue discount on investments | | (2,997 | ) | | (2,201 | ) | |
Accretion of original issue discount on unsecured notes payable | | 66 |
| | 66 |
| |
Amortization of deferred financing costs | | 1,341 |
| | 999 |
| |
Changes in operating assets and liabilities: | | | | | |
Fee income received | | 1,031 |
| | 3,583 |
| |
Decrease in restricted cash | | 6,576 |
| | 11,315 |
| |
(Increase) decrease in interest, dividends and fees receivable | | (2,190 | ) | | 3,285 |
| |
Decrease in due from portfolio companies | | 302 |
| | 958 |
| |
(Increase) decrease in receivables from unsettled transactions | | (8,869 | ) | | 5,346 |
| |
Decrease in insurance recoveries receivable | | — |
| | 759 |
| |
(Increase) decrease in other assets | | (2,746 | ) | | 372 |
| |
Increase in accounts payable, accrued expenses and other liabilities | | 1,073 |
| | 1,534 |
| |
Decrease in base management fee and Part I incentive fee payable | | (464 | ) | | (3,557 | ) | |
Decrease in due to affiliate | | (281 | ) | | (145 | ) | |
Increase in interest payable | | 3,380 |
| | 5,148 |
| |
Increase (decrease) in payables from unsettled transactions | | (25,226 | ) | | 13,269 |
| |
Decrease in director fees payable | | (8 | ) | | (369 | ) | |
Decrease in legal settlements payable | | — |
| | (530 | ) | |
Increase (decrease) in amounts payable to syndication partners | | (1 | ) | | 1,030 |
| |
Purchases of investments and net revolver activity | | (200,166 | ) | | (104,153 | ) | |
Principal payments received on investments (scheduled payments) | | 14,149 |
| | 6,371 |
| |
Principal payments received on investments (payoffs) | | 196,415 |
| | 209,241 |
| |
PIK interest income received in cash | | 1,103 |
| | 3,434 |
| |
Proceeds from the sale of investments | | 74,296 |
| | 6,427 |
| |
Net cash provided by operating activities | | 67,208 |
| | 179,071 |
| |
Financing activities: | | | | | |
Distributions paid in cash | | (17,327 | ) | | (24,024 | ) | |
Borrowings under credit facilities | | 35,000 |
| | 84,000 |
| |
Repayments of borrowings under credit facilities | | (85,995 | ) | | (158,882 | ) | |
Repayments of secured borrowings | | — |
| | (4,503 | ) | |
Repurchases of common stock under stock repurchase program | | — |
| | (12,500 | ) | |
Repurchases of common stock under dividend reinvestment plan | | (294 | ) | | (1,250 | ) | |
Deferred financing costs paid | | (6,175 | ) | | — |
| |
Net cash used by financing activities | | (74,791 | ) | | (117,159 | ) | |
Net increase (decrease) in cash and cash equivalents | | (7,583 | ) | | 61,912 |
| |
Cash and cash equivalents, beginning of period | | 53,018 |
| | 117,923 |
| |
Cash and cash equivalents, end of period | | $ | 45,435 |
| | $ | 179,835 |
| |
Supplemental information: | | | | | |
Cash paid for interest | | $ | 4,797 |
| | $ | 6,976 |
| |
Non-cash operating activities: | | | | | |
Purchases of investments from restructurings | | $ | — |
| | $ | (125,693 | ) | |
Proceeds from investment restructurings | | $ | — |
| | $ | 125,693 |
| |
Non-cash financing activities: | | | | | |
Issuance of shares of common stock under dividend reinvestment plan | | $ | 294 |
| | $ | 1,250 |
| |
|
| | | | | | | | |
| | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Operating activities: | | | | |
Net increase (decrease) in net assets resulting from operations | | $ | (151,624 | ) | | $ | 92,203 |
|
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | | | | |
Net unrealized (appreciation) depreciation | | 160,654 |
| | (14,497 | ) |
Net realized (gains) losses | | 23,192 |
| | (43,175 | ) |
PIK interest income | | (3,107 | ) | | (3,112 | ) |
Accretion of original issue discount on investments | | (5,454 | ) | | (13,224 | ) |
Accretion of original issue discount on unsecured notes payable | | 48 |
| | 107 |
|
Amortization of deferred financing costs | | 968 |
| | 1,545 |
|
Deferred taxes | | (1,525 | ) | | 291 |
|
Purchases of investments | | (379,169 | ) | | (270,266 | ) |
Proceeds from the sales and repayments of investments | | 251,499 |
| | 329,035 |
|
Changes in operating assets and liabilities: | | | | |
(Increase) decrease in interest, dividends and fees receivable | | 4,950 |
| | 1,575 |
|
(Increase) decrease in due from portfolio companies | | 842 |
| | (50 | ) |
(Increase) decrease in receivables from unsettled transactions | | 2,718 |
| | 24,942 |
|
(Increase) decrease in other assets | | 68 |
| | 189 |
|
Increase (decrease) in accounts payable, accrued expenses and other liabilities | | 163 |
| | (2,076 | ) |
Increase (decrease) in base management fee and incentive fee payable | | (1,428 | ) | | 699 |
|
Increase (decrease) in due to affiliate | | (38 | ) | | (1,334 | ) |
Increase (decrease) in interest payable | | (615 | ) | | (1,248 | ) |
Increase (decrease) in payables from unsettled transactions | | (23,700 | ) | | (27,336 | ) |
Increase (decrease) in amounts payable to syndication partners | | — |
| | 477 |
|
Net cash provided by (used in) operating activities | | (121,558 | ) | | 74,745 |
|
Financing activities: | | | | |
Distributions paid in cash | | (25,795 | ) | | (26,086 | ) |
Borrowings under credit facilities | | 224,000 |
| | 228,825 |
|
Repayments of borrowings under credit facilities | | (134,000 | ) | | (45,000 | ) |
Repayments of unsecured notes | | (161,250 | ) | | (228,825 | ) |
Issuance of unsecured notes | | 297,459 |
| | — |
|
Repayments of secured borrowings | | — |
| | (692 | ) |
Repurchases of common stock under dividend reinvestment plan | | (987 | ) | | (696 | ) |
Deferred financing costs paid | | (3,715 | ) | | (2,608 | ) |
Deferred offering costs paid | | (45 | ) | | — |
|
Net cash provided by (used in) financing activities | | 195,667 |
| | (75,082 | ) |
Effect of exchange rate changes on foreign currency | | (6 | ) | | — |
|
Net increase (decrease) in cash and cash equivalents and restricted cash | | 74,103 |
| | (337 | ) |
Cash and cash equivalents and restricted cash, beginning of period | | 15,406 |
| | 13,489 |
|
Cash and cash equivalents and restricted cash, end of period | | $ | 89,509 |
| | $ | 13,152 |
|
Supplemental information: | | | | |
Cash paid for interest | | $ | 13,349 |
| | $ | 17,472 |
|
Non-cash financing activities: | | | | |
Issuance of shares of common stock under dividend reinvestment plan | | $ | 987 |
| | $ | 696 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
DecemberMarch 31, 20172020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Control Investments | | | | | | | | | (8)(9) |
C5 Technology Holdings, LLC | | Data Processing & Outsourced Services | | | | | | | |
829 Common Units | | | | | $ | — |
| | $ | — |
| | (20) |
34,984,460.37 Preferred Units | | | | | 34,984 |
| | 27,638 |
| | (20) |
| | | | | 34,984 |
| | 27,638 |
| | |
Dominion Diagnostics, LLC | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024 | 6.46 | % | | $ | 27,799 |
| | 27,799 |
| | 27,799 |
| | (6)(20) |
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024 | 6.46 | % | | 5,260 |
| | 5,260 |
| | 5,260 |
| | (6)(19)(20) |
30,030.8 Common Units in DD Healthcare Services Holdings, LLC | | | | | 18,626 |
| | 10,115 |
| | (20) |
| | | | | 51,685 |
| | 43,174 |
| | |
First Star Speir Aviation Limited | | Airlines | | | | | | | (10) |
First Lien Term Loan, 9.00% cash due 12/15/2020 | | | 11,510 |
| | 2,097 |
| | 11,510 |
| | (11)(20) |
100% equity interest | | | | | 8,500 |
| | 3,165 |
| | (11)(12)(20) |
| | | | | 10,597 |
| | 14,675 |
| | |
New IPT, Inc. | | Oil & Gas Equipment & Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | 6.45 | % | | 2,605 |
| | 2,605 |
| | 2,605 |
| | (6)(20) |
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021 | 6.45 | % | | 1,009 |
| | 1,009 |
| | 1,009 |
| | (6)(19)(20) |
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | — |
| | 1,596 |
| | (20) |
| | | | | 3,614 |
| | 5,210 |
| | |
Senior Loan Fund JV I, LLC | | Multi-Sector Holdings | | | | | | | (14) |
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | 8.73 | % | | 96,250 |
| | 96,250 |
| | 92,171 |
| | (6)(11)(20) |
87.5% LLC equity interest | | | | | 49,322 |
| | — |
| | (11)(16)(19) |
| | | | | 145,572 |
| | 92,171 |
| | |
Thruline Marketing, Inc. | | Advertising | | | | | | |
|
9,073 Class A Units in FS AVI Holdco, LLC | | | | | 9,287 |
| | 4,399 |
| | (20) |
| | | | | 9,287 |
| | 4,399 |
| | |
Total Control Investments (24.9% of net assets) | | | | | $ | 255,739 |
| | $ | 187,267 |
| | |
| | | | | | | | | |
Affiliate Investments | | | | | | | | | (17) |
Assembled Brands Capital LLC | | Specialized Finance | | | | | | | |
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023 | 6.99 | % | | $ | 7,623 |
| | $ | 7,623 |
| | $ | 6,115 |
| | (6)(19)(20) |
1,609,201 Class A Units | | | | | 765 |
| | 917 |
| | (20) |
1,019,168.80 Preferred Units, 6% | | | | | 1,019 |
| | 1,050 |
| | (20) |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | — |
| | — |
| | (20) |
| | | | | 9,407 |
| | 8,082 |
| | |
Caregiver Services, Inc. | | Health Care Services | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | 1,080 |
| | 1,332 |
| | (20) |
| | | | | 1,080 |
| | 1,332 |
| | |
Total Affiliate Investments (1.3% of net assets) | | | | | $ | 10,487 |
| | $ | 9,414 |
| | |
| | | | | | | | | |
Non-Control/Non-Affiliate Investments | | | | | | | | | (18) |
4 Over International, LLC | | Commercial Printing | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022 | 7.45 | % | | $ | 5,738 |
| | $ | 5,710 |
| | $ | 5,528 |
| | (6)(20) |
First Lien Revolver, LIBOR+6.00% cash due 6/7/2021 | 7.45 | % | | 2,232 |
| | 2,214 |
| | 2,150 |
| | (6)(20) |
| | | | | 7,924 |
| | 7,678 |
| | |
99 Cents Only Stores LLC | | General Merchandise Stores | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022 | 6.07 | % | | 19,380 |
| | 19,085 |
| | 13,889 |
| | (6) |
| | | | | 19,085 |
| | 13,889 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
Control Investments (3)(15) | | | | | | | | | | |
Traffic Solutions Holdings, Inc. | | | | Construction and engineering | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash 2% PIK due 4/1/2021 (13) | | 8.70 | % | | | | $ | 36,661 |
| | $ | 36,637 |
| | $ | 36,662 |
|
First Lien Revolver, LIBOR+6% (1% floor) cash due 4/1/2021 (13) | | 7.70 | % | | | | 2,000 |
| | 1,997 |
| | 2,000 |
|
LC Facility, 6% cash due 4/1/2021 | |
|
| | | | 4,752 |
| | 4,748 |
| | 4,752 |
|
746,114 Series A Preferred Units, 10% | | | | | | | | 20,029 |
| | 7,700 |
|
746,114 Shares of Common Stock | | | | | | | | 5,316 |
| | — |
|
| | | | | | | | 68,727 |
| | 51,114 |
|
TransTrade Operators, Inc. | | | | Air freight & logistics | | | | | | |
First Lien Term Loan, 5% cash due 12/31/2017 (22)(24) | |
|
| | | | 15,973 |
| | 15,574 |
| | 1,810 |
|
First Lien Revolver, 8% cash due 12/31/2017 (22)(24) | |
|
| | | | 7,757 |
| | 7,757 |
| | — |
|
596.67 Series A Common Units | | | | | | | | — |
| | — |
|
4,000 Series A Preferred Units in TransTrade Holdings LLC | | | | | | | | 4,000 |
| | — |
|
5,200,000 Series B Preferred Units in TransTrade Holdings LLC | | | | | | | | 5,200 |
| | — |
|
| | | | | | | | 32,531 |
| | 1,810 |
|
First Star Speir Aviation Limited (11)(16) | | | | Airlines | | | | | | |
First Lien Term Loan, 9% cash due 12/15/2020 | |
|
| | | | 32,510 |
| | 25,194 |
| | 32,511 |
|
100% equity interest (6) | | | | | | | | 8,500 |
| | 6,937 |
|
| | | | | | | | 33,694 |
| | 39,448 |
|
First Star Bermuda Aviation Limited (11)(16) | | | | Airlines | | | | | | |
First Lien Term Loan, 9% cash 3% PIK due 8/19/2018 | |
|
| | | | 11,868 |
| | 11,868 |
| | 11,868 |
|
100% equity interest (6) | | | | | | | | 5,192 |
| | 7,316 |
|
| | | | | | | | 17,060 |
| | 19,184 |
|
Eagle Hospital Physicians, LLC | | | | Healthcare services | | | | | | |
Earn-out (19) | | | | | | | | 7,851 |
| | 5,083 |
|
| | | | | | | | 7,851 |
| | 5,083 |
|
Senior Loan Fund JV I, LLC (11)(17)(18) | | | | Multi-sector holdings | | | | | | |
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC (13) | | 6.52 | % | | | | 100,804 |
| | 100,804 |
| | 100,804 |
|
Class B Mezzanine Secured Deferrable Fixed Rate Notes, 15% PIK due 2036 in SLF Repack Issuer 2016 LLC | | | | | | 27,463 |
| | 27,463 |
| | 27,463 |
|
87.5% LLC equity interest (25) | | | | | | | | 16,172 |
| | 4,880 |
|
| | | | | | | | 144,439 |
| | 133,147 |
|
Ameritox Ltd. | | | | Healthcare services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021 (13)(22) | | 6.69 | % | | | | 39,438 |
| | 37,533 |
| | 4,800 |
|
14,090,126.4 Class A Preferred Units in Ameritox Holdings II, LLC | | | | | | | | 14,090 |
| | — |
|
1,602,260.83 Class B Preferred Units in Ameritox Holdings II, LLC | | | | | | | | 1,602 |
| | — |
|
4,930.03 Class A Units in Ameritox Holdings II, LLC | | | | | | | | 29,049 |
| | — |
|
| | | | | | | | 82,274 |
| | 4,800 |
|
New IPT, Inc. | | | | Oil & gas equipment services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 3/17/2021 (13) | | 6.69 | % | | | | 4,107 |
| | 4,107 |
| | 4,107 |
|
Second Lien Term Loan, LIBOR+5.1% (1% floor) cash due 9/17/2021 (13) | | 6.79 | % | | | | 2,504 |
| | 2,504 |
| | 2,504 |
|
First Lien Revolver, LIBOR+5% (1% floor) cash due 3/17/2021 (13) | | 6.69 | % | | | | 1,009 |
| | 1,009 |
| | 1,009 |
|
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | | | | — |
| | 963 |
|
| | | | | | | | 7,620 |
| | 8,583 |
|
AdVenture Interactive, Corp. | | | | Advertising | | | | | | |
9,073 shares of common stock | | | | | | | | 13,611 |
| | 6,421 |
|
| | | | | | | | 13,611 |
| | 6,421 |
|
Keypath Education, Inc. | | | | Advertising | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 4/3/2022 (13) | | 8.69 | % | | | | 19,960 |
| | 19,960 |
| | 19,960 |
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 4/3/2022 (13) | | 8.69 | % | | | | — |
| | — |
| | — |
|
9,073 Class A Units in FS AVI Holdco, LLC | | | | | | | | 10,648 |
| | 7,984 |
|
| | | | | | | | 30,608 |
| | 27,944 |
|
Total Control Investments (36.3% of net assets) | | | | | | | | $ | 438,415 |
| | $ | 297,534 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Access CIG, LLC | | Diversified Support Services | | | | | | | |
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026 | 9.53 | % | | $ | 15,000 |
| | $ | 14,900 |
| | $ | 12,863 |
| | (6) |
| | | | | 14,900 |
| | 12,863 |
| | |
Accupac, Inc. | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 1/17/2026 | 7.84 | % | | 12,550 |
| | 12,338 |
| | 12,330 |
| | (6)(20) |
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 1/17/2026 | | | — |
| | (39 | ) | | (41 | ) | | (6)(19)(20) |
First Lien Revolver, LIBOR+6.00% cash due 1/17/2026 | 7.05 | % | | 1,564 |
| | 1,537 |
| | 1,536 |
| | (6)(20) |
| | | | | 13,836 |
| | 13,825 |
| | |
Acquia Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 10/31/2025 | 8.58 | % | | 20,950 |
| | 20,559 |
| | 19,961 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.00% cash due 10/31/2025 | | | — |
| | (43 | ) | | (106 | ) | | (6)(19)(20) |
| | | | | 20,516 |
| | 19,855 |
| | |
Aden & Anais Merger Sub, Inc. | | Apparel, Accessories & Luxury Goods | | | | | | | |
51,645 Common Units in Aden & Anais Holdings, Inc. | | | | | 5,165 |
| | — |
| | (20) |
| | | | | 5,165 |
| | — |
| | |
AdVenture Interactive, Corp. | | Advertising | | | | | | | |
9,073 shares of common stock | | | | | 13,611 |
| | 12,845 |
| | (20) |
| | | | | 13,611 |
| | 12,845 |
| | |
AI Ladder (Luxembourg) Subco S.a.r.l. | | Electrical Components & Equipment | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025 | 5.49 | % | | 21,563 |
| | 21,072 |
| | 18,185 |
| | (6)(11) |
| | | | | 21,072 |
| | 18,185 |
| | |
AI Sirona (Luxembourg) Acquisition S.a.r.l. | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/2026 | 7.25 | % | | € | 17,500 |
| | 20,035 |
| | 14,977 |
| | (6)(11)(20) |
| | | | | 20,035 |
| | 14,977 |
| | |
AirStrip Technologies, Inc. | | Application Software | | | | | | | |
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/2025 | | | | | 90 |
| | — |
| | (20) |
| | | | | 90 |
| | — |
| | |
Aldevron, L.L.C. | | Biotechnology | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 10/12/2026 | 5.70 | % | | $ | 8,000 |
| | 7,920 |
| | 7,560 |
| | (6) |
| | | | | 7,920 |
| | 7,560 |
| | |
Algeco Scotsman Global Finance Plc | | Construction & Engineering | | | | | | | |
Fixed Rate Bond, 8.00% cash due 2/15/2023 | | | 13,524 |
| | 13,232 |
| | 10,447 |
| | (11) |
| | | | | 13,232 |
| | 10,447 |
| | |
Altice France S.A. | | Integrated Telecommunication Services | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 4.70 | % | | 1,378 |
| | 1,202 |
| | 1,319 |
| | (6)(11) |
| | | | | 1,202 |
| | 1,319 |
| | |
Alvotech Holdings S.A. | | Biotechnology | | | | | | | (13) |
Fixed Rate Bond 15% PIK Note A due 12/13/2023 | | | 14,800 |
| | 17,538 |
| | 18,425 |
| | (11)(20) |
Fixed Rate Bond 15% PIK Note B due 12/13/2023 | | | 14,800 |
| | 17,538 |
| | 17,997 |
| | (11)(20) |
| | | | | 35,076 |
| | 36,422 |
| | |
Ancile Solutions, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021 | 8.45 | % | | 8,429 |
| | 8,371 |
| | 8,218 |
| | (6)(20) |
| | | | | 8,371 |
| | 8,218 |
| | |
Apptio, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025 | 8.25 | % | | 23,764 |
| | 23,380 |
| | 22,647 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 | | | — |
| | (24 | ) | | (72 | ) | | (6)(19)(20) |
| | | | | 23,356 |
| | 22,575 |
| | |
See notes to Oaktree Specialty Lending Corporation
Consolidated Financial Statements.Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
| | | | | | | | | |
Associated Asphalt Partners, LLC | | Construction Materials | | | | | | | |
First Lien Term Loan, LIBOR+5.25% cash due 4/5/2024 | 6.25 | % | | $ | 2,569 |
| | $ | 2,113 |
| | $ | 1,863 |
| | (6) |
| | | | | 2,113 |
| | 1,863 |
| | |
Asurion, LLC | | Property & Casualty Insurance | | | | | | | |
First Lien Term Loan, LIBOR+3.00% cash due 11/3/2024 | 3.99 | % | | 2,098 |
| | 1,769 |
| | 2,024 |
| | (6) |
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/2025 | 7.49 | % | | 21,274 |
| | 21,234 |
| | 19,718 |
| | (6) |
| | | | | 23,003 |
| | 21,742 |
| | |
Atlas Senior Loan Fund XV, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+7.54% cash due 10/23/2032 | 9.46 | % | | 741 |
| | 474 |
| | 468 |
| | (6)(11) |
| | | | | 474 |
| | 468 |
| | |
Aurora Lux Finco S.À.R.L. | | Airport Services | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 7.00 | % | | 23,000 |
| | 22,447 |
| | 21,623 |
| | (6)(11)(20) |
| | | | | 22,447 |
| | 21,623 |
| | |
Avantor Inc. | | Health Care Distributors | | | | | | | |
Fixed Rate Bond, 9.00% cash due 10/1/2025 | | | 3,000 |
| | 2,976 |
| | 3,177 |
| | |
| | | | | 2,976 |
| | 3,177 |
| | |
Avoca Capital CLO X Designated Activity Company | | Multi-Sector Holdings | | | | | | | |
Class ER Notes, EURIBOR+6.05% cash due 1/15/2030 | 6.05 | % | | € | 741 |
| | 552 |
| | 627 |
| | (6)(11) |
| | | | | 552 |
| | 627 |
| | |
Blackhawk Network Holdings, Inc. | | Data Processing & Outsourced Services | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026 | 7.81 | % | | $ | 26,250 |
| | 26,031 |
| | 21,613 |
| | (6) |
| | | | | 26,031 |
| | 21,613 |
| | |
Boxer Parent Company Inc. | | Systems Software | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 5.24 | % | | 13,845 |
| | 13,732 |
| | 11,642 |
| | (6) |
| | | | | 13,732 |
| | 11,642 |
| | |
California Pizza Kitchen, Inc. | | Restaurants | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 8/23/2022 | | | 3,106 |
| | 3,081 |
| | 1,571 |
| | (6)(21) |
| | | | | 3,081 |
| | 1,571 |
| | |
Carlyle US CLO 2019-3, Ltd. | | Multi-Sector Holdings | | | | | | |
|
Class D Notes, LIBOR+7.03% cash due 10/20/2032 | 9.11 | % | | 504 |
| | 315 |
| | 343 |
| | (6)(11) |
| | | | | 315 |
| | 343 |
| | |
Chief Power Finance II, LLC | | Independent Power Producers & Energy Traders | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 12/31/2022 | 7.95 | % | | 22,425 |
| | 21,938 |
| | 21,151 |
| | (6)(20) |
| | | | | 21,938 |
| | 21,151 |
| | |
CITGO Holding, Inc. | | Oil & Gas Refining & Marketing | | | | | | | |
Fixed Rate Bond, 9.25% cash due 8/1/2024 | | | 10,672 |
| | 10,672 |
| | 8,778 |
| | |
First Lien Term Loan, LIBOR+7.00% cash due 8/1/2023 | 8.00 | % | | 9,950 |
| | 9,825 |
| | 8,225 |
| | (6) |
| | | | | 20,497 |
| | 17,003 |
| | |
CITGO Petroleum Corp. | | Oil & Gas Refining & Marketing | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024 | 6.00 | % | | 9,900 |
| | 9,801 |
| | 8,762 |
| | (6) |
| | | | | 9,801 |
| | 8,762 |
| | |
Commscope, Inc. | | Communications Equipment | | | | | | | |
First Lien Term Loan, LIBOR+3.25% cash due 4/6/2026 | 4.24 | % | | 1,532 |
| | 1,325 |
| | 1,456 |
| | (6)(11) |
| | | | | 1,325 |
| | 1,456 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Connect U.S. Finco LLC | | Alternative Carriers | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026 | 5.49 | % | | $ | 31,378 |
| | $ | 30,608 |
| | $ | 25,299 |
| | (6)(11) |
| | | | | 30,608 |
| | 25,299 |
| | |
Continental Intermodal Group LP | | Oil & Gas Storage & Transportation | | | | | | | |
First Lien Term Loan, LIBOR+8.50% PIK due 1/28/2025 | | | 31,599 |
| | 31,599 |
| | 29,545 |
| | (6)(15)(20) |
| | | | | 31,599 |
| | 29,545 |
| | |
Convergeone Holdings, Inc. | | IT Consulting & Other Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026 | 5.99 | % | | 14,696 |
| | 14,197 |
| | 11,573 |
| | (6) |
| | | | | 14,197 |
| | 11,573 |
| | |
Conviva Inc. | | Application Software | | | | | | | |
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021 | | | | | 105 |
| | 395 |
| | (20) |
| | | | | 105 |
| | 395 |
| | |
Corrona, LLC | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+5.75% cash due 12/13/2025 | 6.75 | % | | 10,352 |
| | 10,180 |
| | 10,041 |
| | (6)(20) |
First Lien Delayed Draw Term Loan, LIBOR+5.75% cash due 12/13/2025 | | | — |
| | (32 | ) | | (110 | ) | | (6)(19)(20) |
First Lien Revolver, PRIME + 4.75% cash due 12/13/2025 | 8.00 | % | | 1,221 |
| | 1,190 |
| | 1,166 |
| | (6)(19)(20) |
1,099 Class A2 Common Units in Corrona Group Holdings, L.P. | | | | | 1,099 |
| | 1,099 |
| | (20) |
| | | | | 12,437 |
| | 12,196 |
| | |
Covia Holdings Corporation | | Oil & Gas Equipment & Services | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 6/1/2025 | | | 7,860 |
| | 7,860 |
| | 3,720 |
| | (6)(11)(21) |
| | | | | 7,860 |
| | 3,720 |
| | |
Coyote Buyer, LLC | | Specialty Chemicals | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 2/6/2026 | 7.74 | % | | 13,189 |
| | 13,057 |
| | 13,057 |
| | (6)(20) |
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025 | 7.74 | % | | 39 |
| | 35 |
| | 35 |
| | (6)(19)(20) |
| | | | | 13,092 |
| | 13,092 |
| | |
Crown Point CLO 7 Ltd. | | Multi-Sector Holdings | | | | | | |
|
Class E Notes, LIBOR+6.30% cash due 10/20/2031 | 8.12 | % | | 2,745 |
| | 1,969 |
| | 1,561 |
| | (6)(11) |
| | | | | 1,969 |
| | 1,561 |
| | |
CTOS, LLC | | Trading Companies & Distributors | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 4/18/2025 | 5.00 | % | | 10,190 |
| | 10,290 |
| | 8,789 |
| | (6) |
| | | | | 10,290 |
| | 8,789 |
| | |
Dealer Tire, LLC | | Distributors | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025 | 5.24 | % | | 4,010 |
| | 3,498 |
| | 3,335 |
| | (6) |
| | | | | 3,498 |
| | 3,335 |
| | |
The Dun & Bradstreet Corporation | | Research & Consulting Services | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 2/6/2026 | 4.96 | % | | 10,000 |
| | 9,831 |
| | 9,088 |
| | (6) |
Fixed Rate Bond 6.875% cash due 8/15/2026 | | | 5,000 |
| | 5,000 |
| | 5,228 |
| | |
| | | | | 14,831 |
| | 14,316 |
| | |
Eagleview Technology Corporation | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026 | 8.57 | % | | 12,000 |
| | 11,880 |
| | 10,320 |
| | (6)(20) |
| | | | | 11,880 |
| | 10,320 |
| | |
EHR Canada, LLC | | Food Retail | | | | | | | |
First Lien Term Loan, LIBOR+8.00% cash due 9/28/2020 | 9.45 | % | | 6,861 |
| | 6,829 |
| | 6,909 |
| | (6)(20) |
| | | | | 6,829 |
| | 6,909 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Elevation CLO 2013-1, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class D1R2 Notes, LIBOR+7.65% cash due 8/15/2032 | 9.34 | % | | $ | 1,418 |
| | $ | 1,096 |
| | $ | 949 |
| | (6)(11) |
| | | | | 1,096 |
| | 949 |
| | |
Elevation CLO 2017-6, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+6.60% cash due 7/15/2029 | 8.43 | % | | 500 |
| | 392 |
| | 310 |
| | (6)(11) |
| | | | | 392 |
| | 310 |
| | |
Elevation CLO 2018-10, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+6.29% cash due 10/20/2031 | 8.12 | % | | 1,411 |
| | 1,070 |
| | 816 |
| | (6)(11) |
| | | | | 1,070 |
| | 816 |
| | |
Elevation CLO 2018-9, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+6.30% cash due 7/15/2031 | 8.13 | % | | 1,275 |
| | 792 |
| | 751 |
| | (6)(11) |
| | | | | 792 |
| | 751 |
| | |
EOS Fitness Opco Holdings, LLC | | Leisure Facilities | | | | | | | |
487.5 Class A Preferred Units, 12% | | | | | 488 |
| | 907 |
| | (20) |
12,500 Class B Common Units | | | | | — |
| | 492 |
| | (20) |
| | | | | 488 |
| | 1,399 |
| | |
ExamSoft Worldwide, Inc. | | Application Software | | | | | | | |
180,707 Class C Units in ExamSoft Investor LLC | | | | | 181 |
| | — |
| | (20) |
| | | | | 181 |
| | — |
| | |
GI Chill Acquisition LLC | | Managed Health Care | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025 | 5.45 | % | | 17,730 |
| | 17,641 |
| | 15,336 |
| | (6)(20) |
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/2026 | 8.95 | % | | 10,000 |
| | 9,921 |
| | 8,700 |
| | (6)(20) |
| | | | | 27,562 |
| | 24,036 |
| | |
Global Medical Response | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025 | 5.86 | % | | 6,289 |
| | 6,172 |
| | 5,675 |
| | (6) |
| | | | | 6,172 |
| | 5,675 |
| | |
GKD Index Partners, LLC | | Specialized Finance | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 6/29/2023 | 8.45 | % | | 21,781 |
| | 21,640 |
| | 21,389 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.00% cash due 6/29/2023 | 8.12 | % | | 924 |
| | 914 |
| | 902 |
| | (6)(19)(20) |
| | | | | 22,554 |
| | 22,291 |
| | |
Guidehouse LLP | | Research & Consulting Services | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 5/1/2025 | 5.49 | % | | 4,975 |
| | 4,927 |
| | 4,079 |
| | (6) |
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026 | 8.99 | % | | 20,000 |
| | 19,924 |
| | 17,300 |
| | (6)(20) |
| | | | | 24,851 |
| | 21,379 |
| | |
HealthEdge Software, Inc. | | Application Software | | | | | | | |
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023 | | | | | 213 |
| | 1,891 |
| | (20) |
| | | | | 213 |
| | 1,891 |
| | |
HNC Holdings, Inc. | | Building Products | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 10/5/2023 | 5.00 | % | | 1,734 |
| | 1,621 |
| | 1,570 |
| | (6) |
| | | | | 1,621 |
| | 1,570 |
| | |
Houghton Mifflin Harcourt Publishers Inc. | | Education Services | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 11/22/2024 | 7.24 | % | | 6,913 |
| | 6,649 |
| | 6,187 |
| | (6)(11) |
| | | | | 6,649 |
| | 6,187 |
| | |
Hyland Software, Inc. | | Systems Software | | | | | | | |
First Lien Term Loan, LIBOR+3.25% cash due 7/1/2024 | 4.24 | % | | 836 |
| | 749 |
| | 785 |
| | (6) |
| | | | | 749 |
| | 785 |
| | |
I Drive Safely, LLC | | Education Services | | | | | | | |
125,079 Class A Common Units of IDS Investments, LLC | | | | | 1,000 |
| | 200 |
| | (20) |
| | | | | 1,000 |
| | 200 |
| | |
IBG Borrower LLC | | Apparel, Accessories & Luxury Goods | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 8/2/2022 | 8.50 | % | | 13,284 |
| | 12,374 |
| | 11,424 |
| | (6)(20) |
| | | | | 12,374 |
| | 11,424 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
iCIMs, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024 | 7.50 | % | | $ | 16,718 |
| | $ | 16,464 |
| | $ | 16,024 |
| | (6)(20) |
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024 | | | — |
| | (17 | ) | | (37 | ) | | (6)(19)(20) |
| | | | | 16,447 |
| | 15,987 |
| | |
Integral Development Corporation | | Other Diversified Financial Services | | | | | | | |
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024 | | | | | 113 |
| | — |
| | (20) |
| | | | | 113 |
| | — |
| | |
Intelsat Jackson Holdings S.A. | | Alternative Carriers | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 1/2/2024 | 6.43 | % | | 769 |
| | 696 |
| | 717 |
| | (6)(11) |
| | | | | 696 |
| | 717 |
| | |
L Squared Capital Partners LLC | | Multi-Sector Holdings | | | | | | | |
2.00% limited partnership interest | | | | | 864 |
| | 2,462 |
| | (11)(16) |
| | | | | 864 |
| | 2,462 |
| | |
Lanai Holdings III, Inc. | | Health Care Distributors | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 8/29/2022 | 6.53 | % | | 13,016 |
| | 12,840 |
| | 9,580 |
| | (6) |
| | | | | 12,840 |
| | 9,580 |
| | |
Lannett Company, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 11/25/2020 | 6.00 | % | | 611 |
| | 611 |
| | 544 |
| | (6)(11) |
| | | | | 611 |
| | 544 |
| | |
Lift Brands Holdings, Inc. | | Leisure Facilities | | | | | | | |
2,000,000 Class A Common Units in Snap Investments, LLC | | | | | 1,399 |
| | 1,644 |
| | (20) |
| | | | | 1,399 |
| | 1,644 |
| | |
Lightbox Intermediate, L.P. | | Real Estate Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026 | 5.80 | % | | 39,700 |
| | 39,178 |
| | 34,738 |
| | (6)(20) |
| | | | | 39,178 |
| | 34,738 |
| | |
LTI Holdings, Inc. | | Auto Parts & Equipment | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 7/24/2026 | 5.74 | % | | 1,317 |
| | 1,139 |
| | 997 |
| | (6) |
First Lien Term Loan, LIBOR+3.50% cash due 9/6/2025 | 4.49 | % | | 17,815 |
| | 14,646 |
| | 13,398 |
| | (6) |
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026 | 7.74 | % | | 9,000 |
| | 9,000 |
| | 4,878 |
| | (6) |
| | | | | 24,785 |
| | 19,273 |
| | |
Maravai Intermediate Holdings, LLC | | Biotechnology | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 8/1/2025 | 5.75 | % | | 11,820 |
| | 11,702 |
| | 10,343 |
| | (6)(20) |
| | | | | 11,702 |
| | 10,343 |
| | |
Mayfield Agency Borrower Inc. | | Property & Casualty Insurance | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 2/28/2025 | 5.49 | % | | 28,970 |
| | 28,100 |
| | 23,611 |
| | (6) |
| | | | | 28,100 |
| | 23,611 |
| | |
McAfee, LLC | | Systems Software | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024 | 4.69 | % | | 12,433 |
| | 12,200 |
| | 11,750 |
| | (6) |
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2025 | 9.44 | % | | 7,000 |
| | 7,031 |
| | 6,650 |
| | (6) |
| | | | | 19,231 |
| | 18,400 |
| | |
MHE Intermediate Holdings, LLC | | Diversified Support Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024 | 6.07 | % | | 2,917 |
| | 2,900 |
| | 2,839 |
| | (6)(20) |
| | | | | 2,900 |
| | 2,839 |
| | |
Mindbody, Inc. | | Internet Services & Infrastructure | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 8.00 | % | | 28,952 |
| | 28,482 |
| | 26,781 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025 | 8.07 | % | | 3,048 |
| | 2,998 |
| | 2,819 |
| | (6)(20) |
| | | | | 31,480 |
| | 29,600 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
| | | | | | | | | |
Ministry Brands, LLC | | Application Software | | | | | | | |
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022 | 6.00 | % | | $ | 575 |
| | $ | 566 |
| | $ | 568 |
| | (6)(19)(20) |
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023 | 10.51 | % | | 7,056 |
| | 7,005 |
| | 7,004 |
| | (6)(20) |
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023 | 10.51 | % | | 1,944 |
| | 1,917 |
| | 1,929 |
| | (6)(20) |
| | | | | 9,488 |
| | 9,501 |
| | |
Mountain View CLO XIV Ltd. | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+6.71% cash due 4/15/2029 | 8.54 | % | | 593 |
| | 365 |
| | 407 |
| | (6)(11) |
| | | | | 365 |
| | 407 |
| | |
MRI Software LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 6.57 | % | | 12,798 |
| | 12,676 |
| | 11,327 |
| | (6)(20) |
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026 | | | — |
| | (13 | ) | | (255 | ) | | (6)(19)(20) |
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | 6.57 | % | | 636 |
| | 623 |
| | 490 |
| | (6)(19)(20) |
| | | | | 13,286 |
| | 11,562 |
| | |
Olaplex, Inc. | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026 | 7.50 | % | | 35,500 |
| | 34,817 |
| | 33,192 |
| | (6)(20) |
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025 | 7.50 | % | | 3,834 |
| | 3,761 |
| | 3,585 |
| | (6)(20) |
| | | | | 38,578 |
| | 36,777 |
| | |
OmniSYS Acquisition Corporation | | Diversified Support Services | | | | | | | |
100,000 Common Units in OSYS Holdings, LLC | | | | | 1,000 |
| | 660 |
| | (20) |
| | | | | 1,000 |
| | 660 |
| | |
Onvoy, LLC | | Integrated Telecommunication Services | | | | | | | |
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/2025 | 11.50 | % | | 16,750 |
| | 16,750 |
| | 12,228 |
| | (6)(20) |
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC | | | | | 1,967 |
| | — |
| | (20) |
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC | | | | | — |
| | — |
| | (20) |
| | | | | 18,717 |
| | 12,228 |
| | |
OZLM Funding III, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class DR Notes, LIBOR+7.77% cash due 1/22/2029 | 9.58 | % | | 4,517 |
| | 3,360 |
| | 2,597 |
| | (6)(11) |
| | | | | 3,360 |
| | 2,597 |
| | |
PaySimple, Inc. | | Data Processing & Outsourced Services | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025 | 6.46 | % | | 37,561 |
| | 36,882 |
| | 34,181 |
| | (6)(20) |
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025 | 6.48 | % | | 8,256 |
| | 8,022 |
| | 7,154 |
| | (6)(19)(20) |
| | | | | 44,904 |
| | 41,335 |
| | |
Petsmart, Inc. | | Specialty Stores | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 3/11/2022 | 5.00 | % | | 1,629 |
| | 1,466 |
| | 1,566 |
| | (6) |
| | | | | 1,466 |
| | 1,566 |
| | |
Pingora MSR Opportunity Fund I-A, LP | | Thrifts & Mortgage Finance | | | | | | | |
1.86% limited partnership interest | | | | | 938 |
| | 355 |
| | (11)(16)(19) |
| | | | | 938 |
| | 355 |
| | |
PLATO Learning Inc. | | Education Services | | | | | | | |
Unsecured Senior PIK Note, 8.50% PIK due 12/9/2021 | | | 2,970 |
| | 2,434 |
| | — |
| | (20)(22) |
Unsecured Junior PIK Note, 10.00% PIK due 12/9/2021 | | | 14,279 |
| | 10,227 |
| | — |
| | (20)(22) |
Unsecured Revolver, 5.00% cash due 12/9/2021 | | | 2,865 |
| | 2,631 |
| | 573 |
| | (20)(21) |
126,127.80 Class A Common Units of Edmentum | | | | | 126 |
| | — |
| | (20) |
| | | | | 15,418 |
| | 573 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
ProFrac Services, LLC | | Industrial Machinery | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023 | 8.14 | % | | $ | 16,175 |
| | $ | 16,063 |
| | $ | 14,153 |
| | (6)(20) |
| | | | | 16,063 |
| | 14,153 |
| | |
Project Boost Purchaser, LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026 | 4.49 | % | | 6,965 |
| | 6,895 |
| | 5,874 |
| | (6) |
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027 | 8.99 | % | | 3,750 |
| | 3,750 |
| | 2,906 |
| | (6)(20) |
| | | | | 10,645 |
| | 8,780 |
| | |
QuorumLabs, Inc. | | Application Software | | | | | | | |
64,887,669 Junior-2 Preferred Stock | | | | | 375 |
| | — |
| | (20) |
| | | | | 375 |
| | — |
| | |
Refac Optical Group | | Specialty Stores | | | | | | | |
1,550.9435 Shares of Common Stock in Refac Holdings, Inc. | | | | | 1 |
| | — |
| | (20) |
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10% | | | | | 305 |
| | — |
| | (20) |
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10% | | | | | 999 |
| | — |
| | (20) |
| | | | | 1,305 |
| | — |
| | |
Salient CRGT, Inc. | | Aerospace & Defense | | |
|
| |
|
| |
|
First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022 | 7.57 | % | | 3,043 |
| | 3,019 |
| | 2,510 |
| | (6)(20) |
| | | | | 3,019 |
| | 2,510 |
| | |
Scilex Pharmaceuticals Inc. | | Pharmaceuticals | | | | | | | |
Fixed Rate Zero Coupon Bond due 8/15/2026 | | | 15,716 |
| | 11,602 |
| | 11,394 |
| | (20) |
| | | | | 11,602 |
| | 11,394 |
| | |
Shackleton 2018-XII CLO, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class E Notes, LIBOR+5.90% cash due 7/20/2031 | 7.72 | % | | 1,443 |
| | 1,028 |
| | 824 |
| | (6)(11) |
| | | | | 1,028 |
| | 824 |
| | |
Shackleton 2019-XIV CLO, Ltd. | | Multi-Sector Holdings | | | | | | | |
Class D Notes, LIBOR+6.48% cash due 7/20/2030 | 8.30 | % | | 1,097 |
| | 666 |
| | 579 |
| | (6)(11) |
| | | | | 666 |
| | 579 |
| | |
ShareThis, Inc. | | Application Software | | | | | | | |
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024 | | | | | 367 |
| | — |
| | (20) |
| | | | | 367 |
| | — |
| | |
Sorrento Therapeutics, Inc. | | Biotechnology | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 11/7/2023 | 8.50 | % | | 16,116 |
| | 15,235 |
| | 15,955 |
| | (6)(11)(20) |
1,572,246 Common Stock Warrants (exercise price $3.28) expiration date 5/7/2029 | | | | | 1,750 |
| | 1,384 |
| | (11)(20) |
333,326 Common Stock Warrants (exercise price $3.94) expiration date 11/3/2029 | | | | | — |
| | 280 |
| | (11)(20) |
500,000 Common Stock Warrants (exercise price $3.26) expiration date 6/6/2030 | | | | | — |
| | 415 |
| | (11)(20) |
| | | | | 16,985 |
| | 18,034 |
| | |
Sunshine Luxembourg VII SARL | | Personal Products | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026 | 5.32 | % | | 1,040 |
| | 949 |
| | 947 |
| | (6)(11) |
| | | | | 949 |
| | 947 |
| | |
Supermoose Borrower, LLC | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 5.20 | % | | 7,066 |
| | 6,331 |
| | 5,695 |
| | (6) |
| | | | | 6,331 |
| | 5,695 |
| | |
Surgery Center Holdings, Inc. | | Health Care Facilities | | | | | | | |
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024 | 4.25 | % | | 4,350 |
| | 3,552 |
| | 3,373 |
| | (6)(11) |
| | | | | 3,552 |
| | 3,373 |
| | |
Swordfish Merger Sub LLC | | Auto Parts & Equipment | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026 | 7.75 | % | | 12,500 |
| | 12,454 |
| | 9,844 |
| | (6)(20) |
| | | | | 12,454 |
| | 9,844 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Tacala, LLC | | Restaurants | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/2028 | 8.49 | % | | $ | 6,196 |
| | $ | 6,181 |
| | $ | 4,848 |
| | (6) |
| | | | | 6,181 |
| | 4,848 |
| | |
TerSera Therapeutics LLC | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, LIBOR+9.25% cash due 3/30/2024 | 10.70 | % | | 29,663 |
| | 29,175 |
| | 29,241 |
| | (6)(20) |
668,879 Common Units of TerSera Holdings LLC | | | | | 1,961 |
| | 2,859 |
| | (20) |
| | | | | 31,136 |
| | 32,100 |
| | |
Thunder Finco (US), LLC | | Movies & Entertainment | | | | | | | |
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/2027 | 8.99 | % | | 12,500 |
| | 12,188 |
| | 9,250 |
| | (6)(11)(20) |
| | | | | 12,188 |
| | 9,250 |
| | |
TIBCO Software Inc. | | Application Software | | | | | | | |
Second Lien Term Loan, LIBOR+7.25% cash due 3/3/2028 | 8.24 | % | | 15,000 |
| | 14,925 |
| | 14,325 |
| | (6) |
| | | | | 14,925 |
| | 14,325 |
| | |
TigerConnect, Inc. | | Application Software | | | | | | | |
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024 | | | | | 60 |
| | 525 |
| | (20) |
| | | | | 60 |
| | 525 |
| | |
Transact Holdings Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 4/30/2026 | 5.74 | % | | 6,965 |
| | 6,861 |
| | 5,398 |
| | (6)(20) |
| | | | | 6,861 |
| | 5,398 |
| | |
Truck Hero, Inc. | | Auto Parts & Equipment | | | | | | | |
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/2025 | 9.25 | % | | 21,500 |
| | 21,191 |
| | 16,663 |
| | (6)(20) |
| | | | | 21,191 |
| | 16,663 |
| | |
Turbocombustor Technology, Inc. | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 12/2/2020 | 5.50 | % | | 3,490 |
| | 3,140 |
| | 3,071 |
| | (6) |
| | | | | 3,140 |
| | 3,071 |
| | |
Uber Technologies, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025 | 5.00 | % | | 5,661 |
| | 5,626 |
| | 5,326 |
| | (6)(11) |
| | | | | 5,626 |
| | 5,326 |
| | |
UFC Holdings, LLC | | Movies & Entertainment | | | | | | | |
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026 | 4.25 | % | | 1,374 |
| | 1,210 |
| | 1,225 |
| | (6) |
| | | | | 1,210 |
| | 1,225 |
| | |
Uniti Fiber Holdings Inc. | | Specialized REITs | | | | | | | |
Fixed Rate Bond, 8.25% cash due 10/15/2023 | | | 5,026 |
| | 4,779 |
| | 3,908 |
| | (11) |
Fixed Rate Bond, 7.88% cash due 2/15/2025 | | | 19,685 |
| | 19,685 |
| | 18,454 |
| | (11) |
| | | | | 24,464 |
| | 22,362 |
| | |
U.S. Renal Care, Inc. | | Health Care Services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 6/26/2026 | 6.00 | % | | 1,127 |
| | 924 |
| | 997 |
| | (6) |
| | | | | 924 |
| | 997 |
| | |
Veritas US Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023 | 5.95 | % | | 31,805 |
| | 32,017 |
| | 27,551 |
| | (6) |
| | | | | 32,017 |
| | 27,551 |
| | |
Verscend Holding Corp. | | Health Care Technology | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025 | 5.49 | % | | 24,625 |
| | 24,506 |
| | 23,394 |
| | (6) |
Fixed Rate Bond, 9.75% cash due 8/15/2026 | | | 12,000 |
| | 12,021 |
| | 12,068 |
| | |
| | | | | 36,527 |
| | 35,462 |
| | |
Vertex Aerospace Services Corp. | | Aerospace & Defense | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 6/29/2025 | 5.49 | % | | 15,720 |
| | 15,661 |
| | 13,657 |
| | (6) |
| | | | | 15,661 |
| | 13,657 |
| | |
Vitalyst Holdings, Inc. | | IT Consulting & Other Services | | | | | | | |
675 Series A Preferred Stock Units | | | | | 675 |
| | 440 |
| | (20) |
7,500 Class A Common Stock Units | | | | | 75 |
| | — |
| | (20) |
| | | | | 750 |
| | 440 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Windstream Services, LLC | | Integrated Telecommunication Services | | | | | | | |
Fixed Rate Bond, 8.63% cash due 10/31/2025 | | | $ | 1,460 |
| | $ | 1,420 |
| | $ | 1,029 |
| | (11)(20) |
| | | | | 1,420 |
| | 1,029 |
| | |
WP CPP Holdings, LLC | | Aerospace & Defense | | | | | | | |
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 9.53 | % | | 15,000 |
| | 14,884 |
| | 10,300 |
| | (6)(20) |
| | | | | 14,884 |
| | 10,300 |
| | |
WPEngine, Inc. | | Application Software | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 3/27/2026 | 7.77 | % | | 14,188 |
| | 13,834 |
| | 13,833 |
| | (6)(20) |
First Lien Delayed Draw Term Loan, LIBOR+6.50% cash due 3/27/2026 | | | — |
| | (657 | ) | | (659 | ) | | (6)(19)(20) |
| | | | | 13,177 |
| | 13,174 |
| | |
xMatters, Inc. | | Application Software | | | | | | | |
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025 | | | | | 709 |
| | 269 |
| | (20) |
| | | | | 709 |
| | 269 |
| | |
Zep Inc. | | Specialty Chemicals | | |
|
| |
|
| | |
First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024 | 5.07 | % | | 1,965 |
| | 1,897 |
| | 1,326 |
| | (6) |
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025 | 9.32 | % | | 30,000 |
| | 29,898 |
| | 19,170 |
| | (6)(20) |
| | | | | 31,795 |
| | 20,496 |
| | |
Zephyr Bidco Limited | | Specialized Finance | | | | | | | |
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/2026 | 7.74 | % | | £ | 18,000 |
| | 23,666 |
| | 19,194 |
| | (6)(11) |
| | | | | 23,666 |
| | 19,194 |
| | |
Total Non-Control/Non-Affiliate Investments (158.9% of net assets) | | | | | $ | 1,362,354 |
| | $ | 1,195,506 |
| | |
Total Portfolio Investments (185.1% of net assets) | | | | | $ | 1,628,580 |
| | $ | 1,392,187 |
| | |
Cash and Cash Equivalents | | | | | | | | | |
JP Morgan Prime Money Market Fund, Institutional Shares | | | | | $ | 82,928 |
| | $ | 82,928 |
| | |
Other cash accounts | | | | | 6,581 |
| | 6,581 |
| | |
Total Cash and Cash Equivalents (11.9% of net assets) | | | | | $ | 89,509 |
| | $ | 89,509 |
| | |
Total Portfolio Investments and Cash and Cash Equivalents (197.0% of net assets) | | | | | $ | 1,718,089 |
| | $ | 1,481,696 |
| | |
|
| | | | | | | | | | | | | | | | |
Derivative Instrument | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Counterparty | | Cumulative Unrealized Appreciation /(Depreciation) |
Foreign currency forward contract | | $ | 19,756 |
| | £ | 14,850 |
| | 8/18/2020 | | JPMorgan Chase Bank, N.A. | | $ | 1,310 |
|
Foreign currency forward contract | | $ | 14,532 |
| | € | 13,213 |
| | 8/31/2020 | | JPMorgan Chase Bank, N.A. | | (42 | ) |
| | | | | | | | | | $ | 1,268 |
|
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
DecemberMarch 31, 20172020
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
Affiliate Investments (4) | | | | | | | | | | |
Caregiver Services, Inc. | | | | Healthcare services | | | | | | |
Second Lien Term Loan, 10% cash 2% PIK due 6/30/2019 | |
|
| | | | $ | 9,752 |
| | $ | 9,751 |
| | $ | 9,708 |
|
1,080,399 Shares of Series A Preferred Stock, 10% | | | | | | | | 1,080 |
| | 2,161 |
|
| | | | | | | | 10,831 |
| | 11,869 |
|
AmBath/ReBath Holdings, Inc. | | | | Home improvement retail | | | | | | |
First Lien Term Loan B, 12.5% cash 2.5% PIK due 8/31/2018 | |
|
| | | | 22,552 |
| | 22,566 |
| | 22,552 |
|
4,668,788 Shares of Preferred Stock | | | | | | | | — |
| | 2,048 |
|
| | | | | | | | 22,566 |
| | 24,600 |
|
Total Affiliate Investments (4.4% of net assets) | | | | | | | | $ | 33,397 |
| | $ | 36,469 |
|
| | | | | | | | | | |
Non-Control/Non-Affiliate Investments (7) | | | | | | | | | | |
Cenegenics, LLC | | | | Healthcare services | | | | | | |
First Lien Term Loan, 9.75% cash 2% PIK due 9/30/2019 (22) | |
|
| | | | 28,746 |
| | $ | 27,738 |
| | $ | 15,812 |
|
First Lien Revolver, 15% cash due 9/30/2019 (22) | |
|
| | | | 2,203 |
| | 2,203 |
| | 1,085 |
|
452,914.87 Common Units in Cenegenics, LLC | | | | | | | | 598 |
| | — |
|
345,380.141 Preferred Units in Cenegenics, LLC | | | | | | | | 300 |
| | — |
|
| | | | | | | | 30,839 |
| | 16,897 |
|
Riverlake Equity Partners II, LP | | | | Multi-sector holdings | | | | | | |
1.92% limited partnership interest (11)(25) | | | | | | | | 871 |
| | 588 |
|
| | | | | | | | 871 |
| | 588 |
|
Riverside Fund IV, LP | | | | Multi-sector holdings | | | | | | |
0.34% limited partnership interest (11)(25) | | | | | | | | 153 |
| | 356 |
|
| | | | | | | | 153 |
| | 356 |
|
Bunker Hill Capital II (QP), L.P. | | | | Multi-sector holdings | | | | | | |
0.51% limited partnership interest (11)(25) | | | | | | | | 638 |
| | 808 |
|
| | | | | | | | 638 |
| | 808 |
|
Maverick Healthcare Group, LLC (20) | | | | Healthcare equipment | | | | | | |
First Lien Term Loan A, LIBOR+7.5% cash (1.75% floor) cash due 1/15/2018 (13)(22) | | 9.25 | % | | | | 16,558 |
| | 16,204 |
| | 12,415 |
|
First Lien Term Loan B, LIBOR+11% cash (1.75% floor) cash due 1/15/2018 (13)(22) | | 12.75 | % | | | | 46,030 |
| | 39,110 |
| | — |
|
CapEx Line, LIBOR+7.75% (1.75% floor) cash due 1/15/2018 (13)(22) | | 10.25 | % | | | | 1,272 |
| | 1,261 |
| | 1,121 |
|
First Lien Revolver, PRIME+6.5% cash due 1/15/2018 (13)(22) | | 10.75 | % | | | | 56 |
| | 41 |
| | 50 |
|
| | | | | | | | 56,616 |
| | 13,586 |
|
Refac Optical Group | | | | Specialty stores | | | | | | |
First Lien Term Loan A, LIBOR+8% cash due 9/30/2018 (13) | | 9.56 | % | | | | 3,581 |
| | 3,552 |
| | 3,581 |
|
First Lien Term Loan B, LIBOR+9% cash, 1.75% PIK due 9/30/2018 (13) | | 10.56 | % | | | | 34,701 |
| | 34,617 |
| | 34,665 |
|
First Lien Term Loan C, 12.5% cash due 9/30/2018 | |
|
| | | | 3,416 |
| | 3,416 |
| | 3,346 |
|
First Lien Revolver, LIBOR+8% cash due 9/30/2018 (13) | | 9.56 | % | | | | 3,520 |
| | 3,516 |
| | 3,520 |
|
1,550.9435 Shares of Common Stock in Refac Holdings, Inc. | | | | | | | | 1 |
| | — |
|
550.9435 Shares of Series A-2 Preferred Stock in Refac Holdings, Inc., 10% | | | | | | | | 305 |
| | — |
|
1,000 Shares of Series A Preferred Stock Units in Refac Holdings, Inc., 10% | | | | | | | | 999 |
| | 397 |
|
| | | | | | | | 46,406 |
| | 45,509 |
|
Baird Capital Partners V, LP | | | | Multi-sector holdings | | | | | | |
0.4% limited partnership interest (11)(25) | | | | | | | | 994 |
| | 634 |
|
| | | | | | | | 994 |
| | 634 |
|
Milestone Partners IV, L.P. | | | | Multi-sector holdings | | | | | | |
0.82% limited partnership interest (11)(25) | | | | | | | | 1,030 |
| | 1,716 |
|
| | | | | | | | 1,030 |
| | 1,716 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
RCPDirect, L.P. | | | | Multi-sector holdings | | | | | | |
0.9% limited partnership interest (11)(25) | | | | | | | | $ | 295 |
| | $ | 575 |
|
| | | | | | | | 295 |
| | 575 |
|
Riverside Fund V, L.P. | | | | Multi-sector holdings | | | | | | |
0.48% limited partnership interest (11)(25) | | | | | | | | 1,452 |
| | 1,481 |
|
| | | | | | | | 1,452 |
| | 1,481 |
|
ACON Equity Partners III, LP | | | | Multi-sector holdings | | | | | | |
0.13% limited partnership interest (11)(25) | | | | | | | | 785 |
| | 837 |
|
| | | | | | | | 785 |
| | 837 |
|
BMC Acquisition, Inc. | | | | Other diversified financial services | | | | | | |
500 Series A Preferred Shares, 8% | | | | | | | | 500 |
| | 774 |
|
50,000 Common Shares (6) | | | | | | | | 1 |
| | 59 |
|
| | | | | | | | 501 |
| | 833 |
|
Edmentum, Inc. | | | | Education services | | | | | | |
Unsecured Senior PIK Note, 8.5% PIK due 6/9/2020 (23) | | | | | | $ | 2,487 |
| | 2,434 |
| | — |
|
Unsecured Junior PIK Note, 10% PIK due 6/9/2020 (23) | | | | | 11,593 |
| | 10,227 |
| | — |
|
Unsecured Revolver, 5% cash due 6/9/2020 (10)(22) | |
|
| | | | 1,731 |
| | 1,720 |
| | (400 | ) |
126,127.80 Class A Common Units | | | | | | | | 126 |
| | — |
|
| | | | | | | | 14,507 |
| | (400 | ) |
I Drive Safely, LLC | | | | Education services | | | | | | |
125,079 Class A Common Units of IDS Investments, LLC | | | | | | | | 1,000 |
| | — |
|
| | | | | | | | 1,000 |
| | — |
|
Yeti Acquisition, LLC | | | | Leisure products | | | | | | |
3,000,000 Common Stock Units of Yeti Holdings, Inc. | | | | | | | | — |
| | 5,900 |
|
| | | | | | | | — |
| | 5,900 |
|
Vitalyst Holdings, Inc. | | | | IT consulting & other services | | | | | | |
675 Series A Preferred Units of PCH Support Holdings, Inc., 10% | | | | | | | | 675 |
| | 521 |
|
7,500 Class A Common Stock Units of PCH Support Holdings, Inc. | | | | | | | | 75 |
| | — |
|
| | | | | | | | 750 |
| | 521 |
|
Beecken Petty O'Keefe Fund IV, L.P. | | | | Multi-sector holdings | | | | | | |
0.5% limited partnership interest (11)(25) | | | | | | | | 973 |
| | 1,398 |
|
| | | | | | | | 973 |
| | 1,398 |
|
Comprehensive Pharmacy Services LLC | | | | Pharmaceuticals | | | | | | |
20,000 Common Shares in MCP CPS Group Holdings, Inc. | | | | | | | | 2,000 |
| | 2,815 |
|
| | | | | | | | 2,000 |
| | 2,815 |
|
Garretson Firm Resolution Group, Inc. | | | | Diversified support services | | | | | | |
First Lien Revolver, PRIME+5.5% cash due 5/22/2020 (13) | | 9.75 | % | | | | 711 |
| | 711 |
| | 666 |
|
4,950,000 Preferred Units in GRG Holdings, LP, 8% | | | | | | | | 495 |
| | 196 |
|
50,000 Common Units in GRG Holdings, LP | | | | | | | | 5 |
| | — |
|
| | | | | | | | 1,211 |
| | 862 |
|
Teaching Strategies, LLC | | | | Education services | | | | | | |
Second Lien Term Loan, LIBOR+9.5% (1% floor) cash due 8/27/2023 (13) | | 11.19 | % | | | | 33,500 |
| | 33,500 |
| | 34,119 |
|
| | | | | | | | 33,500 |
| | 34,119 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
Dominion Diagnostics, LLC | | | | Healthcare services | | | | | | |
Subordinated Term Loan, 11% cash 1% PIK due 10/8/2019 (22) | |
|
| | | | $ | 19,900 |
| | $ | 17,262 |
| | $ | 1,035 |
|
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/8/2019 (13) | �� | 6.35 | % | | | | 48,669 |
| | 36,830 |
| | 36,877 |
|
First Lien Revolver, LIBOR+5% (1% floor) cash due 4/8/2019 (10)(13) | | 6.35 | % | | | | | | — |
| | (1,013 | ) |
| | | | | | | | 54,092 |
| | 36,899 |
|
Sterling Capital Partners IV, L.P. | | | | Multi-sector holdings | | | | | | |
0.2% limited partnership interest (11)(25) | | | | | | | | 1,640 |
| | 1,188 |
|
| | | | | | | | 1,640 |
| | 1,188 |
|
Advanced Pain Management | | | | Healthcare services | | | | | | |
First Lien Term Loan, LIBOR+8.5% (1.25% floor) cash due 2/26/2018 (13)(22) | | 10.07 | % | | | | 24,000 |
| | 22,994 |
| | — |
|
| | | | | | | | 22,994 |
| | — |
|
TravelClick, Inc. | | | | Internet software & services | | | | | | |
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 11/6/2021 (13)(21) | | 9.32 | % | | | | 2,697 |
| | 2,482 |
| | 2,710 |
|
| | | | | | | | 2,482 |
| | 2,710 |
|
Pingora MSR Opportunity Fund I-A, LP | | | | Thrift & mortgage finance | | | | | | |
1.86% limited partnership interest (11)(25) | | | | | | | | 6,905 |
| | 5,629 |
|
| | | | | | | | 6,905 |
| | 5,629 |
|
Credit Infonet, Inc. | | | | Data processing & outsourced services | | | | | | |
Subordinated Term Loan, 12.25% cash 0.75% PIK due 10/26/2020 | |
|
| | | | 13,940 |
| | 13,940 |
| | 14,024 |
|
| | | | | | | | 13,940 |
| | 14,024 |
|
HealthEdge Software, Inc. | | | | Application software | | | | | | |
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023 | | | | | | | | 213 |
| | 772 |
|
| | | | | | | | 213 |
| | 772 |
|
InMotion Entertainment Group, LLC | | | | Consumer electronics | | | | | | |
First Lien Term Loan A, LIBOR+7.25% (1.25% floor) cash due 10/1/2021 (13) | | 8.95 | % | | | | 12,086 |
| | 12,042 |
| | 12,086 |
|
First Lien Term Loan B, LIBOR+7.25% (1.25% floor) cash due 10/1/2021 (13) | | 8.95 | % | | | | 5,268 |
| | 5,170 |
| | 5,268 |
|
First Lien Revolver, LIBOR+6.75% (1.25% floor) cash due 10/1/2018 (13) | | 8.45 | % | | | | 5,904 |
| | 5,897 |
| | 5,904 |
|
CapEx Line, LIBOR+7.75% (1.25% floor) cash due 10/1/2018 (13) | | 9.45 | % | | | | 787 |
| | 779 |
| | 787 |
|
1,000,000 Class A Units in InMotion Entertainment Holdings, LLC | | | | | | | | 1,000 |
| | 1,855 |
|
| | | | | | | | 24,888 |
| | 25,900 |
|
Thing5, LLC | | | | Data processing & outsourced services | | | | | | |
First Lien Term Loan, LIBOR+7.5% (1% floor) cash 2% PIK due 10/11/2020 (12)(13) | | 9.19 | % | | | | 47,575 |
| | 47,575 |
| | 40,561 |
|
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 10/11/2020 (13) | | 9.19 | % | | | | 4,000 |
| | 4,000 |
| | 4,000 |
|
2,000,000 Units in T5 Investment Vehicle, LLC | | | | | | | | 2,000 |
| | — |
|
| | | | | | | | 53,575 |
| | 44,561 |
|
Kason Corporation | | | | Industrial machinery | | | | | | |
Mezzanine Term Loan, 11.5% cash 1.75% PIK due 10/28/2019 | |
|
| | | | 6,032 |
| | 6,032 |
| | 5,877 |
|
498.6 Class A Preferred Units in Kason Investment, LLC, 8% | | | | | | | | 499 |
| | 588 |
|
5,540 Class A Common Units in Kason Investment, LLC | | | | | | | | 55 |
| | — |
|
| | | | | | | | 6,586 |
| | 6,465 |
|
SPC Partners V, L.P. | | | | Multi-sector holdings | | | | | | |
0.571% limited partnership interest (11)(25) | | | | | | | | 1,772 |
| | 1,929 |
|
| | | | | | | | 1,772 |
| | 1,929 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
P2 Upstream Acquisition Co. | | | | Application software | | | | | | |
First Lien Revolver, LIBOR+4% (1% floor) cash due 11/1/2018 (10)(13)(21) | | 5.69 | % | | | | | | $ | — |
| | $ | (200 | ) |
| | | | | | | | — |
| | (200 | ) |
OmniSYS Acquisition Corporation | | | | Diversified support services | | | | | | |
First Lien Term Loan, LIBOR+7.5% (1% floor) cash due 11/21/2018 (13) | | 9.19 | % | | | | $ | 5,500 |
| | 5,498 |
| | 5,488 |
|
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 11/21/2018 (10)(13) | | 9.19 | % | | | | | | — |
| | (5 | ) |
100,000 Common Units in OSYS Holdings, LLC | | | | | | | | 1,000 |
| | 898 |
|
| | | | | | | | 6,498 |
| | 6,381 |
|
Moelis Capital Partners Opportunity Fund I-B, LP | | | | Multi-sector holdings | | | | | | |
1.0% limited partnership interest (11)(25) | | | | | | | | 1,045 |
| | 1,420 |
|
| | | | | | | | 1,045 |
| | 1,420 |
|
Aden & Anais Merger Sub, Inc. | | | | Apparel, accessories & luxury goods | | | | | | |
51,645 Common Units in Aden & Anais Holdings, Inc. | | | | | | | | 5,165 |
| | — |
|
| | | | | | | | 5,165 |
| | — |
|
Lift Brands, Inc. | | | | Leisure facilities | | | | | | |
First Lien Term Loan, LIBOR+7.5% (1% floor) cash due 12/23/2019 (13) | | 9.19 | % | | | | 21,222 |
| | 21,211 |
| | 21,222 |
|
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 12/23/2019 (10)(13) | | 9.19 | % | | | | | | (3 | ) | | — |
|
2,000,000 Class A Common Units in Snap Investments, LLC | | | | | | | | 2,004 |
| | 2,878 |
|
| | | | | | | | 23,212 |
| | 24,100 |
|
Tailwind Capital Partners II, L.P. | | | | Multi-sector holdings | | | | | | |
0.3% limited partnership interest (11)(25) | | | | | | | | 1,588 |
| | 1,894 |
|
| | | | | | | | 1,588 |
| | 1,894 |
|
Long's Drugs Incorporated | | | | Pharmaceuticals | | | | | | |
Second Lien Term Loan, LIBOR+11.25% cash due 2/19/2022 (13) | | 12.63 | % | | | | 26,909 |
| | 26,909 |
| | 27,447 |
|
50 Series A Preferred Shares in Long's Drugs Incorporated | | | | | | | | 500 |
| | 799 |
|
25 Series B Preferred Shares in Long's Drugs Incorporated | | | | | | | | 313 |
| | 472 |
|
| | | | | | | | 27,722 |
| | 28,718 |
|
Conviva Inc. | | | | Application software | | | | | | |
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021 | | | | | | | | 105 |
| | 223 |
|
| | | | | | | | 105 |
| | 223 |
|
OnCourse Learning Corporation | | | | Education services | | | | | | |
264,312 Class A Units in CIP OCL Investments, LLC | | | | | | | | 2,726 |
| | 1,878 |
|
| | | | | | | | 2,726 |
| | 1,878 |
|
ShareThis, Inc. | | | | Internet software & services | | | | | | |
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024 | | | | | | | | 367 |
| | 3 |
|
| | | | | | | | 367 |
| | 3 |
|
ExamSoft Worldwide, Inc. | | | | Internet software & services | | | | | | |
180,707 Class C Units in ExamSoft Investor LLC | | | | | | | | 181 |
| | 129 |
|
| | | | | | | | 181 |
| | 129 |
|
RCPDirect II, LP | | | | Multi-sector holdings | | | | | | |
0.4% limited partnership interest (11)(25) | | | | | | | | 617 |
| | 777 |
|
| | | | | | | | 617 |
| | 777 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
Integral Development Corporation | | | | Other diversified financial services | | | | | | |
First Lien Term Loan, LIBOR+9.5% (1% floor) cash due 7/10/2019 (13) | | 10.84 | % | | | | $ | 10,750 |
| | $ | 10,720 |
| | $ | 10,118 |
|
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024 | | | | | | | | 113 |
| | — |
|
| | | | | | | | 10,833 |
| | 10,118 |
|
Loftware, Inc. | | | | Internet software & services | | | | | | |
Mezzanine Term Loan, 11% cash 1% PIK due 7/18/2020 | |
|
| | | | 6,214 |
| | 6,214 |
| | 6,216 |
|
300,000 Class A Common Units in RPLF Holdings, LLC | | | | | | | | 300 |
| | 223 |
|
| | | | | | | | 6,514 |
| | 6,439 |
|
Webster Capital III, L.P. | | | | Multi-sector holdings | | | | | | |
0.754% limited partnership interest (11)(25) | | | | | | | | 1,274 |
| | 1,578 |
|
| | | | | | | | 1,274 |
| | 1,578 |
|
L Squared Capital Partners LLC | | | | Multi-sector holdings | | | | | | |
2% limited partnership interest (11)(25) | | | | | | | | 2,660 |
| | 2,677 |
|
| | | | | | | | 2,660 |
| | 2,677 |
|
BeyondTrust Software, Inc. | | | | Application software | | | | | | |
4,500,000 Class A membership interests in BeyondTrust Holdings LLC | | | | | | | | 4,500 |
| | 5,779 |
|
| | | | | | | | 4,500 |
| | 5,779 |
|
GOBP Holdings Inc. | | | | Food retail | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 10/21/2022 (13)(21) | | 9.94 | % | | | | 4,214 |
| | 4,177 |
| | 4,231 |
|
| | | | | | | | 4,177 |
| | 4,231 |
|
Kellermeyer Bergensons Services, LLC | | | | Diversified support services | | | | | | |
Second Lien Term Loan, LIBOR+8.50% (1% floor) cash due 4/29/2022 (13) | | 9.88 | % | | | | 6,105 |
| | 5,911 |
| | 5,914 |
|
| | | | | | | | 5,911 |
| | 5,914 |
|
Dodge Data & Analytics LLC | | | | Data processing & outsourced services | | | | | | |
First Lien Term Loan, LIBOR+8.75% (1% floor) cash due 10/31/2019 (13) | | 10.13 | % | | | | 7,238 |
| | 7,238 |
| | 7,173 |
|
500,000 Class A Common Units in Skyline Data, News and Analytics LLC | | | | | | | | 500 |
| | 242 |
|
| | | | | | | | 7,738 |
| | 7,415 |
|
Metamorph US 3, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+5.5% (1% floor) cash 2% PIK due 12/1/2020 (13)(22) | | 7.07 | % | | | | 9,942 |
| | 9,306 |
| | 3,804 |
|
First Lien Revolver, LIBOR+6.5% (1% floor) cash due 12/1/2020 (10)(13)(22) | | 8.07 | % | | | | 2,205 |
| | 2,156 |
| | (75 | ) |
| | | | | | | | 11,462 |
| | 3,729 |
|
Janrain, Inc. | | | | Internet software & services | | | | | | |
218,008 Common Stock Warrants (exercise price $1.3761) expiration date 12/5/2024 | | | | | | | | 45 |
| | — |
|
| | | | | | | | 45 |
| | — |
|
TigerText, Inc. | | | | Internet software & services | | | | | | |
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024 | | | | | | | | 60 |
| | 426 |
|
| | | | | | | | 60 |
| | 426 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
EOS Fitness Opco Holdings, LLC | | | | Leisure facilities | | | | | | |
First Lien Term Loan, LIBOR+8.75% (0.75% floor) cash due 12/30/2019 (13) | | 10.12 | % | | | | $ | 3,650 |
| | $ | 3,650 |
| | $ | 3,687 |
|
First Lien Revolver, LIBOR+8.75% (0.75% floor) cash due 12/30/2019 (13) | | 10.12 | % | | | | | | — |
| | 50 |
|
487.5 Class A Preferred Units, 12% | | | | | | | | 488 |
| | 695 |
|
12,500 Class B Common Units | | | | | | | | 13 |
| | 567 |
|
| | | | | | | | 4,151 |
| | 4,999 |
|
Motion Recruitment Partners LLC | | | | Human resources & employment services | | | | | | |
First Lien Revolver, LIBOR+6% (1% floor) cash due 2/13/2020 (10)(13) | | 7.69 | % | | | | | | (6 | ) | | 3 |
|
| | | | | | | | (6 | ) | | 3 |
|
WeddingWire, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+8.5% (1% floor) cash due 2/20/2020 (13) | | 10.20 | % | | | | 25,438 |
| | 25,438 |
| | 25,565 |
|
First Lien Revolver, LIBOR+8.5% (1% floor) cash due 2/20/2020 (13) | | 10.20 | % | | | | | | — |
| | 15 |
|
483,645 Common Shares of WeddingWire, Inc. | | | | | | | | 1,200 |
| | 1,655 |
|
| | | | | | | | 26,638 |
| | 27,235 |
|
xMatters, Inc. | | | | Internet software & services | | | | | | |
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025 | | | | | | | | 709 |
| | 372 |
|
| | | | | | | | 709 |
| | 372 |
|
Edge Fitness, LLC | | | | Leisure facilities | | | | | | |
Delayed Draw Term Loan, LIBOR+7.75% (1% floor) cash due 6/30/2020 (13) | | 9.09 | % | | | | 5,535 |
| | 5,535 |
| | 5,535 |
|
| | | | | | | | 5,535 |
| | 5,535 |
|
Golden State Medical Supply, Inc. | | | | Pharmaceuticals | | | | | | |
Mezzanine Term Loan, 10% cash 2.5% PIK due 4/24/2021 | |
|
| | | | 15,001 |
| | 15,001 |
| | 14,932 |
|
| | | | | | | | 15,001 |
| | 14,932 |
|
AirStrip Technologies, Inc. | | | | Internet software & services | | | | | | |
22,858.71 Series C-1 Preferred Stock Warrants (exercise price $34.99757) expiration date 5/11/2025 | | | | | | | | 90 |
| | — |
|
| | | | | | | | 90 |
| | — |
|
Access Medical Acquisition, Inc. | | | | Healthcare services | | | | | | |
450,000 Shares of Class A Common Stock in CMG Holding Company, LLC (6) | | | | | | | | 151 |
| | 970 |
|
| | | | | | | | 151 |
| | 970 |
|
QuorumLabs, Inc. | | | | Internet software & services | | | | | | |
2,727,939 Common Stock Warrants (exercise price $0.0001) expiration date 7/8/2025 | | | | | | | | 375 |
| | — |
|
| | | | | | | | 375 |
| | — |
|
Valet Merger Sub, Inc. | | | | Environmental & facilities services | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/24/2021 (13) | | 8.57 | % | | | | 50,532 |
| | 49,935 |
| | 50,531 |
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/24/2021 (10)(13) | | 8.57 | % | | | | | | (115 | ) | | — |
|
| | | | | | | | 49,820 |
| | 50,531 |
|
Argon Medical Devices, Inc. | | | | Healthcare equipment | | | | | | |
Second Lien Term Loan, LIBOR+9.5% (1% floor) cash due 6/23/2022 (13) | | 11.07 | % | | | | 43,000 |
| | 43,000 |
| | 43,000 |
|
| | | | | | | | 43,000 |
| | 43,000 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Lytx, Inc. | | | | Research & consulting services | | | | | | |
3,500 Class A Units in Lytx Holdings, LLC | | | | | | | | $ | 2,478 |
| | $ | 2,509 |
|
3,500 Class B Units in Lytx Holdings, LLC | | | | | | | | — |
| | 1,596 |
|
| | | | | | | | 2,478 |
| | 4,105 |
|
Onvoy, LLC | | | | Integrated telecommunication services | | | | | | |
Second Lien Term Loan, LIBOR+10.5% (1% floor) cash due 2/10/2025 (13) | | 12.19 | % | | | | $ | 16,750 |
| | 16,750 |
| | 12,939 |
|
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC | | | | | | | | 1,967 |
| | 166 |
|
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC | | | | | | | | — |
| | — |
|
| | | | | | | | 18,717 |
| | 13,105 |
|
4 Over International, LLC | | | | Commercial printing | | | | | | |
First Lien Term Loan, LIBOR+6% (1% floor) cash due 6/7/2022 (13) | | 7.57 | % | | | | 6,045 |
| | 5,985 |
| | 6,045 |
|
First Lien Revolver, LIBOR+6% (1% floor) cash due 6/7/2021 (10)(13) | | 7.57 | % | | | | | | (17 | ) | | — |
|
| | | | | | | | 5,968 |
| | 6,045 |
|
Ping Identity Corporation | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+9.25% (1% floor) cash due 6/30/2021 (13) | | 10.82 | % | | | | 42,500 |
| | 41,605 |
| | 42,929 |
|
First Lien Revolver, LIBOR+9.25% (1% floor) cash due 6/30/2021 (10)(13) | | 10.82 | % | | | | | | (55 | ) | | 25 |
|
| | | | | | | | 41,550 |
| | 42,954 |
|
Ancile Solutions, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 6/30/2021 (13) | | 8.69 | % | | | | 10,198 |
| | 9,990 |
| | 10,106 |
|
| | | | | | | | 9,990 |
| | 10,106 |
|
Ministry Brands, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 12/2/2022 (13) | | 6.38 | % | | | | 3,891 |
| | 3,859 |
| | 3,925 |
|
First Lien Delayed Draw Term Loan, LIBOR+5% (1% floor) cash due 12/2/2022 (13) | | 6.38 | % | | | | 1,685 |
| | 1,669 |
| | 1,705 |
|
Second Lien Term Loan, LIBOR+9.25% (1% floor) cash due 6/2/2023 (13) | | 10.63 | % | | | | 7,056 |
| | 6,968 |
| | 7,090 |
|
Second Lien Delayed Draw Term Loan, LIBOR+9.25% (1% floor) cash due 6/2/2023 (13) | | 10.63 | % | | | | 1,944 |
| | 1,919 |
| | 1,953 |
|
First Lien Revolver LIBOR+5% (1% floor) cash due 12/2/2022 (13) | | 6.57 | % | | | | 1,000 |
| | 991 |
| | 1,009 |
|
| | | | | | | | 15,406 |
| | 15,682 |
|
California Pizza Kitchen, Inc. | | | | Restaurants | | | | | | |
First Lien Term Loan, LIBOR+6% (1% floor) cash due 8/23/2022 (13)(21) | | 7.57 | % | | | | 4,938 |
| | 4,898 |
| | 4,851 |
|
| | | | | | | | 4,898 |
| | 4,851 |
|
Aptos, Inc. | | | | Data processing & outsourced services | | | | | | |
First Lien Term Loan B, LIBOR+6.75% (1% floor) cash due 9/1/2022 (13) | | 8.44 | % | | | | 5,411 |
| | 5,325 |
| | 5,357 |
|
| | | | | | | | 5,325 |
| | 5,357 |
|
SPC Partners VI, L.P. | | | | Multi-sector holdings | | | | | | |
0.39% limited partnership interest (11)(25) | | | | | | | | 139 |
| | 139 |
|
| | | | | | | | 139 |
| | 139 |
|
Impact Sales, LLC | | | | Advertising | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 12/30/2021 (13) | | 8.33 | % | | | | 11,138 |
| | 10,942 |
| | 11,104 |
|
Delayed Draw Term Loan, LIBOR+7% (1% floor) cash due 12/30/2021 (13) | | 8.33 | % | | | | 512 |
| | 436 |
| | 501 |
|
| | | | | | | | 11,378 |
| | 11,605 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
DFT Intermediate LLC | | | | Specialized finance | | | | | | |
First Lien Term Revolver, LIBOR+5.5% (1% floor) cash due 3/1/2022 (13) | | 7.07 | % | | | | $ | 3,300 |
| | $ | 3,224 |
| | $ | 3,276 |
|
| | | | | | | | 3,224 |
| | 3,276 |
|
TerSera Therapeutics, LLC | | | | Pharmaceuticals | | | | | | |
Second Lien Term Loan, LIBOR+9.25% (1% floor) cash due 3/30/2024 (13) | | 10.94 | % | | | | 15,000 |
| | 14,603 |
| | 14,676 |
|
668,879 Common Units of TerSera Holdings LLC | | | | | | | | 1,500 |
| | 1,816 |
|
| | | | | | | | 16,103 |
| | 16,492 |
|
Cablevision Systems Corp. | | | | Integrated telecommunication services | | | | | | |
Fixed Rate Bond 10.875% cash due 10/15/2025 (11)(21) | |
|
| | | | 5,897 |
| | 7,046 |
| | 7,017 |
|
| | | | | | | | 7,046 |
| | 7,017 |
|
HC2 Holdings Inc. | | | | Multi-sector holdings | | | | | | |
Fixed Rate Bond 11% cash due 12/1/2019 (11)(21) | |
|
| | | | 10,500 |
| | 10,641 |
| | 10,723 |
|
| | | | | | | | 10,641 |
| | 10,723 |
|
Natural Resource Partners LP | | | | Precious metals & minerals | | | | | | |
Fixed Rate Bond 10.5% cash due 3/15/2022 (11)(21) | |
|
| | | | 7,000 |
| | 7,426 |
| | 7,490 |
|
| | | | | | | | 7,426 |
| | 7,490 |
|
Virgin Media | | | | Integrated telecommunication services | | | | | | |
Fixed Rate Bond 5.5% cash due 8/15/2026 (11)(21) | |
|
| | | | 2,000 |
| | 2,036 |
| | 2,055 |
|
Fixed Rate Bond 5.25% cash due 1/15/2026 (11)(21) | | | | | | 3,000 |
| | 3,006 |
| | 3,041 |
|
| | | | | | | | 5,042 |
| | 5,096 |
|
Scientific Games International, Inc. | | | | Casinos & gaming | | | | | | |
First Lien Term Loan B4, LIBOR+3.25% cash due 8/14/2024 (13)(21) | | 4.67 | % | | | | 11,340 |
| | 11,277 |
| | 11,446 |
|
| | | | | | | | 11,277 |
| | 11,446 |
|
Salient CRGT Inc. | | | | IT consulting & other services | | | | | | |
First Lien Term Loan, LIBOR+5.75% (1% floor) cash due 2/28/2022 (13)(21) | | 7.32 | % | | | | 3,368 |
| | 3,310 |
| | 3,397 |
|
| | | | | | | | 3,310 |
| | 3,397 |
|
Allied Universal Holdco LLC | | | | Security & alarm services | | | | | | |
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 7/28/2022 (13)(21) | | 5.44 | % | | | | 11,939 |
| | 12,014 |
| | 11,863 |
|
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 7/27/2023 (13)(21) | | 9.88 | % | | | | 1,149 |
| | 1,170 |
| | 1,148 |
|
| | | | | | | | 13,184 |
| | 13,011 |
|
Truck Hero, Inc. | | | | Auto parts & equipment | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 4/21/2025 (13) | | 9.89 | % | | | | 21,500 |
| | 21,191 |
| | 21,661 |
|
| | | | | | | | 21,191 |
| | 21,661 |
|
BMC Software Finance, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+3.25% (1% floor) cash due 9/10/2022 (13)(21) | | 4.82 | % | | | | 16,834 |
| | 16,946 |
| | 16,875 |
|
| | | | | | | | 16,946 |
| | 16,875 |
|
Internet Pipeline, Inc. | | | | Internet software & services | | | | | | |
Incremental First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 8/1/2022 (13) | | 7.74 | % | | | | 5,578 |
| | 5,516 |
| | 5,689 |
|
| | | | | | | | 5,516 |
| | 5,689 |
|
MHE Intermediate Holdings, LLC | | | | Diversified support services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 3/11/2024 (13) | | 6.69 | % | | | | 2,985 |
| | 2,958 |
| | 2,985 |
|
| | | | | | | | 2,958 |
| | 2,985 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
PowerPlan Holdings, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 2/23/2022 (13) | | 6.82 | % | | | | $ | 4,975 |
| | $ | 4,932 |
| | $ | 4,975 |
|
| | | | | | | | 4,932 |
| | 4,975 |
|
UOS, LLC | | | | Trucking | | | | | | |
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 4/18/2023 (13)(21) | | 7.07 | % | | | | 6,898 |
| | 7,055 |
| | 7,062 |
|
| | | | | | | | 7,055 |
| | 7,062 |
|
Veritas US Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 1/27/2023 (13)(21) | | 6.19 | % | | | | 34,821 |
| | 35,233 |
| | 34,949 |
|
| | | | | | | | 35,233 |
| | 34,949 |
|
Staples, Inc. | | | | Distributors | | | | | | |
First Lien Term Loan, LIBOR+4% (1% floor) cash due 8/12/2024 (13)(21) | | 5.49 | % | | | | 6,633 |
| | 6,617 |
| | 6,516 |
|
| | | | | | | | 6,617 |
| | 6,516 |
|
Zep Inc. | | | | Housewares & Specialties | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 8/11/2025 (13) | | 9.63 | % | | | | 30,000 |
| | 29,856 |
| | 29,925 |
|
| | | | | | | | 29,856 |
| | 29,925 |
|
DTZ U.S. Borrower, LLC | | | | Real estate services | | | | | | |
First Lien Term Loan, LIBOR+3.25% (1% floor) cash due 11/4/2021 (13)(21) | | 4.94 | % | | | | 12,934 |
| | 12,974 |
| | 12,786 |
|
| | | | | | | | 12,974 |
| | 12,786 |
|
Micro Holding Corp. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 9/13/2024 (13)(21) | | 5.34 | % | | | | 5,985 |
| | 5,957 |
| | 6,012 |
|
| | | | | | | | 5,957 |
| | 6,012 |
|
Accudyne Industries, LLC | | | | Oil & gas equipment services | | | | | | |
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 8/18/2024 (13)(21) | | 5.32 | % | | | | 19,865 |
| | 19,924 |
| | 20,035 |
|
| | | | | | | | 19,924 |
| | 20,035 |
|
McAfee, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2024 (13)(21) | | 6.07 | % | | | | 7,980 |
| | 7,904 |
| | 7,966 |
|
Second Lien Term Loan LIBOR+8.5% (1% floor) cash due 9/29/2025 (13)(21) | | 10.07 | % | | | | 8,000 |
| | 8,050 |
| | 8,040 |
|
| | | | | | | | 15,954 |
| | 16,006 |
|
99 Cents Only Stores LLC | | | | General merchandise stores | | | | | | |
First Lien Term Loan LIBOR+5% 1.50% PIK due 1/13/2022 (13)(21) | | 6.57 | % | | | | 4,605 |
| | 4,206 |
| | 4,484 |
|
| | | | | | | | 4,206 |
| | 4,484 |
|
Navicure, Inc. | | | | Health care technology | | | | | | |
Second Lien Term Loan, LIBOR+7.5% (1% floor) cash due 10/31/2025 (13)(21) | | 8.86 | % | | | | 14,500 |
| | 14,357 |
| | 14,609 |
|
| | | | | | | | 14,357 |
| | 14,609 |
|
Strategic Materials Holdings Corp. | | | | Health care distributors | | | | | | |
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 10/27/2025 (13)(21) | | 9.13 | % | | | | 9,000 |
| | 8,911 |
| | 9,053 |
|
| | | | | | | | 8,911 |
| | 9,053 |
|
Lanai Holdings III, Inc. | | | | Environmental & facilities services | | | | | | |
First Lien Term Loan B, LIBOR+4.75% (1% floor) cash due 8/29/2022 (13)(21) | | 6.23 | % | | | | 20,254 |
| | 19,754 |
| | 19,444 |
|
| | | | | | | | 19,754 |
| | 19,444 |
|
Vine Oil & Gas LP | | | | Oil & gas exploration & production | | | | | | |
First Lien Term Loan B, LIBOR+6.875% (1% floor) cash due 11/25/2021 (13)(21) | | 8.44 | % | | | | 18,000 |
| | 17,913 |
| | 17,865 |
|
| | | | | | | | 17,913 |
| | 17,865 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Sprint Capital Corp | | | | Wireless telecommunication services | | | | | | |
Fixed Rate Bond 6.875% cash due 11/15/2028 (11)(21) | |
|
| | | | $ | 5,000 |
| | $ | 5,000 |
| | $ | 5,044 |
|
| | | | | | | | 5,000 |
| | 5,044 |
|
Avantor Inc. | | | | Commodity chemicals | | | | | | |
Fixed Rate Bond 6% cash due 10/1/2024 (11)(21) | |
|
| | | | 8,000 |
| | 7,980 |
| | 7,990 |
|
Fixed Rate Bond 9% cash due 10/1/2025 (11)(21) | |
|
| | | | 3,000 |
| | 2,969 |
| | 2,963 |
|
| | | | | | | | 10,949 |
| | 10,953 |
|
Datto Inc. | | | | Technology distributors | | | | | | |
First Lien Term Loan LIBOR+8% (1% floor) cash due 12/7/2022 (13) | | 9.41 | % | | | | 35,000 |
| | 34,310 |
| | 34,300 |
|
First Lien Revolver LIBOR+8% (1% floor) cash due 12/7/2022 (13) | | 9.41 | % | | | | | | (46 | ) | | (47 | ) |
| | | | | | | | 34,264 |
| | 34,253 |
|
Altice Finco SA | | | | Integrated telecommunication services | | | | | | |
Fixed Rate Bond 8.125% cash due 1/15/2024 (11)(21) | |
|
| | | | 3,000 |
| | 3,060 |
| | 3,150 |
|
Fixed Rate Bond 7.625% cash due 2/15/2025 (11)(21) | |
|
| | | | 2,000 |
| | 2,015 |
| | 2,043 |
|
| | | | | | | | 5,075 |
| | 5,193 |
|
Numericable SFR SA | | | | Integrated telecommunication services | | | | | | |
Fixed Rate Bond 7.375% cash due 5/1/2026 (11)(21) | |
|
| | | | 5,000 |
| | 5,125 |
| | 5,169 |
|
| | | | | | | | 5,125 |
| | 5,169 |
|
CITGO Petroleum Corp | | | | Oil & gas refining & marketing | | | | | | |
First Lien Term Loan LIBOR+3.5% (1% floor) cash due 7/29/2021 (11)(13)(21) | | 4.84 | % | | | | 3,000 |
| | 2,948 |
| | 2,957 |
|
| | | | | | | | 2,948 |
| | 2,957 |
|
CITGO Holding Inc. | | | | Oil & gas refining & marketing | | | | | | |
First Lien Term Loan LIBOR+8.5% (1% floor) cash due 5/12/2018 (11)(13)(21) | | 9.84 | % | | | | 29,658 |
| | 29,783 |
| | 30,029 |
|
| | | | | | | | 29,783 |
| | 30,029 |
|
Asset International, Inc. | | | | Research & consulting services | | | | | | |
Second Lien Term Loan LIBOR+9.25% (1% floor) cash due 6/29/2025 (13) | | 10.94 | % | | | | 15,000 |
| | 14,657 |
| | 14,657 |
|
| | | | | | | | 14,657 |
| | 14,657 |
|
Total Non-Control/Non-Affiliate Investments (131.9% of net assets) | | | | | | | | $ | 1,204,629 |
| | $ | 1,081,401 |
|
Total Portfolio Investments (172.7% of net assets) | | | | | | | | $ | 1,676,441 |
| | $ | 1,415,404 |
|
Cash and Cash Equivalents | | | | | | | | | | |
JP Morgan Prime Money Market Fund | | | | | | | | $ | 30,074 |
| | $ | 30,074 |
|
Other cash accounts | | | | | | | | 15,361 |
| | 15,361 |
|
Total Cash and Cash Equivalents (5.5% of net assets) | | | | | | | | $ | 45,435 |
| | $ | 45,435 |
|
Total Portfolio Investments, Cash and Cash Equivalents (178.2% of net assets) | | | | | | | | $ | 1,721,876 |
| | $ | 1,460,839 |
|
See notes to Consolidated Financial Statements.
| |
(1) | All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted. |
| |
(2) | See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region. |
| |
(3) | Control Investments generally are defined by the Investment Company Act of 1940, as amended ("1940 Act"), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation. |
| |
(4) | Affiliate Investments generally are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities. |
| |
(5) | Equity ownership may be held in shares or units of companies related to the portfolio companies. |
| |
(6) | Income producing through payment of dividends or distributions. |
| |
(7) | Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. |
| |
(8) | Principal includes accumulated payment in kind ("PIK") interest and is net of repayments. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
December 31, 2017
(dollar amounts in thousands)
(unaudited)
| |
(9)(4) | Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents. |
| |
(10)(5) | Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par. |
| |
(11) | Investment is not a "qualifying asset" as defined under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70%Each of the Company's total assets. As of December 31, 2017, qualifying assets represented 77.3% ofinvestments is pledged as collateral under the Company's total assets and non-qualifying assets represented 22.7% of the Company's total assets. |
| |
(12) | The sale of a portion of this loan does not qualify for true sale accounting under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 860 - Transfers and Servicing ("ASC 860"), and therefore, the entire debt investment remainsCredit Facility (as defined in the Consolidated Schedule of Investments. Accordingly, the fair value of the Company's debt investments includes $11.6 million relatedNote 6 to the Company's secured borrowings. (See Note 14 in the accompanying notes to the Consolidated Financial Statements.) Statements). |
| |
(13)(6) | The interest rate on the principal balance outstanding for all floating rate loans is indexed to the London Interbank Offered Rate ("LIBOR") and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate basedbase rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of March 31, 2020, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45%, the 180-day LIBOR at 1.07%, the PRIME at 3.25%, the 30-day UK LIBOR at 0.24% and the 30-day EURIBOR at (0.40)%. Most loans include an interest floor, which generally ranges from 0% to 1%. |
| |
(14)(7) | WithPrincipal includes accumulated payment in kind ("PIK") interest and is net of repayments, if any. “£” signifies the exception ofinvestment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments held by the Company’s wholly-owned subsidiaries that have each received a license from theare denominated in U.S. Small Business Administration (“SBA”) to operate as a small business investment company (“SBIC”), each of the Company's investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.dollars. |
| |
(15)(8) | Control Investments generally are defined by the Investment Company Act of 1940, as amended (the "Investment Company Act"), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation. |
| |
(9) | As defined in the 1940Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" thisthese portfolio companycompanies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the threesix months ended DecemberMarch 31, 20172020 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control. |
| |
(16)(10) | First Star Bermuda Aviation Limited and First Star Speir Aviation 1 Limited areis a wholly-owned holding companiescompany formed by the Company in order to facilitate its investment strategy. In accordance with Accounting Standards Update ("ASU") 2013-08, the Company has deemed the holding companiescompany to be an investment companiescompany under accounting principles generally accepted in the United States ("GAAP") and therefore deemed it appropriate to consolidate the financial results and financial position of the holding companiescompany and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companiescompany are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities. |
| |
(17)(11) | Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of March 31, 2020, qualifying assets represented 77.2% of the Company's total assets and non-qualifying assets represented 22.8% of the Company's total assets. |
| |
(12) | Income producing through payment of dividends or distributions. |
| |
(13) | PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of March 31, 2020, the accumulated PIK interest balance for each of the A notes and the B notes was $3.0 million. The fair value of this investment is inclusive of PIK. |
| |
(14) | See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition. |
| |
(18)(15) | The Class A Mezzanine Secured Deferrable Floating Rate Notes bearDuring the quarter ended March 31, 2020, this portfolio company modified its scheduled interest at a rate of LIBOR plus the applicable margin as defined in the indenture. The Class A Mezzanine Secured Deferrable Floating Rate Notes and Class B Mezzanine Secured Deferrable Fixed Rate Notes are collectively referredpayment to as the "mezzanine notes".PIK. |
| |
(19) | In June 2017, the Company sold all of its investments in Eagle Hospital Physicians, LLC ("Eagle Physicians") in exchange for cash and the right to receive contingent payments in the future based on the performance of Eagle Physicians, which is referred to as an "earn-out" in the consolidated schedule of investments. Prior to the sale of its investments in Eagle Physicians, the Company may have been deemed to control Eagle Physicians within the meaning of the 1940 Act due to the fact that the Company owned greater than 25% of the voting securities in Eagle Physicians. After the sale and as of December 31, 2017, the Company no longer owns any of the voting securities in Eagle Physicians and is not deemed to control Eagle Physicians within the meaning of the 1940 Act. |
| |
(20) | Payments on the Company's investment in Maverick Healthcare Group, LLC ("Maverick Healthcare") are currently past due. In May 2017, the Company entered into a forbearance agreement with Maverick Healthcare in which the Company has temporarily agreed not to take action against Maverick Healthcare. As of December 31, 2017, the forbearance agreement extends to February 28, 2018. |
| |
(21)(16) | As of December 31, 2017, these investments are categorizedThis investment was valued using net asset value as Level 2 within thea practical expedient for fair value hierarchy established by FASB ASCvalue. Consistent with Financial Accounting Standards Board ("FASB") guidance under Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820"). All other, these investments are categorized as Level 3 as of December 31, 2017 and were valued using significant unobservable inputs.excluded from the hierarchical levels.
|
| |
(22)(17) | Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities. |
| |
(18) | Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. |
| |
(19) | Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par. |
| |
(20) | As of March 31, 2020, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)
| |
(21) | This investment was on cash non-accrual status as of DecemberMarch 31, 2017.2020. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable. |
| |
(23)(22) | This investment was on PIK non-accrual status as of DecemberMarch 31, 2017.2020. PIK non-accrual status is inclusive of other non-cash income, where applicable. |
| |
(24) | As of December 31, 2017, payments on the Company's investment in TransTrade Operators, Inc. were past due. |
| |
(25) | This investment was valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. |
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 20172019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
Control Investments (3)(15) | | | | | | | | | | |
Traffic Solutions Holdings, Inc. | | | | Construction and engineering | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash 2% PIK due 4/1/2021 (13) | | 8.34 | % | | | | $ | 36,567 |
| | $ | 36,539 |
| | $ | 36,568 |
|
First Lien Revolver, LIBOR+6% (1% floor) cash due 4/1/2021 (13) | | 7.34 | % | | | | 1,250 |
| | 1,247 |
| | 1,250 |
|
LC Facility, 6% cash due 4/1/2021 | | | | | | 4,752 |
| | 4,748 |
| | 4,752 |
|
746,114 Series A Preferred Units, 10% | | | | | | | | 20,029 |
| | 7,700 |
|
746,114 Shares of Common Stock | | | | | | | | 5,316 |
| | — |
|
| | | | | | | | 67,879 |
| | 50,270 |
|
TransTrade Operators, Inc. | | | | Air freight & logistics | | | | | | |
First Lien Term Loan, 5% cash due 12/31/2017 (23) | | | | | | 15,973 |
| | 15,574 |
| | 1,810 |
|
First Lien Revolver, 8% cash due 12/31/2017 (23) | | | | | | 7,757 |
| | 7,757 |
| | — |
|
596.67 Series A Common Units | | | | | | | | — |
| | — |
|
4,000 Series A Preferred Units in TransTrade Holdings LLC | | | | | | | | 4,000 |
| | — |
|
5,200,000 Series B Preferred Units in TransTrade Holdings LLC | | | | | | | | 5,200 |
| | — |
|
| | | | | | | | 32,531 |
| | 1,810 |
|
First Star Speir Aviation Limited (11)(16) | | | | Airlines | | | | | | |
First Lien Term Loan, 9% cash due 12/15/2020 | | | | | | 41,395 |
| | 34,542 |
| | 41,395 |
|
100% equity interest (6) | | | | | | | | 8,500 |
| | 3,926 |
|
| | | | | | | | 43,042 |
| | 45,321 |
|
First Star Bermuda Aviation Limited (11)(16) | | | | Airlines | | | | | | |
First Lien Term Loan, 9% cash 3% PIK due 8/19/2018 | | | | | | 11,868 |
| | 11,868 |
| | 11,868 |
|
100% equity interest (6) | | | | | | | | 2,693 |
| | 2,323 |
|
| | | | | | | | 14,561 |
| | 14,191 |
|
Eagle Hospital Physicians, LLC | | | | Healthcare services | | | | | | |
Earn-out (19) | | | | | | | | 7,851 |
| | 4,986 |
|
| | | | | | | | 7,851 |
| | 4,986 |
|
Senior Loan Fund JV I, LLC (11)(17)(18) | | | | Multi-sector holdings | | | | | | |
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC (13) | | 6.88 | % | | | | 101,030 |
| | 101,030 |
| | 101,030 |
|
Class B Mezzanine Secured Deferrable Fixed Rate Notes, 15% PIK due 2036 in SLF Repack Issuer 2016 LLC | | | | | | 27,641 |
| | 27,641 |
| | 27,641 |
|
87.5% LLC equity interest (6)(25) | | | | | | | | 16,172 |
| | 5,525 |
|
| | | | | | | | 144,843 |
| | 134,196 |
|
Ameritox Ltd. | | | | Healthcare services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021 (13)(23) | | 6.33 | % | | | | 38,338 |
| | 37,539 |
| | 4,445 |
|
14,090,126.4 Class A Preferred Units in Ameritox Holdings II, LLC | | | | | | | | 14,090 |
| | — |
|
1,602,260.83 Class B Preferred Units in Ameritox Holdings II, LLC | | | | | | | | 1,602 |
| | — |
|
4,930.03 Class A Units in Ameritox Holdings II, LLC | | | | | | | | 29,049 |
| | — |
|
| | | | | | | | 82,280 |
| | 4,445 |
|
New IPT, Inc. | | | | Oil & gas equipment services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 3/17/2021 (13) | | 6.33 | % | | | | 4,107 |
| | 4,107 |
| | 4,107 |
|
Second Lien Term Loan, LIBOR+5.1% (1% floor) cash due 9/17/2021 (13) | | 6.43 | % | | | | 2,504 |
| | 2,504 |
| | 2,504 |
|
First Lien Revolver, LIBOR+5% (1% floor) cash due 3/17/2021 (13) | | 6.33 | % | | | | 1,009 |
| | 1,009 |
| | 1,009 |
|
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | | | | — |
| | 736 |
|
| | | | | | | | 7,620 |
| | 8,356 |
|
AdVenture Interactive, Corp. | | | | Advertising | | | | | | |
9,073 shares of common stock | | | | | | | | 13,611 |
| | 13,818 |
|
| | | | | | | | 13,611 |
| | 13,818 |
|
Keypath Education, Inc. (20) | | | | Advertising | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 4/3/2022 (13) | | 8.33 | % | | | | 19,960 |
| | 19,960 |
| | 19,960 |
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 4/3/2022 (13) | | 8.33 | % | | | | — |
| | — |
| | — |
|
9,073 Class A Units in FS AVI Holdco, LLC | | | | | | | | 10,648 |
| | 7,918 |
|
| | | | | | | | 30,608 |
| | 27,878 |
|
Total Control Investments (35.2% of net assets) | | | | | | | | $ | 444,826 |
| | $ | 305,271 |
|
See notes to Consolidated Financial Statements.
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Control Investments | | | | | | | | | (8)(9) |
C5 Technology Holdings, LLC | | Data processing & outsourced services | | | | | | | |
829 Common Units | | | | | $ | — |
| | $ | — |
| | (20) |
34,984,460.37 Preferred Units | | | | | 34,984 |
| | 34,984 |
| | (20) |
| | | | | 34,984 |
| | 34,984 |
| | |
First Star Speir Aviation Limited | | Airlines | | | | | | | (10) |
First Lien Term Loan, 9.00% cash due 12/15/2020 | | | $ | 11,510 |
| | 2,140 |
| | 11,510 |
| | (11)(20) |
100% equity interest | | | | | 8,500 |
| | 4,630 |
| | (11)(12)(20) |
| | | | | 10,640 |
| | 16,140 |
| | |
New IPT, Inc. | | Oil & gas equipment services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | 7.10 | % | | 3,256 |
| | 3,256 |
| | 3,256 |
| | (6)(20) |
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021 | 7.10 | % | | 1,009 |
| | 1,009 |
| | 1,009 |
| | (6)(19)(20) |
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | — |
| | 2,903 |
| | (20) |
| | | | | 4,265 |
| | 7,168 |
| | |
Senior Loan Fund JV I, LLC | | Multi-sector holdings | | | | | | | (14)(15) |
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | 9.39 | % | | 96,250 |
| | 96,250 |
| | 96,250 |
| | (6)(11)(20) |
87.5% LLC equity interest | | | | | 49,322 |
| | 30,052 |
| | (11)(16)(19) |
| | | | | 145,572 |
| | 126,302 |
| | |
Thruline Marketing, Inc. | | Advertising | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022 | 9.10 | % | | 18,146 |
| | 18,146 |
| | 18,146 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022 | | | — |
| | — |
| | — |
| | (6)(19)(20) |
9,073 Class A Units in FS AVI Holdco, LLC | | | | | 10,648 |
| | 6,438 |
| | (20) |
| | | | | 28,794 |
| | 24,584 |
| | |
Total Control Investments (22.5% of net assets) | | | | | $ | 224,255 |
| | $ | 209,178 |
| | |
| | | | | | | | | |
Affiliate Investments | | | | | | | | | (17) |
Assembled Brands Capital LLC | | Specialized finance | | | | | | | |
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023 | 8.10 | % | | $ | 5,585 |
| | $ | 5,585 |
| | $ | 5,585 |
| | (6)(19)(20) |
1,609,201 Class A Units | | | | | 765 |
| | 782 |
| | (20) |
1,019,168.80 Preferred Units, 6% | | | | | 1,019 |
| | 1,019 |
| | (20) |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | — |
| | — |
| | (20) |
| | | | | 7,369 |
| | 7,386 |
| | |
Caregiver Services, Inc. | | Healthcare services | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | 1,080 |
| | 1,784 |
| | (20) |
| | | | | 1,080 |
| | 1,784 |
| | |
Total Affiliate Investments (1.0% of net assets) | | | | | $ | 8,449 |
| | $ | 9,170 |
| | |
| | | | | | | | | |
Non-Control/Non-Affiliate Investments | | | | | | | | | (18) |
4 Over International, LLC | | Commercial printing | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022 | 8.04 | % | | $ | 5,799 |
| | $ | 5,764 |
| | $ | 5,688 |
| | (6)(20) |
First Lien Revolver, PRIME+5.00% cash due 6/7/2021 | 10.00 | % | | 255 |
| | 238 |
| | 212 |
| | (6)(19)(20) |
| | | | | 6,002 |
| | 5,900 |
| | |
99 Cents Only Stores LLC | | General merchandise stores | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022 | 7.10 | % | | 19,326 |
| | 18,946 |
| | 16,934 |
| | (6) |
| | | | | 18,946 |
| | 16,934 |
| | |
Access CIG, LLC | | Diversified support services | | | | | | | |
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026 | 10.07 | % | | 15,000 |
| | 14,892 |
| | 15,000 |
| | (6)(20) |
| | | | | 14,892 |
| | 15,000 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 20172019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
Affiliate Investments (4) | | | | | | | | | | |
Caregiver Services, Inc. | | | | Healthcare services | | | | | | |
Second Lien Term Loan, 10% cash 2% PIK due 6/30/2019 | | | | | | $ | 9,719 |
| | $ | 9,719 |
| | $ | 9,665 |
|
1,080,399 Shares of Series A Preferred Stock, 10% | | | | | | | | 1,080 |
| | 2,534 |
|
| | | | | | | | 10,799 |
| | 12,199 |
|
AmBath/ReBath Holdings, Inc. | | | | Home improvement retail | | | | | | |
First Lien Term Loan B, 12.5% cash 2.5% PIK due 8/31/2018 | | | | | | 22,955 |
| | 22,944 |
| | 22,957 |
|
4,668,788 Shares of Preferred Stock | | | | | | | | — |
| | 1,827 |
|
| | | | | | | | 22,944 |
| | 24,784 |
|
Total Affiliate Investments (4.3% of net assets) | | | | | | | | $ | 33,743 |
| | $ | 36,983 |
|
| | | | | | | | | | |
Non-Control/Non-Affiliate Investments (7) | | | | | | | | | | |
Cenegenics, LLC | | | | Healthcare services | | | | | | |
First Lien Term Loan, 9.75% cash 2% PIK due 9/30/2019 (23) | | | | | | 28,600 |
| | $ | 27,737 |
| | $ | 15,811 |
|
First Lien Revolver, 15% cash due 9/30/2019 (23) | | | | | | 2,203 |
| | 2,203 |
| | 1,218 |
|
452,914.87 Common Units in Cenegenics, LLC | | | | | | | | 598 |
| | — |
|
345,380.141 Preferred Units in Cenegenics, LLC | | | | | | | | 300 |
| | — |
|
| | | | | | | | 30,838 |
| | 17,029 |
|
Riverlake Equity Partners II, LP | | | | Multi-sector holdings | | | | | | |
1.92% limited partnership interest (11)(25) | | | | | | | | 870 |
| | 625 |
|
| | | | | | | | 870 |
| | 625 |
|
Riverside Fund IV, LP | | | | Multi-sector holdings | | | | | | |
0.34% limited partnership interest (11)(25) | | | | | | | | 219 |
| | 397 |
|
| | | | | | | | 219 |
| | 397 |
|
Bunker Hill Capital II (QP), L.P. | | | | Multi-sector holdings | | | | | | |
0.51% limited partnership interest (11)(25) | | | | | | | | 826 |
| | 1,056 |
|
| | | | | | | | 826 |
| | 1,056 |
|
Maverick Healthcare Group, LLC (21) | | | | Healthcare equipment | | | | | | |
First Lien Term Loan A, LIBOR+7.5% cash (1.75% floor) cash due 4/30/2017 (13)(23) | | 9.25 | % | | | | 16,309 |
| | 16,204 |
| | 14,209 |
|
First Lien Term Loan B, LIBOR+11% cash (1.75% floor) cash due 4/30/2017 (13)(23) | | 12.75 | % | | | | 41,739 |
| | 39,110 |
| | 14,531 |
|
CapEx Line, LIBOR+7.75% (1.75% floor) cash due 4/30/2017 (13)(23) | | 9.50 | % | | | | 1,272 |
| | 1,261 |
| | 1,124 |
|
First Lien Revolver, PRIME+6.5% cash due 4/30/2017 (13)(23) | | 10.75 | % | | | | 55 |
| | 40 |
| | 55 |
|
| | | | | | | | 56,615 |
| | 29,919 |
|
Refac Optical Group | | | | Specialty stores | | | | | | |
First Lien Term Loan A, LIBOR+8% cash due 9/30/2018 (13) | | 9.23 | % | | | | 4,027 |
| | 3,997 |
| | 4,027 |
|
First Lien Term Loan B, LIBOR+9% cash, 1.75% PIK due 9/30/2018 (13) | | 10.23 | % | | | | 34,621 |
| | 34,533 |
| | 34,275 |
|
First Lien Term Loan C, 12.5% cash due 9/30/2018 | | | | | | 3,416 |
| | 3,416 |
| | 3,314 |
|
First Lien Revolver, LIBOR+8% cash due 9/30/2018 (13) | | 9.23 | % | | | | 3,520 |
| | 3,516 |
| | 3,520 |
|
1,550.9435 Shares of Common Stock in Refac Holdings, Inc. | | | | | | | | 1 |
| | — |
|
550.9435 Shares of Series A-2 Preferred Stock in Refac Holdings, Inc., 10% | | | | | | | | 305 |
| | — |
|
1,000 Shares of Series A Preferred Stock Units in Refac Holdings, Inc., 10% | | | | | | | | 999 |
| | 397 |
|
| | | | | | | | 46,767 |
| | 45,533 |
|
Baird Capital Partners V, LP | | | | Multi-sector holdings | | | | | | |
0.4% limited partnership interest (11)(25) | | | | | | | | 994 |
| | 601 |
|
| | | | | | | | 994 |
| | 601 |
|
Milestone Partners IV, L.P. | | | | Multi-sector holdings | | | | | | |
0.82% limited partnership interest (11)(25) | | | | | | | | 948 |
| | 1,527 |
|
| | | | | | | | 948 |
| | 1,527 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Aden & Anais Merger Sub, Inc. | | Apparel, accessories & luxury goods | | | | | | | |
51,645 Common Units in Aden & Anais Holdings, Inc. | | | | | $ | 5,165 |
| | $ | — |
| | (20) |
| | | | | 5,165 |
| | — |
| | |
AdVenture Interactive, Corp. | | Advertising | | | | | | | |
9,073 shares of common stock | | | | | 13,611 |
| | 12,677 |
| | (20) |
| | | | | 13,611 |
| | 12,677 |
| | |
AI Ladder (Luxembourg) Subco S.a.r.l. | | Electrical components & equipment | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025 | 6.60 | % | | $ | 21,752 |
| | 21,210 |
| | 20,032 |
| | (6)(11) |
| | | | | 21,210 |
| | 20,032 |
| | |
AI Sirona (Luxembourg) Acquisition S.a.r.l. | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, EURIBOR+7.25% cash due 7/10/2026 | 7.25 | % | | € | 17,500 |
| | 20,035 |
| | 18,673 |
| | (6)(11) |
| | | | | 20,035 |
| | 18,673 |
| | |
Air Medical Group Holdings, Inc. | | Healthcare services | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025 | 6.29 | % | | $ | 6,321 |
| | 6,192 |
| | 5,936 |
| | (6) |
| | | | | 6,192 |
| | 5,936 |
| | |
AirStrip Technologies, Inc. | | Application software | | | | | | | |
22,858.71 Series C-1 Preferred Stock Warrants (exercise price $34.99757) expiration date 5/11/2025 | | | | | 90 |
| | — |
| | (20) |
| | | | | 90 |
| | — |
| | |
Airxcel, Inc. | | Household appliances | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 4/28/2025 | 6.54 | % | | 7,900 |
| | 7,837 |
| | 7,614 |
| | (6) |
| | | | | 7,837 |
| | 7,614 |
| | |
Aldevron, L.L.C. | | Biotechnology | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 9/20/2026 | 6.36 | % | | 8,000 |
| | 7,920 |
| | 8,040 |
| | (6) |
| | | | | 7,920 |
| | 8,040 |
| | |
Algeco Scotsman Global Finance Plc | | Construction & engineering | | | | | | | |
Fixed Rate Bond, 8.00% cash due 2/15/2023 | | | 23,915 |
| | 23,443 |
| | 23,982 |
| | (11) |
| | | | | 23,443 |
| | 23,982 |
| | |
Allen Media, LLC | | Movies & entertainment | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 8/30/2023 | 8.60 | % | | 19,238 |
| | 18,858 |
| | 18,613 |
| | (6)(20) |
| | | | | 18,858 |
| | 18,613 |
| | |
Altice France S.A. | | Integrated telecommunication services | | | | | | | |
Fixed Rate Bond, 8.13% cash due 1/15/2024 | | | 3,000 |
| | 3,045 |
| | 3,113 |
| | (11) |
Fixed Rate Bond, 7.63% cash due 2/15/2025 | | | 2,000 |
| | 2,012 |
| | 2,083 |
| | (11) |
| | | | | 5,057 |
| | 5,196 |
| | |
Alvotech Holdings S.A. | | Biotechnology | | | | | | | |
Fixed Rate Bond 15% PIK Note A due 12/13/2023 | | | 14,800 |
| | 16,304 |
| | 18,089 |
| | (11)(13)(20) |
Fixed Rate Bond 15% PIK Note B due 12/13/2023 | | | 14,800 |
| | 16,304 |
| | 16,609 |
| | (11)(13)(20) |
| | | | | 32,608 |
| | 34,698 |
| | |
Ancile Solutions, Inc. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021 | 9.10 | % | | 8,677 |
| | 8,591 |
| | 8,504 |
| | (6)(20) |
| | | | | 8,591 |
| | 8,504 |
| | |
Apptio, Inc. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025 | 9.56 | % | | 23,764 |
| | 23,340 |
| | 23,325 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 | | | — |
| | (27 | ) | | (28 | ) | | (6)(19)(20) |
| | | | | 23,313 |
| | 23,297 |
| | |
Asurion, LLC | | Property & casualty insurance | | | | | | | |
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/2025 | 8.54 | % | | 22,000 |
| | 21,954 |
| | 22,382 |
| | (6) |
| | | | | 21,954 |
| | 22,382 |
| | |
See notes to Oaktree Specialty Lending Corporation
Consolidated Financial Statements.Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Avantor Inc. | | Healthcare distributors | | | | | | | |
Fixed Rate Bond, 9.00% cash due 10/1/2025 | | | $ | 3,000 |
| | $ | 2,975 |
| | $ | 3,379 |
| | |
| | | | | 2,975 |
| | 3,379 |
| | |
Belk Inc. | | Department stores | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 12/12/2022 | 6.80 | % | | 653 |
| | 585 |
| | 480 |
| | (6) |
| | | | | 585 |
| | 480 |
| | |
Blackhawk Network Holdings, Inc. | | Data processing & outsourced services | | | | | | | |
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026 | 9.06 | % | | 26,250 |
| | 26,013 |
| | 26,283 |
| | (6) |
| | | | | 26,013 |
| | 26,283 |
| | |
Boxer Parent Company Inc. | | Systems software | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 6.29 | % | | 13,915 |
| | 13,798 |
| | 13,416 |
| | (6) |
| | | | | 13,798 |
| | 13,416 |
| | |
California Pizza Kitchen, Inc. | | Restaurants | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 8/23/2022 | 8.53 | % | | 3,122 |
| | 3,097 |
| | 2,800 |
| | (6) |
| | | | | 3,097 |
| | 2,800 |
| | |
Cenegenics, LLC | | Healthcare services | | | | | | | (23) |
First Lien Term Loan, 9.75% cash 2.00% PIK due 9/30/2019 | | | 29,781 |
| | 27,738 |
| | — |
| | (20)(21) |
First Lien Revolver, 15.00% cash due 9/30/2019 | | | 2,203 |
| | 2,203 |
| | — |
| | (20)(21) |
452,914.87 Common Units in Cenegenics, LLC | | | | | 598 |
| | — |
| | (20) |
345,380.141 Preferred Units in Cenegenics, LLC | | | | | 300 |
| | — |
| | (20) |
| | | | | 30,839 |
| | — |
| | |
CITGO Holding, Inc. | | Oil & gas refining & marketing | | | | | | | |
Fixed Rate Bond, 9.25% cash due 8/1/2024 | | | 10,672 |
| | 10,672 |
| | 11,366 |
| | |
First Lien Term Loan, LIBOR+7.00% cash due 8/1/2023 | | | 10,000 |
| | 9,855 |
| | 10,219 |
| | (6) |
| | | | | 20,527 |
| | 21,585 |
| | |
CITGO Petroleum Corp. | | Oil & gas refining & marketing | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024 | 7.10 | % | | 9,950 |
| | 9,851 |
| | 10,012 |
| | (6) |
| | | | | 9,851 |
| | 10,012 |
| | |
Connect U.S. Finco LLC | | Alternative carriers | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026 | 7.10 | % | | 30,000 |
| | 29,400 |
| | 29,580 |
| | (6)(11) |
| | | | | 29,400 |
| | 29,580 |
| | |
Convergeone Holdings, Inc. | | IT consulting & other services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026 | 7.04 | % | | 14,770 |
| | 14,225 |
| | 13,352 |
| | (6) |
| | | | | 14,225 |
| | 13,352 |
| | |
Conviva Inc. | | Application software | | | | | | | |
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021 | | | | | 105 |
| | 411 |
| | (20) |
| | | | | 105 |
| | 411 |
| | |
Covia Holdings Corporation | | Oil & gas equipment services | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 6/1/2025 | 6.31 | % | | 7,900 |
| | 7,900 |
| | 6,484 |
| | (6)(11) |
| | | | | 7,900 |
| | 6,484 |
| | |
DigiCert, Inc. | | Internet services & infrastructure | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024 | 6.04 | % | | 4,222 |
| | 4,184 |
| | 4,221 |
| | (6) |
| | | | | 4,184 |
| | 4,221 |
| | |
Dominion Diagnostics, LLC | | Healthcare services | | | | | | | (23) |
Subordinated Term Loan, 11.00% cash 1.00% PIK due 10/18/2019 | | | 20,273 |
| | 14,281 |
| | 2,890 |
| | (20)(21) |
First Lien Term Loan, PRIME+4.00% cash due 4/8/2019 | 9.00 | % | | 45,691 |
| | 45,691 |
| | 45,691 |
| | (6)(20) |
First Lien Revolver, PRIME+4.00% cash due 4/8/2019 | 9.00 | % | | 2,090 |
| | 2,090 |
| | 2,090 |
| | (6)(20) |
| | | | | 62,062 |
| | 50,671 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
The Dun & Bradstreet Corporation | | Research & consulting services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/6/2026 | 7.05 | % | | $ | 10,000 |
| | $ | 9,817 |
| | $ | 10,074 |
| | (6) |
Fixed Rate Bond 6.875% cash due 8/15/2026 | | | 5,000 |
| | 5,000 |
| | 5,459 |
| | |
| | | | | 14,817 |
| | 15,533 |
| | |
Eagleview Technology Corporation | | Application software | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026 | 9.55 | % | | 12,000 |
| | 11,880 |
| | 11,520 |
| | (6)(20) |
| | | | | 11,880 |
| | 11,520 |
| | |
EHR Canada, LLC | | Food retail | | | | | | | |
First Lien Term Loan, LIBOR+8.00% cash due 9/28/2020 | 10.10 | % | | 14,611 |
| | 14,473 |
| | 14,903 |
| | (6)(20) |
| | | | | 14,473 |
| | 14,903 |
| | |
EOS Fitness Opco Holdings, LLC | | Leisure facilities | | | | | | | |
487.5 Class A Preferred Units, 12% | | | | | 488 |
| | 855 |
| | (20) |
12,500 Class B Common Units | | | | | — |
| | 934 |
| | (20) |
| | | | | 488 |
| | 1,789 |
| | |
Equitrans Midstream Corp. | | Oil & gas storage & transportation | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 1/31/2024 | 6.55 | % | | 11,910 |
| | 11,603 |
| | 11,926 |
| | (6)(11) |
| | | | | 11,603 |
| | 11,926 |
| | |
ExamSoft Worldwide, Inc. | | Application software | | | | | | | |
180,707 Class C Units in ExamSoft Investor LLC | | | | | 181 |
| | — |
| | (20) |
| | | | | 181 |
| | — |
| | |
GI Chill Acquisition LLC | | Managed healthcare | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025 | 6.10 | % | | 17,820 |
| | 17,731 |
| | 17,775 |
| | (6)(20) |
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/2026 | 9.60 | % | | 10,000 |
| | 9,914 |
| | 10,000 |
| | (6)(20) |
| | | | | 27,645 |
| | 27,775 |
| | |
GKD Index Partners, LLC | | Specialized finance | | | | | | | |
First Lien Term Loan, LIBOR+7.25% cash due 6/29/2023 | 9.35 | % | | 22,402 |
| | 22,235 |
| | 22,108 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.25% cash due 6/29/2023 | | | — |
| | (9 | ) | | (15 | ) | | (6)(19)(20) |
| | | | | 22,226 |
| | 22,093 |
| | |
GoodRx, Inc. | | Interactive media & services | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 10/12/2026 | 9.54 | % | | 22,222 |
| | 21,805 |
| | 22,500 |
| | (6)(20) |
| | | | | 21,805 |
| | 22,500 |
| | |
Guidehouse LLP | | Research & consulting services | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026 | 9.54 | % | | 20,000 |
| | 19,917 |
| | 19,750 |
| | (6) |
| | | | | 19,917 |
| | 19,750 |
| | |
HealthEdge Software, Inc. | | Application software | | | | | | | |
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023 | | | | | 213 |
| | 757 |
| | (20) |
| | | | | 213 |
| | 757 |
| | |
I Drive Safely, LLC | | Education services | | | | | | | |
125,079 Class A Common Units of IDS Investments, LLC | | | | | 1,000 |
| | 200 |
| | (20) |
| | | | | 1,000 |
| | 200 |
| | |
IBG Borrower LLC | | Apparel, accessories & luxury goods | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 8/2/2022 | 9.13 | % | | 14,209 |
| | 13,027 |
| | 13,286 |
| | (6)(20) |
| | | | | 13,027 |
| | 13,286 |
| | |
iCIMs, Inc. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024 | 8.56 | % | | 16,718 |
| | 16,436 |
| | 16,438 |
| | (6)(20) |
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024 | | | — |
| | (15 | ) | | (15 | ) | | (6)(19)(20) |
| | | | | 16,421 |
| | 16,423 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
| | | | | | | | | |
Integral Development Corporation | | Other diversified financial services | | | | | | | |
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024 | | | | | $ | 113 |
| | $ | — |
| | (20) |
| | | | | 113 |
| | — |
| | |
Kellermeyer Bergensons Services, LLC | | Environmental & facilities services | | | | | | | |
Second Lien Term Loan, LIBOR+8.50% cash due 4/29/2022 | 10.77 | % | | $ | 6,105 |
| | 5,940 |
| | 5,937 |
| | (6)(20) |
| | | | | 5,940 |
| | 5,937 |
| | |
L Squared Capital Partners LLC | | Multi-sector holdings | | | | | | | |
2.00% limited partnership interest | | | | | 864 |
| | 2,237 |
| | (11)(16) |
| | | | | 864 |
| | 2,237 |
| | |
Lanai Holdings III, Inc. | | Healthcare distributors | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 8/29/2022 | 7.01 | % | | 19,892 |
| | 19,586 |
| | 18,583 |
| | (6) |
| | | | | 19,586 |
| | 18,583 |
| | |
Lannett Company, Inc. | | Pharmaceuticals | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 11/25/2020 | 7.04 | % | | 762 |
| | 762 |
| | 759 |
| | (6)(11) |
| | | | | 762 |
| | 759 |
| | |
Lift Brands Holdings, Inc. | | Leisure facilities | | | | | | | |
2,000,000 Class A Common Units in Snap Investments, LLC | | | | | 1,399 |
| | 3,020 |
| | (20) |
| | | | | 1,399 |
| | 3,020 |
| | |
Lightbox Intermediate, L.P. | | Real estate services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026 | 7.05 | % | | 39,900 |
| | 39,332 |
| | 39,501 |
| | (6)(20) |
| | | | | 39,332 |
| | 39,501 |
| | |
Long's Drugs Incorporated | | Pharmaceuticals | | | | | | | |
50 Series A Preferred Shares in Long's Drugs Incorporated | | | | | 385 |
| | 924 |
| | (20) |
25 Series B Preferred Shares in Long's Drugs Incorporated | | | | | 210 |
| | 572 |
| | (20) |
| | | | | 595 |
| | 1,496 |
| | |
LTI Holdings, Inc. | | Auto parts & equipment | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026 | 8.79 | % | | 9,000 |
| | 9,000 |
| | 8,246 |
| | (6) |
| | | | | 9,000 |
| | 8,246 |
| | |
Lytx Holdings, LLC | | Research & consulting services | | | | | | | |
3,500 Class B Units | | | | | — |
| | 2,053 |
| | (20) |
| | | | | — |
| | 2,053 |
| | |
Maravai Intermediate Holdings, LLC | | Biotechnology | | | | | | | |
First Lien Term Loan, LIBOR+4.25% cash due 8/2/2025 | 6.31 | % | | 11,880 |
| | 11,761 |
| | 11,813 |
| | (6)(20) |
| | | | | 11,761 |
| | 11,813 |
| | |
Mayfield Agency Borrower Inc. | | Property & casualty insurance | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 2/28/2025 | 6.54 | % | | 15,892 |
| | 15,630 |
| | 15,481 |
| | (6) |
Second Lien Term Loan, LIBOR+8.50% cash due 3/2/2026 | 10.54 | % | | 35,925 |
| | 35,492 |
| | 36,285 |
| | (6)(20) |
| | | | | 51,122 |
| | 51,766 |
| | |
McAfee, LLC | | Systems software | | | | | | | |
First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024 | 5.79 | % | | 10,957 |
| | 10,884 |
| | 10,995 |
| | (6) |
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2025 | 10.54 | % | | 7,000 |
| | 7,034 |
| | 7,093 |
| | (6) |
| | | | | 17,918 |
| | 18,088 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
MHE Intermediate Holdings, LLC | | Diversified support services | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024 | 7.10 | % | | $ | 2,932 |
| | $ | 2,913 |
| | $ | 2,874 |
| | (6)(20) |
| | | | | 2,913 |
| | 2,874 |
| | |
Mindbody, Inc. | | Internet services & infrastructure | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 9.06 | % | | 28,952 |
| | 28,434 |
| | 28,402 |
| | (6)(20) |
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025 | | | — |
| | (55 | ) | | (58 | ) | | (6)(19)(20) |
| | | | | 28,379 |
| | 28,344 |
| | |
Ministry Brands, LLC | | Application software | | | | | | | |
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023 | 11.34 | % | | 7,056 |
| | 6,997 |
| | 7,056 |
| | (6)(20) |
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023 | 11.34 | % | | 1,944 |
| | 1,927 |
| | 1,944 |
| | (6)(20) |
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022 | 7.04 | % | | 200 |
| | 191 |
| | 200 |
| | (6)(19)(20) |
| | | | | 9,115 |
| | 9,200 |
| | |
Navicure, Inc. | | Healthcare technology | | | | | | | |
Second Lien Term Loan, LIBOR+7.50% cash due 10/31/2025 | 9.54 | % | | 14,500 |
| | 14,389 |
| | 14,573 |
| | (6)(20) |
| | | | | 14,389 |
| | 14,573 |
| | |
Numericable SFR SA | | Integrated telecommunication services | | | | | | | |
Fixed Rate Bond, 7.38% cash due 5/1/2026 | | | 5,000 |
| | 5,104 |
| | 5,380 |
| | (11) |
| | | | | 5,104 |
| | 5,380 |
| | |
OmniSYS Acquisition Corporation | | Diversified support services | | | | | | | |
100,000 Common Units in OSYS Holdings, LLC | | | | | 1,000 |
| | 750 |
| | (20) |
| | | | | 1,000 |
| | 750 |
| | |
Onvoy, LLC | | Integrated telecommunication services | | | | | | | |
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/2025 | 12.54 | % | | 16,750 |
| | 16,750 |
| | 13,187 |
| | (6)(20) |
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC | | | | | 1,967 |
| | — |
| | (20) |
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC | | | | | — |
| | — |
| | (20) |
| | | | | 18,717 |
| | 13,187 |
| | |
P2 Upstream Acquisition Co. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 10/30/2020 | 6.19 | % | | 2,976 |
| | 2,936 |
| | 2,950 |
| | (6) |
First Lien Revolver, LIBOR+4.00% cash due 2/1/2020 | | | — |
| | — |
| | (79 | ) | | (6)(19) |
| | | | | 2,936 |
| | 2,871 |
| | |
PaySimple, Inc. | | Data processing & outsourced services | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025 | 7.55 | % | | 37,750 |
| | 37,004 |
| | 37,184 |
| | (6)(20) |
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025 | | | — |
| | (242 | ) | | (184 | ) | | (6)(19)(20) |
| | | | | 36,762 |
| | 37,000 |
| | |
Pingora MSR Opportunity Fund I-A, LP | | Thrift & mortgage finance | | | | | | | |
1.86% limited partnership interest | | | | | 1,217 |
| | 691 |
| | (11)(16)(19) |
| | | | | 1,217 |
| | 691 |
| | |
PLATO Learning Inc. | | Education services | | | | | | | |
Unsecured Senior PIK Note, 8.5% PIK due 12/9/2021 | | | 2,845 |
| | 2,434 |
| | — |
| | (20)(22) |
Unsecured Junior PIK Note, 10% PIK due 12/9/2021 | | | 13,577 |
| | 10,227 |
| | — |
| | (20)(22) |
Unsecured Revolver, 5.00% cash due 12/9/2021 | | | 2,064 |
| | 1,885 |
| | (184 | ) | | (19)(20)(21) |
126,127.80 Class A Common Units of Edmentum | | | | | 126 |
| | — |
| | (20) |
| | | | | 14,672 |
| | (184 | ) | | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
| | | | | | | | | |
Project Boost Purchaser, LLC | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026 | 5.54 | % | | $ | 7,000 |
| | $ | 6,930 |
| | $ | 6,964 |
| | (6) |
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027 | 10.14 | % | | 3,750 |
| | 3,750 |
| | 3,750 |
| | (6)(20) |
| | | | | 10,680 |
| | 10,714 |
| | |
ProFrac Services, LLC | | Industrial machinery | | | | | | | |
First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023 | 8.66 | % | | 17,192 |
| | 17,055 |
| | 16,848 |
| | (6)(20) |
| | | | | 17,055 |
| | 16,848 |
| | |
QuorumLabs, Inc. | | Application software | | | | | | | |
64,887,669 Junior-2 Preferred Stock | | | | | 375 |
| | — |
| | (20) |
| | | | | 375 |
| | — |
| | |
Refac Optical Group | | Specialty stores | | | | | | | |
1,550.9435 Shares of Common Stock in Refac Holdings, Inc. | | | | | 1 |
| | — |
| | (20) |
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10% | | | | | 305 |
| | — |
| | (20) |
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10% | | | | | 999 |
| | — |
| | (20) |
| | | | | 1,305 |
| | — |
| | |
Salient CRGT, Inc. | | Aerospace & defense | | | | | | | |
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022 | 8.05 | % | | 3,086 |
| | 3,056 |
| | 2,932 |
| | (6)(20) |
| | | | | 3,056 |
| | 2,932 |
| | |
Scilex Pharmaceuticals Inc. | | Pharmaceuticals | | | | | | | |
Fixed Rate Zero Coupon Bond due 8/15/2026 | | | 15,879 |
| | 11,146 |
| | 11,353 |
| | (20) |
| | | | | 11,146 |
| | 11,353 |
| | |
ShareThis, Inc. | | Application software | | | | | | | |
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024 | | | | | 367 |
| | 2 |
| | (20) |
| | | | | 367 |
| | 2 |
| | |
Sorrento Therapeutics, Inc. | | Biotechnology | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 11/7/2023 | 9.13 | % | | 30,000 |
| | 28,132 |
| | 29,250 |
| | (6)(11)(20) |
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 11/7/2023 | | | | | (62 | ) | | (69 | ) | | (6)(11)(19)(20) |
Stock Warrants Strike (exercise price $3.28) expiration date 5/7/2029 | | | | | 1,750 |
| | 1,667 |
| | (11)(20) |
Stock Warrants Strike (exercise price $3.94) expiration date 11/3/2029 | | | | | — |
| | 320 |
| | (11)(20) |
| | | | | 29,820 |
| | 31,168 |
| | |
Swordfish Merger Sub LLC | | Auto parts & equipment | | | | | | | |
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026 | 8.79 | % | | 12,500 |
| | 12,450 |
| | 12,135 |
| | (6)(20) |
| | | | | 12,450 |
| | 12,135 |
| | |
TerSera Therapeutics, LLC | | Pharmaceuticals | | | | | | | |
Second Lien Term Loan, LIBOR+9.25% cash due 3/30/2024 | 11.35 | % | | 25,463 |
| | 25,025 |
| | 25,192 |
| | (6)(20) |
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 12/31/2020 | | | | | — |
| | (45 | ) | | (6)(19)(20) |
668,879 Common Units of TerSera Holdings LLC | | | | | 1,731 |
| | 2,629 |
| | (20) |
| | | | | 26,756 |
| | 27,776 |
| | |
TigerText, Inc. | | Application software | | | | | | | |
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024 | | | | | 60 |
| | 560 |
| | (20) |
| | | | | 60 |
| | 560 |
| | |
Transact Holdings Inc. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+4.75% cash due 4/30/2026 | 7.01 | % | | 7,000 |
| | 6,895 |
| | 6,965 |
| | (6) |
| | | | | 6,895 |
| | 6,965 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Tribe Buyer LLC | | Human resource & employment services | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 2/16/2024 | 6.54 | % | | $ | 830 |
| | $ | 830 |
| | $ | 775 |
| | (6)(20) |
| | | | | 830 |
| | 775 |
| | |
Truck Hero, Inc. | | Auto parts & equipment | | | | | | | |
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/2025 | 10.29 | % | | 21,500 |
| | 21,191 |
| | 20,103 |
| | (6)(20) |
| | | | | 21,191 |
| | 20,103 |
| | |
Uber Technologies, Inc. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025 | 6.03 | % | | 5,689 |
| | 5,652 |
| | 5,667 |
| | (6) |
| | | | | 5,652 |
| | 5,667 |
| | |
Uniti Group LP | | Specialized REITs | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022 | 7.04 | % | | 8,403 |
| | 8,264 |
| | 8,213 |
| | (6)(11) |
| | | | | 8,264 |
| | 8,213 |
| | |
UOS, LLC | | Trading companies & distributors | | | | | | | |
First Lien Term Loan, LIBOR+5.50% cash due 4/18/2023 | 7.54 | % | | 10,242 |
| | 10,357 |
| | 10,370 |
| | (6) |
| | | | | 10,357 |
| | 10,370 |
| | |
Veritas US Inc. | | Application software | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023 | 6.60 | % | | 34,200 |
| | 34,468 |
| | 32,413 |
| | (6) |
| | | | | 34,468 |
| | 32,413 |
| | |
Verscend Holding Corp. | | Healthcare technology | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025 | 6.54 | % | | 24,750 |
| | 24,633 |
| | 24,879 |
| | (6) |
Fixed Rate Bond, 9.75% cash due 8/15/2026 | | | 12,000 |
| | 12,022 |
| | 12,823 |
| | |
| | | | | 36,655 |
| | 37,702 |
| | |
Vertex Aerospace Services Corp. | | Aerospace & defense | | | | | | | |
First Lien Term Loan, LIBOR+4.50% cash due 6/29/2025 | 6.54 | % | | 15,800 |
| | 15,735 |
| | 15,869 |
| | (6) |
| | | | | 15,735 |
| | 15,869 |
| | |
Vitalyst Holdings, Inc. | | IT consulting & other services | | | | | | | |
675 Series A Preferred Stock Units | | | | | 675 |
| | 440 |
| | (20) |
7,500 Class A Common Stock Units | | | | | 75 |
| | — |
| | (20) |
| | | | | 750 |
| | 440 |
| | |
Windstream Services, LLC | | Integrated telecommunication services | | | | | | | |
Fixed Rate Bond, 8.63% cash due 10/31/2025 | | | 5,000 |
| | 4,863 |
| | 5,113 |
| | (11) |
| | | | | 4,863 |
| | 5,113 |
| | |
WP CPP Holdings, LLC | | Aerospace & defense | | | | | | | |
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 10.01 | % | | 15,000 |
| | 14,874 |
| | 14,937 |
| | (6) |
| | | | | 14,874 |
| | 14,937 |
| | |
xMatters, Inc. | | Application software | | | | | | | |
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025 | | | | | 709 |
| | 273 |
| | (20) |
| | | | | 709 |
| | 273 |
| | |
Yeti Holdings, Inc. | | Leisure products | | | | | | | |
537,629 Shares Yeti Holdings, Inc. Common Stock | | | | | — |
| | 15,054 |
| | |
| | | | | — |
| | 15,054 |
| | |
Zep Inc. | | Specialty chemicals | | | | | | | |
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025 | 10.35 | % | | 30,000 |
| | 29,889 |
| | 21,950 |
| | (6)(20) |
First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024 | 6.04 | % | | 1,975 |
| | 1,899 |
| | 1,564 |
| | (6) |
| | | | | 31,788 |
| | 23,514 |
| | |
Zephyr Bidco Limited | | Specialized finance | | | | | | | |
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/2026 | 8.21 | % | | £ | 18,000 |
| | 23,632 |
| | 22,006 |
| | (6)(11) |
| | | | | 23,632 |
| | 22,006 |
| | |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(3)(4)(5) | Cash Interest Rate (6) | Industry | Principal (7) |
| | Cost | | Fair Value | | Notes |
Total Non-Control/Non-Affiliate Investments (131.1% of net assets) | | | | | $ | 1,280,310 |
| | $ | 1,219,694 |
| | |
Total Portfolio Investments (154.5% of net assets) | | | | | $ | 1,513,014 |
| | $ | 1,438,042 |
| | |
Cash and Cash Equivalents | | | | | | | | | |
JP Morgan Prime Money Market Fund, Institutional Shares | | | | | $ | 9,611 |
| | $ | 9,611 |
| | |
Other cash accounts | | | | | 5,795 |
| | 5,795 |
| | |
Total Cash and Cash Equivalents (1.7% of net assets) | | | | | $ | 15,406 |
| | $ | 15,406 |
| | |
Total Portfolio Investments and Cash and Cash Equivalents (156.2% of net assets) | | | | | $ | 1,528,420 |
| | $ | 1,453,448 |
| | |
|
| | | | | | | | | | | | | | | | |
Derivative Instrument | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Counterparty | | Cumulative Unrealized Appreciation /(Depreciation) |
Foreign currency forward contract | | $ | 22,161 |
| | £ | 17,910 |
| | 10/15/2019 | | JPMorgan Chase Bank, N.A. | | $ | 76 |
|
Foreign currency forward contract | | $ | 19,193 |
| | € | 17,150 |
| | 11/29/2019 | | JPMorgan Chase Bank, N.A. | | 414 |
|
| | | | | | | | | | $ | 490 |
|
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 20172019
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
RCPDirect, L.P. | | | | Multi-sector holdings | | | | | | |
0.9% limited partnership interest (11)(25) | | | | | | | | $ | 354 |
| | $ | 559 |
|
| | | | | | | | 354 |
| | 559 |
|
Riverside Fund V, L.P. | | | | Multi-sector holdings | | | | | | |
0.48% limited partnership interest (11)(25) | | | | | | | | 1,452 |
| | 1,405 |
|
| | | | | | | | 1,452 |
| | 1,405 |
|
ACON Equity Partners III, LP | | | | Multi-sector holdings | | | | | | |
0.13% limited partnership interest (11)(25) | | | | | | | | 785 |
| | 962 |
|
| | | | | | | | 785 |
| | 962 |
|
BMC Acquisition, Inc. | | | | Other diversified financial services | | | | | | |
500 Series A Preferred Shares | | | | | | | | 500 |
| | 763 |
|
50,000 Common Shares (6) | | | | | | | | 1 |
| | 67 |
|
| | | | | | | | 501 |
| | 830 |
|
Edmentum, Inc. | | | | Education services | | | | | | |
Unsecured Senior PIK Note, 8.5% PIK due 6/9/2020 | | | | | | $ | 2,434 |
| | 2,434 |
| | 1,922 |
|
Unsecured Junior PIK Note, 10% PIK due 6/9/2020 (24) | | | | | 11,304 |
| | 10,227 |
| | 379 |
|
Unsecured Revolver, 5% cash due 6/9/2020 | | | | | | | | — |
| | — |
|
126,127.80 Class A Common Units | | | | | | | | 126 |
| | — |
|
| | | | | | | | 12,787 |
| | 2,301 |
|
I Drive Safely, LLC | | | | Education services | | | | | | |
125,079 Class A Common Units of IDS Investments, LLC | | | | | | | | 1,000 |
| | — |
|
| | | | | | | | 1,000 |
| | — |
|
Yeti Acquisition, LLC | | | | Leisure products | | | | | | |
3,000,000 Common Stock Units of Yeti Holdings, Inc. | | | | | | | | — |
| | 5,900 |
|
| | | | | | | | — |
| | 5,900 |
|
Vitalyst Holdings, Inc. | | | | IT consulting & other services | | | | | | |
675 Series A Preferred Units of PCH Support Holdings, Inc., 10% | | | | | | | | 675 |
| | 511 |
|
7,500 Class A Common Stock Units of PCH Support Holdings, Inc. | | | | | | | | 75 |
| | — |
|
| | | | | | | | 750 |
| | 511 |
|
Beecken Petty O'Keefe Fund IV, L.P. | | | | Multi-sector holdings | | | | | | |
0.5% limited partnership interest (11)(25) | | | | | | | | 1,014 |
| | 1,310 |
|
| | | | | | | | 1,014 |
| | 1,310 |
|
Comprehensive Pharmacy Services LLC | | | | Pharmaceuticals | | | | | | |
20,000 Common Shares in MCP CPS Group Holdings, Inc. | | | | | | | | 2,000 |
| | 2,776 |
|
| | | | | | | | 2,000 |
| | 2,776 |
|
Garretson Firm Resolution Group, Inc. | | | | Diversified support services | | | | | | |
First Lien Revolver, PRIME+5.5% cash due 5/22/2020 (13) | | 9.75 | % | | | | 25 |
| | 25 |
| | 25 |
|
4,950,000 Preferred Units in GRG Holdings, LP, 8% | | | | | | | | 495 |
| | 198 |
|
50,000 Common Units in GRG Holdings, LP | | | | | | | | 5 |
| | — |
|
| | | | | | | | 525 |
| | 223 |
|
Teaching Strategies, LLC | | | | Education services | | | | | | |
Second Lien Term Loan, LIBOR+9.5% (1% floor) cash due 8/27/2023 (13) | | 10.83 | % | | | | 33,500 |
| | 33,500 |
| | 33,964 |
|
| | | | | | | | 33,500 |
| | 33,964 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
Dominion Diagnostics, LLC | | | | Healthcare services | | | | | | |
Subordinated Term Loan, 11% cash 1% PIK due 10/8/2019 (23) | | | | | | $ | 19,866 |
| | $ | 17,625 |
| | $ | 8,534 |
|
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/8/2019 (13) | | 6.30 | % | | | | 49,414 |
| | 37,574 |
| | 44,592 |
|
First Lien Revolver, LIBOR+5% (1% floor) cash due 4/8/2019 (13) | | 6.30 | % | | | | | | — |
| | — |
|
| | | | | | | | 55,199 |
| | 53,126 |
|
Sterling Capital Partners IV, L.P. | | | | Multi-sector holdings | | | | | | |
0.2% limited partnership interest (11)(25) | | | | | | | | 1,770 |
| | 1,297 |
|
| | | | | | | | 1,770 |
| | 1,297 |
|
Advanced Pain Management | | | | Healthcare services | | | | | | |
First Lien Term Loan, LIBOR+8.5% (1.25% floor) cash due 2/26/2018 (13)(23) | | 9.75 | % | | | | 24,000 |
| | 23,409 |
| | 1,157 |
|
| | | | | | | | 23,409 |
| | 1,157 |
|
TravelClick, Inc. | | | | Internet software & services | | | | | | |
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 11/6/2021 (13) | | 8.99 | % | | | | 2,697 |
| | 2,475 |
| | 2,710 |
|
| | | | | | | | 2,475 |
| | 2,710 |
|
Pingora MSR Opportunity Fund I-A, LP | | | | Thrift & mortgage finance | | | | | | |
1.86% limited partnership interest (11)(25) | | | | | | | | 7,240 |
| | 6,129 |
|
| | | | | | | | 7,240 |
| | 6,129 |
|
Credit Infonet, Inc. | | | | Data processing & outsourced services | | | | | | |
Subordinated Term Loan, 12.25% cash 0.75% PIK due 10/26/2020 | | | | | | 13,940 |
| | 13,940 |
| | 13,941 |
|
| | | | | | | | 13,940 |
| | 13,941 |
|
HealthEdge Software, Inc. | | | | Application software | | | | | | |
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023 | | | | | | | | 213 |
| | 768 |
|
| | | | | | | | 213 |
| | 768 |
|
InMotion Entertainment Group, LLC | | | | Consumer electronics | | | | | | |
First Lien Term Loan A, LIBOR+7.75% (1.25% floor) cash due 10/1/2018 (13) | | 9.09 | % | | | | 12,259 |
| | 12,223 |
| | 12,259 |
|
First Lien Term Loan B, LIBOR+7.75% (1.25% floor) cash due 10/1/2018 (13) | | 9.09 | % | | | | 5,344 |
| | 5,265 |
| | 5,344 |
|
First Lien Revolver, LIBOR+6.25% cash due 10/1/2018 (13) | | 6.25 | % | | | | 3,904 |
| | 3,897 |
| | 3,904 |
|
CapEx Line, LIBOR+7.75% (1.25% floor) cash due 10/1/2018 (13) | | 9.09 | % | | | | 797 |
| | 789 |
| | 797 |
|
1,000,000 Class A Units in InMotion Entertainment Holdings, LLC | | | | | | | | 1,000 |
| | 1,761 |
|
| | | | | | | | 23,174 |
| | 24,065 |
|
Thing5, LLC | | | | Data processing & outsourced services | | | | | | |
First Lien Term Loan, LIBOR+7.5% (1% floor) cash 2% PIK due 10/11/2020 (12)(13) | | 8.83 | % | | | | 47,530 |
| | 47,530 |
| | 40,900 |
|
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 10/11/2020 (13) | | 8.83 | % | | | | 1,000 |
| | 1,000 |
| | 1,000 |
|
2,000,000 Units in T5 Investment Vehicle, LLC | | | | | | | | 2,000 |
| | — |
|
| | | | | | | | 50,530 |
| | 41,900 |
|
Kason Corporation | | | | Industrial machinery | | | | | | |
Mezzanine Term Loan, 11.5% cash 1.75% PIK due 10/28/2019 | | | | | | 6,006 |
| | 6,006 |
| | 5,850 |
|
498.6 Class A Preferred Units in Kason Investment, LLC, 8% | | | | | | | | 499 |
| | 569 |
|
5,540 Class A Common Units in Kason Investment, LLC | | | | | | | | 55 |
| | — |
|
| | | | | | | | 6,560 |
| | 6,419 |
|
SPC Partners V, L.P. | | | | Multi-sector holdings | | | | | | |
0.571% limited partnership interest (11)(25) | | | | | | | | 1,762 |
| | 1,857 |
|
| | | | | | | | 1,762 |
| | 1,857 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
P2 Upstream Acquisition Co. | | | | Application software | | | | | | |
First Lien Revolver, LIBOR+4% (1% floor) cash due 11/1/2018 (10)(13) | | 5.33 | % | | | | | | $ | — |
| | $ | (238 | ) |
| | | | | | | | — |
| | (238 | ) |
OmniSYS Acquisition Corporation | | | | Diversified support services | | | | | | |
First Lien Term Loan, LIBOR+7.5% (1% floor) cash due 11/21/2018 (13) | | 8.83 | % | | | | $ | 5,500 |
| | 5,495 |
| | 5,468 |
|
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 11/21/2018 (10)(13) | | 8.83 | % | | | | | | — |
| | (15 | ) |
100,000 Common Units in OSYS Holdings, LLC | | | | | | | | 1,000 |
| | 903 |
|
| | | | | | | | 6,495 |
| | 6,356 |
|
Moelis Capital Partners Opportunity Fund I-B, LP | | | | Multi-sector holdings | | | | | | |
1.0% limited partnership interest (11)(25) | | | | | | | | 1,045 |
| | 1,457 |
|
| | | | | | | | 1,045 |
| | 1,457 |
|
Aden & Anais Merger Sub, Inc. | | | | Apparel, accessories & luxury goods | | | | | | |
51,645 Common Units in Aden & Anais Holdings, Inc. | | | | | | | | 5,165 |
| | 1,241 |
|
| | | | | | | | 5,165 |
| | 1,241 |
|
Lift Brands, Inc. | | | | Leisure facilities | | | | | | |
First Lien Term Loan, LIBOR+7.5% (1% floor) cash due 12/23/2019 (13) | | 8.83 | % | | | | 21,371 |
| | 21,358 |
| | 21,370 |
|
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 12/23/2019 (10)(13) | | 8.83 | % | | | | | | (3 | ) | | (1 | ) |
2,000,000 Class A Common Units in Snap Investments, LLC | | | | | | | | 2,004 |
| | 2,922 |
|
| | | | | | | | 23,359 |
| | 24,291 |
|
Tailwind Capital Partners II, L.P. | | | | Multi-sector holdings | | | | | | |
0.3% limited partnership interest (11)(25) | | | | | | | | 1,583 |
| | 1,956 |
|
| | | | | | | | 1,583 |
| | 1,956 |
|
Long's Drugs Incorporated | | | | Pharmaceuticals | | | | | | |
Second Lien Term Loan, LIBOR+11.25% cash due 2/19/2022 (13) | | 12.49 | % | | | | 26,909 |
| | 26,909 |
| | 27,447 |
|
50 Series A Preferred Shares in Long's Drugs Incorporated | | | | | | | | 813 |
| | 1,267 |
|
| | | | | | | | 27,722 |
| | 28,714 |
|
Conviva Inc. | | | | Application software | | | | | | |
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021 | | | | | | | | 105 |
| | 169 |
|
| | | | | | | | 105 |
| | 169 |
|
OnCourse Learning Corporation | | | | Education services | | | | | | |
264,312 Class A Units in CIP OCL Investments, LLC | | | | | | | | 2,726 |
| | 1,988 |
|
| | | | | | | | 2,726 |
| | 1,988 |
|
ShareThis, Inc. | | | | Internet software & services | | | | | | |
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024 | | | | | | | | 367 |
| | 8 |
|
| | | | | | | | 367 |
| | 8 |
|
Aptean, Inc. | | | | Internet software & services | | | | | | |
Second Lien Term Loan, LIBOR+9.5% (1% floor) cash due 12/20/2023 (13) | | 10.84 | % | | | | 5,900 |
| | 5,821 |
| | 5,952 |
|
| | | | | | | | 5,821 |
| | 5,952 |
|
ExamSoft Worldwide, Inc. | | | | Internet software & services | | | | | | |
180,707 Class C Units in ExamSoft Investor LLC | | | | | | | | 181 |
| | 135 |
|
| | | | | | | | 181 |
| | 135 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) |
| | Cost | | Fair Value |
|
DigiCert, Inc. | | | | Internet software & services | | | | | | |
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 10/21/2022 (13) | | 10.24 | % | | | | $ | 61,500 |
| | $ | 60,980 |
| | $ | 61,500 |
|
| | | | | | | | 60,980 |
| | 61,500 |
|
RCPDirect II, LP | | | | Multi-sector holdings | | | | | | |
0.4% limited partnership interest (11)(25) | | | | | | | | 617 |
| | 719 |
|
| | | | | | | | 617 |
| | 719 |
|
Integral Development Corporation | | | | Other diversified financial services | | | | | | |
First Lien Term Loan, LIBOR+9.5% (1% floor) cash due 7/10/2019 (13) | | 10.80 | % | | | | 11,500 |
| | 11,466 |
| | 10,815 |
|
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024 | | | | | | | | 113 |
| | — |
|
| | | | | | | | 11,579 |
| | 10,815 |
|
Loftware, Inc. | | | | Internet software & services | | | | | | |
Mezzanine Term Loan, 11% cash 1% PIK due 7/18/2020 | | | | | | 6,198 |
| | 6,198 |
| | 6,198 |
|
300,000 Class A Common Units in RPLF Holdings, LLC | | | | | | | | 300 |
| | 220 |
|
| | | | | | | | 6,498 |
| | 6,418 |
|
Webster Capital III, L.P. | | | | Multi-sector holdings | | | | | | |
0.754% limited partnership interest (11)(25) | | | | | | | | 1,020 |
| | 1,296 |
|
| | | | | | | | 1,020 |
| | 1,296 |
|
L Squared Capital Partners LLC | | | | Multi-sector holdings | | | | | | |
2% limited partnership interest (11)(25) | | | | | | | | 2,660 |
| | 2,660 |
|
| | | | | | | | 2,660 |
| | 2,660 |
|
BeyondTrust Software, Inc. | | | | Application software | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/25/2019 (13) | | 8.33 | % | | | | 26,677 |
| | 26,174 |
| | 26,676 |
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/25/2019 (10)(13) | | 8.33 | % | | | | | | (54 | ) | | — |
|
4,500,000 Class A membership interests in BeyondTrust Holdings LLC | | | | | | | | 4,500 |
| | 5,660 |
|
| | | | | | | | 30,620 |
| | 32,336 |
|
GOBP Holdings Inc. | | | | Food retail | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 10/21/2022 (13) | | 9.58 | % | | | | 4,214 |
| | 4,176 |
| | 4,251 |
|
| | | | | | | | 4,176 |
| | 4,251 |
|
Kellermeyer Bergensons Services, LLC | | | | Diversified support services | | | | | | |
Second Lien Term Loan, LIBOR+8.50% (1% floor) cash due 4/29/2022 (13) | | 9.81 | % | | | | 6,105 |
| | 5,907 |
| | 5,983 |
|
| | | | | | | | 5,907 |
| | 5,983 |
|
Dodge Data & Analytics LLC | | | | Data processing & outsourced services | | | | | | |
First Lien Term Loan, LIBOR+8.75% (1% floor) cash due 10/31/2019 (13) | | 10.13 | % | | | | 7,348 |
| | 7,348 |
| | 6,881 |
|
500,000 Class A Common Units in Skyline Data, News and Analytics LLC | | | | | | | | 500 |
| | 202 |
|
| | | | | | | | 7,848 |
| | 7,083 |
|
Metamorph US 3, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+5.5% (1% floor) cash 2% PIK due 12/1/2020 (13)(23) | | 6.74 | % | | | | 9,969 |
| | 9,550 |
| | 3,816 |
|
First Lien Revolver, LIBOR+6.5% (1% floor) cash due 12/1/2020 (10)(13)(23) | | 7.74 | % | | | | 2,205 |
| | 2,203 |
| | (74 | ) |
| | | | | | | | 11,753 |
| | 3,742 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Schulman Associates Institutional Board Review, Inc. | | | | Research & consulting services | | | | | | |
Second Lien Term Loan, LIBOR+8% (1% floor) cash due 6/3/2021 (13) | | 9.30 | % | | | | $ | 17,000 |
| | $ | 17,000 |
| | $ | 17,000 |
|
| | | | | | | | 17,000 |
| | 17,000 |
|
Janrain, Inc. | | | | Internet software & services | | | | | | |
218,008 Common Stock Warrants (exercise price $1.3761) expiration date 12/5/2024 | | | | | | | | 45 |
| | — |
|
| | | | | | | | 45 |
| | — |
|
TigerText, Inc. | | | | Internet software & services | | | | | | |
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024 | | | | | | | | 60 |
| | 409 |
|
| | | | | | | | 60 |
| | 409 |
|
Survey Sampling International, LLC | | | | Research & consulting services | | | | | | |
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 12/16/2021 (13) | | 10.27 | % | | | | 18,700 |
| | 18,475 |
| | 18,513 |
|
| | | | | | | | 18,475 |
| | 18,513 |
|
PSC Industrial Holdings Corp. | | | | Diversified support services | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 12/3/2021 (13) | | 9.49 | % | | | | 7,000 |
| | 6,839 |
| | 7,000 |
|
| | | | | | | | 6,839 |
| | 7,000 |
|
EOS Fitness Opco Holdings, LLC | | | | Leisure facilities | | | | | | |
First Lien Term Loan, LIBOR+8.75% (0.75% floor) cash due 12/30/2019 (13) | | 9.99 | % | | | | 3,675 |
| | 3,675 |
| | 3,711 |
|
First Lien Revolver, LIBOR+8.75% (0.75% floor) cash due 12/30/2019 (13) | | 9.99 | % | | | | | | — |
| | 50 |
|
487.5 Class A Preferred Units, 12% | | | | | | | | 488 |
| | 678 |
|
12,500 Class B Common Units | | | | | | | | 13 |
| | 463 |
|
| | | | | | | | 4,176 |
| | 4,902 |
|
Motion Recruitment Partners LLC | | | | Human resources & employment services | | | | | | |
First Lien Revolver, LIBOR+6% (1% floor) cash due 2/13/2020 (10)(13) | | 7.24 | % | | | | | | (6 | ) | | — |
|
| | | | | | | | (6 | ) | | — |
|
WeddingWire, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+8.5% (1% floor) cash due 2/20/2020 (13) | | 9.84 | % | | | | 25,781 |
| | 25,781 |
| | 25,911 |
|
First Lien Revolver, LIBOR+8.5% (1% floor) cash due 2/20/2020 (13) | | 9.84 | % | | | | | | — |
| | 15 |
|
483,645 Common Shares of WeddingWire, Inc. | | | | | | | | 1,200 |
| | 1,607 |
|
| | | | | | | | 26,981 |
| | 27,533 |
|
xMatters, Inc. | | | | Internet software & services | | | | | | |
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025 | | | | | | | | 709 |
| | 368 |
|
| | | | | | | | 709 |
| | 368 |
|
Edge Fitness, LLC | | | | Leisure facilities | | | | | | |
Delayed Draw Term Loan, LIBOR+7.75% (1% floor) cash due 6/30/2020 (13) | | 9.05 | % | | | | 3,398 |
| | 3,398 |
| | 3,397 |
|
| | | | | | | | 3,398 |
| | 3,397 |
|
Golden State Medical Supply, Inc. | | | | Pharmaceuticals | | | | | | |
Mezzanine Term Loan, 10% cash 2.5% PIK due 4/24/2021 | | | | | | 15,001 |
| | 15,001 |
| | 14,835 |
|
| | | | | | | | 15,001 |
| | 14,835 |
|
AirStrip Technologies, Inc. | | | | Internet software & services | | | | | | |
22,858.71 Series C-1 Preferred Stock Warrants (exercise price $34.99757) expiration date 5/11/2025 | | | | | | | | 90 |
| | — |
|
| | | | | | | | 90 |
| | — |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Access Medical Acquisition, Inc. | | | | Healthcare services | | | | | | |
450,000 Shares of Class A Common Stock in CMG Holding Company, LLC (6) | | | | | | | | $ | 151 |
| | $ | 970 |
|
| | | | | | | | 151 |
| | 970 |
|
QuorumLabs, Inc. | | | | Internet software & services | | | | | | |
2,727,939 Common Stock Warrants (exercise price $0.0001) expiration date 7/8/2025 | | | | | | | | 375 |
| | — |
|
| | | | | | | | 375 |
| | — |
|
Poseidon Merger Sub, Inc. | | | | Advertising | | | | | | |
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 8/15/2023 (13) | | 9.81 | % | | | | $ | 30,000 |
| | 29,101 |
| | 30,300 |
|
| | | | | | | | 29,101 |
| | 30,300 |
|
Valet Merger Sub, Inc. | | | | Environmental & facilities services | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/24/2021 (13) | | 8.24 | % | | | | 50,661 |
| | 50,016 |
| | 50,660 |
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/24/2021 (10)(13) | | 8.24 | % | | | | — |
| | (115 | ) | | — |
|
| | | | | | | | 49,901 |
| | 50,660 |
|
Argon Medical Devices, Inc. | | | | Healthcare equipment | | | | | | |
Second Lien Term Loan, LIBOR+9.5% (1% floor) cash due 6/23/2022 (13) | | 10.74 | % | | | | 43,000 |
| | 43,000 |
| | 43,002 |
|
| | | | | | | | 43,000 |
| | 43,002 |
|
Lytx, Inc. | | | | Research & consulting services | | | | | | |
3,500 Class A Units in Lytx Holdings, LLC | | | | | | | | 2,478 |
| | 2,459 |
|
3,500 Class B Units in Lytx Holdings, LLC | | | | | | | | — |
| | 559 |
|
| | | | | | | | 2,478 |
| | 3,018 |
|
Onvoy, LLC | | | | Integrated telecommunication services | | | | | | |
Second Lien Term Loan, LIBOR+10.5% (1% floor) cash due 2/10/2025 (13) | | 11.83 | % | | | | 16,750 |
| | 16,750 |
| | 16,704 |
|
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC | | | | | | | | 1,967 |
| | 2,088 |
|
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC | | | | | | | | — |
| | — |
|
| | | | | | | | 18,717 |
| | 18,792 |
|
4 Over International, LLC | | | | Commercial printing | | | | | | |
First Lien Term Loan, LIBOR+6% (1% floor) cash due 6/7/2022 (13) | | 7.24 | % | | | | 6,045 |
| | 6,001 |
| | 6,045 |
|
First Lien Revolver, LIBOR+6% (1% floor) cash due 6/7/2021 (10)(13) | | 7.24 | % | | | | | | (17 | ) | | — |
|
| | | | | | | | 5,984 |
| | 6,045 |
|
Ping Identity Corporation | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+9.25% (1% floor) cash due 6/30/2021 (13) | | 10.49 | % | | | | 42,500 |
| | 41,557 |
| | 43,176 |
|
First Lien Revolver, LIBOR+9.25% (1% floor) cash due 6/30/2021 (10)(13) | | 10.49 | % | | | | | | (55 | ) | | 40 |
|
| | | | | | | | 41,502 |
| | 43,216 |
|
Ancile Solutions, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 6/30/2021 (13) | | 8.33 | % | | | | 10,330 |
| | 10,104 |
| | 10,248 |
|
| | | | | | | | 10,104 |
| | 10,248 |
|
See notes to Consolidated Financial Statements.
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Ministry Brands, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 12/2/2022 (13) | | 6.24 | % | | | | $ | 3,891 |
| | $ | 3,857 |
| | $ | 3,891 |
|
First Lien Delayed Draw Term Loan, LIBOR+5% (1% floor) cash due 12/2/2022 (13) | | 6.24 | % | | | | 1,352 |
| | 1,336 |
| | 1,352 |
|
Second Lien Term Loan, LIBOR+9.25% (1% floor) cash due 6/2/2023 (13) | | 10.49 | % | | | | 7,056 |
| | 6,964 |
| | 7,056 |
|
Second Lien Delayed Draw Term Loan, LIBOR+9.25% (1% floor) cash due 6/2/2023 (13) | | 10.49 | % | | | | 1,944 |
| | 1,918 |
| | 1,944 |
|
First Lien Revolver LIBOR+5% (1% floor) cash due 12/2/2022 (10)(13) | | 6.24 | % | | | | — |
| | (9 | ) | | — |
|
| | | | | | | | 14,066 |
| | 14,243 |
|
Sailpoint Technologies, Inc. | | | | Application software | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 8/16/2021 (13) | | 8.33 | % | | | | 20,870 |
| | 20,529 |
| | 20,870 |
|
First Lien Revolver, LIBOR+7% (1% floor) cash due 8/16/2021 (10)(13) | | 8.33 | % | | | | | | (22 | ) | | — |
|
| | | | | | | | 20,507 |
| | 20,870 |
|
California Pizza Kitchen, Inc. | | | | Restaurants | | | | | | |
First Lien Term Loan, LIBOR+6% (1% floor) cash due 8/23/2022 (13) | | 7.24 | % | | | | 4,950 |
| | 4,910 |
| | 4,917 |
|
| | | | | | | | 4,910 |
| | 4,917 |
|
Aptos, Inc. | | | | Data processing & outsourced services | | | | | | |
First Lien Term Loan B, LIBOR+6.75% (1% floor) cash due 9/1/2022 (13) | | 8.08 | % | | | | 5,445 |
| | 5,354 |
| | 5,391 |
|
| | | | | | | | 5,354 |
| | 5,391 |
|
SPC Partners VI, L.P. | | | | Multi-sector holdings | | | | | | |
0.39% limited partnership interest (11)(25) | | | | | | | | — |
| | — |
|
| | | | | | | | — |
| | — |
|
Impact Sales, LLC | | | | Advertising | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash due 12/30/2021 (13) | | 8.30 | % | | | | 11,166 |
| | 10,955 |
| | 11,145 |
|
Delayed Draw Term Loan, LIBOR+7% (1% floor) cash due 12/30/2021 (13) | | 8.30 | % | | | | 513 |
| | 443 |
| | 506 |
|
| | | | | | | | 11,398 |
| | 11,651 |
|
DFT Intermediate LLC | | | | Specialized finance | | | | | | |
First Lien Term Revolver, LIBOR+5.5% (1% floor) cash due 3/1/2022 (13) | | 6.74 | % | | | | 3,300 |
| | 3,224 |
| | 3,278 |
|
| | | | | | | | 3,224 |
| | 3,278 |
|
Systems, Inc. | | | | Industrial machinery | | | | | | |
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 3/3/2022 (13) | | 6.57 | % | | | | 8,668 |
| | 8,553 |
| | 8,625 |
|
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 3/3/2022 (10)(13) | | 6.57 | % | | | | | | (40 | ) | | (40 | ) |
| | | | | | | | 8,513 |
| | 8,585 |
|
TerSera Therapeutics, LLC | | | | Pharmaceuticals | | | | | | |
Second Lien Term Loan, LIBOR+9.25% (1% floor) cash due 3/30/2024 (13) | | 10.58 | % | | | | 15,000 |
| | 14,586 |
| | 14,629 |
|
668,879 Common Units of TerSera Holdings LLC | | | | | | | | 1,500 |
| | 1,816 |
|
| | | | | | | | 16,086 |
| | 16,445 |
|
Cablevision Systems Corp. | | | | Integrated telecommunication services | | | | | | |
Fixed Rate Bond 10.875% cash due 10/15/2025 (22) | | | | | | 5,897 |
| | 7,077 |
| | 7,298 |
|
| | | | | | | | 7,077 |
| | 7,298 |
|
See notes to Consolidated Financial Statements. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Terraform Power Operating | | | | Multi-utilities | | | | | | |
Fixed Rate Bond 6.375% cash due 2/1/2023 (11)(22) | | | | | | $ | 6,000 |
| | $ | 6,201 |
| | $ | 6,255 |
|
| | | | | | | | 6,201 |
| | 6,255 |
|
HC2 Holdings Inc. | | | | Multi-sector holdings | | | | | | |
Fixed Rate Bond 11% cash due 12/1/2019 (11)(22) | | | | | | 10,500 |
| | 10,666 |
| | 10,631 |
|
| | | | | | | | 10,666 |
| | 10,631 |
|
Natural Resource Partners LP | | | | Precious metals & minerals | | | | | | |
Fixed Rate Bond 10.5% cash due 3/15/2022 (11)(22) | | | | | | 7,000 |
| | 7,459 |
| | 7,464 |
|
| | | | | | | | 7,459 |
| | 7,464 |
|
Virgin Media | | | | Integrated telecommunication services | | | | | | |
Fixed Rate Bond 5.5% cash due 8/15/2026 (11)(22) | | | | | | 2,000 |
| | 2,038 |
| | 2,108 |
|
Fixed Rate Bond 5.25% cash due 1/15/2026 (11)(22) | | | | | | 3,000 |
| | 3,009 |
| | 3,161 |
|
| | | | | | | | 5,047 |
| | 5,269 |
|
Scientific Games International, Inc. | | | | Casinos & gaming | | | | | | |
First Lien Term Loan B4, LIBOR+3.25% cash due 8/14/2024 (13)(22) | | 4.58 | % | | | | 11,368 |
| | 11,313 |
| | 11,402 |
|
| | | | | | | | 11,313 |
| | 11,402 |
|
ASHCO, LLC | | | | Specialty stores | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 12/15/2023 (13) | | 6.24 | % | | | | 12,000 |
| | 11,762 |
| | 11,335 |
|
| | | | | | | | 11,762 |
| | 11,335 |
|
Salient CRGT Inc. | | | | IT consulting & other services | | | | | | |
First Lien Term Loan, LIBOR+5.75% (1% floor) cash due 2/28/2022 (13) | | 6.99 | % | | | | 3,440 |
| | 3,377 |
| | 3,416 |
|
| | | | | | | | 3,377 |
| | 3,416 |
|
BJ's Wholesale Club, Inc. | | | | Hypermarkets & super centers | | | | | | |
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 1/26/2024 (13)(22) | | 4.99 | % | | | | 11,970 |
| | 11,979 |
| | 11,504 |
|
| | | | | | | | 11,979 |
| | 11,504 |
|
Everi Payments Inc. | | | | Casinos & gaming | | | | | | |
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 5/9/2024 (13)(22) | | 5.74 | % | | | | 11,970 |
| | 11,996 |
| | 12,093 |
|
| | | | | | | | 11,996 |
| | 12,093 |
|
LSF9 Atlantis Holdings, LLC | | | | Computer & electronics retail | | | | | | |
First Lien Term Loan, LIBOR+6% (1% floor) cash due 5/1/2023 (13) | | 7.24 | % | | | | 6,459 |
| | 6,399 |
| | 6,498 |
|
| | | | | | | | 6,399 |
| | 6,498 |
|
Allied Universal Holdco LLC | | | | Security & alarm services | | | | | | |
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 7/28/2022 (13)(22) | | 5.08 | % | | | | 11,970 |
| | 12,043 |
| | 11,958 |
|
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 7/27/2023 (13)(22) | | 9.81 | % | | | | 1,149 |
| | 1,171 |
| | 1,145 |
|
| | | | | | | | 13,214 |
| | 13,103 |
|
Truck Hero, Inc. | | | | Auto parts & equipment | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 4/21/2025 (13) | | 9.58 | % | | | | 21,500 |
| | 21,191 |
| | 21,715 |
|
| | | | | | | | 21,191 |
| | 21,715 |
|
BMC Software Finance, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+4% (1% floor) cash due 9/10/2022 (13)(22) | | 5.24 | % | | | | 16,881 |
| | 16,999 |
| | 16,993 |
|
| | | | | | | | 16,999 |
| | 16,993 |
|
See notes to Consolidated Financial Statements. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
Internet Pipeline, Inc. | | | | Internet software & services | | | | | | |
Incremental First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 8/1/2022 (13) | | 7.48 | % | | | | $ | 5,565 |
| | $ | 5,513 |
| | $ | 5,677 |
|
| | | | | | | | 5,513 |
| | 5,677 |
|
CCC Information Services Inc. | | | | Internet software & services | | | | | | |
Second Lien Term Loan, LIBOR+6.75% (1% floor) cash due 3/13/2025 (13) | | 7.99 | % | | | | 2,500 |
| | 2,559 |
| | 2,581 |
|
| | | | | | | | 2,559 |
| | 2,581 |
|
Hyland Software Inc. | | | | Internet software & services | | | | | | |
Second Lien Term Loan, LIBOR+7% (1% floor) cash due 7/7/2025 (13) | | 8.24 | % | | | | 2,000 |
| | 1,991 |
| | 1,980 |
|
| | | | | | | | 1,991 |
| | 1,980 |
|
Idera, Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan B, LIBOR+5% (1% floor) cash due 6/27/2024 (13) | | 6.24 | % | | | | 6,926 |
| | 6,910 |
| | 6,978 |
|
| | | | | | | | 6,910 |
| | 6,978 |
|
MHE Intermediate Holdings, LLC | | | | Diversified support services | | | | | | |
First Lien Term Loan, LIBOR+5% (1% floor) cash due 3/11/2024 (13) | | 6.33 | % | | | | 2,993 |
| | 2,964 |
| | 2,993 |
|
| | | | | | | | 2,964 |
| | 2,993 |
|
PowerPlan Holdings, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 2/23/2022 (13) | | 6.49 | % | | | | 4,988 |
| | 4,941 |
| | 4,987 |
|
| | | | | | | | 4,941 |
| | 4,987 |
|
UOS, LLC | | | | Trucking | | | | | | |
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 4/18/2023 (13) | | 6.74 | % | | | | 6,916 |
| | 7,081 |
| | 7,106 |
|
| | | | | | | | 7,081 |
| | 7,106 |
|
Veritas US Inc. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 1/27/2023 (13)(22) | | 5.83 | % | | | | 34,947 |
| | 35,379 |
| | 35,336 |
|
| | | | | | | | 35,379 |
| | 35,336 |
|
Staples, Inc. | | | | Distributors | | | | | | |
First Lien Term Loan, LIBOR+4% (1% floor) cash due 8/12/2024 (13)(22) | | 5.31 | % | | | | 10,000 |
| | 9,976 |
| | 9,967 |
|
Fixed Rate Bond 8.5% cash due 9/15/2025 (22) | | | | | | 5,000 |
| | 4,988 |
| | 4,863 |
|
| | | | | | | | 14,964 |
| | 14,830 |
|
Zep Inc. | | | | Housewares & Specialties | | | | | | |
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 8/11/2025 (13) | | 9.48 | % | | | | 30,000 |
| | 29,852 |
| | 29,775 |
|
| | | | | | | | 29,852 |
| | 29,775 |
|
DTZ U.S. Borrower, LLC | | | | Real estate services | | | | | | |
First Lien Term Loan, LIBOR+3.25% (1% floor) cash due 11/4/2021 (13)(22) | | 4.57 | % | | | | 12,967 |
| | 13,011 |
| | 13,014 |
|
| | | | | | | | 13,011 |
| | 13,014 |
|
Micro Holding Corp. | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+3.5% (1% floor) cash due 9/15/2024 (13) | | 4.82 | % | | | | 6,000 |
| | 5,970 |
| | 5,978 |
|
| | | | | | | | 5,970 |
| | 5,978 |
|
Accudyne Industries, LLC | | | | Oil & gas equipment services | | | | | | |
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 8/18/2024 (13)(22) | | 5.01 | % | | | | 19,915 |
| | 19,977 |
| | 19,990 |
|
| | | | | | | | 19,977 |
| | 19,990 |
|
See notes to Consolidated Financial Statements. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
|
| | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1)(2)(5)(9)(14) | | Cash Interest Rate (13) | | Industry | | Principal (8) | | Cost | | Fair Value |
McAfee, LLC | | | | Internet software & services | | | | | | |
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2024 (13) | | 5.83 | % | | | | $ | 8,000 |
| | $ | 7,921 |
| | $ | 8,083 |
|
| | | | | | | | 7,921 |
| | 8,083 |
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Total Non-Control/Non-Affiliate Investments (138.2% of net assets) | | | | | | | | $ | 1,279,096 |
| | $ | 1,199,501 |
|
Total Portfolio Investments (177.7% of net assets) | | | | | | | | $ | 1,757,665 |
| | $ | 1,541,755 |
|
Cash and Cash Equivalents | | | | | | | | | | |
JP Morgan Prime Money Market Fund | | | | | | | | $ | 48,808 |
| | $ | 48,808 |
|
Other cash accounts | | | | | | | | 4,210 |
| | 4,210 |
|
Total Cash and Cash Equivalents (6.1% of net assets) | | | | | | | | $ | 53,018 |
| | $ | 53,018 |
|
Total Portfolio Investments, Cash and Cash Equivalents (183.8% of net assets) | | | | | | | | $ | 1,810,683 |
| | $ | 1,594,773 |
|
See notes to Consolidated Financial Statements.
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(1) | All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted. |
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(2) | See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region. |
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(3) | Control Investments generally are defined by the 1940 Act, as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation. |
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(4) | Affiliate Investments generally are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities. |
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(5) | Equity ownership may be held in shares or units of companies related to the portfolio companies. |
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(6) | Income producing through payment of dividends or distributions. |
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(7) | Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. |
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(8) | Principal includes accumulated PIK interest and is net of repayments. |
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(9)(4) | Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents. |
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(10)(5) | Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result inWith the exception of investments held by the Company’s wholly-owned subsidiaries that each formerly held a negative cost basis. A negative fair value may resultlicense from the unfunded commitment being valued below par. |
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(11) | Investment is not a "qualifying asset"SBA to operate as defined under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70%an SBIC, each of the Company's total assets. As of September 30, 2017, qualifying assets represented 83.6% ofinvestments is pledged as collateral under the Company's total assets and non-qualifying assets represented 16.4% of the Company's total assets. |
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(12) | The sale of a portion of this loan does not qualify for true sale accounting under ASC 860, and therefore, the entire debt investment remainsCredit Facility (as defined in the Consolidated Schedule of Investments. Accordingly, the fair value of the Company's debt investments includes $11.6 million relatedNote 6 to the Company's secured borrowings. (See Note 14 in the accompanying notes to the Consolidated Financial Statements.)Statements). |
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(13)(6) | The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate basedbase rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2019, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, the PRIME at 5.00%, the 30-day UK LIBOR at 0.71% and the 30-day EURIBOR at (0.51)%. Most loans include an interest floor, which generally ranges from 0% to 1%. |
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(14)(7) | WithPrincipal includes accumulated PIK interest and is net of repayments, if any. “£” signifies the exception ofinvestment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments held by the Company’s wholly-owned subsidiaries that have each received a license from the SBA to operate as a SBIC, each of the Company's investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.denominated in U.S. dollars. |
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(15)(8) | Control Investments generally are defined by the Investment Company Act, as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation. |
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(9) | As defined in the 1940Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the Company's annual report on Form 10-K for the year ended September 30, 2019 for transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control. |
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(16)(10) | First Star Bermuda Aviation Limited and First Star Speir Aviation 1 Limited areis a wholly-owned holding companiescompany formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding companiescompany to be an investment companiescompany under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding companiescompany and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companiescompany are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities. |
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(17)(11) | Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2019, qualifying assets represented 75.0% of the Company's total assets and non-qualifying assets represented 25.0% of the Company's total assets. |
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(12) | Income producing through payment of dividends or distributions. |
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(13) | PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of September 30, 2019, the accumulated PIK interest balance for each of the A notes and the B notes was $1.8 million. The fair value of this investment is inclusive of PIK. |
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(14) | See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2017
(dollar amounts in thousands)
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(18)(15) | InOn December 28, 2018, the mezzanine notes issued by SLF Repack Issuer 2016, the Company restructured its investment inLLC, a wholly-owned, special purpose issuer subsidiary of Senior Loan Fund JV I, LLC. As part of the restructuring,LLC ("SLF JV I"), were redeemed and the Company exchanged itspurchased subordinated notes for Class A Mezzanine Secured Deferrable Floating Rate Notes and Class B Mezzanine Secured Deferrable Fixed Rate NotesLLC equity interests issued by a newly formed, wholly owned subsidiary,SLF JV I. Prior to December 28, 2018, the mezzanine notes issued by SLF Repack Issuer 2016, LLC. TheLLC consisted of Class A Mezzanine Secured Deferrable Floating Rate Notes bear interest at amezzanine secured deferrable floating rate of LIBOR plus the applicable margin as defined in the indenture. The Class A Mezzanine Secured Deferrable Floating Rate Notesnotes and Class B Mezzanine Secured Deferrable Fixed Rate Notes are collectively referred to as the "mezzanine notes".mezzanine secured deferrable fixed rate notes. |
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(19) | In June 2017, the Company sold all of its investments in Eagle Physicians in exchange for cash and the right to receive contingent payments in the future based on the performance of Eagle Physicians, which is referred to as an "earn-out" in the consolidated schedule of investments. Prior to the sale of its investments in Eagle Physicians, the Company may have been deemed to control Eagle Physicians within the meaning of the 1940 Act due to the fact that the Company owned greater than 25% of the voting securities in Eagle Physicians. After the sale and as of September 30, 2017, the Company no longer owns any of the voting securities in Eagle Physicians and is not deemed to control Eagle Physicians within the meaning of the 1940 Act. |
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(20) | In June 2017, AdVenture Interactive, Corp. reorganized its business to separate its marketing services business from its online program management business. In connection with the reorganization, FS AVI Holdco LLC was formed as a separate entity and is the new parent to Keypath Education, Inc., which represents AdVenture Interactive, Corp.'s former marketing services business, and the Company's first lien term loan and revolver with AdVenture Interactive, Corp. was assigned to Keypath Education, Inc. |
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(21) | The Company's investment in Maverick Healthcare is currently past due. In May 2017, the Company entered into a forbearance agreement with Maverick Healthcare in which the Company has temporarily agreed not to take action against Maverick Healthcare. |
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(22) | As of September 30, 2017, these investments are categorized as Level 2 within the fair value hierarchy established by ASC 820. All other investments are categorized as Level 3 as of September 30, 2017 and were valued using significant unobservable inputs. |
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(23) | This investment was on cash non-accrual status as of September 30, 2017. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable. |
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(24) | This investment was on PIK non-accrual status as of September 30, 2017. PIK non-accrual status is inclusive of other non-cash income, where applicable. |
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(25)(16) | This investment was valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. |
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(17) | Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities. |
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(18) | Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. |
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(19) | Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par. |
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(20) | As of September 30, 2019, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820. |
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(21) | This investment was on cash non-accrual status as of September 30, 2019. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable. |
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)
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(22) | This investment was on PIK non-accrual status as of September 30, 2019. PIK non-accrual status is inclusive of other non-cash income, where applicable. |
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(23) | Payments on this investment were past due as of September 30, 2019. |
See notes to Consolidated Financial Statements.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 1. Organization
Oaktree Specialty Lending Corporation (formerly known as Fifth Street Finance Corp. through October 17, 2017) (together with its consolidated subsidiaries, the "Company") is a specialty finance company that islooks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company was formed in late 2007 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development companyBusiness Development Company under the 1940Investment Company Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for tax purposes.
The Company seeks to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and preferred equity.certain equity co-investments. The Company may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions.
As of October 17, 2017,March 31, 2020, the Company is externally managed by Oaktree Capital Management, L.P. (“Oaktree” or the “Investment Adviser”), a subsidiary of Oaktree Capital Group, LLC (“OCG”), a global investment manager specializing in alternative investments, pursuant to an investment advisory agreement between the Company and the Investment AdviserOaktree, as amended from time to time (the “New Investment“Investment Advisory Agreement”). Oaktree Fund Administration, LLC (“Oaktree Administrator” or “OFA”), a subsidiary of the Investment Adviser,Oaktree, provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement between the Company and OFAOaktree Administrator, as amended from time to time (the “New Administration“Administration Agreement”). See Note 11.
Prior to October 17, 2017, the Company was externally managed by Fifth Street Management LLC (“FSM”), an indirect, partially-owned subsidiary of Fifth Street In 2019, Brookfield Asset Management Inc. (“FSAM”("Brookfield"), acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and FSC CT LLC ("FSC CT" or the "Former Administrator"), a subsidiary of FSM, also provided certain administrativeinvestment, marketing and other services necessary for the Company to operate pursuant to an administration agreement (the "Former Administration Agreement")
On September 7, 2017, stockholders of the Company approved the New Investment Advisory Agreement to take effect upon the closing of the transactions contemplated by the Asset Purchase Agreement (the “Purchase Agreement”), by and among Oaktree, FSM, and, for certain limited purposes, FSAM, and Fifth Street Holdings L.P., the direct, partial owner of FSM (the “Transaction”). Upon the closing of the Transaction on October 17, 2017, Oaktree became the investment adviser to each of Oaktree Strategic Income Corporation (formerly known as Fifth Street Senior Floating Rate Corp.) (“OCSI”) and the Company. The closing of the Transaction resulted in an assignment for purposes of the 1940 Act of the investment advisory agreement between FSM and the Company and, as a result, its immediate termination.support teams.
Note 2. Significant Accounting Policies
Basis of Presentation:
The Consolidated Financial Statements of the Company have been prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. Certain prior-period financial information has been reclassified to conform to current period presentation. The Company is an investment company following the accounting and reporting guidance in FASB ASC Topic 946, Financial Services - Investment Companies ("ASC 946").
Use of Estimates:
The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
Consolidation:
The accompanying Consolidated Financial Statements include the accounts of Oaktree Specialty Lending Corporation and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain subsidiaries that hold investments are treated as pass through entities for tax purposes. The assets of certain of the consolidated subsidiaries are not directly available to satisfy the claims of the creditors of Oaktree Specialty Lending Corporation or any of its other subsidiaries. As of DecemberMarch 31, 2017,2020, the consolidated subsidiaries were Fifth Street Fund of Funds LLC ("Fund of Funds"), Fifth Street Funding II, LLC ("Funding II"), Fifth Street Mezzanine Partners IV, L.P. ("FSMP IV"), Fifth Street Mezzanine
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Partners V, L.P. ("FSMP V" and together with FSMP IV, the "SBIC"Excluded Subsidiaries"), FSMP IV GP, LLC, FSMP V GP, LLC, OCSL SRNE, LLC, OCSL AB Blocker, LLC and FSFC Holdings, Inc. ("Holdings"). In addition, the Company consolidates various holding companies held in connection with its equity investments in certain portfolio investments.
Since the Company isAs an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements. The portfolio investments held by the CompanyStatements but rather are included on the Statements of Assets and Liabilities as investments at fair value.
Fair Value Measurements:
The Company is required to report its investments for which current market values are not readily available at fair value. The Company values its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, the Investment AdviserOaktree obtains and analyzes readily available market quotations provided by independent pricing servicesvendors and brokers for all of the Company's first lien and second lien ("senior secured") debt investments for which quotations are available. In determining the fair value of a particular investment, pricing servicesvendors and brokers use observable market information, including both binding and non-binding indicative quotations.
The Investment AdviserCompany seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If the Company is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within the Company's set threshold, the Company seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by independent pricing servicesvendors and company specific data that could affect the credit quality and/or fair valuebrokers based on available market information, including trading activity of the investment. Investments for which market quotationssubject or similar securities, or by performing a comparable security analysis to ensure that fair values are readily available may be valued at such market quotations.reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In orderaddition to validate market quotations,ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the Investment Adviser looks at a number of factors to determine ifvaluation process. Generally, the quotations are representative of fair value, including the source and nature of the quotations. The Investment AdviserCompany does not adjust any of the prices unless it has a reasonreceived from these sources.
If the quotations obtained from pricing vendors or brokers are determined to believe market quotationsnot be reliable or are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently causing a quoted purchase or sale price to become stale or in the event of a "fire sale" by a distressed seller. In these instances,readily available, the Company values such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available (as discussed below).
If the quotation provided by the pricing service is based on only one or two market sources, the Company performs additional procedures to corroborate such information, which may include the market yield technique discussed below and a quantitative and qualitative assessmentany of the credit quality and market trends affecting the portfolio company.
The Company performs detailed valuations of its debt and equity investments for which market quotations are not readily available or are deemed not to represent fair value of the investments. The Company typically uses three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that the Company is deemed to control under the 1940Investment Company Act. To estimate the EV of a portfolio company, the Investment AdviserOaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. The Investment AdviserOaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase price multiplesprices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. The Company may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
The Company estimates the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The Company's Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:
The quarterly valuation process begins with each portfolio company or investment being initially valued by the Investment Adviser'sOaktree's valuation team in conjunction with the Investment Adviser'sOaktree's portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of the Investment Adviser;Oaktree;
Separately, independent valuation firms engaged by the Board of Directors prepare valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to the Investment AdviserOaktree and the Audit Committee of the Board of Directors;
The Investment AdviserOaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
The Audit Committee reviews the preliminary valuations with the Investment Adviser,Oaktree, and the Investment AdviserOaktree responds and supplements the preliminary valuations to reflect any discussions between the Investment AdviserOaktree and the Audit Committee;
The Audit Committee makes a recommendation to the full Board of Directors regarding the fair value of the investments in the Company's portfolio; and
The Board of Directors discusses valuations and determines the fair value of each investment in the Company's portfolio.
The fair value of the Company's investments as of DecemberMarch 31, 20172020 and September 30, 20172019 was determined in good faith by the Board of Directors. The Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of the Company's portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. However, the Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company's valuation policy and a consistently applied valuation process.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
With the exception of the line items entitled "deferred financing costs," "deferred offering costs," "other assets," "deferred tax asset, net," "deferred tax liability," "credit facility payable" and "unsecured notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statements of Assets and Liabilities. The carrying value of the line items titled "interest, dividends and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "accounts payable, accrued expenses and other liabilities," "base management fee and incentive fee payable," "due to affiliate," "interest payable," "payable to syndication partners" and "payables from unsettled transactions" approximate fair value due to their short maturities.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Foreign Currency Translation:
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the prevailing foreign exchange rate on the reporting date. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Derivative Instruments:
The Company does not utilize hedge accounting and as such values its derivative instruments at fair value with the unrealized gains or losses recorded in “net unrealized appreciation (depreciation)” in the Company’s Consolidated Statements of Operations.
Investment Income:
Interest Income
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations.
In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For the Company's secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial loan sales is recorded within interest expense in the Consolidated Statements of Operations.
PIK Interest Income
The Company's investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company's assessment of the portfolio company's business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Based on this and other information, the Company determines whether to cease accruing PIK interest on a loan or debt security. The Company's determination to cease accruing PIK interest is generally made well before the Company's full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the consolidated financial statements and, as a result, increases the cost bases of these investmentsConsolidated Financial Statements including for purposes of computing the capital gaingains incentive fee payable by the Company to the Investment Adviser beginning in the fiscal year ending September 30, 2019.Oaktree. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s stockholders, even though the Company has not yet collected the cash and may never do so.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Fee Income
Oaktree may provide financial advisory services to portfolio companies and, in return, the Company may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by the Company upon the investment closing date. The Company receives a variety ofmay also receive additional fees in the ordinary course of business, including servicing, advisory, amendment structuring and prepayment fees, which are classified as fee income and recognized as they are earned.earned or the services are rendered.
The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are to betypically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of itsthe assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. A percentage of theseThese fees isare included in net investment income over the life of the loan.
Dividend Income
The Company generally recognizes dividend income on the ex-dividendrecord date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
record distributions from equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents and restricted cash consist of demand deposits and highly liquid investments with maturities of three months or less when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and cash equivalents are classified as Level 1 assets and restricted cash are included on the Company's Consolidated Schedule of Investments.
As of December 31, 2017 and September 30, 2017, included in cash and cash equivalents was $28.0 million and $25.2 million, respectively, held in bank accounts of the SBIC Subsidiaries. These cashInvestments and cash equivalents are permitted only for certain uses, including funding operating expenses of the SBIC Subsidiaries. This cash is not permitted to be used to fund the Company's investments that are held outside the SBIC Subsidiaries or for other corporate purposes of the Company.
As of September 30, 2017, included in restricted cash was $6.8 million that was held at U.S. Bank, National Association in connection with the Company's Sumitomo Facility (as defined in Note 6). The Company was restricted in terms of access to this cash until the occurrence of the periodic distribution dates and, in connection therewith, the Company’s submission of its required periodic reporting schedules and verifications of the Company’s compliance with the terms of the credit agreement.classified as Level 1 assets.
Due from Portfolio Companies:
Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, including any escrow receivableproceeds from the sale of portfolio companies not yet received or being held in escrow, and excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).
Receivables/Payables Fromfrom Unsettled Transactions:
Receivables/payables from unsettled transactions consistsconsist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset at the time of payment.when incurred. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability at the time of payment.when incurred. Deferred financing costs are amortized using the effective interest method over the termsterm of the respective debt arrangement. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense. For extinguishments of the Company’s unsecured notes payable, any unamortized deferred financing costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.
Deferred Offering Costs:
Offering costs consist ofLegal fees and expensesother costs incurred in connection with the offerCompany’s shelf registration statement are capitalized as deferred offering costs in the Consolidated Statements of Assets and saleLiabilities. To the extent any such costs relate to equity offerings, these costs are charged as a reduction of capital upon utilization. To the extent any such costs relate to debt offerings, these costs are treated as deferred financing costs and are amortized over the term of the Company's securities, including legal, accounting and printing fees. The Company chargesrespective debt arrangement. Any deferred offering costs to capitalthat remain at the timeexpiration of the shelf registration statement or when it becomes probable that an offering. There were no offering costs charged to capital during the three months ended December 31, 2017will not be completed are expensed.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and 2016.per share amounts, percentages and as otherwise indicated)
Income Taxes:
The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income within the tax rules under
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar years 20152018 and 2016 and does not expect to incur a U.S. federal excise tax for calendar year 2017.2019.
The Company holds certain portfolio investments through taxable subsidiaries, including FundsFund of Funds and Holdings. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s Consolidated Financial Statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more-likely-than-not" to be sustained assuming examination by tax authorities. Management has analyzed the Company's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2014, 20152017, 2018 or 2016.2019. The Company identifies its major tax jurisdictions as U.S. Federal and California, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Secured Borrowings:Recent Accounting Pronouncements:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The Company followsguidance is effective from March 12, 2020 through December 31, 2022. As of March 31, 2020, the guidance in ASC 860 when accounting for loan participations and other partial loan sales. Such guidance provides accounting and reporting standards for transfers and servicing of financial assets and requiresdid not have a participation or other partial loan sales to meet the definition of a "participating interest," as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest or which are not eligible for sale accounting remain on the Company's Consolidated Statements of Assets and Liabilities and the proceeds are recorded as a secured borrowing until the definition is met. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value. See Note 14 for additional information.
Amounts Payable to Syndication Partners:
The Company acts as administrative agent for certain loans it originates and then syndicates. As administrative agent, the Company receives interest, principal and/or other payments from borrowers that is redistributed to syndication partners. If not redistributed by the reporting date, such amounts are classified in restricted cash and a payable is recorded to syndication partnersmaterial impact on the Consolidated Statements of Assets and Liabilities.
Fair Value Option:
The Company adopted certain principles under FASB ASC Topic 825 Financial Instruments – Fair Value Option ("ASC 825") and elected the fair value option for its secured borrowings, which had a cost basis of $13.5 million in the aggregate as of each of December 31, 2017 and September 30, 2017. The Company believes that by electing the fair value option for these financial instruments, it provides consistent measurement of the assets and liabilities which relate to the partial loan sales mentioned above.Statements.
However, the Company has not elected the fair value option to report other selected financial assets and liabilities at fair value. With the exception of the line items entitled "deferred financing costs," "other assets," "credit facilities payable," and "unsecured notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statement of Assets and Liabilities. The carrying value of the line items titled "interest, dividends, and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "accounts payable, accrued expenses and other liabilities," "base management fee and part I
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
incentive fee payable," "due to affiliate," "interest payable," "amounts payable to syndication partners," "director fees payable" and "payables from unsettled transactions" approximate fair value due to their short maturities.
Recent Accounting Pronouncements:
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations. This ASU is intended to clarify revenue recognition accounting when a third party is involved in providing goods or services to a customer. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing. This ASU is intended to clarify two aspects of Topic 606: identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients. This ASU amends certain aspects of ASU 2014-09, addresses certain implementation issues identified and clarifies the new revenue standards’ core revenue recognition principles. The new standards will be effective for the Company on October 1, 2018 and early adoption is permitted on the original effective date of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method nor has it determined the effect of this standard on its Consolidated Financial Statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall ("ASU 2016-01"), which makes limited amendments to the guidance in GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted specifically for the amendments pertaining to the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption of all other amendments is not permitted. Upon adoption, the Company will be required to make a cumulative-effect adjustment to the Consolidated Statement of Assets and Liabilities as of the beginning of the first reporting period in which the guidance is effective. The Company did not early adopt the new guidance during the three months ended December 31, 2017. The Company is evaluating the effect that ASU 2016-01 will have on its Consolidated Financial Statements and related disclosures.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included within cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The amendment should be adopted retrospectively. The Company did not early adopt the new guidance during the three months ended December 31, 2017. The new guidance is not expected to have a material effect on the Company's Consolidated Financial Statements.
Note 3. Portfolio Investments
As of DecemberMarch 31, 2017, 172.7%2020, 185.1% of net assets at fair value, or $1.4 billion, was invested in 122128 portfolio companies, including the Company's investment$92.2 million in Class A mezzanine secured deferrable floating rate notes, Class B mezzanine secured deferrable fixed ratesubordinated notes and limited liability company ("LLC") equity interests in Senior Loan Fundof SLF JV I, LLC (together with its consolidated subsidiaries, "SLF JV I"), which had a fair value of $100.8 million, $27.5 million and $4.9 million, respectively.I. As of DecemberMarch 31, 2017, 5.6%2020, 11.9% of net assets at fair value, or $45.8$89.5 million, was invested in cash and cash equivalents (including restricted cash).equivalents. In comparison, as of September 30, 2017, 177.7%2019, 154.5% of net assets at fair value, or $1.5$1.4 billion, was invested in 125104 portfolio investments, including the Company's investment$126.3 million in Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed ratesubordinated notes and LLC equity interests inof SLF JV I, which had a fair value of $101.0 million, $27.6 million and $5.5 million, respectively, and 6.9%1.7% of net assets at fair value, or $59.9$15.4 million, was invested in cash and cash equivalents (including restricted cash).equivalents. As of DecemberMarch 31, 2017, 75.8%2020, 81.9% of the Company's portfolio at fair value consisted of senior secured debt investments that were secured by priority liens on the assets of the portfolio companies and 16.0%12.4% consisted of subordinated notes, including debt investments in SLF JV I. As of September 30, 2017, 78.0%2019, 78.6% of the Company's portfolio at fair value consisted of senior secured debt investments that were secured by priority liens on the assets of the portfolio companies and 14.4%12.3% consisted of subordinated notes, including debt investments in SLF JV I.
The Company also held equity investments in certain of its portfolio companies consisting of common stock, preferred stock, warrants, limited partnership interests or LLC equity interests. These instruments generally do not produce a current return but are held for potential investment appreciation and capital gain.
During the three and six months ended March 31, 2020, the Company recorded net realized gains (losses) of $(26.5) million and $(23.2) million, respectively. During the three and six months ended March 31, 2019, the Company recorded net realized gains (losses) of $25.2 million and $43.2 million, respectively. During the three and six months ended March 31, 2020, the Company recorded net unrealized appreciation (depreciation) of $(163.5) million and $(160.7) million, respectively. During the three and six months ended March 31, 2019, the Company recorded net unrealized appreciation (depreciation) of $21.5 million and $14.5 million, respectively.
The composition of the Company's investments as of March 31, 2020 and September 30, 2019 at cost and fair value was as follows:
|
| | | | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
| | Cost | | Fair Value | | Cost | | Fair Value |
Investments in debt securities | | $ | 1,373,111 |
| | $ | 1,220,682 |
| | $ | 1,274,367 |
| | $ | 1,212,174 |
|
Investments in equity securities | | 109,897 |
| | 79,334 |
| | 93,075 |
| | 99,566 |
|
Debt investments in SLF JV I | | 96,250 |
| | 92,171 |
| | 96,250 |
| | 96,250 |
|
Equity investment in SLF JV I | | 49,322 |
| | — |
| | 49,322 |
| | 30,052 |
|
Total | | $ | 1,628,580 |
| | $ | 1,392,187 |
| | $ | 1,513,014 |
| | $ | 1,438,042 |
|
The following table presents the composition of the Company's debt investments as of March 31, 2020 and September 30, 2019 at fixed rates and floating rates:
|
| | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
| | Fair Value | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio |
Fixed rate debt securities | | $ | 122,988 |
| | 9.37 | % | | $ | 132,965 |
| | 10.16 | % |
Floating rate debt securities, including debt investments in SLF JV I | | 1,189,865 |
| | 90.63 |
| | 1,175,459 |
| | 89.84 |
|
Total | | $ | 1,312,853 |
| | 100.00 | % | | $ | 1,308,424 |
| | 100.00 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
During the three months ended December 31, 2017 and December 31, 2016, the Company recorded a net realized loss on investments and secured borrowings of $0.3 million and $23.1 million, respectively. During the three months ended December 31, 2017 and December 31, 2016, the Company recorded net unrealized depreciation on investments and secured borrowings of $43.5 million and $74.4 million, respectively.
The composition of the Company's investments as of December 31, 2017 and September 30, 2017 at cost and fair value was as follows:
|
| | | | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
| | Cost | | Fair Value | | Cost | | Fair Value |
Investments in debt securities | | $ | 1,343,309 |
| | $ | 1,171,848 |
| | $ | 1,426,301 |
| | $ | 1,296,138 |
|
Investments in equity securities | | 188,693 |
| | 110,409 |
| | 186,521 |
| | 111,421 |
|
Debt investments in SLF JV I | | 128,267 |
| | 128,267 |
| | 128,671 |
| | 128,671 |
|
Equity investment in SLF JV I | | 16,172 |
| | 4,880 |
| | 16,172 |
| | 5,525 |
|
Total | | $ | 1,676,441 |
| | $ | 1,415,404 |
| | $ | 1,757,665 |
| | $ | 1,541,755 |
|
The composition of the Company's debt investments as of December 31, 2017 and September 30, 2017 at fixed rates and floating rates was as follows:
|
| | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
| | Fair Value | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio |
Fixed rate debt securities, including debt investments in SLF JV I | | $ | 229,274 |
| | 17.63 | % | | $ | 233,869 |
| | 16.41 | % |
Floating rate debt securities, including debt investments in SLF JV I | | 1,070,841 |
| | 82.37 |
| | 1,190,940 |
| | 83.59 |
|
Total | | $ | 1,300,115 |
| | 100.00 | % | | $ | 1,424,809 |
| | 100.00 | % |
The following table presents the financial instruments carried at fair value as of DecemberMarch 31, 20172020 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
| | | | Level 1 | | Level 2 | | Level 3 | | Measured at Net Asset Value (a) | | Total | | Level 1 | | Level 2 | | Level 3 | | Measured at Net Asset Value (a) | | Total |
Investments in debt securities (senior secured) | | $ | — |
| | $ | 258,128 |
| | $ | 815,352 |
| | $ | — |
| | $ | 1,073,480 |
| | $ | — |
| | $ | 420,512 |
| | $ | 720,110 |
| | $ | — |
| | $ | 1,140,622 |
|
Investments in debt securities (subordinated, including debt investments in SLF JV I) | | — |
| | 56,684 |
| | 169,951 |
| | — |
| | 226,635 |
| | — |
| | 67,064 |
| | 105,167 |
| | — |
| | 172,231 |
|
Investments in equity securities (preferred) | | — |
| | — |
| | 16,350 |
| | — |
| | 16,350 |
| | — |
| | — |
| | 31,367 |
| | — |
| | 31,367 |
|
Investments in equity securities (common, including LLC equity interests of SLF JV I) | | — |
| | — |
| | 68,434 |
| | 30,505 |
| | 98,939 |
| |
Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I) | | | — |
| | — |
| | 45,150 |
| | 2,817 |
| | 47,967 |
|
Total investments at fair value | | — |
| | 314,812 |
| | 1,070,087 |
| | 30,505 |
| | 1,415,404 |
| | — |
| | 487,576 |
| | 901,794 |
| | 2,817 |
| | 1,392,187 |
|
Cash and cash equivalents | | 45,435 |
| | — |
| | — |
| | — |
| | 45,435 |
| |
Cash equivalents | | | 82,928 |
| | — |
| | — |
| | — |
| | 82,928 |
|
Derivative asset | | | — |
| | 1,268 |
| | — |
| | — |
| | 1,268 |
|
Total assets at fair value | | $ | 45,435 |
| | $ | 314,812 |
| | $ | 1,070,087 |
| | $ | 30,505 |
| | $ | 1,460,839 |
|
| $ | 82,928 |
| | $ | 488,844 |
| | $ | 901,794 |
| | $ | 2,817 |
| | $ | 1,476,383 |
|
Secured borrowings relating to senior secured debt investments | | — |
| | — |
| | 11,601 |
| | — |
| | 11,601 |
| |
Total liabilities at fair value | | $ | — |
| | $ | — |
| | $ | 11,601 |
| | $ | — |
| | $ | 11,601 |
| |
__________
| |
(a) | In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table presents the financial instruments carried at fair value as of September 30, 20172019 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
| | | | Level 1 | | Level 2 | | Level 3 | | Measured at Net Asset Value (a) | | Total | | Level 1 | | Level 2 | | Level 3 | | Measured at Net Asset Value (a) | | Total |
Investments in debt securities (senior secured) | | $ | — |
| | $ | 142,257 |
| | $ | 1,060,442 |
| | $ | — |
| | $ | 1,202,699 |
| | $ | — |
| | $ | 477,542 |
| | $ | 653,334 |
| | $ | — |
| | $ | 1,130,876 |
|
Investments in debt securities (subordinated, including debt investments in SLF JV I) | | — |
| | 41,778 |
| | 180,331 |
| | — |
| | 222,109 |
| | — |
| | 67,239 |
| | 110,309 |
| | — |
| | 177,548 |
|
Investments in equity securities (preferred) | | — |
| | — |
| | 16,445 |
| | — |
| | 16,445 |
| | — |
| | — |
| | 40,578 |
| | — |
| | 40,578 |
|
Investments in equity securities (common, including LLC equity interests of SLF JV I) | | — |
| | — |
| | 69,164 |
| | 31,338 |
| | 100,502 |
| |
Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I) | | | 15,054 |
| | — |
| | 41,006 |
| | 32,980 |
| | 89,040 |
|
Total investments at fair value | | — |
| | 184,035 |
| | 1,326,382 |
| | 31,338 |
| | 1,541,755 |
| | 15,054 |
| | 544,781 |
| | 845,227 |
| | 32,980 |
| | 1,438,042 |
|
Cash and cash equivalents | | 53,018 |
| | — |
| | — |
| | — |
| | 53,018 |
| |
Cash equivalents | | | 9,611 |
| | — |
| | — |
| | — |
| | 9,611 |
|
Derivative assets | | | — |
| | 490 |
| | — |
| | — |
| | 490 |
|
Total assets at fair value | | $ | 53,018 |
| | $ | 184,035 |
| | $ | 1,326,382 |
| | $ | 31,338 |
| | $ | 1,594,773 |
| | $ | 24,665 |
| | $ | 545,271 |
| | $ | 845,227 |
| | $ | 32,980 |
| | $ | 1,448,143 |
|
Secured borrowings relating to senior secured debt investments | | — |
| | — |
| | 13,256 |
| | — |
| | 13,256 |
| |
Total liabilities at fair value | | $ | — |
| | $ | — |
| | $ | 13,256 |
| | $ | — |
| | $ | 13,256 |
| |
__________
| |
(a) | In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities. |
When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to thehave both unobservable or Level 3 components and observable components (i.e. components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology. Transfers between levels are recognized at the beginning of the
reporting period.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table provides a roll-forward in the changes in fair value from September 30, 2017 to December 31, 20172019 to March 31, 2020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
|
| | | | | | | | | | | | | | | | | | | | |
| | Investments |
| | Senior Secured Debt | | Subordinated Debt (including debt investments in SLF JV I) | | Preferred Equity | | Common Equity and Warrants | | Total |
Fair value as of December 31, 2019 | | $ | 697,632 |
| | $ | 108,348 |
| | $ | 38,909 |
| | $ | 44,645 |
| | $ | 889,534 |
|
Purchases | | 142,790 |
| | 106 |
| | — |
| | — |
| | 142,896 |
|
Sales and repayments | | (81,656 | ) | | (117 | ) | | — |
| | (6,535 | ) | | (88,308 | ) |
Transfers in (a)(b) | | 34,522 |
| | 1,405 |
| | — |
| | 18,625 |
| | 54,552 |
|
Transfers out (a)(b) | | (18,625 | ) | | — |
| | — |
| | — |
| | (18,625 | ) |
PIK interest income | | 1,841 |
| | — |
| | — |
| | — |
| | 1,841 |
|
Accretion of OID | | 2,139 |
| | 313 |
| | — |
| | — |
| | 2,452 |
|
Net unrealized appreciation (depreciation) | | (29,696 | ) | | 9,393 |
| | (7,242 | ) | | (16,160 | ) | | (43,705 | ) |
Net realized gains (losses) | | (28,837 | ) | | (14,281 | ) | | (300 | ) | | 4,575 |
| | (38,843 | ) |
Fair value as of March 31, 2020 | | $ | 720,110 |
| | $ | 105,167 |
| | $ | 31,367 |
| | $ | 45,150 |
| | $ | 901,794 |
|
Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of March 31, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended March 31, 2020 | | $ | (60,406 | ) | | $ | (4,888 | ) | | $ | (7,542 | ) | | $ | (14,708 | ) | | $ | (87,544 | ) |
__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the three months ended March 31, 2020 as a result of a decreased number of market quotes available and/or decreased market liquidity.
(b) There was one transfer from senior secured debt to common equity and warrants during the three months ended March 31, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million.
The following table provides a roll-forward in the changes in fair value from December 31, 2018 to March 31, 2019 for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Investments | | Liabilities |
| | Senior Secured Debt | | Subordinated Debt (including debt investments in SLF JV I) | | Preferred Equity | | Common Equity | | Total | | Secured Borrowings |
Fair value as of September 30, 2017 | | $ | 1,060,442 |
| | $ | 180,331 |
| | $ | 16,445 |
| | $ | 69,164 |
| | $ | 1,326,382 |
| | $ | 13,256 |
|
New investments & net revolver activity | | 58,869 |
| | 1,730 |
| | — |
| | 2,500 |
| | 63,099 |
| | — |
|
Redemptions/repayments/sales | | (239,894 | ) | | (812 | ) | | — |
| | 9 |
| | (240,697 | ) | | — |
|
Transfers out (a) | | (37,368 | ) | | — |
| | — |
| | — |
| | (37,368 | ) | | — |
|
Net accrual of PIK interest income | | 683 |
| | 75 |
| | — |
| | — |
| | 758 |
| | — |
|
Accretion of OID | | 186 |
| | — |
| | — |
| | — |
| | 186 |
| | — |
|
Net unrealized depreciation on investments | | (27,566 | ) | | (11,372 | ) | | (95 | ) | | (3,230 | ) | | (42,263 | ) | | — |
|
Net unrealized depreciation on secured borrowings | | — |
| | — |
| | — |
| | — |
| | — |
| | (1,655 | ) |
Realized loss on investments | | — |
| | (1 | ) | | — |
| | (9 | ) | | (10 | ) | | — |
|
Fair value as of December 31, 2017 | | $ | 815,352 |
| | $ | 169,951 |
| | $ | 16,350 |
| | $ | 68,434 |
| | $ | 1,070,087 |
| | $ | 11,601 |
|
Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of December 31, 2017 and reported within net unrealized depreciation on investments and net unrealized (appreciation) depreciation on secured borrowings in the Consolidated Statement of Operations for the three months ended December 31, 2017 | | $ | (27,539 | ) | | $ | (11,441 | ) | | $ | (94 | ) | | $ | (4,243 | ) | | $ | (43,317 | ) | | $ | (1,655 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Investments | | Liabilities |
| | Senior Secured Debt | | Subordinated Debt (including debt investments in SLF JV I) | | Preferred Equity | | Common Equity and Warrants | | Total | | Secured Borrowings |
Fair value as of December 31, 2018 | | $ | 741,372 |
| | $ | 119,953 |
| | $ | 4,988 |
| | $ | 34,107 |
| | $ | 900,420 |
| | $ | 9,302 |
|
Purchases | | 60,800 |
| | 1,978 |
| | — |
| | — |
| | 62,778 |
| | — |
|
Sales and repayments | | (95,212 | ) | | (394 | ) | | — |
| | (9,995 | ) | | (105,601 | ) | | (367 | ) |
Transfers in (a) | | 19,780 |
| | — |
| | — |
| | — |
| | 19,780 |
| | — |
|
PIK interest income | | 420 |
| | 26 |
| | — |
| | — |
| | 446 |
| | — |
|
Accretion of OID | | 5,486 |
| | 292 |
| | — |
| | — |
| | 5,778 |
| | — |
|
Net unrealized appreciation (depreciation) | | (13,190 | ) | | (1,420 | ) | | 25 |
| | 7,073 |
| | (7,512 | ) | | 76 |
|
Net realized gains (losses) | | 17,499 |
| | — |
| | — |
| | 7,937 |
| | 25,436 |
| | — |
|
Fair value as of March 31, 2019 | | $ | 736,955 |
| | $ | 120,435 |
| | $ | 5,013 |
| | $ | 39,122 |
| | $ | 901,525 |
| | $ | 9,011 |
|
Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of March 31, 2019 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended March 31, 2019 | | $ | (8,658 | ) | | $ | (1,420 | ) | | $ | 25 |
| | $ | 7,876 |
| | $ | (2,177 | ) | | $ | 76 |
|
__________
(a) There were transfers out ofinto Level 3 tofrom Level 2 for certain investments during the quarterthree months ended DecemberMarch 31, 20172019 as a result of an increaseda decreased number of market quotes available and/or increaseddecreased market liquidity.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table provides a roll-forward in the changes in fair value from September 30, 20162019 to DecemberMarch 31, 20162020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
|
| | | | | | | | | | | | | | | | | | | | |
| | Investments |
| | Senior Secured Debt | | Subordinated Debt (including debt investments in SLF JV I) | | Preferred Equity | | Common Equity and Warrants | | Total |
Fair value as of September 30, 2019 | | $ | 653,334 |
| | $ | 110,309 |
| | $ | 40,578 |
| | $ | 41,006 |
| | $ | 845,227 |
|
Purchases | | 239,185 |
| | 1,065 |
| | — |
| | 1,328 |
| | 241,578 |
|
Sales and repayments | | (154,948 | ) | | (3,863 | ) | | (1,388 | ) | | (6,574 | ) | | (166,773 | ) |
Transfers in (a)(b) | | 67,939 |
| | 5,113 |
| | — |
| | 18,625 |
| | 91,677 |
|
Transfers out (a)(b) | | (33,625 | ) | | — |
| | — |
| | — |
| | (33,625 | ) |
PIK interest income | | 2,960 |
| | — |
| | — |
| | — |
| | 2,960 |
|
Accretion of OID | | 3,565 |
| | 617 |
| | — |
| | — |
| | 4,182 |
|
Net unrealized appreciation (depreciation) | | (29,397 | ) | | 6,268 |
| | (8,318 | ) | | (13,850 | ) | | (45,297 | ) |
Net realized gains (losses) | | (28,903 | ) | | (14,342 | ) | | 495 |
| | 4,615 |
| | (38,135 | ) |
Fair value as of March 31, 2020 | | $ | 720,110 |
| | $ | 105,167 |
| | $ | 31,367 |
| | $ | 45,150 |
| | $ | 901,794 |
|
Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of March 31, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the six months ended March 31, 2020 | | $ | (58,203 | ) | | $ | (5,123 | ) | | $ | (7,716 | ) | | $ | (12,397 | ) | | $ | (83,439 | ) |
__________
(a) There were transfers into/out of Level 3 from/to Level 2 for certain investments during the six months ended March 31, 2020 as a result of a change in the number of market quotes available and/or a change in market liquidity.
(b) There was one transfer from senior secured debt to common equity and warrants during the six months ended March 31, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million.
The following table provides a roll-forward in the changes in fair value from September 30, 2018 to March 31, 2019 for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Investments | | Liabilities |
| | Senior Secured Debt | | Subordinated Debt (including debt investments in SLF JV I) | | Preferred Equity | | Common Equity | | Total | | Secured Borrowings |
Fair value as of September 30, 2016 | | $ | 1,689,535 |
| | $ | 285,277 |
| | $ | 47,749 |
| | $ | 106,540 |
| | $ | 2,129,101 |
| | $ | 18,400 |
|
New investments & net revolver activity | | 99,858 |
| | 126,402 |
| | — |
| | 1,586 |
| | 227,846 |
| | — |
|
Redemptions/repayments | | (194,616 | ) | | (150,043 | ) | | (652 | ) | | (1,786 | ) | | (347,097 | ) | | (4,503 | ) |
Net accrual (receipt) of PIK interest income | | (1,026 | ) | | (247 | ) | | 676 |
| | — |
| | (597 | ) | | — |
|
Accretion of OID | | 2,201 |
| | — |
| | — |
| | — |
| | 2,201 |
| | — |
|
Net change in unearned income | | (26 | ) | | 11 |
| | — |
| | — |
| | (15 | ) | | — |
|
Net unrealized appreciation (depreciation) on investments | | (81,425 | ) | | 14,877 |
| | 1,372 |
| | (9,720 | ) | | (74,896 | ) | | — |
|
Net unrealized appreciation on secured borrowings | | — |
| | — |
| | — |
| | — |
| | — |
| | 84 |
|
Realized gain (loss) on investments | | (140 | ) | | (19,857 | ) | | 443 |
| | (3,600 | ) | | (23,154 | ) | | — |
|
Fair value as of December 31, 2016 | | $ | 1,514,361 |
| | $ | 256,420 |
| | $ | 49,588 |
| | $ | 93,020 |
| | $ | 1,913,389 |
| | $ | 13,981 |
|
Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of December 31, 2016 and reported within net unrealized depreciation on investments and net unrealized (appreciation) depreciation on secured borrowings in the Consolidated Statement of Operations for the three months ended December 31, 2016 | | $ | (80,481 | ) | | $ | (793 | ) | | $ | 1,697 |
| | $ | (11,786 | ) | | $ | (91,363 | ) | | $ | 84 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Investments | | Liabilities |
| | Senior Secured Debt | | Subordinated Debt (including debt investments in SLF JV I) | | Preferred Equity | | Common Equity and Warrants | | Total | | Secured Borrowings |
Fair value as of September 30, 2018 | | $ | 638,971 |
| | $ | 158,859 |
| | $ | 4,918 |
| | $ | 61,134 |
| | $ | 863,882 |
| | $ | 9,728 |
|
Purchases | | 150,799 |
| | 2,511 |
| | — |
| | 2,514 |
| | 155,824 |
| | — |
|
Sales and repayments | | (128,235 | ) | | (16,143 | ) | | — |
| | (31,286 | ) | | (175,664 | ) | | (812 | ) |
Transfers in (a) | | 23,446 |
| | — |
| | — |
| | — |
| | 23,446 |
| | — |
|
Transfers out (b) | | — |
| | (33,150 | ) | | — |
| | (12,073 | ) | | (45,223 | ) | | — |
|
PIK interest income | | 1,065 |
| | 121 |
| | — |
| | — |
| | 1,186 |
| | — |
|
Accretion of OID | | 12,080 |
| | 663 |
| | — |
| | — |
| | 12,743 |
| | — |
|
Net unrealized appreciation (depreciation) | | 21,908 |
| | 7,574 |
| | 590 |
| | (4,391 | ) | | 25,681 |
| | 95 |
|
Net realized gains (losses) | | 16,921 |
| | — |
| | (495 | ) | | 23,224 |
| | 39,650 |
| | — |
|
Fair value as of March 31, 2019 | | $ | 736,955 |
| | $ | 120,435 |
| | $ | 5,013 |
| | $ | 39,122 |
| | $ | 901,525 |
| | $ | 9,011 |
|
Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of March 31, 2019 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the six months ended March 31, 2019 | | $ | (16,071 | ) | | $ | 7,577 |
| | $ | 95 |
| | $ | 8,733 |
| | $ | 334 |
| | $ | 95 |
|
__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the six months ended March 31, 2019 as a result of a decreased number of market quotes available and/or decreased market liquidity.
(b) There was one transfer from Level 3 to Level 1 during the six months ended March 31, 2019 as a result of an initial public offering of a portfolio company. There was also one transfer out of Level 3 during the six months ended March 31, 2019 as a result of an investment restructuring in which debt investments were exchanged for equity investments that are valued using net asset value as a practical expedient.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, and secured borrowings, which are carried at fair value, as of DecemberMarch 31, 2017:2020:
|
| | | | | | | | | | | | | | | |
Asset | | Fair Value | | Valuation Technique | | Unobservable Input | | Range | | Weighted Average (c) |
Senior secured debt | | $ | 579,327 |
| | Market yield technique | | Market yield | | (a) | 6.4% | - | 20.2% | | 12.2% |
| | 10,340 |
| | Enterprise value technique | | Revenue multiple | | (b) | 0.1x | - | 0.6x | | 0.3x |
| | 103,793 |
| | Enterprise value technique | | EBITDA multiple | | (b) | 3.2x | - | 7.6x | | 4.7x |
| | 44,378 |
| | Enterprise value technique | | Asset multiple | | (b) | 0.9x | - | 1.1x | | 1.0x |
| | 14,657 |
| | Transactions precedent technique | | Transaction price | | (d) | N/A | - | N/A | | N/A |
| | 62,857 |
| | Market quotations | | Broker quoted price | | (e) | N/A | - | N/A | | N/A |
Subordinated debt | | 42,084 |
| | Market yield technique | | Market yield | | (a) | 12.9% | - | 25.0% | | 14.0% |
| | (400 | ) | | Enterprise value technique | | EBITDA multiple | | (a) | 6.8x | - | 7.8x | | 7.3x |
SLF JV I debt investments | | 128,267 |
| | Enterprise value technique | | N/A | | (f) | N/A | - | N/A | | N/A |
Preferred & common equity | | 15,651 |
| | Enterprise value technique | | Revenue multiple | | (b) | 0.1x | - | 10.9x | | 2.4x |
| | 49,797 |
| | Enterprise value technique | | EBITDA multiple | | (b) | 3.2x | - | 15.5x | | 7.7x |
| | 19,336 |
| | Enterprise value technique | | Asset multiple | | (b) | 0.9x | - | 1.1x | | 1.0x |
Total | | $ | 1,070,087 |
| | | | | | | | | | | |
Secured borrowings | | 11,601 |
| | Market yield technique | | Market yield | | (a) | 16.5% | - | 18.5% | | 17.5% |
Total | | $ | 11,601 |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
Asset | | Fair Value | | Valuation Technique | | Unobservable Input | | Range | | Weighted Average (a) |
Senior Secured Debt | | $ | 419,433 |
| | Market Yield | | Market Yield | | (b) | 6.6% | - | 22.0% | | 11.4% |
| | 15,842 |
| | Enterprise Value | | EBITDA Multiple | | (c) | 1.8x | - | 5.9x | | 5.0x |
| | 11,510 |
| | Enterprise Value | | Asset Multiple | | (c) | 0.9x | - | 1.1x | | 1.0x |
| | 26,266 |
| | Transactions Precedent | | Transaction Price | | (d) | N/A | - | N/A | | N/A |
| | 247,059 |
| | Broker Quotations | | Broker Quoted Price | | (e) | N/A | - | N/A | | N/A |
Subordinated Debt | | 11,394 |
| | Market Yield | | Market Yield | | (b) | 15.0% | - | 17.0% | | 16.0% |
| | 1,602 |
| | Enterprise Value | | EBITDA Multiple | | (c) | 7.7x | - | 7.9x | | 7.8x |
SLF JV I Debt Investments | | 92,171 |
| | Enterprise Value | | N/A | | (f) | N/A | - | N/A | | N/A |
Preferred & Common Equity | | 16,201 |
| | Enterprise Value | | Revenue Multiple | | (c) | 0.8x | - | 8.0x | | 3.1x |
| | 50,861 |
| | Enterprise Value | | EBITDA Multiple | | (c) | 1.8x | - | 19.0x | | 7.2x |
| | 3,165 |
| | Enterprise Value | | Asset Multiple | | (c) | 0.9x | - | 1.1x | | 1.0x |
| | 6,290 |
| | Transactions Precedent | | Transaction Price | | (d) | N/A | - | N/A | | N/A |
Total | | $ | 901,794 |
| | | | | | | | | | | |
__________
| |
(a) | Used when market participant would take into account market yield when pricing the investment or secured borrowings.Weighted averages are calculated based on fair value of investments. |
| |
(b) | Used when market participantparticipants would use such multiplestake into account market yield when pricing the investment. |
| |
(c) | Weighted averages are calculated based on fair value of investments or secured borrowings.Used when market participants would use such multiples when pricing the investment. |
| |
(d) | Used when there is an observable transaction or pending event for the investment. |
| |
(e) | The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The company performs additional procedures to corroborate suchCompany evaluates the quotations provided by pricing vendors and brokers based on available market information, which may include the market yield technique and a quantitative and qualitative assessmentincluding trading activity of the credit quality and market trends affecting the portfolio company.subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by the Investment Adviser.Oaktree. |
| |
(f) | The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the mezzaninesubordinated notes held at SLF JV I in an amount not exceeding par under the enterprise valueEV technique. |
Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities and secured borrowings as of December 31, 2017 is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
Under the enterprise value technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities as of December 31, 2017 is the earnings before interest, taxes, depreciation and amortization ("EBITDA")/Revenue/Asset multiple. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, and secured borrowings, which are carried at fair value, as of September 30, 2017:2019:
|
| | | | | | | | | | | | | | | |
Asset | | Fair Value | | Valuation Technique | | Unobservable Input | | Range | | Weighted Average (a) |
Senior Secured Debt | | $ | 314,026 |
| | Market Yield | | Market Yield | | (b) | 6.7% | - | 18.0% | | 11.2% |
| | 17,452 |
| | Enterprise Value | | EBITDA Multiple | | (c) | 1.8x | - | 6.0x | | 5.0x |
| | 11,510 |
| | Enterprise Value | | Asset Multiple | | (c) | 0.9x | | 1.1x | | 1.0x |
| | 3,750 |
| | Transactions Precedent | | Transaction Price | | (d) | N/A | - | N/A | | N/A |
| | 306,596 |
| | Broker Quotations | | Broker Quoted Price | | (e) | N/A | - | N/A | | N/A |
Subordinated Debt | | 11,353 |
| | Market Yield | | Market Yield | | (b) | 13.0% | - | 15.0% | | 14.0% |
| | 2,706 |
| | Enterprise Value | | EBITDA Multiple | | (c) | 6.5x | - | 8.5x | | 7.5x |
SLF JV I Debt Investments | | 96,250 |
| | Enterprise Value | | N/A | | (f) | N/A | - | N/A | | N/A |
Preferred & Common Equity | | 4,004 |
| | Enterprise Value | | Revenue Multiple | | (c) | 0.8x | - | 8.9x | | 3.3x |
| | 72,950 |
| | Enterprise Value | | EBITDA Multiple | | (c) | 1.8x | - | 17.0x | | 6.9x |
| | 4,630 |
| | Enterprise Value | | Asset Multiple | | (c) | 0.9x | - | 1.1x | | 1.0x |
Total | | $ | 845,227 |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
Asset | | Fair Value | | Valuation Technique | | Unobservable Input | | Range | | Weighted Average (c) |
Senior secured debt | | $ | 632,835 |
| | Market yield technique | | Capital structure premium | | (a) | 0.0% | - | 2.0% | | 0.7% |
| | | | | | Tranche specific risk premium/(discount) | | (a) | (2.5)% | - | 10.5% | | 2.9% |
| | | | | | Size premium | | (a) | 0.5% | - | 2.0% | | 1.0% |
| | | | | | Industry premium/(discount) | | (a) | (1.2)% | - | 2.6% | | 0.4% |
| | 58,815 |
| | Enterprise value technique | | Revenue multiple | | (b) | 0.2x | - | 0.6x | | 0.5x |
| | 107,313 |
| | Enterprise value technique | | EBITDA multiple | | (b) | 0.1x | - | 7.2x | | 4.6x |
| | 98,800 |
| | Transactions precedent technique | | Transaction price | | (d) | N/A | - | N/A | | N/A |
| | 162,679 |
| | Market quotations | | Broker quoted price | | (e) | N/A | - | N/A | | N/A |
Subordinated debt | | 40,825 |
| | Market yield technique | | Capital structure premium | | (a) | 2.0% | - | 2.0% | | 2.0% |
| | | | | | Tranche specific risk premium | | (a) | 1.8% | - | 5.9% | | 3.4% |
| | | | | | Size premium | | (a) | 2.0% | - | 2.0% | | 2.0% |
| | | | | | Industry premium/(discount) | | (a) | (0.5)% | - | 2.6% | | 0.6% |
| | 10,835 |
| | Enterprise value technique | | EBITDA multiple | | (b) | 6.3x | - | 7.0x | | 6.4x |
SLF JV I debt investments | | 128,671 |
| | Enterprise value technique | | N/A | | (f) | N/A | - | N/A | | N/A |
Preferred & common equity | | 85,609 |
| | Enterprise value technique | | EBITDA multiple | | (b) | 0.1x | - | 15.6x | | 6.8x |
| | | | | | Revenue multiple | | (b) | 0.9x | | 10.9x | | 2.7x |
Total | | $ | 1,326,382 |
| | | | | | | | | | | |
Secured borrowings | | 13,256 |
| | Market yield technique | | Tranche specific risk premium (discount) | | (a) | (2.0)% | - | 6.5% | | 5.7% |
| | | | | | Size premium | | (a) | 2.0% | - | 2.0% | | 2.0% |
| | | | | | Industry premium | | (a) | 0.2% | - | 0.2% | | 0.2% |
| | | | | | | | | | | | | |
Total | | $ | 13,256 |
| | | | | | | | | | | |
__________
| |
(a) | Used when market participant would take into account this premium or discount when pricing the investment or secured borrowingsWeighted averages are calculated based on a market yield.fair value of investments. |
| |
(b) | Used when market participantparticipants would use such multiplestake into account market yield when pricing the investment. |
| |
(c) | Weighted averages are calculated based on fair value of investments or secured borrowings.Used when market participants would use such multiples when pricing the investment. |
| |
(d) | Used when there is an observable transaction or pending event for the investment. |
| |
(e) | The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The company performs additional procedures to corroborate suchCompany evaluates the quotations provided by pricing vendors and brokers based on available market information, which may include the market yield technique and a quantitative and qualitative assessmentincluding trading activity of the credit quality and market trends affecting the portfolio company.subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by the Investment Adviser.Oaktree. |
| |
(f) | The Company determined the value based on the total assets less the total liabilities senior to the mezzanine notes held at SLF JV I in an amount not exceeding par under the enterprise value technique |
Under the market yield technique, the significant unobservable inputs used in the fair value measurement of the Company's investments in debt securities and secured borrowings as of September 30, 2017 are capital structure premium, tranche specific risk premium (discount), size premium and industry premium (discount). Increases or decreases in any of those inputs in isolation may result in a lower or higher fair value measurement, respectively.
Under the enterprise value technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities as of September 30, 2017 is the EBITDA/Revenue multiple. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| |
(f) | The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the subordinated notes held at SLF JV I in an amount not exceeding par under the EV technique. |
Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
Under the EV technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities is the earnings before interest, taxes, depreciation and amortization ("EBITDA"), revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of DecemberMarch 31, 20172020 and the level of each financial liability within the fair value hierarchy:
| | | | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Credit facility payable | | $ | 205,000 |
| | $ | 205,000 |
| | $ | — |
| | $ | — |
| | $ | 205,000 |
| | $ | 404,825 |
| | $ | 404,825 |
| | $ | — |
| | $ | — |
| | $ | 404,825 |
|
Unsecured notes payable (net of unamortized financing costs) | | 406,486 |
| | 413,245 |
| | — |
| | 162,570 |
| | 250,675 |
| |
Unsecured notes payable (net of unamortized financing costs and unaccreted discount) | | | 293,861 |
| | 274,500 |
| | — |
| | 274,500 |
| | — |
|
Total | | $ | 611,486 |
| | $ | 618,245 |
| | $ | — |
| | $ | 162,570 |
| | $ | 455,675 |
| | $ | 698,686 |
| | $ | 679,325 |
| | $ | — |
| | $ | 274,500 |
| | $ | 404,825 |
|
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of September 30, 20172019 and the level of each financial liability within the fair value hierarchy:
| | | | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Credit facilities payable | | $ | 255,995 |
| | $ | 255,995 |
| | $ | — |
| | $ | — |
| | $ | 255,995 |
| |
Credit facility payable | | | $ | 314,825 |
| | $ | 314,825 |
| | $ | — |
| | $ | — |
| | $ | 314,825 |
|
Unsecured notes payable (net of unamortized financing costs) | | 406,115 |
| | 414,067 |
| | — |
| | 163,517 |
| | 250,550 |
| | 158,542 |
| | 164,966 |
| | — |
| | 164,966 |
| | — |
|
Total | | $ | 662,110 |
| | $ | 670,062 |
| | $ | — |
| | $ | 163,517 |
| | $ | 506,545 |
| | $ | 473,367 |
| | $ | 479,791 |
| | $ | — |
| | $ | 164,966 |
| | $ | 314,825 |
|
The principal valuesvalue of the credit facilitiesfacility payable approximate theirapproximates fair valuesvalue due to theirits variable interest ratesrate and areis included in Level 3 of the hierarchy.
As of March 31, 2020, unsecured notes payable included the 3.500% unsecured notes due 2025 ("2025 Notes"). The Company uses the non-binding indicative quoted priceused market quotes as of the valuation date to estimate the fair value of its 4.875% unsecured notes due 2019 ("2019 Notes"),the 2025 Notes, which are included in Level 32 of the hierarchy.
As of September 30, 2019, unsecured notes payable included the 5.875% unsecured notes due 2024 ("2024 Notes") and the 6.125% unsecured notes due 2028 ("2028 Notes"). The Company usesused the unadjusted quoted price as of the valuation date to calculate the fair value of its 5.875% unsecured notes duethe 2024 ("2024 Notes") and its 6.125% unsecured notes due 2028 ("2028 Notes"), which, beginning October 17, 2017, trade under the symbol "OSLE" on the New York Stock ExchangeNotes and the symbol "OCSLL" on the NASDAQ Global Select Market, respectively.2028 Notes. Although these securities arewere publicly traded, the market iswas relatively inactive, and accordingly, these securities arewere included in Level 2 of the hierarchy. Prior to October 17, 2017, the 2024 Notes and 2028 Notes, trade under the symbol “FSCE” on the New York Stock Exchange and the symbol “FSCFL” on the NASDAQ Global Select Market, respectively.
Portfolio Composition
Summaries of the composition of the Company's investment portfolio at cost as a percentage of total investments and at fair value as a percentage of total investments and total net assets are shown in the following tables:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Cost: | | | | % of Total Investments | | | | % of Total Investments | | | | % of Total Investments | | | | % of Total Investments |
Senior secured debt | | $ | 1,214,175 |
| | 72.44 | % | | $ | 1,313,432 |
| | 74.73 | % | | $ | 1,269,353 |
| | 77.94 | % | | $ | 1,170,258 |
| | 77.35 | % |
Subordinated debt | | 129,134 |
| | 7.70 |
| | 112,869 |
| | 6.42 |
| | 103,758 |
| �� | 6.37 | % | | 104,109 |
| | 6.88 | % |
Debt investments in SLF JV I | | 128,267 |
| | 7.65 |
| | 128,671 |
| | 7.32 |
| | 96,250 |
| | 5.91 | % | | 96,250 |
| | 6.36 | % |
Common equity and warrants | | | 70,347 |
| | 4.32 | % | | 52,630 |
| | 3.48 | % |
LLC equity interests of SLF JV I | | 16,172 |
| | 0.96 |
| | 16,172 |
| | 0.92 |
| | 49,322 |
| | 3.03 | % | | 49,322 |
| | 3.26 | % |
Purchased equity | | 115,057 |
| | 6.86 |
| | 112,558 |
| | 6.40 |
| |
Equity grants | | 48,805 |
| | 2.91 |
| | 48,805 |
| | 2.78 |
| |
Limited partnership interests | | 24,831 |
| | 1.48 |
| | 25,158 |
| | 1.43 |
| |
Preferred equity | | | 39,550 |
| | 2.43 | % | | 40,445 |
| | 2.67 | % |
Total | | $ | 1,676,441 |
| | 100.00 | % | | $ | 1,757,665 |
| | 100.00 | % | | $ | 1,628,580 |
| | 100.00 | % | | $ | 1,513,014 |
| | 100.00 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Fair Value: | | | | % of Total Investments | | % of Total Net Assets | | | | % of Total Investments | | % of Total Net Assets | | | | % of Total Investments | | % of Net Assets | | | | % of Total Investments | | % of Net Assets |
Senior secured debt | | $ | 1,073,480 |
| | 75.84 | % | | 130.97 | % | | $ | 1,202,699 |
| | 78.01 | % | | 138.61 | % | | $ | 1,140,622 |
| | 81.93 | % | | 151.64 | % | | $ | 1,130,876 |
| | 78.64 | % | | 121.51 | % |
Debt investments in SLF JV I | | | 92,171 |
| | 6.62 | % | | 12.25 | % | | 96,250 |
| | 6.69 | % | | 10.34 | % |
Subordinated debt | | 98,368 |
| | 6.95 | % | | 12.00 | % | | 93,438 |
| | 6.06 | % | | 10.77 | % | | 80,060 |
| | 5.75 | % | | 10.64 | % | | 81,298 |
| | 5.65 | % | | 8.74 | % |
Debt investments in SLF JV I | | 128,267 |
| | 9.06 | % | | 15.65 | % | | 128,671 |
| | 8.35 | % | | 14.83 | % | |
Common equity and warrants | | | 47,967 |
| | 3.45 | % | | 6.38 | % | | 58,988 |
| | 4.10 | % | | 6.34 | % |
Preferred equity | | | 31,367 |
| | 2.25 | % | | 4.17 | % | | 40,578 |
| | 2.82 | % | | 4.36 | % |
LLC equity interests of SLF JV I | | 4,880 |
| | 0.34 | % | | 0.60 | % | | 5,525 |
| | 0.36 | % | | 0.64 | % | | — |
| | — |
| | — |
| | 30,052 |
| | 2.10 | % | | 3.23 | % |
Purchased equity | | 77,688 |
| | 5.49 | % | | 9.48 | % | | 78,655 |
| | 5.10 | % | | 9.07 | % | |
Equity grants | | 7,097 |
| | 0.50 | % | | 0.87 | % | | 6,954 |
| | 0.45 | % | | 0.80 | % | |
Limited partnership interests | | 25,624 |
| | 1.82 | % | | 3.13 | % | | 25,813 |
| | 1.67 | % | | 2.97 | % | |
Total | | $ | 1,415,404 |
| | 100.00 | % | | 172.70 | % | | $ | 1,541,755 |
| | 100.00 | % | | 177.69 | % | | $ | 1,392,187 |
| | 100.00 | % | | 185.08 | % | | $ | 1,438,042 |
| | 100.00 | % | | 154.52 | % |
The Company primarily invests in portfolio companies located in North America. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business. The following tables show the composition of the Company's portfolio composition by geographic region at cost as a percentage of total investments and at fair value as a percentage of total investments and total net assets:
|
| | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Cost: | | | | % of Total Investments | | | | % of Total Investments |
Northeast U.S. | | $ | 636,226 |
| | 37.95 | % | | $ | 648,105 |
| | 36.87 | % |
Southwest U.S. | | 270,151 |
| | 16.11 | % | | 271,484 |
| | 15.45 | % |
West U.S. | | 267,702 |
| | 15.97 | % | | 328,673 |
| | 18.70 | % |
Midwest U.S. | | 236,992 |
| | 14.14 | % | | 258,895 |
| | 14.73 | % |
Southeast U.S. | | 187,996 |
| | 11.21 | % | | 176,460 |
| | 10.04 | % |
International | | 65,997 |
| | 3.94 | % | | 62,649 |
| | 3.56 | % |
Northwest U.S. | | 11,377 |
| | 0.68 | % | | 11,399 |
| | 0.65 | % |
Total | | $ | 1,676,441 |
| | 100.00 | % | | $ | 1,757,665 |
| | 100.00 | % |
|
| | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Cost: | | | | % of Total Investments | | | | % of Total Investments |
Northeast | | $ | 497,883 |
| | 30.58 | % | | $ | 394,130 |
| | 26.05 | % |
West | | 342,353 |
| | 21.02 | % | | 377,810 |
| | 24.97 | % |
Midwest | | 286,867 |
| | 17.61 | % | | 322,651 |
| | 21.33 | % |
International | | 191,624 |
| | 11.77 | % | | 171,129 |
| | 11.31 | % |
Southeast | | 159,921 |
| | 9.82 | % | | 131,522 |
| | 8.69 | % |
Southwest | | 69,365 |
| | 4.26 | % | | 66,781 |
| | 4.41 | % |
South | | 45,331 |
| | 2.78 | % | | 13,798 |
| | 0.91 | % |
Northwest | | 35,236 |
| | 2.16 | % | | 35,193 |
| | 2.33 | % |
Total | | $ | 1,628,580 |
| | 100.00 | % | | $ | 1,513,014 |
| | 100.00 | % |
|
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Fair Value: | | | | % of Total Investments | | % of Total Net Assets | | | | % of Total Investments | | % of Total Net Assets |
Northeast U.S. | | $ | 511,200 |
| | 36.12 | % | | 62.37 | % | | $ | 539,803 |
| | 35.01 | % | | 62.22 | % |
Southwest U.S. | | 206,194 |
| | 14.57 | % | | 25.16 | % | | 224,233 |
| | 14.54 | % | | 25.84 | % |
West U.S. | | 237,214 |
| | 16.76 | % | | 28.94 | % | | 297,716 |
| | 19.31 | % | | 34.31 | % |
Midwest U.S. | | 183,896 |
| | 12.99 | % | | 22.44 | % | | 224,111 |
| | 14.54 | % | | 25.83 | % |
Southeast U.S. | | 191,206 |
| | 13.51 | % | | 23.33 | % | | 179,460 |
| | 11.64 | % | | 20.68 | % |
International | | 74,089 |
| | 5.23 | % | | 9.04 | % | | 64,780 |
| | 4.20 | % | | 7.47 | % |
Northwest U.S. | | 11,605 |
| | 0.82 | % | | 1.42 | % | | 11,652 |
| | 0.76 | % | | 1.34 | % |
Total | | $ | 1,415,404 |
| | 100.00 | % | | 172.70 | % | | $ | 1,541,755 |
| | 100.00 | % | | 177.69 | % |
|
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Fair Value: | | | | % of Total Investments | | % of Net Assets | | | | % of Total Investments | | % of Net Assets |
Northeast | | $ | 409,356 |
| | 29.41 | % | | 54.43 | % | | $ | 358,328 |
| | 24.93 | % | | 38.50 | % |
West | | 308,880 |
| | 22.19 | % | | 41.06 | % | | 350,660 |
| | 24.38 | % | | 37.68 | % |
Midwest | | 227,951 |
| | 16.37 | % | | 30.30 | % | | 297,433 |
| | 20.68 | % | | 31.97 | % |
International | | 172,965 |
| | 12.42 | % | | 22.99 | % | | 175,687 |
| | 12.22 | % | | 18.88 | % |
Southeast | | 136,601 |
| | 9.81 | % | | 18.16 | % | | 125,306 |
| | 8.71 | % | | 13.46 | % |
Southwest | | 62,352 |
| �� | 4.48 | % | | 8.29 | % | | 82,395 |
| | 5.73 | % | | 8.85 | % |
South | | 41,187 |
| | 2.96 | % | | 5.48 | % | | 13,416 |
| | 0.93 | % | | 1.44 | % |
Northwest | | 32,895 |
| | 2.36 | % | | 4.37 | % | | 34,817 |
| | 2.42 | % | | 3.74 | % |
Total | | $ | 1,392,187 |
| | 100.00 | % | | 185.08 | % | | $ | 1,438,042 |
| | 100.00 | % | | 154.52 | % |
The following tables show the composition of the Company's portfolio by industry at cost as a percentage of total investments and at fair value as a percentage of total investments and total net assets as of DecemberMarch 31, 20172020 and September 30, 2017 was as follows:2019:
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Cost: | | | | % of Total Investments | | | | % of Total Investments |
Healthcare services | | $ | 209,030 |
| | 12.48 | % | | $ | 210,527 |
| | 11.98 | % |
Internet software & services | | 200,405 |
| | 11.95 |
| | 270,192 |
| | 15.37 |
|
Multi-sector holdings (1) | | 173,005 |
| | 10.32 |
| | 173,427 |
| | 9.87 |
|
Healthcare equipment | | 99,614 |
| | 5.94 |
| | 99,614 |
| | 5.67 |
|
Data processing & outsourced services | | 80,579 |
| | 4.81 |
| | 77,673 |
| | 4.42 |
|
Environmental & facilities services | | 69,576 |
| | 4.15 |
| | 49,902 |
| | 2.84 |
|
Construction & engineering | | 68,726 |
| | 4.10 |
| | 67,879 |
| | 3.86 |
|
Pharmaceuticals | | 60,826 |
| | 3.63 |
| | 60,810 |
| | 3.46 |
|
Advertising | | 55,596 |
| | 3.32 |
| | 84,720 |
| | 4.82 |
|
Education services | | 51,733 |
| | 3.09 |
| | 50,013 |
| | 2.85 |
|
Airlines | | 50,755 |
| | 3.03 |
| | 57,602 |
| | 3.28 |
|
Specialty stores | | 46,407 |
| | 2.77 |
| | 58,530 |
| | 3.33 |
|
Integrated telecommunication services | | 41,005 |
| | 2.45 |
| | 30,840 |
| | 1.75 |
|
Technology distributors | | 34,264 |
| | 2.04 |
| | — |
| | — |
|
Leisure facilities | | 32,898 |
| | 1.96 |
| | 30,931 |
| | 1.76 |
|
Oil & gas refining & marketing | | 32,732 |
| | 1.95 |
| | — |
| | — |
|
Air freight and logistics | | 32,530 |
| | 1.94 |
| | 32,530 |
| | 1.85 |
|
Housewares & specialties | | 29,856 |
| | 1.78 |
| | 29,852 |
| | 1.70 |
|
Oil & gas equipment services | | 27,546 |
| | 1.64 |
| | 27,598 |
| | 1.57 |
|
Consumer electronics | | 24,889 |
| | 1.48 |
| | 23,176 |
| | 1.32 |
|
Home improvement retail | | 22,566 |
| | 1.35 |
| | 22,944 |
| | 1.31 |
|
Auto parts & equipment | | 21,191 |
| | 1.26 |
| | 21,191 |
| | 1.21 |
|
Oil & gas exploration & production | | 17,913 |
| | 1.07 |
| | — |
| | — |
|
Research & consulting services | | 17,135 |
| | 1.02 |
| | 37,952 |
| | 2.16 |
|
Diversified support services | | 16,578 |
| | 0.99 |
| | 22,724 |
| | 1.29 |
|
Healthcare technology | | 14,357 |
| | 0.86 |
| | — |
| | — |
|
Security & alarm services | | 13,183 |
| | 0.79 |
| | 13,214 |
| | 0.75 |
|
Real estate services | | 12,974 |
| | 0.77 |
| | 13,011 |
| | 0.74 |
|
Other diversified financial services | | 11,334 |
| | 0.68 |
| | 12,079 |
| | 0.69 |
|
Casinos & gaming | | 11,277 |
| | 0.67 |
| | 23,309 |
| | 1.33 |
|
Commodity chemicals | | 10,950 |
| | 0.65 |
| | — |
| | — |
|
Healthcare distributors | | 8,911 |
| | 0.53 |
| | — |
| | — |
|
Precious metals & minerals | | 7,426 |
| | 0.44 |
| | 7,459 |
| | 0.42 |
|
Trucking | | 7,055 |
| | 0.42 |
| | 7,081 |
| | 0.40 |
|
Thrift & mortgage finance | | 6,905 |
| | 0.41 |
| | 7,240 |
| | 0.41 |
|
Distributors | | 6,617 |
| | 0.39 |
| | 14,963 |
| | 0.85 |
|
Industrial machinery | | 6,586 |
| | 0.39 |
| | 15,074 |
| | 0.86 |
|
Commercial printing | | 5,968 |
| | 0.36 |
| | 5,983 |
| | 0.34 |
|
Apparel, accessories & luxury goods | | 5,165 |
| | 0.31 |
| | 5,165 |
| | 0.29 |
|
Wireless telecommunication services | | 5,000 |
| | 0.30 |
| | — |
| | — |
|
Restaurants | | 4,898 |
| | 0.29 |
| | 4,910 |
| | 0.28 |
|
Application software | | 4,818 |
| | 0.29 |
| | 51,444 |
| | 2.93 |
|
General merchandise stores | | 4,206 |
| | 0.25 |
| | — |
| | — |
|
Food retail | | 4,178 |
| | 0.25 |
| | 4,176 |
| | 0.24 |
|
IT consulting & other services | | 4,060 |
| | 0.24 |
| | 4,127 |
| | 0.23 |
|
Specialized finance | | 3,224 |
| | 0.19 |
| | 3,224 |
| | 0.18 |
|
Human resources & employment services | | (6 | ) | | — |
| | — |
| | — |
|
Hypermarkets & super centers | | — |
| | — |
| | 11,979 |
| | 0.68 |
|
Computer & electronics retail | | — |
| | — |
| | 6,399 |
| | 0.36 |
|
Multi-utilities | | — |
| | — |
| | 6,201 |
| | 0.35 |
|
Total | | $ | 1,676,441 |
| | 100.00 | % | | $ | 1,757,665 |
| | 100.00 | % |
|
| | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Cost: | | | | % of Total Investments | | | | % of Total Investments |
Application Software | | $ | 195,026 |
| | 11.97 | % | | $ | 132,051 |
| | 8.73 | % |
Multi-Sector Holdings (1) | | 158,515 |
| | 9.73 |
| | 146,436 |
| | 9.67 |
|
Data Processing & Outsourced Services | | 105,919 |
| | 6.50 |
| | 97,759 |
| | 6.46 |
|
Health Care Services | | 72,298 |
| | 4.44 |
| | 100,173 |
| | 6.62 |
|
Biotechnology | | 71,683 |
| | 4.40 |
| | 82,109 |
| | 5.43 |
|
Pharmaceuticals | | 63,384 |
| | 3.89 |
| | 59,294 |
| | 3.92 |
|
Auto Parts & Equipment | | 58,430 |
| | 3.59 |
| | 42,641 |
| | 2.82 |
|
Specialized Finance | | 55,627 |
| | 3.42 |
| | 53,227 |
| | 3.52 |
|
Personal Products | | 53,363 |
| | 3.28 |
| | — |
| | — |
|
Property & Casualty Insurance | | 51,103 |
| | 3.14 |
| | 73,076 |
| | 4.83 |
|
Specialty Chemicals | | 44,887 |
| | 2.76 |
| | 31,788 |
| | 2.10 |
|
Research & Consulting Services | | 39,682 |
| | 2.44 |
| | 34,734 |
| | 2.30 |
|
Real Estate Services | | 39,178 |
| | 2.41 |
| | 39,332 |
| | 2.60 |
|
Aerospace & Defense | | 36,704 |
| | 2.25 |
| | 33,665 |
| | 2.23 |
|
Health Care Technology | | 36,527 |
| | 2.24 |
| | 51,044 |
| | 3.37 |
|
Systems Software | | 33,712 |
| | 2.07 |
| | 31,716 |
| | 2.10 |
|
Oil & Gas Storage & Transportation | | 31,599 |
| | 1.94 |
| | 11,603 |
| | 0.77 |
|
Internet Services & Infrastructure | | 31,480 |
| | 1.93 |
| | 32,563 |
| | 2.15 |
|
Alternative Carriers | | 31,304 |
| | 1.92 |
| | 29,400 |
| | 1.94 |
|
Oil & Gas Refining & Marketing | | 30,298 |
| | 1.86 |
| | 30,378 |
| | 2.01 |
|
Managed Health Care | | 27,562 |
| | 1.69 |
| | 27,645 |
| | 1.83 |
|
Specialized REITs | | 24,464 |
| | 1.50 |
| | 8,264 |
| | 0.55 |
|
Education Services | | 23,067 |
| | 1.42 |
| | 15,672 |
| | 1.04 |
|
Advertising | | 22,898 |
| | 1.41 |
| | 42,405 |
| | 2.80 |
|
Airport Services | | 22,447 |
| | 1.38 |
| | — |
| | — |
|
Independent Power Producers & Energy Traders | | 21,938 |
| | 1.35 |
| | — |
| | — |
|
Integrated Telecommunication Services | | 21,339 |
| | 1.31 |
| | 33,741 |
| | 2.23 |
|
Electrical Components & Equipment | | 21,072 |
| | 1.29 |
| | 21,210 |
| | 1.40 |
|
General Merchandise Stores | | 19,085 |
| | 1.17 |
| | 18,946 |
| | 1.25 |
|
Diversified Support Services | | 18,800 |
| | 1.15 |
| | 18,805 |
| | 1.24 |
|
Apparel, Accessories & Luxury Goods | | 17,539 |
| | 1.08 |
| | 18,192 |
| | 1.20 |
|
Industrial Machinery | | 16,063 |
| | 0.99 |
| | 17,055 |
| | 1.13 |
|
Health Care Distributors | | 15,816 |
| | 0.97 |
| | 22,561 |
| | 1.49 |
|
IT Consulting & Other Services | | 14,947 |
| | 0.92 |
| | 14,975 |
| | 0.99 |
|
Movies & Entertainment | | 13,398 |
| | 0.82 |
| | 18,858 |
| | 1.25 |
|
Construction & Engineering | | 13,232 |
| | 0.81 |
| | 23,443 |
| | 1.55 |
|
Oil & Gas Equipment & Services | | 11,474 |
| | 0.70 |
| | 12,165 |
| | 0.80 |
|
Airlines | | 10,597 |
| | 0.65 |
| | 10,640 |
| | 0.70 |
|
Trading Companies & Distributors | | 10,290 |
| | 0.63 |
| | 10,357 |
| | 0.68 |
|
Restaurants | | 9,262 |
| | 0.57 |
| | 3,097 |
| | 0.20 |
|
Commercial Printing | | 7,924 |
| | 0.49 |
| | 6,002 |
| | 0.40 |
|
Food Retail | | 6,829 |
| | 0.42 |
| | 14,473 |
| | 0.96 |
|
Health Care Facilities | | 3,552 |
| | 0.22 |
| | — |
| | — |
|
Distributors | | 3,498 |
| | 0.21 |
| | — |
| | — |
|
Specialty Stores | | 2,771 |
| | 0.17 |
| | 1,305 |
| | 0.09 |
|
Construction Materials | | 2,113 |
| | 0.13 |
| | — |
| | — |
|
Leisure Facilities | | 1,887 |
| | 0.12 |
| | 1,887 |
| | 0.12 |
|
Building Products | | 1,621 |
| | 0.10 |
| | — |
| | — |
|
Communications Equipment | | 1,325 |
| | 0.08 |
| | — |
| | — |
|
Thrifts & Mortgage Finance | | 938 |
| | 0.06 |
| | 1,217 |
| | 0.08 |
|
Other Diversified Financial Services | | 113 |
| | 0.01 |
| | 113 |
| | 0.01 |
|
Interactive Media & Services | | — |
| | — |
| | 21,805 |
| | 1.44 |
|
Household Appliances | | — |
| | — |
| | 7,837 |
| | 0.52 |
|
Environmental & Facilities Services | | — |
| | — |
| | 5,940 |
| | 0.39 |
|
Human Resource & Employment Services | | — |
| | — |
| | 830 |
| | 0.05 |
|
Department Stores | | — |
| | — |
| | 585 |
| | 0.04 |
|
Total | | $ | 1,628,580 |
| | 100.00 | % | | $ | 1,513,014 |
| | 100.00 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Fair Value: | | | | % of Total Investments | | % of Total Net Assets | | | | % of Total Investments | | % of Total Net Assets |
Internet software & services | | $ | 194,291 |
| | 13.71 | % | | 23.70 | % | | $ | 265,076 |
| | 17.20 | % | | 30.56 | % |
Multi-sector holdings (1) | | 163,865 |
| | 11.58 |
| | 19.99 |
| | 164,511 |
| | 10.67 |
| | 18.96 |
|
Healthcare services | | 76,517 |
| | 5.41 |
| | 9.34 |
| | 93,912 |
| | 6.09 |
| | 10.82 |
|
Data processing & outsourced services | | 71,357 |
| | 5.04 |
| | 8.71 |
| | 68,314 |
| | 4.43 |
| | 7.87 |
|
Environmental & facilities services | | 69,975 |
| | 4.94 |
| | 8.54 |
| | 50,659 |
| | 3.29 |
| | 5.84 |
|
Pharmaceuticals | | 62,958 |
| | 4.45 |
| | 7.68 |
| | 62,770 |
| | 4.07 |
| | 7.23 |
|
Airlines | | 58,631 |
| | 4.14 |
| | 7.15 |
| | 59,511 |
| | 3.86 |
| | 6.86 |
|
Healthcare equipment | | 56,586 |
| | 4.00 |
| | 6.90 |
| | 72,922 |
| | 4.73 |
| | 8.40 |
|
Construction & engineering | | 51,113 |
| | 3.61 |
| | 6.24 |
| | 50,269 |
| | 3.26 |
| | 5.79 |
|
Advertising | | 45,970 |
| | 3.25 |
| | 5.61 |
| | 83,648 |
| | 5.43 |
| | 9.64 |
|
Specialty stores | | 45,508 |
| | 3.22 |
| | 5.55 |
| | 56,867 |
| | 3.69 |
| | 6.55 |
|
Education services | | 35,598 |
| | 2.52 |
| | 4.34 |
| | 38,254 |
| | 2.48 |
| | 4.41 |
|
Integrated telecommunication services | | 35,580 |
| | 2.51 |
| | 4.34 |
| | 31,358 |
| | 2.03 |
| | 3.61 |
|
Leisure facilities | | 34,634 |
| | 2.45 |
| | 4.23 |
| | 32,591 |
| | 2.11 |
| | 3.76 |
|
Technology distributors | | 34,253 |
| | 2.42 |
| | 4.18 |
| | — |
| | — |
| | — |
|
Oil & gas refining & marketing | | 32,986 |
| | 2.33 |
| | 4.02 |
| | — |
| | — |
| | — |
|
Housewares & specialties | | 29,925 |
| | 2.11 |
| | 3.65 |
| | 29,775 |
| | 1.93 |
| | 3.43 |
|
Oil & gas equipment services | | 28,620 |
| | 2.02 |
| | 3.49 |
| | 28,347 |
| | 1.84 |
| | 3.27 |
|
Consumer electronics | | 25,901 |
| | 1.83 |
| | 3.16 |
| | 24,066 |
| | 1.56 |
| | 2.77 |
|
Home improvement retail | | 24,600 |
| | 1.74 |
| | 3.00 |
| | 24,784 |
| | 1.61 |
| | 2.86 |
|
Auto parts & equipment | | 21,661 |
| | 1.53 |
| | 2.64 |
| | 21,715 |
| | 1.41 |
| | 2.50 |
|
Research & consulting services | | 18,761 |
| | 1.33 |
| | 2.29 |
| | 38,531 |
| | 2.50 |
| | 4.44 |
|
Oil & gas exploration & production | | 17,865 |
| | 1.26 |
| | 2.18 |
| | — |
| | — |
| | — |
|
Diversified support services | | 16,143 |
| | 1.14 |
| | 1.97 |
| | 22,554 |
| | 1.46 |
| | 2.60 |
|
Healthcare technology | | 14,609 |
| | 1.03 |
| | 1.78 |
| | — |
| | — |
| | — |
|
Security & alarm services | | 13,011 |
| | 0.92 |
| | 1.59 |
| | 13,103 |
| | 0.85 |
| | 1.51 |
|
Real estate services | | 12,786 |
| | 0.90 |
| | 1.56 |
| | 13,014 |
| | 0.84 |
| | 1.50 |
|
Casinos & gaming | | 11,446 |
| | 0.81 |
| | 1.40 |
| | 23,495 |
| | 1.52 |
| | 2.71 |
|
Commodity chemicals | | 10,953 |
| | 0.77 |
| | 1.34 |
| | — |
| | — |
| | — |
|
Other diversified financial services | | 10,951 |
| | 0.77 |
| | 1.34 |
| | 11,646 |
| | 0.76 |
| | 1.34 |
|
Healthcare distributors | | 9,053 |
| | 0.64 |
| | 1.10 |
| | — |
| | — |
| | — |
|
Precious metals & minerals | | 7,490 |
| | 0.53 |
| | 0.91 |
| | 7,464 |
| | 0.48 |
| | 0.86 |
|
Trucking | | 7,062 |
| | 0.50 |
| | 0.86 |
| | 7,106 |
| | 0.46 |
| | 0.82 |
|
Application software | | 6,574 |
| | 0.46 |
| | 0.80 |
| | 53,905 |
| | 3.50 |
| | 6.21 |
|
Distributors | | 6,516 |
| | 0.46 |
| | 0.80 |
| | 14,829 |
| | 0.96 |
| | 1.71 |
|
Industrial machinery | | 6,465 |
| | 0.46 |
| | 0.79 |
| | 15,004 |
| | 0.97 |
| | 1.73 |
|
Commercial printing | | 6,045 |
| | 0.43 |
| | 0.74 |
| | 6,045 |
| | 0.39 |
| | 0.70 |
|
Leisure products | | 5,900 |
| | 0.42 |
| | 0.72 |
| | 5,900 |
| | 0.38 |
| | 0.68 |
|
Thrift & mortgage finance | | 5,629 |
| | 0.40 |
| | 0.69 |
| | 6,129 |
| | 0.40 |
| | 0.71 |
|
Wireless telecommunication services | | 5,044 |
| | 0.36 |
| | 0.62 |
| | — |
| | — |
| | — |
|
Restaurants | | 4,851 |
| | 0.34 |
| | 0.59 |
| | 4,917 |
| | 0.32 |
| | 0.57 |
|
General Merchandise Stores | | 4,484 |
| | 0.32 |
| | 0.55 |
| | — |
| | — |
| | — |
|
Food retail | | 4,231 |
| | 0.30 |
| | 0.52 |
| | 4,251 |
| | 0.28 |
| | 0.49 |
|
IT consulting & other services | | 3,918 |
| | 0.28 |
| | 0.48 |
| | 3,927 |
| | 0.25 |
| | 0.45 |
|
Specialized finance | | 3,276 |
| | 0.23 |
| | 0.40 |
| | 3,278 |
| | 0.21 |
| | 0.38 |
|
Air freight and logistics | | 1,810 |
| | 0.13 |
| | 0.22 |
| | 1,810 |
| | 0.12 |
| | 0.21 |
|
Human resources & employment services | | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Hypermarkets & super centers | | — |
| | — |
| | — |
| | 11,504 |
| | 0.75 |
| | 1.33 |
|
Computer & electronics retail | | — |
| | — |
| | — |
| | 6,498 |
| | 0.42 |
| | 0.75 |
|
Multi-utilities | | — |
| | — |
| | — |
| | 6,255 |
| | 0.41 |
| | 0.72 |
|
Apparel, accessories & luxury goods | | — |
| | — |
| | — |
| | 1,241 |
| | 0.08 |
| | 0.14 |
|
Total | | $ | 1,415,404 |
| | 100.00 | % | | 172.70 | % | | $ | 1,541,755 |
| | 100.00 | % | | 177.69 | % |
|
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Fair Value: | | | | % of Total Investments | | % of Net Assets | | | | % of Total Investments | | % of Net Assets |
Application Software | | $ | 181,347 |
| | 13.02 | % | | 24.08 | % | | $ | 129,577 |
| | 9.00 | % | | 13.94 | % |
Multi-Sector Holdings (1) | | 104,865 |
| | 7.53 |
| | 13.94 |
| | 128,539 |
| | 8.94 |
| | 13.81 |
|
Data Processing & Outsourced Services | | 90,586 |
| | 6.51 |
| | 12.04 |
| | 98,267 |
| | 6.83 |
| | 10.56 |
|
Biotechnology | | 72,359 |
| | 5.20 |
| | 9.62 |
| | 85,719 |
| | 5.96 |
| | 9.21 |
|
Health Care Services | | 63,374 |
| | 4.55 |
| | 8.42 |
| | 58,391 |
| | 4.06 |
| | 6.27 |
|
Pharmaceuticals | | 59,015 |
| | 4.24 |
| | 7.85 |
| | 60,057 |
| | 4.18 |
| | 6.45 |
|
Personal Products | | 51,549 |
| | 3.70 |
| | 6.85 |
| | — |
| | — |
| | — |
|
Specialized Finance | | 49,567 |
| | 3.56 |
| | 6.59 |
| | 51,485 |
| | 3.58 |
| | 5.53 |
|
Auto Parts & Equipment | | 45,780 |
| | 3.29 |
| | 6.09 |
| | 40,484 |
| | 2.82 |
| | 4.35 |
|
Property & Casualty Insurance | | 45,353 |
| | 3.26 |
| | 6.03 |
| | 74,148 |
| | 5.16 |
| | 7.97 |
|
Research & Consulting Services | | 35,695 |
| | 2.56 |
| | 4.75 |
| | 37,336 |
| | 2.60 |
| | 4.01 |
|
Health Care Technology | | 35,462 |
| | 2.55 |
| | 4.71 |
| | 52,275 |
| | 3.64 |
| | 5.62 |
|
Real Estate Services | | 34,738 |
| | 2.50 |
| | 4.62 |
| | 39,501 |
| | 2.75 |
| | 4.24 |
|
Specialty Chemicals | | 33,588 |
| | 2.41 |
| | 4.47 |
| | 23,514 |
| | 1.64 |
| | 2.53 |
|
Systems Software | | 30,827 |
| | 2.21 |
| | 4.10 |
| | 31,504 |
| | 2.19 |
| | 3.39 |
|
Internet Services & Infrastructure | | 29,600 |
| | 2.13 |
| | 3.93 |
| | 32,565 |
| | 2.26 |
| | 3.50 |
|
Oil & Gas Storage & Transportation | | 29,545 |
| | 2.12 |
| | 3.93 |
| | 11,926 |
| | 0.83 |
| | 1.28 |
|
Aerospace & Defense | | 29,538 |
| | 2.12 |
| | 3.93 |
| | 33,738 |
| | 2.35 |
| | 3.63 |
|
Alternative Carriers | | 26,016 |
| | 1.87 |
| | 3.46 |
| | 29,580 |
| | 2.06 |
| | 3.18 |
|
Oil & Gas Refining & Marketing | | 25,765 |
| | 1.85 |
| | 3.43 |
| | 31,597 |
| | 2.20 |
| | 3.40 |
|
Managed Health Care | | 24,036 |
| | 1.73 |
| | 3.20 |
| | 27,775 |
| | 1.93 |
| | 2.98 |
|
Specialized REITs | | 22,362 |
| | 1.61 |
| | 2.97 |
| | 8,213 |
| | 0.57 |
| | 0.88 |
|
Airport Services | | 21,623 |
| | 1.55 |
| | 2.87 |
| | — |
| | — |
| | — |
|
Independent Power Producers & Energy Traders | | 21,151 |
| | 1.52 |
| | 2.81 |
| | — |
| | — |
| | — |
|
Electrical Components & Equipment | | 18,185 |
| | 1.31 |
| | 2.42 |
| | 20,032 |
| | 1.39 |
| | 2.15 |
|
Advertising | | 17,244 |
| | 1.24 |
| | 2.29 |
| | 37,261 |
| | 2.59 |
| | 4.00 |
|
Diversified Support Services | | 16,362 |
| | 1.18 |
| | 2.18 |
| | 18,624 |
| | 1.30 |
| | 2.00 |
|
Airlines | | 14,675 |
| | 1.05 |
| | 1.95 |
| | 16,140 |
| | 1.12 |
| | 1.73 |
|
Integrated Telecommunication Services | | 14,576 |
| | 1.05 |
| | 1.94 |
| | 28,876 |
| | 2.01 |
| | 3.10 |
|
Industrial Machinery | | 14,153 |
| | 1.02 |
| | 1.88 |
| | 16,848 |
| | 1.17 |
| | 1.81 |
|
General Merchandise Stores | | 13,889 |
| | 1.00 |
| | 1.85 |
| | 16,934 |
| | 1.18 |
| | 1.82 |
|
Health Care Distributors | | 12,757 |
| | 0.92 |
| | 1.70 |
| | 21,962 |
| | 1.53 |
| | 2.36 |
|
IT Consulting & Other Services | | 12,013 |
| | 0.86 |
| | 1.60 |
| | 13,792 |
| | 0.96 |
| | 1.48 |
|
Apparel, Accessories & Luxury Goods | | 11,424 |
| | 0.82 |
| | 1.52 |
| | 13,286 |
| | 0.92 |
| | 1.43 |
|
Movies & Entertainment | | 10,475 |
| | 0.75 |
| | 1.39 |
| | 18,613 |
| | 1.29 |
| | 2.00 |
|
Construction & Engineering | | 10,447 |
| | 0.75 |
| | 1.39 |
| | 23,982 |
| | 1.67 |
| | 2.58 |
|
Oil & Gas Equipment & Services | | 8,930 |
| | 0.64 |
| | 1.19 |
| | 13,652 |
| | 0.95 |
| | 1.47 |
|
Trading Companies & Distributors | | 8,789 |
| | 0.63 |
| | 1.17 |
| | 10,370 |
| | 0.72 |
| | 1.11 |
|
Commercial Printing | | 7,678 |
| | 0.55 |
| | 1.02 |
| | 5,900 |
| | 0.41 |
| | 0.63 |
|
Education Services | | 6,960 |
| | 0.50 |
| | 0.93 |
| | 16 |
| | — |
| | — |
|
Food Retail | | 6,909 |
| | 0.50 |
| | 0.92 |
| | 14,903 |
| | 1.04 |
| | 1.60 |
|
Restaurants | | 6,419 |
| | 0.46 |
| | 0.85 |
| | 2,800 |
| | 0.19 |
| | 0.30 |
|
Health Care Facilities | | 3,373 |
| | 0.24 |
| | 0.45 |
| | — |
| | — |
| | — |
|
Distributors | | 3,335 |
| | 0.24 |
| | 0.44 |
| | — |
| | — |
| | — |
|
Leisure Facilities | | 3,043 |
| | 0.22 |
| | 0.40 |
| | 4,809 |
| | 0.33 |
| | 0.52 |
|
Construction Materials | | 1,863 |
| | 0.13 |
| | 0.25 |
| | — |
| | — |
| | — |
|
Building Products | | 1,570 |
| | 0.11 |
| | 0.21 |
| | — |
| | — |
| | — |
|
Specialty Stores | | 1,566 |
| | 0.11 |
| | 0.21 |
| | — |
| | — |
| | — |
|
Communications Equipment | | 1,456 |
| | 0.10 |
| | 0.19 |
| | — |
| | — |
| | — |
|
Thrifts & Mortgage Finance | | 355 |
| | 0.03 |
| | 0.05 |
| | 691 |
| | 0.05 |
| | 0.07 |
|
Interactive Media & Services | | — |
| | — |
| | — |
| | 22,500 |
| | 1.56 |
| | 2.42 |
|
Leisure Products | | — |
| | — |
| | — |
| | 15,054 |
| | 1.05 |
| | 1.62 |
|
Household Appliances | | — |
| | — |
| | — |
| | 7,614 |
| | 0.53 |
| | 0.82 |
|
Environmental & Facilities Services | | — |
| | — |
| | — |
| | 5,937 |
| | 0.41 |
| | 0.64 |
|
Human Resource & Employment Services | | — |
| | — |
| | — |
| | 775 |
| | 0.05 |
| | 0.08 |
|
Department Stores | | — |
| | — |
| | — |
| | 480 |
| | 0.03 |
| | 0.05 |
|
Total | | $ | 1,392,187 |
| | 100.00 | % | | 185.08 | % | | $ | 1,438,042 |
| | 100.00 | % | | 154.52 | % |
___________________
| |
(1) | This industry includes the Company's investmentinvestments in SLF JV I.I, collateral loan obligations and certain limited partnership interests. |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
As of DecemberMarch 31, 20172020 and September 30, 2017,2019, the Company had no single investment that represented greater than 10% of the total investment portfolio at fair value. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, canmay fluctuate upon repayment or sale of an investment and in any given period can be highly concentrated among several investments. For the three months ended December 31, 2017 and December 31, 2016, no individual investment produced investment income that exceeded 10% of total investment income.
Senior Loan Fund JV I, LLC
In May 2014, the Company entered into an LLC agreement with Trinity Universal Insurance Company, a subsidiary of Kemper Corporation ("Kemper"), to form SLF JV I. On July 1, 2014, SLF JV I began investingThe Company co-invests in senior secured loans of middle-market companies and other corporate debt securities. The Company co-invests in these securities with Kemper through its investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by the Company and one representative selected by Kemper (with approval from a representative of each required). Since the Company does not have a controlling financial interest in SLF JV I, the Company does not consolidate SLF JV I. As of December 31, 2017,
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional mezzaninesubordinated notes issued to the Company and Kemper by SLF JV I. On December 28, 2018, the Company and Kemper directed the redemption of their holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which matureconsisted of equity interests of SLF JV I Funding LLC (the "Equity Interests"), were distributed in-kind to each of the Company and Kemper, based upon their respective holdings of mezzanine notes. Upon such distribution, the Company and Kemper each then directed that a portion of their respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I. SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I (the "SLF JV 1 Subordinated Notes") and the mezzanine notes issued by SLF Repack Issuer 2016, LLC (the "SLF Repack Notes") collectively are referred to as the SLF JV I Notes. Prior to the redemption on October 12, 2036.December 28, 2018, the SLF Repack Notes consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes. The SLF JV I Subordinated Notes are (and the SLF Repack Notes were, prior to their redemption) senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of DecemberMarch 31, 20172020 and September 30, 2017,2019, the Company and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I. As of December 31, 2017I and September 30, 2017, the Company and Kemper owned 87.5% and 12.5%, respectively, of the outstanding mezzanine notes.SLF JV I Subordinated Notes.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch (as amended, the "Deutsche Bank I facility"Facility"), which permitted up to $200.0$250.0 million of borrowings (subject to borrowing base and other limitations) as of DecemberMarch 31, 20172020 and September 30, 2017. As of December 31, 2017, the stated maturity date of the Deutsche Bank I facility was July 1, 2023, and borrowings2019. Borrowings under the Deutsche Bank I facility bear interest atFacility are secured by all of the assets of SLF JV I Funding LLC, a rate equal tospecial purpose financing subsidiary of SLF JV I. As of March 31, 2020, the 3-month LIBOR plus 2.25% per annum during the reinvestment period and at a rate equal to LIBOR plus 2.40% per annum during the amortization period. The reinvestment period of the Deutsche Bank I Facility expires on July 7, 2018. Underwas scheduled to expire June 28, 2021 and the maturity date for the Deutsche Bank I facility, $105.1 million and $71.5 million of borrowingsFacility was outstanding as of December 31, 2017 and September 30, 2017, respectively.
Prior to December 21, 2017, SLF JV I also had an additional $200.0 million senior credit facility with Deutsche Bank AG, New York Branch (the "Deutsche Bank II facility"). Effective December 21, 2017, SLF JV I merged its financing subsidiaries and, in connection with such merger, terminated the Deutsche Bank II facility.June 29, 2026. As of September 30, 2017, there were $41.6 million of borrowings outstanding under the Deutsche Bank II facility.
As of DecemberMarch 31, 2017,2020, borrowings under the Deutsche Bank I facilityFacility accrued interest at a rate equal to 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility, $193.9 million and $170.2 million of borrowings were secured by alloutstanding as of the assets of the special purpose financing subsidiary of SLF JV I.
As of DecemberMarch 31, 20172020 and September 30, 2017,2019, respectively.
As of March 31, 2020 and September 30, 2019, SLF JV I had total assets of $284.5$329.6 million and $276.8 million. As of December 31, 2017, the Company's investment in SLF JV I consisted of LLC equity interests of $4.9$360.9 million, at fair value, and Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes of $100.8 million and $27.5 million, at fair value, respectively. As of September 30, 2017, the Company's investment in SLF JV I consisted of LLC equity interests of $5.5 million, at fair value, and Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes of $101.0 million and $27.6 million, at fair value, respectively. In connection with the restructuring in December 2016 of the Company’s and Kemper’s investment in SLF JV I, the Company and Kemper exchanged their holdings of subordinated notes of SLF JV I for the mezzanine notes issued by SLF Repack Issuer 2016 LLC, a newly formed, wholly owned special purpose issuer subsidiary of SLF JV I, which are secured by SLF JV I’s LLC equity interests in the special purpose entities serving as borrowers under the Deutsche Bank I facility and Deutsche Bank II facility described above. The mezzanine notes are senior in right of payment to the SLF JV I LLC equity interests and any contributions made by the Company to fund investments of SLF JV I through SLF Repack Issuer 2016 LLC. SLF JV I's portfolio primarily consisted of middle-marketsenior secured loans to 53 and other corporate debt securities of 34 and 32 "eligible51 portfolio companies" (as defined in Section 2(a)(46) of the 1940 Act)companies, as of DecemberMarch 31, 20172020 and September 30, 2017,2019, respectively. The portfolio companies in SLF JV I are in industries similar to those in which the Company may invest directly. As of March 31, 2020, the Company's investment in SLF JV I consisted of LLC equity interests and Subordinated Notes of $92.2 million, at fair value. As of September 30, 2019, the Company's investment in SLF JV I consisted of LLC equity interests and Subordinated Notes of $126.3 million, at fair value.
As of each of DecemberMarch 31, 20172020 and September 30, 2017,2019, the Company and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from the Company. As of DecemberMarch 31, 2017,2020 and September 30, 2019, the Company and Kemper had the option to fund additional mezzanine notes,SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each of DecemberMarch 31, 20172020 and September 30, 2017,2019, the Company had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of DecemberMarch 31, 20172020 and September 30, 2017:2019:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Senior secured loans (1) | | $249,967 | | $245,063 | | $337,016 | | $340,960 |
Weighted average interest rate on senior secured loans (2) | | 7.81% | | 7.70% | | 5.54% | | 6.57% |
Number of borrowers in SLF JV I | | 34 | | 32 | | 53 | | 51 |
Largest exposure to a single borrower (1) | | $18,251 | | $18,374 | | $10,686 | | $10,835 |
Total of five largest loan exposures to borrowers (1) | | $77,991 | | $82,728 | | $51,441 | | $50,510 |
__________(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans.loans at fair value.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
SLF JV I Portfolio as of DecemberMarch 31, 20172020 |
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
AdVenture Interactive, Corp. (3) | | Advertising | | 927 Common Stock Shares | |
| |
| | | |
| | $ | 1,088 |
| | $ | 656 |
|
Allied Universal Holdco LLC (3) | | Security & alarm services | | First Lien | | 7/28/2022 | | LIBOR+3.75% (1% floor) | | 5.44 | % | | $ | 6,965 |
| | 7,019 |
| | 6,920 |
|
Ameritox Ltd. (3)(5) | | Healthcare services | | First Lien | | 4/11/2021 | | LIBOR+5% (1% floor) 3% PIK | | 6.69 | % | | 5,926 |
| | 5,638 |
| | 721 |
|
| | | | 301,913.06 Class B Preferred Units | | | | | | | | | | 302 |
| | — |
|
| | | | 928.96 Class A Common Units | | | | | | | | | | 5,474 |
| | — |
|
Total Ameritox Ltd. | | | | | | | | | | | | 5,926 |
| | 11,414 |
| | 721 |
|
Asset International, Inc. | | Research & Consulting Services | | First Lien | | 12/29/2024 | | LIBOR+4.5% (1% floor) | | 6.19 | % | | 7,000 |
| | 6,860 |
| | 6,860 |
|
BJ's Wholesale Club, Inc. | | Hypermarkets & super centers | | First Lien | | 1/26/2024 | | LIBOR+3.75% (1% floor) | | 4.95 | % | | 4,975 |
| | 4,981 |
| | 4,902 |
|
Chloe Ox Parent LLC | | Healthcare services | | First Lien | | 12/14/2024 | | LIBOR+5% (1% floor) | | 6.64 | % | | 10,000 |
| | 9,900 |
| | 10,037 |
|
Compuware Corporation | | Internet software & services | | First Lien B3 | | 12/15/2021 | | LIBOR+4.25% (1% floor) | | 5.63 | % | | 11,126 |
| | 11,019 |
| | 11,213 |
|
DFT Intermediate LLC | | Specialized finance | | First Lien | | 3/1/2023 | | LIBOR+5.5% (1% floor) | | 6.85 | % | | 10,669 |
| | 10,433 |
| | 10,592 |
|
Digital River, Inc. | | Internet software & services | | First Lien | | 2/12/2021 | | LIBOR+6.5% (1% floor) | | 8.08 | % | | 2,775 |
| | 2,786 |
| | 2,782 |
|
Dodge Data & Analytics LLC (3) | | Data processing & outsourced services | | First Lien | | 10/31/2019 | | LIBOR+8.75% (1% floor) | | 10.13 | % | | 9,199 |
| | 9,228 |
| | 9,116 |
|
DTZ U.S. Borrower, LLC (3) | | Real estate services | | First Lien | | 11/4/2021 | | LIBOR+3.25% (1% floor) | | 4.94 | % | | 6,946 |
| | 6,978 |
| | 6,867 |
|
Edge Fitness, LLC | | Leisure facilities | | First Lien | | 12/31/2019 | | LIBOR+7.75% (1% floor) | | 9.05 | % | | 10,600 |
| | 10,601 |
| | 10,600 |
|
EOS Fitness Opco Holdings, LLC (3) | | Leisure facilities | | First Lien | | 12/30/2019 | | LIBOR+8.75% (0.75% floor) | | 10.12 | % | | 18,251 |
| | 18,078 |
| | 18,433 |
|
Everi Payments Inc. | | Casinos & gaming | | First Lien | | 5/9/2024 | | LIBOR+4.5% (1% floor) | | 4.98 | % | | 4,975 |
| | 4,952 |
| | 5,032 |
|
Falmouth Group Holdings Corp. | | Specialty chemicals | | First Lien | | 12/13/2021 | | LIBOR+6.75% (1% floor) | | 8.44 | % | | 4,528 |
| | 4,497 |
| | 4,528 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Access CIG, LLC | First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025 | 5.53 | % | Diversified Support Services | $ | 9,253 |
| | $ | 9,213 |
| | $ | 7,622 |
| |
AdVenture Interactive, Corp. | 927 shares of common stock | | Advertising | | | 1,390 |
| | 1,312 |
| (4) |
AI Convoy (Luxembourg) S.À.R.L. | First Lien Term Loan, LIBOR+3.50% cash due 1/18/2027 | 5.34 | % | Aerospace & Defense | 9,200 |
| | 9,154 |
| | 8,257 |
| |
AI Ladder (Luxembourg) Subco S.a.r.l. | First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025 | 5.49 | % | Electrical Components & Equipment | 6,092 |
| | 5,953 |
| | 5,137 |
| (4) |
Altice France S.A. | First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 4.70 | % | Integrated Telecommunication Services | 9,709 |
| | 9,398 |
| | 9,296 |
| (4) |
Alvogen Pharma US, Inc. | First Lien Term Loan, LIBOR+5.25% cash due 12/31/2023 | 6.32 | % | Pharmaceuticals | 9,879 |
| | 9,586 |
| | 8,594 |
| |
Anastasia Parent, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 5.20 | % | Personal Products | 2,843 |
| | 2,360 |
| | 1,658 |
| |
Apptio, Inc. | First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025 | 8.25 | % | Application Software | 4,615 |
| | 4,542 |
| | 4,398 |
| (4) |
| First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 | | Application Software | — |
| | (6 | ) | | (18 | ) | (4)(5) |
Total Apptio, Inc. | | | | | | 4,536 |
| | 4,380 |
| |
Aurora Lux Finco S.À.R.L. | First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 7.00 | % | Airport Services | 6,500 |
| | 6,344 |
| | 6,111 |
| (4) |
Blackhawk Network Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025 | 3.99 | % | Data Processing & Outsourced Services | 9,825 |
| | 9,807 |
| | 8,134 |
| |
Boxer Parent Company Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 5.24 | % | Systems Software | 7,571 |
| | 7,483 |
| | 6,366 |
| (4) |
Brazos Delaware II, LLC | First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025 | 4.92 | % | Oil & Gas Equipment & Services | 7,369 |
| | 7,342 |
| | 3,887 |
| |
C5 Technology Holdings, LLC | 171 Common Units | | Data Processing & Outsourced Services | | | — |
| | — |
| (4) |
| 7,193,539.63 Preferred Units | | Data Processing & Outsourced Services | | | 7,194 |
| | 5,683 |
| (4) |
Total C5 Technology Holdings, LLC | | | | | | 7,194 |
| | 5,683 |
| |
CITGO Petroleum Corp. | First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024 | 6.00 | % | Oil & Gas Refining & Marketing | 7,920 |
| | 7,841 |
| | 7,009 |
| (4) |
Connect U.S. Finco LLC | First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026 | 5.49 | % | Alternative Carriers | 8,367 |
| | 8,162 |
| | 6,746 |
| (4) |
Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 5.07 | % | Biotechnology | 5,970 |
| | 5,925 |
| | 5,672 |
| |
Dcert Buyer, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/16/2026 | 4.99 | % | Internet Services & Infrastructure | 8,000 |
| | 7,980 |
| | 7,193 |
| |
Dealer Tire, LLC | First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025 | 5.24 | % | Distributors | 948 |
| | 904 |
| | 788 |
| (4) |
Delta 2 (Lux) S.à.r.l. | First Lien Term Loan, LIBOR+2.50% cash due 2/1/2024 | 3.50 | % | Movies & Entertainment | 5,167 |
| | 4,649 |
| | 4,665 |
| |
Ellie Mae, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 4/17/2026 | 5.20 | % | Application Software | 4,974 |
| | 4,950 |
| | 4,372 |
| |
eResearch Technology, Inc. | First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027 | 5.95 | % | Application Software | 7,500 |
| | 7,425 |
| | 6,653 |
| |
Frontier Communications Corporation | First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024 | 5.21 | % | Integrated Telecommunication Services | 7,162 |
| | 7,068 |
| | 6,846 |
| |
GFL Environmental, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 5/30/2025 | 4.00 | % | Environmental & Facilities Services | 718 |
| | 663 |
| | 700 |
| |
Gigamon, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024 | 5.25 | % | Systems Software | 7,820 |
| | 7,767 |
| | 6,726 |
| |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
Garretson Resolution Group, Inc. | | Diversified support services | | First Lien | | 5/22/2021 | | LIBOR+6.5% (1% floor) | | 8.19 | % | | $ | 5,797 |
| | $ | 5,780 |
| | $ | 5,432 |
|
Gigamon Inc. | | Systems software | | First Lien | | 12/18/2024 | | LIBOR+4.5% (1% floor) | | 6.03 | % | | 8,000 |
| | 7,920 |
| | 7,960 |
|
InMotion Entertainment Group, LLC (3) | | Consumer electronics | | First Lien | | 10/1/2021 | | LIBOR+7.25% (1.25% floor) | | 8.95 | % | | 8,750 |
| | 8,769 |
| | 8,750 |
|
| | | | First Lien B | | 10/1/2021 | | LIBOR+7.25% (1.25% floor) | | 8.95 | % | | 8,750 |
| | 8,660 |
| | 8,750 |
|
Total InMotion Entertainment Group, LLC | | | | | | | | | | | | 17,500 |
| | 17,429 |
| | 17,500 |
|
Keypath Education, Inc. (3) | | Advertising | | First Lien | | 4/3/2022 | | LIBOR+7% (1.00% floor) | | 8.69 | % | | 2,040 |
| | 2,039 |
| | 2,040 |
|
| | | | 927 shares Common Stock | | | | | | | | | | 1,391 |
| | 815 |
|
| | | | | | | | | | | | 2,040 |
| | 3,430 |
| | 2,855 |
|
Lift Brands, Inc. (3) | | Leisure facilities | | First Lien | | 12/23/2019 | | LIBOR+7.5% (1% floor) | | 9.19 | % | | 18,149 |
| | 18,132 |
| | 18,149 |
|
Metamorph US 3, LLC (3)(5) | | Internet software & services | | First Lien | | 12/1/2020 | | LIBOR+5.5% (1% floor) 2% PIK | | 7.07 | % | | 9,942 |
| | 9,232 |
| | 3,775 |
|
Motion Recruitment Partners LLC | | Human resources & employment services | | First Lien | | 2/13/2020 | | LIBOR+6% (1% floor) | | 7.57 | % | | 4,298 |
| | 4,255 |
| | 4,303 |
|
NAVEX Global, Inc. | | Internet software & services | | First Lien | | 11/19/2021 | | LIBOR+4.75% (1% floor) | | 5.82 | % | | 5,944 |
| | 5,911 |
| | 5,974 |
|
New IPT, Inc. (3) | | Oil & gas equipment & services | | First Lien | | 3/17/2021 | | LIBOR+5% (1% floor) | | 6.69 | % | | 1,794 |
| | 1,794 |
| | 1,794 |
|
| | | | Second Lien | | 9/17/2021 | | LIBOR+5.1% (1% floor) | | 6.79 | % | | 1,094 |
| | 1,094 |
| | 1,094 |
|
| | | | 21.876 Class A Common Units | | | | | | | |
| | — |
| | 420 |
|
Total New IPT, Inc. | | | | | | | | | | | | 2,888 |
| | 2,888 |
| | 3,308 |
|
Novetta Solutions, LLC | | Internet software & services | | First Lien | | 9/30/2022 | | LIBOR+5% (1% floor) | | 6.70 | % | | 6,102 |
| | 6,053 |
| | 5,937 |
|
OmniSYS Acquisition Corporation (3) | | Diversified support services | | First Lien | | 11/21/2018 | | LIBOR+7.5% (1% floor) | | 9.19 | % | | 10,896 |
| | 10,899 |
| | 10,873 |
|
Refac Optical Group (3) | | Specialty stores | | First Lien A | | 9/30/2018 | | LIBOR+8% | | 9.56 | % | | 4,111 |
| | 4,098 |
| | 4,111 |
|
Salient CRGT, Inc. (3) | | IT consulting & other services | | First Lien | | 2/28/2022 | | LIBOR+5.75% (1% floor) | | 7.32 | % | | 2,405 |
| | 2,364 |
| | 2,426 |
|
Scientific Games International, Inc. (3) | | Casinos & gaming | | First Lien | | 8/14/2024 | | LIBOR+3.25% | | 4.67 | % | | 6,615 |
| | 6,583 |
| | 6,677 |
|
SHO Holding I Corporation | | Footwear | | First Lien | | 10/27/2022 | | LIBOR+5% (1% floor) | | 6.42 | % | | 8,573 |
| | 8,545 |
| | 8,273 |
|
TravelClick, Inc. (3) | | Internet software & services | | Second Lien | | 11/6/2021 | | LIBOR+7.75% (1% floor) | | 9.32 | % | | 5,127 |
| | 5,127 |
| | 5,153 |
|
TV Borrower US, LLC | | Integrated telecommunications services | | First Lien | | 2/22/2024 | | LIBOR+4.75% (1% floor) | | 6.44 | % | | 2,034 |
| | 2,025 |
| | 2,045 |
|
Valet Merger Sub, Inc. (3) | | Environmental & facilities services | | First Lien | | 9/24/2021 | | LIBOR+7% (1% floor) | | 8.57 | % | | 12,965 |
| | 12,838 |
| | 12,965 |
|
Vubiquity, Inc. | | Application software | | First Lien | | 8/12/2021 | | LIBOR+5.5% (1% floor) | | 7.19 | % | | 2,646 |
| | 2,630 |
| | 2,626 |
|
| | | | | | | | | | | | $ | 249,967 |
| | $ | 255,973 |
| | $ | 239,601 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
GoodRx, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025 | 3.74 | % | Interactive Media & Services | $ | 8,592 |
| | $ | 8,470 |
| | $ | 8,119 |
| |
Guidehouse LLP | Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026 | 8.99 | % | Research & Consulting Services | 6,000 |
| | 5,977 |
| | 5,190 |
| (4) |
Helios Software Holdings, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025 | 5.32 | % | Systems Software | 3,990 |
| | 3,950 |
| | 3,438 |
| |
Intelsat Jackson Holdings S.A. | First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023 | 5.68 | % | Alternative Carriers | 10,686 |
| | 10,563 |
| | 9,905 |
| |
KIK Custom Products Inc. | First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023 | 5.00 | % | Household Products | 8,000 |
| | 7,976 |
| | 7,237 |
| |
Mindbody, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 8.00 | % | Internet Services & Infrastructure | 4,524 |
| | 4,450 |
| | 4,185 |
| (4) |
| First Lien Revolver, LIBOR+7.00% cash due 2/14/2025 | 8.07 | % | Internet Services & Infrastructure | 476 |
| | 468 |
| | 440 |
| (4) |
Total Mindbody, Inc. | | | | | | 4,918 |
| | 4,625 |
| |
MRI Software LLC | First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 6.57 | % | Application Software | 3,411 |
| | 3,379 |
| | 3,019 |
| (4) |
| First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026 | | Application Software | — |
| | (4 | ) | | (68 | ) | (4)(5) |
| First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | 6.57 | % | Application Software | 169 |
| | 166 |
| | 130 |
| (4)(5) |
Total MRI Software LLC | | | | | | 3,541 |
| | 3,081 |
| |
Navicure, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/22/2026 | 4.99 | % | Health Care Technology | 6,000 |
| | 5,970 |
| | 5,565 |
| |
New IPT, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | 6.45 | % | Oil & Gas Equipment & Services | 1,138 |
| | 1,138 |
| | 1,138 |
| (4) |
| 21.876 Class A Common Units in New IPT Holdings, LLC | | Oil & Gas Equipment & Services | | | — |
| | 697 |
| (4) |
Total New IPT, Inc. | | | | | | 1,138 |
| | 1,835 |
| |
Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025 | 5.57 | % | Electrical Components & Equipment | 6,860 |
| | 6,835 |
| | 5,831 |
| |
Novetta Solutions, LLC | First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022 | 6.00 | % | Application Software | 5,962 |
| | 5,935 |
| | 5,315 |
| |
OEConnection LLC | First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026 | 5.45 | % | Application Software | 7,271 |
| | 7,234 |
| | 5,871 |
| |
| First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026 | | Application software | — |
| | (3 | ) | | (133 | ) | (5) |
Total OEConnection LLC | | | | | | 7,231 |
| | 5,738 |
| |
Olaplex, Inc. | First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026 | 7.50 | % | Personal Products | 5,000 |
| | 4,904 |
| | 4,675 |
| (4) |
| First Lien Revolver, LIBOR+6.50% cash due 1/8/2025 | 7.50 | % | Personal Products | 540 |
| | 530 |
| | 505 |
| (4) |
Total Olaplex, Inc. | | | | | | 5,434 |
| | 5,180 |
| |
Quikrete Holdings, Inc. | First Lien Term Loan, LIBOR+2.50% cash due 2/1/2027 | 3.49 | % | Construction Materials | 2,280 |
| | 2,106 |
| | 2,109 |
| |
Sabert Corporation | First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026 | 5.50 | % | Metal & Glass Containers | 4,350 |
| | 4,307 |
| | 4,046 |
| |
Salient CRGT, Inc. | First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022 | 7.57 | % | Aerospace & Defense | 2,173 |
| | 2,156 |
| | 1,793 |
| (4) |
Scientific Games International, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024 | 3.74 | % | Casinos & Gaming | 6,483 |
| | 6,461 |
| | 5,262 |
| |
SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022 | 6.78 | % | Footwear | 8,376 |
| | 8,362 |
| | 6,575 |
| |
Signify Health, LLC | First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024 | 5.95 | % | Health Care Services | 9,800 |
| | 9,732 |
| | 8,232 |
| |
Sirva Worldwide, Inc. | First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025 | 6.49 | % | Diversified Support Services | 4,844 |
| | 4,771 |
| | 3,633 |
| |
Star US Bidco LLC | First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027 | 5.94 | % | Industrial Machinery | 2,973 |
| | 2,943 |
| | 2,587 |
| |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Sunshine Luxembourg VII SARL | First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026 | 5.32 | % | Personal Products | $ | 7,980 |
| | $ | 7,940 |
| | $ | 7,262 |
| (4) |
Supermoose Borrower, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 5.20 | % | Application Software | 4,913 |
| | 4,566 |
| | 3,960 |
| (4) |
Surgery Center Holdings, Inc. | First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024 | 4.25 | % | Health Care Facilities | 4,987 |
| | 4,966 |
| | 3,868 |
| (4) |
Thruline Marketing, Inc. | 927 Class A Units in FS AVI Holdco, LLC | | Advertising | | | 949 |
| | 449 |
| (4) |
Thunder Finco (US), LLC | First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 5.24 | % | Movies & Entertainment | 8,000 |
| | 7,920 |
| | 6,260 |
| |
Uber Technologies, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025 | 5.00 | % | Application Software | 10,509 |
| | 10,440 |
| | 9,887 |
| (4) |
UFC Holdings, LLC | First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026 | 4.25 | % | Movies & Entertainment | 4,831 |
| | 4,787 |
| | 4,306 |
| (4) |
Veritas US Inc. | First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023 | 5.95 | % | Application Software | 6,859 |
| | 6,826 |
| | 5,941 |
| (4) |
Verscend Holding Corp. | First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025 | 5.49 | % | Health Care Technology | 4,133 |
| | 4,099 |
| | 3,926 |
|
|
VM Consolidated, Inc. | First Lien Term Loan, LIBOR+3.25% cash due 2/28/2025 | 4.24 | % | Data Processing & Outsourced Services | 10,542 |
| | 10,554 |
| | 9,593 |
| (4) |
WideOpenWest Finance, LLC | First Lien Term Loan, LIBOR+3.25% cash due 8/18/2023 | 4.25 | % | Cable & Satellite | 962 |
| | 867 |
| | 897 |
| |
WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 9.53 | % | Aerospace & Defense | 6,000 |
| | 5,953 |
| | 4,120 |
| (4) |
| | | | $ | 337,016 |
| | $ | 341,737 |
| | $ | 299,572 |
| |
__________
(1) Represents the interest rate as of DecemberMarch 31, 2017.2020. All interest rates are payable in cash, unless otherwise noted.
(2) Represents the current determination of fair value as of December 31, 2017 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(3) This investment is held by both the Company and SLF JV I as of December 31, 2017.
(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement.agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of March 31, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45% and the 180-day LIBOR at 1.07%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(5)(3) Represents the current determination of fair value as of March 31, 2020 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was on cash non-accrual statusheld by both the Company and SLF JV I as of DecemberMarch 31, 2017. Cash non-accrual status is inclusive of PIK and other non-cash2020.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income where applicable.which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
SLF JV I Portfolio as of September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
AdVenture Interactive, Corp. (3) | | Advertising | | 927 Common Stock Shares | | | | | | | | | | $ | 1,088 |
| | $ | 1,412 |
|
Allied Universal Holdco LLC (3) | | Security & alarm services | | First Lien | | 7/28/2022 | | LIBOR+3.75% (1% floor) | | 5.08 | % | | $ | 6,982 |
| | 7,040 |
| | 6,976 |
|
Ameritox Ltd. (3)(5) | | Healthcare services | | First Lien | | 4/11/2021 | | LIBOR+5% (1% floor) 3% PIK | | 6.33 | % | | 5,759 |
| | 5,638 |
| | 668 |
|
| | | | 301,913.06 Class B Preferred Units | | | | | | | | | | 302 |
| | — |
|
| | | | 928.96 Class A Common Units | | | | | | | | | | 5,474 |
| | — |
|
Total Ameritox Ltd. | | | | | | | | | | | | 5,759 |
| | 11,414 |
| | 668 |
|
BeyondTrust Software, Inc. (3) | | Application software | | First Lien | | 9/25/2019 | | LIBOR+7% (1% floor) | | 8.33 | % | | 15,330 |
| | 15,231 |
| | 15,329 |
|
BJ's Wholesale Club, Inc. (3) | | Hypermarkets & super centers | | First Lien | | 1/26/2024 | | LIBOR+3.75% (1% floor) | | 4.99 | % | | 4,988 |
| | 4,993 |
| | 4,793 |
|
Compuware Corporation | | Internet software & services | | First Lien B3 | | 12/15/2021 | | LIBOR+4.25% (1% floor) | | 5.49 | % | | 11,154 |
| | 11,041 |
| | 11,293 |
|
DFT Intermediate LLC (3) | | Specialized finance | | First Lien | | 3/1/2023 | | LIBOR+5.5% (1% floor) | | 6.74 | % | | 10,723 |
| | 10,474 |
| | 10,652 |
|
Digital River, Inc. | | Internet software & services | | First Lien | | 2/12/2021 | | LIBOR+6.5% (1% floor) | | 7.82 | % | | 4,524 |
| | 4,541 |
| | 4,546 |
|
Dodge Data & Analytics LLC (3) | | Data processing & outsourced services | | First Lien | | 10/31/2019 | | LIBOR+8.75% (1% floor) | | 10.13 | % | | 9,339 |
| | 9,372 |
| | 8,744 |
|
DTZ U.S. Borrower, LLC (3) | | Real estate services | | First Lien | | 11/4/2021 | | LIBOR+3.25% (1% floor) | | 4.57 | % | | 6,964 |
| | 6,998 |
| | 6,990 |
|
Edge Fitness, LLC | | Leisure facilities | | First Lien | | 12/31/2019 | | LIBOR+7.75% (1% floor) | | 9.05 | % | | 10,600 |
| | 10,602 |
| | 10,600 |
|
EOS Fitness Opco Holdings, LLC (3) | | Leisure facilities | | First Lien | | 12/30/2019 | | LIBOR+8.75% (0.75% floor) | | 9.99 | % | | 18,374 |
| | 18,182 |
| | 18,557 |
|
Everi Payments Inc.(3) | | Casinos & gaming | | First Lien | | 5/9/2024 | | LIBOR+4.5% (1% floor) | | 5.74 | % | | 4,988 |
| | 4,964 |
| | 5,039 |
|
Falmouth Group Holdings Corp. | | Specialty chemicals | | First Lien | | 12/13/2021 | | LIBOR+6.75% (1% floor) | | 8.08 | % | | 4,610 |
| | 4,578 |
| | 4,610 |
|
Garretson Resolution Group, Inc. | | Diversified support services | | First Lien | | 5/22/2021 | | LIBOR+6.5% (1% floor) | | 7.83 | % | | 5,836 |
| | 5,818 |
| | 5,766 |
|
InMotion Entertainment Group, LLC (3) | | Consumer electronics | | First Lien | | 10/1/2018 | | LIBOR+7.75% (1.25% floor) | | 9.09 | % | | 8,875 |
| | 8,884 |
| | 8,875 |
|
| | | | First Lien B | | 10/1/2018 | | LIBOR+7.75% (1.25% floor) | | 9.09 | % | | 8,875 |
| | 8,828 |
| | 8,871 |
|
Total InMotion Entertainment Group, LLC | | | | | | | | | | | | 17,750 |
| | 17,712 |
| | 17,746 |
|
Keypath Education, Inc. (3) | | Advertising | | First Lien | | 4/3/2022 | | LIBOR+7% (1.00% floor) | | 8.33 | % | | 2,040 |
| | 2,040 |
| | 2,039 |
|
| | | | 927 shares Common Stock | | | | | | | | | | 1,391 |
| | 809 |
|
| | | | | | | | | | | | 2,040 |
| | 3,431 |
| | 2,848 |
|
Lift Brands, Inc. (3) | | Leisure facilities | | First Lien | | 12/23/2019 | | LIBOR+7.5% (1% floor) | | 8.83 | % | | 18,276 |
| | 18,257 |
| | 18,275 |
|
Metamorph US 3, LLC (3)(5) | | Internet software & services | | First Lien | | 12/1/2020 | | LIBOR+5.5% (1% floor) 2% PIK | | 6.74 | % | | 9,969 |
| | 9,481 |
| | 3,786 |
|
Motion Recruitment Partners LLC | | Human resources & employment services | | First Lien | | 2/13/2020 | | LIBOR+6% (1% floor) | | 7.24 | % | | 4,330 |
| | 4,281 |
| | 4,330 |
|
NAVEX Global, Inc. | | Internet software & services | | First Lien | | 11/19/2021 | | LIBOR+4.75% (1% floor) | | 5.49 | % | | 5,959 |
| | 5,925 |
| | 5,982 |
|
New IPT, Inc. (3) | | Oil & gas equipment & services | | First Lien | | 3/17/2021 | | LIBOR+5% (1% floor) | | 6.33 | % | | 1,794 |
| | 1,794 |
| | 1,794 |
|
| | | | Second Lien | | 9/17/2021 | | LIBOR+5.1% (1% floor) | | 6.43 | % | | 1,094 |
| | 1,094 |
| | 1,094 |
|
| | | | 21.876 Class A Common Units | | | | | | | | | | — |
| | 321 |
|
Total New IPT, Inc. | | | | | | | | | | | | 2,888 |
| | 2,888 |
| | 3,209 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Access CIG, LLC | First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025 | 6.07 | % | Diversified support services | $ | 9,300 |
| | $ | 9,256 |
| | $ | 9,201 |
| |
AdVenture Interactive, Corp. | 927 shares of common stock | | Advertising | | | 1,390 |
| | 1,295 |
| (4) |
AI Ladder (Luxembourg) Subco S.a.r.l. | First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025 | 6.60 | % | Electrical components & equipment | 6,145 |
| | 5,992 |
| | 5,659 |
| (4) |
Air Newco LP | First Lien Term Loan, LIBOR+4.75% cash due 5/31/2024 | 6.79 | % | IT consulting & other services | 9,900 |
| | 9,875 |
| | 9,916 |
| |
AL Midcoast Holdings LLC | First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025 | 7.60 | % | Oil & gas storage & transportation | 9,900 |
| | 9,801 |
| | 9,764 |
| |
Altice France S.A. | First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 6.03 | % | Integrated telecommunication services | 7,444 |
| | 7,282 |
| | 7,439 |
| |
Alvogen Pharma US, Inc. | First Lien Term Loan, LIBOR+4.75% cash due 4/1/2022 | 6.79 | % | Pharmaceuticals | 7,656 |
| | 7,656 |
| | 6,963 |
| |
Apptio, Inc. | First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025 | 9.56 | % | Application software | 4,615 |
| | 4,534 |
| | 4,530 |
| (4) |
| First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 | | Application software | — |
| | (7 | ) | | (7 | ) | (4)(5) |
Total Apptio, Inc. | | | | | | 4,527 |
| | 4,523 |
| |
Blackhawk Network Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025 | 5.04 | % | Data processing & outsourced services | 9,875 |
| | 9,855 |
| | 9,858 |
| |
Boxer Parent Company Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 6.29 | % | Systems software | 7,609 |
| | 7,518 |
| | 7,336 |
| (4) |
Brazos Delaware II, LLC | First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025 | 6.05 | % | Oil & gas equipment & services | 7,406 |
| | 7,376 |
| | 6,855 |
| |
C5 Technology Holdings, LLC | 171 Common Units | | Data Processing & Outsourced Services | | | — |
| | — |
| (4) |
| 7,193,539.63 Preferred Units | | Data Processing & Outsourced Services | | | 7,194 |
| | 7,194 |
| (4) |
Total C5 Technology Holdings, LLC | | | | | | 7,194 |
| | 7,194 |
| |
Cast & Crew Payroll, LLC | First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026 | 6.05 | % | Application software | 4,975 |
| | 4,925 |
| | 5,018 |
| |
CITGO Petroleum Corp. | First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024 | 7.10 | % | Oil & gas refining & marketing | 7,960 |
| | 7,880 |
| | 8,010 |
| (4) |
Connect U.S. Finco LLC | First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026 | 7.10 | % | Alternative Carriers | 8,000 |
| | 7,840 |
| | 7,888 |
| (4) |
Curium Bidco S.à r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 6.10 | % | Biotechnology | 6,000 |
| | 5,955 |
| | 6,030 |
| |
Dcert Buyer, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026 | 6.26 | % | Internet services & infrastructure | 8,000 |
| | 7,980 |
| | 7,985 |
| |
DigiCert, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024 | 6.04 | % | Internet services & infrastructure | 8,250 |
| | 8,148 |
| | 8,249 |
| (4) |
Ellie Mae, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026 | 6.04 | % | Application software | 5,000 |
| | 4,975 |
| | 5,015 |
| |
Everi Payments Inc. | First Lien Term Loan, LIBOR+3.00% cash due 5/9/2024 | 5.04 | % | Casinos & gaming | 4,764 |
| | 4,742 |
| | 4,776 |
| |
Falmouth Group Holdings Corp. | First Lien Term Loan, LIBOR+6.75% cash due 12/14/2021 | 8.95 | % | Specialty chemicals | 4,938 |
| | 4,909 |
| | 4,910 |
| |
Frontier Communications Corporation | First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024 | 5.80 | % | Integrated telecommunication services | 6,473 |
| | 6,400 |
| | 6,471 |
| |
Gentiva Health Services, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025 | 5.81 | % | Healthcare services | 7,920 |
| | 7,801 |
| | 7,974 |
| |
Gigamon, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024 | 6.29 | % | Systems software | 7,860 |
| | 7,801 |
| | 7,644 |
| |
GoodRx, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025 | 4.81 | % | Interactive media & services | 7,852 |
| | 7,835 |
| | 7,862 |
| |
Guidehouse LLP | Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026 | 9.54 | % | Research & consulting services | 6,000 |
| | 5,975 |
| | 5,925 |
| (4) |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
Novetta Solutions, LLC | | Internet software & services | | First Lien | | 9/30/2022 | | LIBOR+5% (1% floor) | | 6.34 | % | | $ | 6,118 |
| | $ | 6,066 |
| | $ | 5,950 |
|
OmniSYS Acquisition Corporation (3) | | Diversified support services | | First Lien | | 11/21/2018 | | LIBOR+7.5% (1% floor) | | 8.83 | % | | 10,896 |
| | 10,900 |
| | 10,833 |
|
Refac Optical Group (3) | | Specialty stores | | First Lien A | | 9/30/2018 | | LIBOR+8% | | 9.23 | % | | 4,623 |
| | 4,605 |
| | 4,623 |
|
Salient CRGT, Inc. (3) | | IT consulting & other services | | First Lien | | 2/28/2022 | | LIBOR+5.75% (1% floor) | | 6.99 | % | | 2,457 |
| | 2,412 |
| | 2,440 |
|
Scientific Games International, Inc. (3) | | Casinos & gaming | | First Lien | | 8/14/2024 | | LIBOR+3.25% (1% floor) | | 4.58 | % | | 6,632 |
| | 6,598 |
| | 6,651 |
|
SHO Holding I Corporation | | Footwear | | First Lien | | 10/27/2022 | | LIBOR+5% (1% floor) | | 6.24 | % | | 8,594 |
| | 8,566 |
| | 8,487 |
|
TravelClick, Inc. (3) | | Internet software & services | | Second Lien | | 11/6/2021 | | LIBOR+7.75% (1% floor) | | 8.99 | % | | 5,127 |
| | 5,127 |
| | 5,153 |
|
TV Borrower US, LLC | | Integrated telecommunications services | | First Lien | | 2/22/2024 | | LIBOR+4.75% (1% floor) | | 6.08 | % | | 3,582 |
| | 3,565 |
| | 3,607 |
|
Valet Merger Sub, Inc. (3) | | Environmental & facilities services | | First Lien | | 9/24/2021 | | LIBOR+7% (1% floor) | | 8.24 | % | | 12,998 |
| | 12,862 |
| | 12,998 |
|
Vubiquity, Inc. | | Application software | | First Lien | | 8/12/2021 | | LIBOR+5.5% (1% floor) | | 6.83 | % | | 2,653 |
| | 2,636 |
| | 2,633 |
|
| | | | | | | | | | | | $ | 245,063 |
| | $ | 251,648 |
| | $ | 235,526 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Indivior Finance S.a.r.l. | First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022 | 6.76 | % | Pharmaceuticals | $ | 7,898 |
| | $ | 7,797 |
| | $ | 7,272 |
| |
Intelsat Jackson Holdings S.A. | First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023 | 5.80 | % | Alternative Carriers | 10,000 |
| | 9,891 |
| | 10,042 |
| |
KIK Custom Products Inc. | First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023 | 6.26 | % | Household products | 8,000 |
| | 7,972 |
| | 7,610 |
| |
McDermott Technology (Americas), Inc. | First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025 | 7.10 | % | Oil & gas equipment & services | 4,187 |
| | 4,119 |
| | 2,676 |
| |
Mindbody, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 9.06 | % | Internet services & infrastructure | 4,524 |
| | 4,443 |
| | 4,438 |
| (4) |
| First Lien Revolver, LIBOR+7.00% cash due 2/15/2025 | | Internet services & infrastructure | — |
| | (9 | ) | | (9 | ) | (4)(5) |
Total Mindbody, Inc. | | | | | | 4,434 |
| | 4,429 |
| |
Navicure, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 9/18/2026 | 6.13 | % | Healthcare technology | 6,000 |
| | 5,970 |
| | 6,008 |
| |
New IPT, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | 7.10 | % | Oil & gas equipment & services | 1,422 |
| | 1,422 |
| | 1,422 |
| (4) |
| 21.876 Class A Common Units in New IPT Holdings, LLC | | Oil & gas equipment & services | | | — |
| | 1,268 |
| (4) |
Total New IPT, Inc. | | | | | | 1,422 |
| | 2,690 |
| |
Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025 | 6.56 | % | Electrical components & equipment | 6,895 |
| | 6,868 |
| | 6,792 |
| |
Novetta Solutions, LLC | First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022 | 7.05 | % | Application software | 5,993 |
| | 5,961 |
| | 5,882 |
| |
OCI Beaumont LLC | First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025 | 6.10 | % | Commodity chemicals | 7,880 |
| | 7,872 |
| | 7,890 |
| |
OEConnection LLC | First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026 | 6.13 | % | Application software | 7,312 |
| | 7,275 |
| | 7,298 |
| |
| First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026 | | Application software | — |
| | (3 | ) | | (1 | ) | (5) |
Total OEConnection LLC | | | | | | 7,272 |
| | 7,297 |
| |
Red Ventures, LLC | First Lien Term Loan, LIBOR+3.00% cash due 11/8/2024 | 5.04 | % | Interactive media & services | 3,990 |
| | 3,971 |
| | 4,011 |
| |
Salient CRGT, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022 | 8.05 | % | Aerospace & defense | 2,205 |
| | 2,183 |
| | 2,094 |
| (4) |
Scientific Games International, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024 | 4.79 | % | Casinos & gaming | 6,516 |
| | 6,491 |
| | 6,470 |
| |
SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022 | 7.26 | % | Footwear | 8,420 |
| | 8,403 |
| | 7,999 |
| |
Signify Health, LLC | First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024 | 6.60 | % | Healthcare services | 9,850 |
| | 9,775 |
| | 9,838 |
| |
Sirva Worldwide, Inc. | First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025 | 7.54 | % | Diversified support services | 4,906 |
| | 4,833 |
| | 4,759 |
| |
Sunshine Luxembourg VII SARL | First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026 | 6.59 | % | Personal products | 8,000 |
| | 7,960 |
| | 8,048 |
| |
Thruline Marketing, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022 | 9.10 | % | Advertising | 1,854 |
| | 1,851 |
| | 1,854 |
| (4) |
| 927 Class A Units in FS AVI Holdco, LLC | | Advertising | | | 1,088 |
| | 658 |
| (4) |
Total Thruline Marketing, Inc. | | | | | | 2,939 |
| | 2,512 |
| |
Triple Royalty Sub LLC | Fixed Rate Bond 144A 9.0% Toggle PIK cash due 4/15/2033 | | Pharmaceuticals | 5,000 |
| | 5,000 |
| | 5,175 |
| |
Uber Technologies, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025 | 6.03 | % | Application software | 9,875 |
| | 9,836 |
| | 9,836 |
| (4) |
UFC Holdings, LLC | First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026 | 5.30 | % | Movies & entertainment | 4,489 |
| | 4,489 |
| | 4,506 |
| |
Uniti Group LP | First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022 | 7.04 | % | Specialized REITs | 6,401 |
| | 6,221 |
| | 6,256 |
| (4) |
Valeant Pharmaceuticals International Inc. | First Lien Term Loan, LIBOR+2.75% cash due 11/27/2025 | 4.79 | % | Pharmaceuticals | 1,772 |
| | 1,764 |
| | 1,778 |
| |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Veritas US Inc. | First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023 | 6.60 | % | Application software | $ | 6,894 |
| | $ | 6,856 |
| | $ | 6,534 |
| (4) |
Verra Mobility, Corp. | First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025 | 5.79 | % | Data processing & outsourced services | 10,835 |
| | 10,849 |
| | 10,894 |
| |
WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 10.01 | % | Aerospace & defense | 6,000 |
| | 5,949 |
| | 5,974 |
| (4) |
| | | | $ | 340,960 |
| | $ | 347,985 |
| | $ | 345,032 |
| |
__________
(1) Represents the interest rate as of September 30, 2017.2019. All interest rates are payable in cash, unless otherwise noted.
(2) Represents the current determination of fair value as of September 30, 2017 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(3) This investment is held by both the Company and SLF JV I as of September 30, 2017.
(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement.agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2019, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(5) This investment was on cash non-accrual status(3) Represents the current determination of fair value as of September 30, 2017. Cash non-accrual status2019 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is inclusivenot included in the Company's Board of PIKDirectors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and other non-cashSLF JV I as of September 30, 2019.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income where applicable.which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
The cost and fair value of the Company's debt investment in SLF JV I were $96.3 million and $92.2 million, respectively, as of March 31, 2020. Both the cost and fair value of the Class A mezzanine secured deferrable floating rate notes ofCompany's debt investment in SLF JV I held by the Company were $100.8 million and $101.0$96.3 million as of December 31, 2017 and September 30, 2017,2019. The Company earned interest income of $2.1 million and $4.3 million on its debt investment in the SLF JV I for the three and six months ended March 31, 2020, respectively. The Company earned interest income of $1.8$2.3 million and $0.2$5.1 million on its investments in these notesthe SLF JV I Notes for the three and six months ended DecemberMarch 31, 2017 and December 31, 2016,2019, respectively. Both the cost and fair value of the Class B mezzanine secured deferrable fixed rate notes ofThe Company's debt investment in SLF JV I held by the Company were $27.5 million and $27.6 million as of each of December 31, 2017 and September 30, 2017, respectively. The Company earned PIK interest of $1.0 million on its investments in these notes for the three months ended December 31, 2017. Prior to their repayment, the subordinated notes of SLF JV I borebears interest at a rate of one-month LIBOR plus 8.0%7.0% per annum and the Company earned interest income of $2.9 millionmatures on its investments in these notes for the three months ended December 31, 2016. 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by the Company was $16.2were $49.3 million and $4.9$0.0 million, respectively, as of DecemberMarch 31, 2017,2020, and $16.2$49.3 million and $5.5$30.1 million, respectively, as of September 30, 2017.2019. The Company did not earned anyearn dividend income for the three and six months ended DecemberMarch 31, 20172020 and earned dividend income of $0.7 million for the three months ended December 31, 20162019, with respect to its investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are incomegenerally dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of March 31, 2020 and September 30, 2019 and for the three and six months ended March 31, 2020 and 2019:
|
| | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Selected Balance Sheet Information: | | | | |
Investments at fair value (cost March 31, 2020: $341,737; cost September 30, 2019: $347,985) | | $ | 299,572 |
| | $ | 345,032 |
|
Cash and cash equivalents | | 14,039 |
| | 3,674 |
|
Restricted cash | | 5,242 |
| | 5,242 |
|
Other assets | | 10,783 |
| | 6,912 |
|
Total assets | | $ | 329,636 |
| | $ | 360,860 |
|
| | | | |
Senior credit facility payable | | $ | 193,910 |
| | $ | 170,210 |
|
Debt securities payable at fair value (proceeds March 31, 2020: $110,000; proceeds September 30, 2019: $110,000) | | 105,339 |
| | 110,000 |
|
Other liabilities | | 30,387 |
| | 46,303 |
|
Total liabilities | | $ | 329,636 |
| | $ | 326,513 |
|
Members' equity | | — |
| | 34,347 |
|
Total liabilities and members' equity | | $ | 329,636 |
| | $ | 360,860 |
|
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Below is certain summarized financial information for SLF JV I as of December 31, 2017 and September 30, 2017 and for the three months ended December 31, 2017 and December 31, 2016:
|
| | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Selected Balance Sheet Information: | | | | |
Investments in loans at fair value (cost December 31, 2017: $255,973; cost September 30, 2017: $251,648) | | $ | 239,601 |
| | $ | 235,526 |
|
Receivables from secured financing arrangements at fair value (cost December 31, 2017: $9,787; cost September 30, 2017: $9,783) | | 8,334 |
| | 8,305 |
|
Cash and cash equivalents | | 28,386 |
| | 24,389 |
|
Restricted cash | | 4,100 |
| | 5,097 |
|
Other assets | | 4,117 |
| | 3,485 |
|
Total assets | | $ | 284,538 |
| | $ | 276,802 |
|
| | | | |
Senior credit facilities payable | | $ | 105,053 |
| | $ | 113,053 |
|
Debt securities payable at fair value (proceeds December 31, 2017: $146,572; proceeds September 30, 2017: $147,052) | | 146,572 |
| | 147,052 |
|
Other liabilities | | 27,407 |
| | 10,383 |
|
Total liabilities | | $ | 279,032 |
| | $ | 270,488 |
|
Members' equity | | 5,506 |
| | 6,314 |
|
Total liabilities and members' equity | | $ | 284,538 |
| | $ | 276,802 |
|
| | | | Three months ended December 31, 2017 | | Three months ended December 31, 2016 | | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Selected Statements of Operations Information: | | | | | | | | | | | | |
Interest income | | $ | 4,728 |
| | $ | 6,759 |
| | $ | 5,546 |
| | $ | 5,551 |
| | $ | 10,939 |
| | $ | 10,989 |
|
Other income | | — |
| | 308 |
| | 291 |
| | 80 |
| | 297 |
| | 89 |
|
Total investment income | | 4,728 |
| | 7,067 |
| | 5,837 |
| | 5,631 |
| | 11,236 |
| | 11,078 |
|
Interest expense | | 5,145 |
| | 6,014 |
| | 4,493 |
| | 4,709 |
| | 9,134 |
| | 9,863 |
|
Other expenses | | 161 |
| | 408 |
| | 64 |
| | 276 |
| | 131 |
| | 326 |
|
Total expenses (1) | | 5,306 |
| | 6,422 |
| | 4,557 |
| | 4,985 |
| | 9,265 |
| | 10,189 |
|
Net unrealized depreciation | | (226 | ) | | (22,473 | ) | |
Net realized gain (loss) | | (4 | ) | | 22,708 |
| |
Net unrealized appreciation (depreciation) | | | (37,491 | ) | | 4,576 |
| | (34,550 | ) | | 1,120 |
|
Net realized gains (losses) | | | (615 | ) | | 19 |
| | (1,767 | ) | | (4,986 | ) |
Net income (loss) | | $ | (808 | ) | | $ | 880 |
| | $ | (36,826 | ) | | $ | 5,241 |
| | $ | (34,346 | ) | | $ | (2,977 | ) |
__________
(1) There are no management fees or incentive fees charged at SLF JV I.
SLF JV I has elected to fair value the debt securities issued to the Company and Kemper under FASB ASC 825.Topic 825, Financial Instruments - Fair Value Option. The debt securities are valued based on the total assets less the total liabilities senior to the mezzaninesubordinated notes of SLF JV I in an amount not exceeding par under the enterprise valueEV technique.
During the threesix months ended DecemberMarch 31, 20172020 and December 31, 2016,2019, the Company did not sell any senior secured debt investments to SLF JV I.
Note 4. Fee Income
TheFor the three and six months ended March 31, 2020 the Company receives a variety of fees in the ordinary course of business, including servicing, advisory, amendment, structuring and prepayment fees, which are classified asrecorded total fee income of $2.1 million and recognized as they are earned. The unearned$3.1 million, respectively, of which $0.2 million and $0.4 million, respectively, was recurring in nature. For the three and six months ended March 31, 2019, the Company recorded total fee income balance as of December 31, 2017 and September 30, 2017 was $1.1 million and $1.1$2.3 million, respectively.respectively, of which $0.1 million and $0.3 million, respectively, was recurring in nature. Recurring fee income primarily consisted of servicing fees and exit fees.
As
Note 5. Share Data and Net Assets
Earnings per Share
The following table sets forth the computation of Decemberbasic and diluted earnings per share, pursuant to ASC Topic 260-10, Earnings per Share, for the three and six months ended March 31, 2017, the Company had a receivable for $1.5 million in aggregate exit fees of one portfolio investment, which are paid contingent upon the future occurrence of certain events in connection with the exit of this investment. A percentage of these fees are included in net investment income over the life of the loan.2020 and 2019:
|
| | | | | | | | | | | | | | | | |
(Share amounts in thousands) | | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Earnings (loss) per common share — basic and diluted: | | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | $ | (165,467 | ) | | $ | 64,485 |
| | $ | (151,624 | ) | | $ | 92,203 |
|
Weighted average common shares outstanding — basic and diluted | | 140,961 |
| | 140,961 |
| | 140,961 |
| | 140,961 |
|
Earnings (loss) per common share — basic and diluted | | $ | (1.17 | ) | | $ | 0.46 |
| | $ | (1.08 | ) | | $ | 0.65 |
|
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For the three months ended December 31, 2017, the Company recorded total fee income of $1.0 million, $0.1 million of which was recurringChanges in nature. For the three months ended December 31, 2016, the Company recorded total fee income of $3.6 million, $0.8 million of which was recurring in nature. Recurring fee income primarily consists of servicing fees and exit fees.Net Assets
Note 5. Share Data and Distributions
Earnings per Share
The following table sets forthpresents the computation of basic and diluted earnings per share, pursuant to FASB ASC Topic 260-10 Earnings per Share,changes in net assets for the three and six months ended DecemberMarch 31, 2017 and 2016:2020:
|
| | | | | | | | |
(Share amounts in thousands) | | Three months ended December 31, 2017 | | Three months ended December 31, 2016 |
Earnings (loss) per common share — basic: | | | | |
Net decrease in net assets resulting from operations | | $ | (30,441 | ) | | $ | (74,242 | ) |
Weighted average common shares outstanding — basic | | 140,961 |
| | 142,853 |
|
Loss per common share — basic | | $ | (0.22 | ) | | $ | (0.52 | ) |
Earnings (loss) per common share — diluted: | | | | |
Net decrease in net assets resulting from operations | | $ | (30,441 | ) | | $ | (74,242 | ) |
Weighted average common shares outstanding — diluted | | 140,961 |
| | 142,853 |
|
Loss per common share — diluted | | $ | (0.22 | ) | | $ | (0.52 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | |
| | Shares | | Par Value | | Additional paid-in-capital | | Accumulated Overdistributed Earnings | | Total Net Assets |
Balance at September 30, 2019 | | 140,961 |
| | $ | 1,409 |
| | $ | 1,487,774 |
| | $ | (558,553 | ) | | $ | 930,630 |
|
Net investment income | | — |
| | — |
| | — |
| | 7,836 |
| | 7,836 |
|
Net unrealized appreciation (depreciation) | | — |
| | — |
| | — |
| | 2,879 |
| | 2,879 |
|
Net realized gains (losses) | | — |
| | — |
| | — |
| | 3,288 |
| | 3,288 |
|
Provision for income tax (expense) benefit | | — |
| | — |
| | — |
| | (160 | ) | | (160 | ) |
Distributions to stockholders | | — |
| | — |
| | — |
| | (13,391 | ) | | (13,391 | ) |
Issuance of common stock under dividend reinvestment plan | | 88 |
| | 1 |
| | 480 |
| | — |
| | 481 |
|
Repurchases of common stock under dividend reinvestment plan | | (88 | ) | | (1 | ) | | (480 | ) | | — |
| | (481 | ) |
Balance at December 31, 2019 | | 140,961 |
| | $ | 1,409 |
| | $ | 1,487,774 |
| | $ | (558,101 | ) | | $ | 931,082 |
|
Net investment income | | — |
| | $ | — |
| | $ | — |
| | $ | 22,841 |
| | $ | 22,841 |
|
Net unrealized appreciation (depreciation) | | — |
| | — |
| | — |
| | (163,533 | ) | | (163,533 | ) |
Net realized gains (losses) | | — |
| | — |
| | — |
| | (26,480 | ) | | (26,480 | ) |
Provision for income tax (expense) benefit | | — |
| | — |
| | — |
| | 1,705 |
| | 1,705 |
|
Distributions to stockholders | | — |
| | — |
| | — |
| | (13,391 | ) | | (13,391 | ) |
Issuance of common stock under dividend reinvestment plan | | 158 |
| | 2 |
| | 504 |
| | — |
| | 506 |
|
Repurchases of common stock under dividend reinvestment plan | | (158 | ) | | (2 | ) | | (504 | ) | | — |
| | (506 | ) |
Balance at March 31, 2020 | | 140,961 |
| | $ | 1,409 |
| | $ | 1,487,774 |
| | $ | (736,959 | ) | | $ | 752,224 |
|
The following table presents the changes in net assets for the three and six months ended March 31, 2019:
|
| | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | |
| | Shares | | Par Value | | Additional paid-in-capital | | Accumulated Overdistributed Earnings | | Total Net Assets |
Balance at September 30, 2018 | | 140,961 |
| | $ | 1,409 |
| | $ | 1,492,739 |
| | $ | (636,113 | ) | | $ | 858,035 |
|
Net investment income | | — |
| | — |
| | — |
| | 17,317 |
| | 17,317 |
|
Net unrealized appreciation (depreciation) | | — |
| | — |
| | — |
| | (6,975 | ) | | (6,975 | ) |
Net realized gains (losses) | | — |
| | — |
| | — |
| | 17,962 |
| | 17,962 |
|
Provision for income tax (expense) benefit | | — |
| | — |
| | — |
| | (586 | ) | | (586 | ) |
Distributions to stockholders | | — |
| | — |
| | — |
| | (13,391 | ) | | (13,391 | ) |
Issuance of common stock under dividend reinvestment plan | | 87 |
| | 1 |
| | 383 |
| | — |
| | 384 |
|
Repurchases of common stock under dividend reinvestment plan | | (87 | ) | | (1 | ) | | (383 | ) | | — |
| | (384 | ) |
Balance at December 31, 2018 | | 140,961 |
| | $ | 1,409 |
| | $ | 1,492,739 |
| | $ | (621,786 | ) | | $ | 872,362 |
|
Net investment income | | — |
| | $ | — |
| | $ | — |
| | $ | 17,709 |
| | $ | 17,709 |
|
Net unrealized appreciation (depreciation) | | — |
| | — |
| | — |
| | 21,472 |
| | 21,472 |
|
Net realized gains (losses) | | — |
| | — |
| | — |
| | 25,213 |
| | 25,213 |
|
Provision for income tax (expense) benefit | | — |
| | — |
| | — |
| | 91 |
| | 91 |
|
Distributions to stockholders | | — |
| | — |
| | — |
| | (13,391 | ) | | (13,391 | ) |
Issuance of common stock under dividend reinvestment plan | | 60 |
| | 1 |
| | 311 |
| | — |
| | 312 |
|
Repurchases of common stock under dividend reinvestment plan | | (60 | ) | | (1 | ) | | (311 | ) | | — |
| | (312 | ) |
Balance at March 31, 2019 | | 140,961 |
| | $ | 1,409 |
| | $ | 1,492,739 |
| | $ | (570,692 | ) | | $ | 923,456 |
|
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Distributions
Distributions to common stockholders are recorded on the ex-dividend date. The Company is required to distribute dividends each taxable year to its stockholders of an amount generally at least equal to 90% of its investment company taxable income, determined without regard to any deduction for dividends paid, in order to be eligible for tax benefits allowed to a RIC under Subchapter M of the Code. The Company anticipates paying out as a distribution all or substantially all of those amounts. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, are generallymay be distributed although the Company may decide to retain such net realized capital gainsstockholders or retained for investment.reinvestment.
The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors authorizes, and the Company declares a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP with such shares issued at the greater of the most recently computed net asset value per share of common stock or 95% of the current market price per share of common stock on the payment date for such distribution (or such lesser discount that still exceeds the most recently computed net asset value per share of common stock).distribution. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP.
For income tax purposes, the Company estimates thathas reported its distributions for the 20172019 calendar year will be composed primarily ofas ordinary income and the actualincome. The character of such distributions will bewas appropriately reported to the Internal Revenue Service and stockholders for the 20172019 calendar year. To the extent that the Company’s taxable earnings for a fiscal and taxable year fall below the amount of distributions paid for the fiscal and taxable year, a portion of the total amount of the Company’s distributions for the fiscal and taxable year may beis deemed a return of capital for tax purposes to the Company’s stockholders.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table reflects the distributions per share that the Company has paid, including shares issued under the DRIP, on its common stock during the threesix months ended DecemberMarch 31, 20172020 and 2016:2019:
|
| | | | | | | | | | | | | | | | | |
Date Declared | | Record Date | | Payment Date | | Amount per Share | | Cash Distribution | | DRIP Shares Issued | | | | DRIP Shares Value |
August 7, 2017 | | December 15, 2017 | | December 29, 2017 | | $ | 0.125 |
| | $ 17.3 million | | 58,456 |
| | (1) | | $ 0.3 million |
Total for the three months ended December 31, 2017 | | $ | 0.125 |
| | $ 17.3million | | 58,456 |
| | | | $ 0.3 million |
| | | | | | | | | | | | | | |
Date Declared | | Record Date | | Payment Date | | Amount per Share | | Cash Distribution (2) | | DRIP Shares Issued | | | | DRIP Shares Value (2) |
August 3, 2016 | | October 14, 2016 | | October 31, 2016 | | $ | 0.06 |
| | $ 8.2 million | | 81,391 |
| | (1) | | $ 0.4 million |
August 3, 2016 | | November 15, 2016 | | November 30, 2016 | | 0.06 |
| | 8.2 million | | 80,962 |
| | (1) | | 0.4 million |
October 18, 2016 | | December 15, 2016 | | December 30, 2016 | | 0.06 |
| | 7.7 million | | 70,316 |
| | (1) | | 0.4 million |
Total for the three months ended December 31, 2016 | | $ | 0.18 |
| | $ 24.0 million | | 232,669 |
| | | | $ 1.3 million |
|
| | | | | | | | | | | | | | | |
Date Declared | | Record Date | | Payment Date | | Amount per Share | | Cash Distribution | | DRIP Shares Issued (1) | | DRIP Shares Value |
November 12, 2019 | | December 13, 2019 | | December 31, 2019 | | $ | 0.095 |
| | $ 12.9 million | | 87,747 |
| | $ 0.5 million |
January 31, 2020 | | March 13, 2020 | | March 31, 2020 | | 0.095 |
| | 12.9 million | | 157,523 |
| | 0.5 million |
Total for the six months ended March 31, 2020 | | $ | 0.190 |
| | $ 25.8 million | | 245,270 |
| | $ 1.0 million |
Date Declared | | Record Date | | Payment Date | | Amount per Share | | Cash Distribution | | DRIP Shares Issued (1) | | DRIP Shares Value |
November 19, 2018 | | December 17, 2018 | | December 28, 2018 | | $ | 0.095 |
| | $ 13.0 million | | 87,429 |
| | $ 0.4 million |
February 1, 2019 | | March 15, 2019 | | March 29, 2019 | | 0.095 |
| | 13.1 million | | 59,603 |
| | 0.3 million |
Total for the six months ended March 31, 2019 | | $ | 0.190 |
| | $ 26.1 million | | 147,032 |
| | $ 0.7 million |
__________
(1) Shares were purchased on the open market and distributed.
(2) Totals do not sum due to rounding.
Common Stock Offering
There were no common stock offerings during the threesix months ended DecemberMarch 31, 20172020 and December 31, 2016.
Stock Repurchase Program
On November 28, 2016, the Company’s Board of Directors approved a common stock repurchase program authorizing the Company to repurchase up to $12.5 million in the aggregate of its outstanding common stock through November 28, 2017. During the three months ended December 31, 2016, the Company repurchased 2,298,247 shares of its common stock for $12.5 million, including commissions, under the common stock repurchase plan. This authorization has been fully utilized.2019.
Note 6. Borrowings
INGCredit Facility
On November 30, 2017, the Company entered into a senior secured revolving credit facility (the “ING facility”(as amended and restated, the “Credit Facility”) pursuant to a Senior Secured Revolving Credit Agreement (the “ING Credit Agreement”) with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. The ING facilityCredit Facility provides that the Company may use the proceeds of the loans and issuances of letters of credit under the facilityCredit Facility for general corporate purposes, including acquiring and funding leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other investments. The ING Credit AgreementFacility further allows the Company to request letters of credit from ING Capital LLC, as the issuing bank.
The ING facility permits up to $600
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
As of March 31, 2020 and September 30, 2019, (i) the size of the Credit Facility was $700 million of borrowings and includes(with an “accordion” feature that permits the Company, under certain circumstances, to increase the size of the facility up to $800 million. Borrowings under$1.02 billion), (ii) the ING Credit Agreement bearperiod during which the Company may make drawings will expire on February 25, 2023 and the maturity date is February 25, 2024 and (iii) the interest at a rate equal to, at the Company’s election, eithermargin for (a) LIBOR (1-loans (which may be 1-, 2-, 3- or 6-month, at the Company’s option) plus a margin ofwas 2.00% (which can be increased up to 2.25%) and (b) alternate base rate loans was 1.00% (which can be increased up to 1.25%), 2.50% or 2.75% per annumeach depending on the Company’s senior debt coverage ratio as calculated under the ING Credit Agreement, with no LIBOR floor or (b) an alternate base rate plus a margin of 1.25%, 1.50% or 1.75% per annum depending on the Company’s senior debt coverage ratio as calculated under the ING Credit Agreement. The period during whichratio.
On December 13, 2019, the Company may make drawings underamended the ING facility expires on November 29, 2020 (the “Revolving Termination Date”) andCredit Facility to (1) reduce the final maturity daterequired ratio of total assets (less total liabilities) to total indebtedness of the facility will be one year followingCompany and its subsidiaries (subject to certain exceptions), from 1.65 to 1.00 to 1.50 to 1.00 and (2) modify the Revolving Termination Date.definition of Advance Rate to reference asset coverage of 1.50 to 1.00, rather than 1.65 to 1.00.
The ING facilityCredit Facility is secured by substantially all of the Company’s assets (excluding, among other things, investments held in and by certain subsidiaries of the Company or investments in certain portfolio companies of the Company) and guaranteed by certain subsidiaries of the Company pursuant to a Guarantee, PledgeCompany. As of March 31, 2020, except for assets that were held by the Excluded Subsidiaries and Security Agreement (“ING Security Agreement”) entered into in connection withcertain other immaterial subsidiaries, substantially all of the ING Credit Agreement, among the Company, the other obligors party thereto, and ING Capital LLC,Company's assets are pledged as collateral agent tounder the secured parties. Pursuant to the ING Security Agreement, the Company pledged its entire equity interest in certain immaterial subsidiaries to the collateral agent pursuant to the terms of the ING Security Agreement.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Credit Facility.
The ING Credit Agreement and related agreements governing the ING facility requiredFacility requires the Company to, among other things, (i) make representations and warranties regarding the collateral as well as each of the Company’s portfolio companies’ businesses, (ii) agree to certain indemnification obligations, and (iii) comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including covenants related to: (A) limitations on the incurrence of additional indebtedness and liens, (B) limitations on certain investments, (C) limitations on certain asset transfers and restricted payments, (D) maintaining a certain minimum stockholders’ equity, (E) maintaining a ratio of total assets (less total liabilities) to total indebtedness, of the Company and its subsidiaries (subject to certain exceptions), of not less than 2.0:1.0,1.50 to 1.00, (F) maintaining a ratio of consolidated EBITDA to consolidated interest expense, of the Company and its subsidiaries (subject to certain exceptions), of not less than (1) 2.02.25 to 1.0 for the first year following the closing date and (2) 2.25:1.00, thereafter, (G) maintaining a minimum liquidity and net worth, and (H) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. The ING facilityCredit Facility also includeincludes usual and customary default provisions such as the failure to make timely payments under the facility, the occurrence of a change in control, and the failure by the Company to materially perform under the ING Credit Agreement and related agreements governing the ING facility, which, if not complied with, could accelerate repayment under the ING facility. As of DecemberMarch 31, 2017,2020, the Company was in compliance with all financial covenants under the ING facility.
Credit Facility. In addition to the asset coverage ratio described above, borrowings under the Credit Facility (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that will apply different advance rates to different types of assets in the Company’s portfolio. Each loan or letter of credit originated or assumed under the ING facilityCredit Facility is subject to the satisfaction of certain conditions. The Company cannot be assured that it will be able to borrow funds under the ING facility at any particular time or at all.
From May 27, 2010 through November 30, 2017, the Company was party to a secured syndicated revolving credit facility with certain lenders party thereto from time to time and ING Capital LLC, as administrative agent (as amended, the “Prior ING Facility”). In connection with the entry into the ING Credit Agreement, the Company repaid all outstanding borrowings under the Prior ING Facility following which the Prior ING Facility was terminated. Obligations under the Prior ING Facility would have otherwise matured on August 6, 2018. During the three months ended December 31, 2017, the Company expensed $0.2 million of unamortized deferred financing costs related to the Prior ING Facility.
As of DecemberMarch 31, 2017,2020 and September 30, 2019, the Company had $205.0$404.8 million and $314.8 million of borrowings outstanding under the ING facility,Credit Facility, respectively, which had a fair value of $205.0 million.$404.8 million and $314.8 million, respectively. The Company's borrowings under the ING facility bore interest at a weighted average interest rate of 3.961% for the period from November 30, 2017 to December 31, 2017. As of September 30, 2017, the Company had $226.5 million of borrowings outstanding under the Prior ING Facility. The Company’s borrowings under the Prior INGCredit Facility bore interest at a weighted average interest rate of 3.705%3.806% and 2.945%4.688% for the period from October 1, 2017 to November 30, 2017 and the threesix months ended DecemberMarch 31, 2016,2020 and 2019, respectively. For the three and six months ended DecemberMarch 31, 2017,2020, the Company recorded interest expense (inclusive of $2.7fees) of $4.2 million and $8.2 million, respectively, related to the Credit Facility. For the three and six months ended March 31, 2019, the Company recorded interest expense (inclusive of fees) of $4.3 million and $7.5 million in the aggregate, related to the Prior ING Facility and the ING facility. For the three months ended December 31, 2016,Credit Facility.
2025 Notes
On February 25, 2020, the Company recordedissued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest expensemethod over the term of $4.2 million relatedthe 2025 Notes.
The 2025 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the fifth supplemental indenture, dated February 25, 2020 (collectively, the "2025 Notes Indenture"), between the Company and Deutsche Bank Trust Company Americas (the "Trustee"). The 2025 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the Prior ING Facility.
Sumitomo Facility
On September 16, 2011, Funding II, a consolidated wholly-owned bankruptcy remote, special purpose subsidiary2025 Notes. The 2025 Notes rank equally in right of payment with all of the Company, entered into a LoanCompany's existing and Servicing Agreement (as subsequently amended, the "Sumitomo Agreement"), as amended from timefuture liabilities that are not so subordinated. The 2025 Notes effectively rank junior to time, with respect to a credit facility ("Sumitomo facility") with Sumitomo Mitsui Banking Corporation ("SMBC"), an affiliate of Sumitomo Mitsui Financial Group, Inc., as administrative agent, and eachany of the lenders from timeCompany's secured indebtedness (including unsecured indebtedness that the Company later secures) to time party thereto.
Prior to its termination on November 24, 2017, the Sumitomo facility permitted up to $125 million of borrowings (subject to collateral requirements). Borrowings under the Sumitomo facility bore interest at a rate of either (i) LIBOR (1-month) plus 2.00% per annum, with no LIBOR floor, if the borrowings under the Sumitomo facility were greater than 35%extent of the aggregate available borrowings under the Sumitomo facility or (ii) LIBOR (1-month) plus 2.25% per annum, if the borrowings under the Sumitomo Facility were less than or equal to 35%value of the aggregate available borrowings underassets securing such indebtedness. The 2025 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Sumitomo facility. The period during which the Company could have made and reinvested borrowings under the facility expired on September 16, 2017. On November 24, 2017, Funding II, as the borrower under the Sumitomo facility, repaid all outstanding borrowings thereunder, following which the Sumitomo facility was terminated. Obligations under the Sumitomo facility would have otherwise matured on the earlier of August 6, 2018Company's subsidiaries, financing vehicles or the date on which the Prior ING Facility was repaid, refinanced or terminated. As of December 31, 2017, the Company had no borrowings outstanding under the Sumitomo facility. During the three months ended December 31, 2017, the Company expensed $0.5 million of unamortized deferred financing costs related to the Sumitomo Facility.
The Company's borrowings under the Sumitomo facility bore interest at a weighted average interest rate of 3.501% and 2.784% for the period from October 1, 2017 through termination on November 24, 2017 and the three months ended December 31, 2016, respectively. For the three months ended December 31, 2017 and 2016, the Company recorded interest expense of $0.7 million, including $0.6 million of debt issuance costs that were expensed, and $0.6 million, respectively, related to the Sumitomo facility.similar facilities.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
SBIC Subsidiaries
OnInterest on the 2025 Notes is paid semi-annually on February 3, 2010,25 and August 25 at a rate of 3.500% per annum. The 2025 Notes mature on February 25, 2025 and may be redeemed in whole or in part at any time or from time to time at the Company's consolidated, wholly-owned subsidiary, FSMP IV, receivedoption prior to maturity at par plus a license, effective February 1, 2010, from“make-whole” premium, if applicable.
The 2025 Notes Indenture contains certain covenants, including covenants requiring the SBA to operateCompany's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as an SBIC undermodified by Section 301(c)61(a)(1) and (2) of the Small Business Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission ("SEC"), as well as covenants requiring the Company to provide financial information to the holders of the 2025 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1958,1934, as amended. On May 15, 2012,These covenants are subject to limitations and exceptions that are described in the Company's consolidated, wholly-owned subsidiary, FSMP V, received a license, effective May 10, 2012, from2025 Notes Indenture. The Company may repurchase the SBA to operate as an SBIC.
As of December 31, 2017 and September 30, 2017, FSMP IV and FSMP V had no SBA-guaranteed debentures outstanding,2025 Notes in accordance with the Investment Company Act and the rules promulgated thereunder. In addition, holders of the 2025 Notes can require the Company had commenced actions to surrenderrepurchase the license for FSMP IV2025 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2025 Notes Indenture. The 2025 Notes were issued in minimum denominations of $2,000 and FSMP V to the SBA. During the year ended September 30, 2017, FSMP IV and FSMP V repaid all SBA-guaranteed debentures outstanding. On January 17, 2018, the SBA approved FSMP IV's and FSMP V's requests to surrender its licenses.
integral multiples of $1,000 in excess thereof. During the three months ended DecemberMarch 31, 2016,2020, the SBA-guaranteed debentures heldCompany did not repurchase any of the 2025 Notes in the open market.
For each of the three and six months ended March 31, 2020, the Company recorded interest expense (inclusive of fees) of $1.1 million related to the 2025 Notes.
As of March 31, 2020, there were $300.0 million of 2025 Notes outstanding, which had a carrying value and fair value of $293.9 million and $274.5 million, respectively. The carrying value represents the aggregate principal amount outstanding less unamortized deferred financing costs and the unaccreted discount recorded upon the issuance of the 2025 Notes. As March 31, 2020, the total unamortized deferred financing costs and the net unaccreted discount were $3.6 million and $2.5 million, respectively.
2019 Notes
On February 26, 2014, the Company issued $250.0 million in aggregate principal amount of its 4.875% unsecured notes due 2019 (the "2019 Notes") for net proceeds of $244.4 million after deducting OID of $1.4 million, underwriting commissions and discounts of $3.7 million and offering costs of $0.5 million. The OID on the 2019 Notes was amortized based on the effective interest method over the term of the notes. The 2019 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the SBIC subsidiaries outstanding carriedthird supplemental indenture, dated February 26, 2014, between the Company and the Trustee.
Interest on the 2019 Notes was paid semi-annually on March 1 and September 1 at a weighted average interest rate of 3.348% (excluding the SBA annual charge). For4.875% per annum. As of March 31, 2020 and September 30, 2019, there were no 2019 Notes outstanding. The 2019 Notes matured on March 1, 2019 and were fully repaid during the three months ended DecemberMarch 31, 2016,2019. For the three and six months ended March 31, 2019, the Company recorded aggregate interest expense of $2.2$2.1 million and $5.1 million (inclusive of fees), respectively, related to the SBA-guaranteed debentures2019 Notes.
2024 Notes
On October 18, 2012, the Company issued $75.0 million in aggregate principal amount of both SBIC subsidiaries.its 5.875% unsecured 2024 Notes for net proceeds of $72.5 million after deducting underwriting commissions of $2.2 million and offering costs of $0.3 million. The 2024 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the first supplemental indenture, dated October 18, 2012, between the Company and the Trustee.
Interest on the 2024 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 5.875% per annum. On March 2, 2020, the Company redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes, following which they were delisted from the New York Stock Exchange. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. The Company has received exemptive relief fromrecognized a loss of $1.0 million in connection with the SEC to permit it to exclude the debtredemption of the SBIC subsidiaries guaranteed by2024 Notes during each of the SBA fromthree and six months ended March 31, 2020.
For the definition of senior securities in the Company's 200% asset coverage test under the 1940 Act. This allowsthree and six months ended March 31, 2020, the Company increased flexibility underrecorded interest expense of $0.8 million and $1.9 million (inclusive of fees), respectively, related to the 200% asset coverage test by permitting it2024 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.2 million and $2.3 million (inclusive of fees), respectively, related to borrow more than it would otherwise be able to under the 1940 Act absent the receipt of this exemptive relief.2024 Notes.
As of DecemberMarch 31, 2017,2020, there were no 2024 Notes outstanding. As of September 30, 2019, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.9 million and $77.4 million, respectively.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
2028 Notes
In April and May 2013, the Company issued $86.3 million in aggregate principal amount of its 6.125% unsecured 2028 Notes for assets thatnet proceeds of $83.4 million after deducting underwriting commissions of $2.6 million and offering costs of $0.3 million. The 2028 Notes were funded throughissued pursuant to an indenture, dated April 30, 2012, as supplemented by the Company's SBIC subsidiaries, substantially allsecond supplemental indenture, dated April 4, 2013, between the Company and the Trustee.
Interest on the 2028 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 6.125% per annum. On March 13, 2020, the Company redeemed 100%, or $86.3 million aggregate principal amount, of the Company's assetsissued and outstanding 2028 Notes, following which they were pledged as collateral underdelisted from the ING facility.
See Notes 13 through 14 for discussionNasdaq Global Select Market. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of additional debt obligations$1.5 million in connection with the redemption of the Company.2028 Notes during each of the three and six months ended March 31, 2020.
For the three and six months ended March 31, 2020, the Company recorded interest expense of $1.1 million and $2.5 million (inclusive of fees), respectively, related to the 2028 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.4 million and $2.7 million (inclusive of fees), respectively, related to the 2028 Notes.
As of March 31, 2020, there were no 2028 Notes outstanding. As of September 30, 2019, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.6 million and $87.6 million, respectively.
Note 7. Interest and Dividend Income
See Note 2 "Investment Income" for a description of the Company's accounting treatment of investment income.
Accumulated PIK interest activity for the three months ended December 31, 2017 and December 31, 2016 was as follows:
|
| | | | | | | | |
| | Three months ended December 31, 2017 | | Three months ended December 31, 2016 |
PIK balance at beginning of period | | $ | 69,417 |
| | $ | 62,631 |
|
Gross PIK interest accrued | | 8,046 |
| | 5,046 |
|
PIK income reserves (1) | | (6,179 | ) | | (2,209 | ) |
PIK interest received in cash | | (1,103 | ) | | (3,434 | ) |
PIK balance at end of period | | $ | 70,181 |
| | $ | 62,034 |
|
___________________
| |
(1) | PIK income is generally reserved for when a loan is placed on PIK non-accrual status. |
As of each of DecemberMarch 31, 20172020 and September 30, 2017,2019, there were eightthree investments on which the Company had stopped accruing cash and/or PIK interest or OID income. The percentages of the Company's debt investments at cost and fair value by accrual status as of DecemberMarch 31, 20172020 and September 30, 20172019 were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
| | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio | | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio |
Accrual | | $ | 1,258,056 |
| | 85.49 | % | | $ | 1,258,658 |
| | 96.81 | % | | $ | 1,344,535 |
| | 86.46 | % | | $ | 1,357,794 |
| | 95.29 | % |
PIK non-accrual (1) | | 12,661 |
| | 0.86 |
| | — |
| | — |
| | 10,227 |
| | 0.66 |
| | 379 |
| | 0.03 |
|
Cash non-accrual (2) | | 200,859 |
| | 13.65 |
| | 41,457 |
| | 3.19 |
| | 200,210 |
| | 12.88 |
| | 66,636 |
| | 4.68 |
|
Total | | $ | 1,471,576 |
| | 100.00 | % | | $ | 1,300,115 |
| | 100.00 | % | | $ | 1,554,972 |
| | 100.00 | % | | $ | 1,424,809 |
| | 100.00 | % |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
| | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio | | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio |
Accrual | | $ | 1,443,128 |
| | 98.22 | % | | $ | 1,306,989 |
| | 99.55 | % | | $ | 1,311,849 |
| | 95.72 | % | | $ | 1,305,718 |
| | 99.79 | % |
PIK non-accrual (1) | | 12,661 |
| | 0.86 |
| | — |
| | — |
| | 12,661 |
| | 0.92 |
| | — |
| | — |
|
Cash non-accrual (2) | | 13,572 |
| | 0.92 |
| | 5,864 |
| | 0.45 |
| | 46,107 |
| | 3.36 |
| | 2,706 |
| | 0.21 |
|
Total | | $ | 1,469,361 |
| | 100.00 | % | | $ | 1,312,853 |
| | 100.00 | % | | $ | 1,370,617 |
| | 100.00 | % | | $ | 1,308,424 |
| | 100.00 | % |
___________________
| |
(1) | PIK non-accrual status is inclusive of other non-cash income, where applicable. |
| |
(2) | Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable. |
Note 8. Taxable/Distributable Income and Dividend Distributions
Taxable income differs from net increase (decrease) in net assets resulting from operations primarily due to: (1) unrealized appreciation (depreciation) on investments, and secured borrowings and foreign currency, as gains and losses are not included in taxable income until they are realized; (2) origination and exit fees received in connection with investments in portfolio companies; (3) organizational and deferred offering costs; (4) income or loss recognition on exited investments; (5) recognition of interest income on certain loans; (5) income or loss recognition on exited investments; and (6) certain items related to investments in controlled foreign corporations.
As of September 30, 2019, the Company had net capital loss carryforwards of $515.8 million to offset net capital gains that will not expire, to the extent available and permitted by U.S. federal income tax law, of which $109.2 million are available to offset future short-term capital gains and $406.6 million are available to offset future long-term capital gains.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Listed below is a reconciliation of "net decreaseincrease (decrease) in net assets resulting from operations" to taxable income for the three and six months ended DecemberMarch 31, 20172020 and December 31, 2016.2019.
|
| | | | | | | | |
| | Three months ended December 31, 2017 | | Three months ended December 31, 2016 |
Net decrease in net assets resulting from operations | | $ | (30,441 | ) | | $ | (74,242 | ) |
Net unrealized depreciation on investments and secured borrowings | | 43,472 |
| | 74,440 |
|
Book/tax difference due to loan fees | | 264 |
| | 16 |
|
Book/tax difference due to exit fees | | — |
| | 1,081 |
|
Book/tax difference due to organizational and deferred offering costs | | (22 | ) | | (22 | ) |
Book/tax difference due to interest income on certain loans | | — |
| | (168 | ) |
Book/tax difference due to capital losses not recognized | | 591 |
| | 24,206 |
|
Other book/tax differences | | (1,206 | ) | | (1,871 | ) |
Taxable/Distributable Income(1) | | $ | 12,658 |
| | $ | 23,440 |
|
|
| | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Net increase (decrease) in net assets resulting from operations | | $ | (165,467 | ) | | $ | 64,485 |
| | $ | (151,624 | ) | | $ | 92,203 |
|
Net unrealized (appreciation) depreciation | | 163,533 |
| | (21,472 | ) | | 160,654 |
| | (14,497 | ) |
Book/tax difference due to organizational costs | | (21 | ) | | (11 | ) | | (43 | ) | | (21 | ) |
Book/tax difference due to interest income on certain loans | | — |
| | — |
| | — |
| | 878 |
|
Book/tax difference due to capital losses not recognized / (recognized) | | 23,958 |
| | (26,738 | ) | | 19,981 |
| | (44,440 | ) |
Other book/tax differences | | (8,002 | ) | | (296 | ) | | (2,858 | ) | | 290 |
|
Taxable/Distributable Income (1) | | $ | 14,001 |
| | $ | 15,968 |
| | $ | 26,110 |
| | $ | 34,413 |
|
__________
(1) The Company's taxable income for the three and six months ended DecemberMarch 31, 20172020 is an estimate and will not be finally determined until the Company files its tax return for the Company's anticipated fiscal and taxable year ending September 30, 2018.2020. Therefore, the final taxable income may be different than the estimate.
As of September 30, 2017, the components of accumulated undistributed income on a tax basis were as follows:
|
| | | |
Undistributed ordinary income, net | $ | 24,409 |
|
Net realized capital losses | 465,077 |
|
Unrealized losses, net | 97,839 |
|
The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
When assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred tax assets are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. The deferred tax asset recognized by the Company, is permittedas it relates to carry forward net capital losses, if any, incurredthe higher tax basis in taxable years beginning with the Company's taxable year ended September 30, 2012 for an unlimited period. However, any losses incurred during such taxable yearscarrying value of certain assets compared to the book basis of those assets, will be requiredrecognized in future years by these taxable entities. Deferred tax assets are based on the amount of the tax benefit that the Company’s management has determined is more likely than not to be utilized priorrealized in future periods. In determining the realizability of this tax benefit, management considered numerous factors that will give rise to pre-tax income in future periods. Among these are the losses incurredhistorical and expected future book and tax basis pre-tax income of the Company and unrealized gains in taxable years ended prior to the Company’s taxable yearassets at the determination date. Based on these and other factors, the Company determined that, as of March 31, 2020, $3.0 million of $3.8 million net deferred tax assets would not more likely than not be realized in future periods. As of March 31, 2020, the Company recorded a deferred tax asset of $0.8 million on the Consolidated Statements of Assets and Liabilities.
For the three months ended September 30, 2012,March 31, 2020, the Company recognized a total provision for income tax benefit of $1.7 million, which are subject to an expiration date. Aswas comprised of (i) a current income tax expense of approximately $0.1 million primarily as a result of the ordering rule, capital loss carryforwardspenalties and interest incurred, and (ii) a deferred income tax benefit of approximately $1.8 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable yearsubsidiaries.
For the six months ended prior to itsMarch 31, 2020, the Company recognized a total provision for income tax benefit of $1.5 million, which was comprised of (i) a current income tax benefit of approximately $0.1 million primarily as a result of a reversal of penalties and interest previously incurred, partially offset by current tax expense incurred from realized gains on investments held at the Company's wholly-owned taxable year ended September 30, 2012 may be more likely to expire unused than under previoussubsidiaries and (ii) a deferred income tax law.benefit of approximately $1.5 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
As of September 30, 2017,2019, the Company had net capital loss carryforwardsCompany's last tax year end, the components of $466.6 million to offset net capital gains, to the extent available and permitted by U.S. federalaccumulated overdistributed earnings on a tax basis were as follows:
|
| | | |
Undistributed ordinary income, net | $ | 10,699 |
|
Net realized capital losses | (515,800 | ) |
Unrealized losses, net | (53,451 | ) |
The aggregate cost of investments for income tax law. Of the capital loss carryforwards,purposes was $1.5 million expired onbillion as of September 30, 2017, $10.3 million will expire on2019. As of September 30, 2019, and $454.8 million will not expire,the aggregate gross unrealized appreciation for all investments in which there was an excess of value over cost for income tax purposes was $202.2 million. As of September 30, 2019, the aggregate gross unrealized depreciation for all investments in which $71.5 million are available to offset future short-term capital gains and $384.3 million are available to offset future long-term capital gains.there was an
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
As a RIC, the Company is also subject to a U.S. federal excise tax based on distributive requirements of its taxable income on a calendar year basis. The Company did not incur a U.S. federal excise tax for calendar years 2015 and 2016 and does not expect to incur a U.S. federal excise tax for calendar year 2017.
The aggregate cost of investments for income tax purposes was $1.8 billion as of September 30, 2017. As of September 30, 2017, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over cost for income tax purposes was $51.7 million. As of September 30, 2017, the aggregate gross unrealized depreciation for all investments in which there was an excess of cost for income tax purposes over value was $277.8$255.6 million. Net unrealized depreciation based on the aggregate cost of investments for income tax purposes was $226.1$53.4 million.
Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation on Investments and Secured Borrowings
Realized Gains or Losses
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended DecemberMarch 31, 2017,2020, the Company recorded an aggregate net realized losslosses of $0.3 million in connection with the sale of various debt investments in the open market.
During the three months ended December 31, 2016, the Company recorded an aggregate net realized loss of $23.1$26.5 million, which consisted of the following:
| | ($ in millions) | | |
Portfolio Company | Net Realized Gain (Loss) | Net Realized Gain (Loss) |
First Star Aviation, LLC | $ | (3.8 | ) | |
Ansira Partners, Inc. | 0.4 |
| |
Senior Loan Fund JV I, LLC | (19.9 | ) | |
Cenegenics, LLC | | $ | (29.2 | ) |
Dominion Diagnostics, LLC | | (15.6 | ) |
YETI Holdings, Inc. | | 14.2 |
|
Lytx Holdings, LLC | | 5.2 |
|
Other, net | 0.2 |
| (1.1 | ) |
Total, net | $ | (23.1 | ) | $ | (26.5 | ) |
During the three months ended March 31, 2019, the Company recorded net realized gains of $25.2 million, which consisted of the following:
|
| | | |
($ in millions) | |
Portfolio Company | Net Realized Gain (Loss) |
Maverick Healthcare Group, LLC | $ | 17.5 |
|
Comprehensive Pharmacy Services LLC | 7.5 |
|
Other, net | 0.2 |
|
Total, net | $ | 25.2 |
|
During the six months ended March 31, 2020, the Company recorded net realized losses of $23.2 million, which consisted of the following:
|
| | | |
($ in millions) | |
Portfolio Company | Net Realized Gain (Loss) |
Cenegenics, LLC | $ | (29.2 | ) |
Dominion Diagnostics, LLC | (15.6 | ) |
YETI Holdings, Inc. | 17.6 |
|
Lytx Holdings, LLC | 5.2 |
|
Other, net | (1.2 | ) |
Total, net | $ | (23.2 | ) |
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
During the six months ended March 31, 2019, the Company recorded net realized gains of $43.2 million, which consisted of the following:
|
| | | |
($ in millions) | |
Portfolio Company | Net Realized Gain (Loss) |
Maverick Healthcare Group, LLC | $ | 17.5 |
|
BeyondTrust Holdings LLC | 12.4 |
|
Comprehensive Pharmacy Services LLC | 7.5 |
|
InMotion Entertainment Group, LLC | 2.7 |
|
YETI Holdings, Inc. | 2.7 |
|
Other, net | 0.4 |
|
Total, net | $ | 43.2 |
|
Net Unrealized Appreciation or Depreciation on Investments and Secured Borrowings
Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.
During the three months ended DecemberMarch 31, 20172020 and December 31, 2016,2019, the Company recorded net unrealized depreciation on investments and secured borrowingsappreciation (depreciation) of $43.5$(163.5) million and $74.4$21.5 million, respectively. For the three months ended DecemberMarch 31, 2017,2020, this consisted of $39.0$(139.8) million of net unrealized depreciation on debt investments $3.8and $(54.4) million of net unrealized depreciation on equity investments, and $2.3partially offset by $28.4 million of net reclassificationsunrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized gains (resulting inlosses) and $2.2 million of net unrealized depreciation),appreciation of foreign currency forward contracts. For the three months ended March 31, 2019, this consisted of $22.3 million of net unrealized appreciation on equity investments, $3.6 million of net unrealized appreciation on debt investments and $0.8 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $1.6$(5.2) million of net unrealized depreciation related to exited investments (a portion of secured borrowings.which results in a reclassification to realized gains).
During the six months ended March 31, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $(160.7) million and $14.5 million, respectively. For the threesix months ended DecemberMarch 31, 2016, the Company's net unrealized depreciation2020, this consisted of $81.2$(134.0) million of net unrealized depreciation on debt investments $9.6and $(50.0) million of net unrealized depreciation on equity investments, partially offset by $22.5 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $0.1$0.8 million of net unrealized appreciation of foreign currency forward contracts. For the six months ended March 31, 2019, this consisted of $24.2 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $14.0 million of net unrealized appreciation on secured borrowings, offset by $16.5equity investments and $0.4 million of net reclassifications to realized losses (resulting in unrealized appreciation).appreciation of foreign currency forward contracts, partially offset by $(24.1) million of net unrealized depreciation on debt investments.
Note 10. Concentration of Credit Risks
The Company deposits its cash with financial institutions and at times such balances may be in excess of the FDIC insurance limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 11. Related Party Transactions
As of DecemberMarch 31, 20172020 and September 30, 2017,2019, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $6.3$8.7 million and $6.8$10.2 million, respectively, reflecting the unpaid portion of the base management fees and incentive fees payable to Oaktree. Oaktree and FSM.has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.
New Investment Advisory Agreement
Effective October 17, 2017 and as of December 31, 2017, theThe Company is party to the New Investment Advisory Agreement with Oaktree.Agreement. Under the New Investment Advisory Agreement, the Company pays Oaktree a fee for its services under the New Investment Advisory Agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee payable to Oaktree and any incentive fees earned by Oaktree is ultimately borne by common stockholders of the Company.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Prior to October 17, 2017, the Company was externally managed by Fifth Street Management LLC (the "Former Adviser”), an indirect, partially-owned subsidiary of Fifth Street Asset Management Inc., pursuant to an investment advisory agreement between the Company and the Former Adviser (the "Former Investment Advisory Agreement"), which was terminated on October 17, 2017.
Unless earlier terminated as described below, the New Investment Advisory Agreement will remain in effect until October 17, 2019September 30, 2021 and thereafter from year-to-year if approved annually by the Board of Directors of the Company or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, including, in either case, approval by a majority of the directors of the Company who are not interested persons. The New Investment Advisory Agreement will automatically terminate in the event of its assignment. The New Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The New Investment Advisory Agreement may also be terminated, without penalty, upon the vote of a majority of the outstanding voting securities of the Company.
Base Management Fee
Under the New Investment Advisory Agreement, the base management fee onis calculated at an annual rate of 1.50% of total gross assets, including any investment made with borrowings, but excluding cash and cash equivalents, is 1.50%.equivalents. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated. Effective May 3, 2019, the base management fee on the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents, that exceed the product of (A) 200% and (B) the Company’s net asset value will be 1.00%. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to exemptive relief the Company received from the SEC with respect to debentures issued by a small business investment company subsidiary.
For the period from October 17, 2017 to Decemberthree and six months ended March 31, 2017,2020, the base management fee incurred under the Investment Advisory Agreement was $5.3 million and $10.9 million, respectively. For the three and six months ended March 31, 2019, the base management fee (net of waivers) incurred under the New Investment Advisory Agreement was $4.4$5.7 million which was payable to Oaktree. For the period from October 17, 2017 to December 31, 2017, Oaktree voluntarily and irrevocably waived a portion of the base management fee, which resulted in waivers of less than $0.1 million.$11.2 million, respectively.
Incentive Fee
The incentive fee consists of two parts. Under the New Investment Advisory Agreement, the first part of the incentive fee (the “incentive fee on income” or "Part I incentive fee") is calculated and payable quarterly in arrears based upon the “pre-incentive fee net investment income” of the Company for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.
For this purpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, other than fees for providing managerial assistance) accrued during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the New Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as OID debt, instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Under the New Investment Advisory Agreement, the calculation of the incentive fee on income for each quarter is as follows:
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
No incentive fee is payable to Oaktree in any quarter in which the Company’s pre-incentive fee net investment income does not exceed the preferred return rate of 1.50% (the “preferred return”) on net assets;
100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the preferred return but is less than or equal to 1.8182% in any fiscal quarter is payable to Oaktree. This portion of the incentive fee on income is referred to as the “catch-up” provision, and it is intended to provide Oaktree with an incentive fee of 17.5% on all of the Company’s pre-incentive fee net investment income when the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets in any fiscal quarter; and
For any quarter in which the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets, the subordinated incentive fee on income is equal to 17.5% of the amount of the Company’s pre-incentive fee net investment income, as the preferred return and catch-up will have been achieved.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle.
For the period from October 17, 2017 to Decemberthree and six months ended March 31, 2017,2020, the first part of the incentive fee (net of waivers)(incentive fee on income) incurred under the New Investment Advisory Agreement was $0.7 million. To ensure compliance$3.4 million and $6.4 million, respectively. For the three and six months ended March 31, 2019, the first part of the transactions contemplated by the Purchase Agreement, Oaktree entered into a two-year contractualincentive fee waiver with the Company that will waive, to the extent necessary, any management or incentive fees payable(incentive fee on income) incurred under the New Investment Advisory Agreement that exceed what would have been paidwas $3.8 million and $7.5 million (prior to waivers), respectively. Oaktree has voluntarily deferred the Former Adviser in the aggregate under the Former Investment Advisory Agreement. Amounts potentially subject to waiver are accrued quarterly on a cumulative basis and, to the extent required, any fees will be waived or reimbursed as soon as practicable after the endpayment of the two-year period. As of December 31, 2017, Oaktree had accrued an aggregate amount of $0.1 million ofPart I incentive fees potentially subject to waiver.earned during the three months ended March 31, 2020.
Under the New Investment Advisory Agreement, the second part of the incentive fee will be(the "capital gains incentive fee") is determined and payable in arrears as of the end of each fiscal year (or upon termination of the investment advisory agreement,Investment Advisory Agreement, as of the termination date) commencing with the fiscal year endingended September 30, 2019 and will equalequals 17.5% of the Company’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year endingended September 30, 2019 through the end of each subsequent fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees under the New Investment Advisory Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to the Company’s portfolio as of the end of the fiscal year endingended September 30, 2018 will beare excluded from the calculations of the second part of the incentive fee. For the year ended September 30, 2019, the Company incurred $4.6 million of capital gains incentive fees under the Investment Advisory Agreement (prior to waivers).
GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized on a theoretical "liquidation basis." A fee so calculated and accrued would not be payable under applicable law and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts ultimately paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains incentive fee plus the aggregate cumulative unrealized capital appreciation. Any realized capital gains and losses and cumulative unrealized capital appreciation and depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the GAAP accrual. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 17.5% of such cumulative amount, less the aggregate amount of actual capital gains incentive fees payable or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future or any accrued capital gains incentive fee will become payable under the Investment Advisory Agreement. For the three and six months ended March 31, 2020, the Company reversed $6.6 million and $5.6 million of previously accrued capital gains incentive fees, respectively. For the three and six months ended March 31, 2019, the Company recorded a $8.2 million and $10.0 million capital gains incentive fee accrual (prior to waivers), respectively. The Company did not have any cumulative accrued capital gains incentive fees payable as of March 31, 2020.
To ensure compliance with Section 15(f) of the Investment Company Act, Oaktree entered into a two-year contractual fee waiver with the Company, which ended on October 17, 2019, pursuant to which Oaktree waived any management or incentive fees payable under the Investment Advisory Agreement that exceeded what would have been paid to the Former Adviser in the aggregate under the Former Investment Advisory Agreement. The contractual amount of fees permanently waived at the end of the two-year period was $3.9 million. Prior to the end of the two-year period, amounts potentially subject to waiver under the two-year contractual fee waiver were accrued quarterly based on a theoretical “liquidation basis.” As of September 30, 2019, the Company had accrued cumulative fee waivers of $9.1 million. During the three months ended December 31, 2019, the Company reversed $5.2 million of
previously accrued fee waivers since the two-year fee waiver period has ended.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The following table provides a roll-forward of the accrued waiver balance and illustrates the impact of the end of the two-year contractual fee waiver period:
|
| | | |
($ in millions) | |
Accrued fee waivers as of September 30, 2019 (1) | $ | 9.1 |
|
Reversal of previously accrued fee waivers (2) | (5.2 | ) |
Contractual fees waived under the Investment Advisory Agreement (3) | (3.9 | ) |
Accrued fee waivers as of March 31, 2020 | $ | — |
|
| |
(1) | Calculated in accordance with GAAP as of September 30, 2019 and is based on a hypothetical liquidation basis. |
| |
(2) | Reflects the reversal of fee waivers that were previously accrued based on a hypothetical liquidation basis when the two-year contractual fee waiver was in effect. This reversal was recognized in connection with the expiration of the two-year contractual fee waiver, which ended on October 17, 2019, and is reflected in reversal of fees waived in the Consolidated Statement of Operations for the six months ended March 31, 2020. |
| |
(3) | Reflects the amount of fees permanently waived pursuant to the two-year contractual fee waiver. |
As of September 30, 2019, the capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers) was $0.8 million as shown below:
|
| | | |
($ in millions) | September 30, 2019 (1) |
Capital gains incentive fee payable under the Investment Advisory Agreement (prior to waivers) | $ | 4.6 |
|
Contractual fees waived | (3.9 | ) |
Capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers) | $ | 0.8 |
|
| |
(1) | Amounts may not sum due to rounding. |
Indemnification
The New Investment Advisory agreementAgreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of the Investment Adviser'sOaktree's services under the investment advisory agreement or otherwise as the Investment Adviser.
Collection and Disbursement of Fees Owed to FSM
Under the Former Investment Advisory Agreement described below, both the base management fee and incentive fee on income were calculated and paid to FSM at the end of each quarter. In order to ensure that FSM receives the compensation earned during the quarter ending December 31, 2017, the initial payment of the base management fee and incentive fee on income under the New Investment Advisory Agreement will cover the entire quarter in which the New Investment Advisory Agreement became effective, and be calculated at a blended rate that will reflect fee rates under the respective investment advisory agreements for the portion of the quarter in which FSM and Oaktree were serving as investment adviser. This structure will allow Oaktree to pay FSM in early 2018, the pro rata portion of the fees that were earned by, but not paid to, FSM for services rendered to the Company prior to October 17, 2017.
Former Investment Advisory Agreement
The following is a description of the fourth amended and restated investment advisory agreement between FSM and the Company (the “Former Investment Advisory Agreement”), which was terminated on October 17, 2017. The Former Investment Advisory Agreement, dated March 20, 2017, was effective January 1, 2017 through its termination on October 17, 2017. The Former Investment
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Advisory Agreement amended and restated the Company’s third amended and restated investment advisory agreement with FSM, which was effective as of January 1, 2016, to impose a total return hurdle provision and reduce the “preferred return.”
Through October 17, 2017, the Company paid FSM a fee for its services under the Former Investment Advisory Agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee paid to FSM and any incentive fees earned by FSM were ultimately borne by common stockholders of the Company.
Base Management Fee
As of January 1, 2016, the base management fee was calculated at an annual rate of 1.75% of the Company’s gross assets, including any borrowings for investment purposes but excluding cash and cash equivalents. The base management fee was payable quarterly in arrears and the fee for any partial month or quarter was appropriately prorated.
For the period from October 1, 2017 to October 17, 2017 and the three months ended December 31, 2016, the base management fee incurred under the investment advisory agreements with FSM was $1.1 million (net of waivers) and $8.6 (net of waivers), respectively, all of which were payable to FSM. For the period from October 1, 2017 to October 17, 2017 and the three months ended December 31, 2016, FSM voluntarily waived a portion of the base management fee, which resulted in waivers of less than $0.1 million and $0.1 million, respectively.
Incentive Fee
The incentive fee paid to FSM had two parts. The first part was calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding fiscal quarter. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding quarter, was compared to a “hurdle rate” of 1.75% per quarter (2% for periods prior to January 1, 2017), subject to a “catch-up” provision measured as of the end of each quarter. The Company’s net investment income used to calculate this part of the incentive fee was also included in the amount of its gross assets used to calculate the 1.75% base management fee. The operation of the incentive fee with respect to the Company’s pre-incentive fee net investment income for each quarter was as follows:
No incentive fee was payable to FSM in any fiscal quarter in which the Company’s pre-incentive fee net investment income did not exceed the preferred return rate of 1.75% (2% for periods prior to January 1, 2017) (the “preferred return”);
100% of the Company’s pre-incentive fee net investment income, if any, that exceeded the preferred return rate but was less than or equal to 2.1875% (2.5% for periods prior to January 1, 2017) in any fiscal quarter was payable to FSM. This portion of the Company’s pre-incentive fee net investment income (which exceeds the preferred return rate but is less than or equal to 2.1875% (2.5% for periods prior to January 1, 2017)) is referred to as the “catch-up.” The “catch-up” provision was intended to provide FSM with an incentive fee of 20% on all of the Company’s pre-incentive fee net investment income as if a preferred return rate did not apply when the Company’s pre-incentive fee net investment income exceeded 2.1875% in any quarter (2.5% for periods prior to January 1, 2017); and
For any quarter in which the Company’s pre-incentive fee net investment income, if any, exceeded 2.1875% on net assets (2.5% for periods prior to January 1, 2017) , the subordinated incentive fee on income was equal to 20% of the amount of the Company’s pre-incentive fee net investment income as the preferred return and catch-up would have been achieved.
From January 1, 2017 to October 17, 2017, in the event the cumulative subordinated incentive fee on income accrued for the Lookback Period (after giving effect to any reduction(s) pursuant to this paragraph for any prior fiscal quarters of the Lookback Period but not the quarter of calculation) exceeded 20.0% of the cumulative net increase in net assets resulting from operations during the Lookback Period, then the subordinated incentive fee on income for the quarter was reduced by an amount equal to (1) 25% of the subordinated incentive fee on income calculated for such quarter (prior to giving effect to any reduction pursuant to this paragraph) less (2) any base management fees waived by FSM for such fiscal quarter. For this purpose, the “cumulative net increase in net assets resulting from operations” was an amount, if positive, equal to the sum of pre-incentive fee net investment income, base management fees, realized gains and losses and unrealized capital appreciation and depreciation of the Company for the Lookback Period. “Lookback Period” meant the period commencing January 1, 2017 and ending on the last day of the fiscal quarter for which the subordinated incentive fee on income was being calculated.
There was no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there was no clawback of amounts previously paid if subsequent quarters were below the quarterly hurdle and there was no delay of payment if prior quarters were below the quarterly hurdle.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
The second part of the incentive fee was determined and payable in arrears as of the end of each fiscal year (or upon termination of the Former Investment Advisory Agreement, as of the termination date) and equaled 20% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees, provided that, the incentive fee determined as of September 30, 2008 was calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses and unrealized capital depreciation from inception.
For the period from October 1, 2017 to October 17, 2017, no incentive fee was incurred under the Prior Investment Advisory Agreement. For the three months ended December 31, 2016, incentive fees incurred under the investment advisory agreement with FSM were $4.1 million.
GAAP Accruals
GAAP requires the Company to accrue for the theoretical capital gain incentive fee that would be payable after giving effect to the net unrealized capital appreciation. A fee so calculated and accrued would not be payable under either the New Investment Advisory Agreement or theotherwise as investment advisory agreements with FSM, and may never be paid based upon the computation of capital gain incentive fees in subsequent periods. Amounts ultimately paid under the New Investment Advisory Agreement will be consistent with the formula reflected in the New Investment Advisory Agreement. The Company did not accrue for capital gain incentive fees as of December 31, 2017 because the capital gain incentive fee under the New Investment Advisory Agreement will not be charged until the fiscal year ending September 30, 2019.adviser.
Administrative Services
The Company entered intois party to the New Administration Agreement with Oaktree Administrator on October 17, 2017.Administrator. Pursuant to the New Administration Agreement, Oaktree Administrator provides administrative services to the Company necessary for the operations of the Company, which include providing office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as Oaktree Administrator, subject to review by the Company’s Board of Directors, shall from time to time deem to be necessary or useful to perform its obligations under the New Administration Agreement. Oaktree Administrator may, on behalf of the Company, conduct relations and negotiate agreements with custodians, trustees, depositories, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Oaktree Administrator makes reports to the Company’s Board of Directors of its performance of obligations under the New Administration Agreement and furnishes advice and recommendations with respect to such other aspects of the Company’s business and affairs, in each case, as it shall determine to be desirable or as reasonably required by the Company’s Board of Directors; provided that Oaktree Administrator shall not provide any investment advice or recommendation.
Oaktree Administrator also provides portfolio collection functions for interest income, fees and warrants and is responsible for the financial and other records that the Company is required to maintain and prepares, prints and disseminates reports to the Company’s stockholders and all other materials filed with the SEC. In addition, Oaktree Administrator assists the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Oaktree Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
For providing these services, facilities and personnel, the Company reimburses Oaktree Administrator the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the New Administration Agreement, including the Company’s allocable portion of the rent of the Company’s principal executive offices (which are located in a building owned by a Brookfield affiliate) at market rates and the Company’s allocable portion of the costs of compensation and related expenses of its Chief Financial Officer, Chief Compliance Officer, their staffs and other non-investment professionals at Oaktree that perform duties for the Company. Such reimbursement is at cost, with no profit to, or markup by, Oaktree Administrator. The New Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The New Administration Agreement may also be terminated, without penalty, upon the vote of a majority of the Company’s outstanding voting securities.
Prior to its termination by its terms on October 17, 2017 and throughoutFor the Company’s 2017 fiscal year,three months ended March 31, 2020, the Company was party toaccrued administrative expenses of $0.5 million, including $0.1 million of general and administrative expenses. For the Former Administration Agreement with the Former Administrator. The Former Administrator was a wholly-owned subsidiary of FSM. Pursuant to the Former Administration Agreement, the Former Administrator provided services substantially similar to those provided by Oaktree Administrator as described above. For providing these services, facilities and personnel,six months ended March 31, 2020, the Company reimbursedaccrued administrative expenses of $1.0 million, including $0.1 million of general and administrative expenses. For the three months ended March 31, 2019, the Company accrued administrative expenses of $0.5 million, including $0.1 million of general and administrative expenses. For the six months ended March 31, 2019, the Company accrued administrative expenses of $1.3 million, including $0.2 million of general and administrative expenses.
As of each of March 31, 2020 and September 30, 2019, $2.7 million was included in “Due to affiliate” in the Consolidated Statements of Assets and Liabilities, reflecting the unpaid portion of administrative expenses and other reimbursable expenses payable to Oaktree Administrator.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
the Former Administrator the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Former Administration Agreement, including rent and the allocable portion of the costs of compensation and related expenses of its Chief Financial Officer and Chief Compliance Officer and their staffs. Such reimbursement was at cost, with no profit to, or markup by, the Former Administrator. The Former Administration Agreement with FSC CT was terminable by either party without penalty upon 60 days' written notice to the other party.
For the three months ended December 31, 2017, the Company accrued administrative expenses of $0.7 million, including $0.2 million of general and administrative expenses. Of these amounts, $0.2 million was due to the Former Administrator for administrative expenses incurred prior to October 17, 2017 and $0.5 million was due to Oaktree Administrator. For the three months ended December 31, 2016, the Company accrued administrative expenses of $1.4 million, including $0.9 million of general and administrative expenses, which were due to the Former Administrator.
As of December 31, 2017 and September 30, 2017, $1.5 million and $1.8 million was included in “Due to affiliate” in the Consolidated Statements of Assets and Liabilities, respectively, reflecting the unpaid portion of administrative expenses payable to the Former Administrator and Oaktree Administrator.
Note 12. Financial Highlights
|
| | | | |
| | Three months ended December 31, 2017 | | Three months ended December 31, 2016 |
Net asset value at beginning of period | | $6.16 | | $7.97 |
Net investment income (4) | | 0.09 | | 0.16 |
Net unrealized depreciation on investments and secured borrowings (4) | | (0.31) | | (0.52) |
Net realized loss on investments and secured borrowings (4) | | — | | (0.16) |
Distributions to stockholders (4) | | (0.13) | | (0.18) |
Net issuance/repurchases of common stock (4) | | — | | 0.04 |
Net asset value at end of period | | $5.81 | | $7.31 |
Per share market value at beginning of period | | $5.47 | | $5.81 |
Per share market value at end of period | | $4.89 | | $5.37 |
Total return (1) | | (8.37)% | | (4.44)% |
Common shares outstanding at beginning of period | | 140,960,651 | | 143,258,785 |
Common shares outstanding at end of period | | 140,960,651 | | 140,960,651 |
Net assets at beginning of period | | $867,657 | | $1,142,288 |
Net assets at end of period | | $819,595 | | $1,030,272 |
Average net assets (2) | | $849,181 | | $1,090,244 |
Ratio of net investment income to average net assets (5) | | 6.22% | | 8.48% |
Ratio of total expenses to average net assets (excluding fee waiver and insurance recovery) (5) | | 9.67% | | 10.60% |
Effect of fee waivers (5) | | (0.06)% | | (0.02)% |
Effect of insurance recoveries (5) | | —% | | (0.22)% |
Ratio of net expenses to average net assets (5) | | 9.61% | | 10.36% |
Ratio of portfolio turnover to average investments at fair value | | 12.76% | | 8.75% |
Weighted average outstanding debt (3) | | $651,826 | | $1,168,790 |
Average debt per share (4) | | $4.62 | | $8.18 |
Asset coverage ratio | | 230.61% | | 217.39% |
|
| | | | | | | | |
(Share amounts in thousands) | | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Net asset value per share at beginning of period | | $6.61 | | $6.19 | | $6.60 | | $6.09 |
Net investment income (1) | | 0.16 | | 0.13 | | 0.22 | | 0.25 |
Net unrealized appreciation (depreciation) (1) | | (1.15) | | 0.15 | | (1.14) | | 0.10 |
Net realized gains (losses) (1) | | (0.19) | | 0.18 | | (0.16) | | 0.30 |
Provision for income tax (expense) benefit (1) | | 0.01 | | — | | 0.01 | | — |
Distributions to stockholders | | (0.10) | | (0.10) | | (0.19) | | (0.19) |
Net asset value per share at end of period | | $5.34 | | $6.55 | | $5.34 | | $6.55 |
Per share market value at beginning of period | | $5.46 | | $4.23 | | $5.18 | | $4.96 |
Per share market value at end of period | | $3.24 | | $5.18 | | $3.24 | | $5.18 |
Total return (2) | | (38.91)% | | 24.68% | | (34.49)% | | 8.63% |
Common shares outstanding at beginning of period | | 140,961 | | 140,961 | | 140,961 | | 140,961 |
Common shares outstanding at end of period | | 140,961 | | 140,961 | | 140,961 | | 140,961 |
Net assets at beginning of period | | $931,082 | | $872,362 | | $930,630 | | $858,035 |
Net assets at end of period | | $752,224 | | $923,456 | | $752,224 | | $923,456 |
Average net assets (3) | | $846,610 | | $901,507 | | $891,012 | | $885,507 |
Ratio of net investment income to average net assets (4) | | 10.82% | | 7.97% | | 6.87% | | 7.93% |
Ratio of total expenses to average net assets (4) | | 5.37% | | 12.79% | | 6.55% | | 11.54% |
Ratio of net expenses to average net assets (4) | | 5.37% | | 9.24% | | 7.71% | | 9.40% |
Ratio of portfolio turnover to average investments at fair value | | 10.80% | | 7.26% | | 17.56% | | 18.18% |
Weighted average outstanding debt (5) | | $623,696 | | $610,891 | | $556,264 | | $612,649 |
Average debt per share (1) | | $4.42 | | $4.33 | | $3.95 | | $4.35 |
Asset coverage ratio at end of period (6) | | 205.85% | | 254.12% | | 205.85% | | 254.12% |
__________
|
| |
(1) | Calculated based upon weighted average shares outstanding for the period. |
(2) | Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP. |
(2)(3) | Calculated based upon the weighted average net assets for the period. |
(3)(4) | Interim periods are annualized. |
(5) | Calculated based upon the weighted average of loans payable for the period. |
(4) | Calculated based upon weighted average sharesdebt outstanding for the period. |
(5)(6) | Interim periods are annualized.Based on outstanding senior securities of $704.8 million and $597.6 million as of March 31, 2020 and 2019, respectively. |
Note 13. Derivative Instruments
The Company enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies.
In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement ("ISDA Master Agreement") with its derivative counterparty, JPMorgan Chase Bank, N.A. The ISDA Master Agreement permits a single net payment in the event of a default or similar event. No cash collateral has been pledged to cover obligations and no cash collateral has been received from the counterparty with respect to the Company's forward currency contracts.
Net unrealized gains or losses on foreign currency contracts are included in “net unrealized appreciation (depreciation)” and net realized gains or losses on forward currency contracts are included in “net realized gains (losses)” in the accompanying Consolidated Statements of Operations. Forward currency contracts are considered undesignated derivative instruments.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Note 13. Unsecured Notes
2019 Notes
On February 26, 2014, the Company issued $250.0 million in aggregate principal amount of its 4.875% unsecured notes due 2019 (the "2019 Notes") for net proceeds of $244.4 million after deducting OID of $1.4 million, underwriting commissions and discounts of $3.7 million and offering costs of $0.5 million. The OID on the 2019 Notes is amortized based on the effective interest method over the term of the notes.
The 2019 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the supplemental indenture, dated February 26, 2014 (collectively, the "2019 Notes Indenture"), between the Company and the Trustee. The 2019 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2019 Notes. The 2019 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2019 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2019 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities.
Interest on the 2019 Notes is paid semi-annually on March 1 and September 1 at a rate of 4.875% per annum. The 2019 Notes mature on March 1, 2019 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity.
The 2019 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with (regardless of whether the Company is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring the Company to provide financialCertain information to the holders of the 2019 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are subject to limitations and exceptions that are described in the 2019 Notes Indenture. The Company may repurchase the 2019 Notes in accordance with the 1940 Act and the rules promulgated thereunder. In addition, holders of the 2019 Notes can require the Company to repurchase the 2019 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2019 Notes Indenture. The 2019 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the three months ended December 31, 2017 and 2016, the Company did not repurchase any of the 2019 Notes in the open market.
For each of the three months ended December 31, 2017 and 2016, the Company recorded interest expense of $3.3 million related to the 2019 Notes.
AsCompany’s foreign currency forward contracts is presented below as of DecemberMarch 31, 2017, there were $250.0 million of 2019 Notes outstanding, which had a carrying value and fair value of $248.6 million and $250.7 million, respectively.
2024 Notes
On October 18, 2012, the Company issued $75.0 million in aggregate principal amount of its 5.875% unsecured 2024 Notes for net proceeds of $72.5 million after deducting underwriting commissions of $2.2 million and offering costs of $0.3 million.
The 2024 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the first supplemental indenture, dated October 18, 2012 (collectively, the "2024 Notes Indenture"), between the Company and the Trustee. The 2024 Notes are the Company's unsecured obligations and rank senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2024 Notes; equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness (including existing unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries or financing vehicles.
Interest on the 2024 Notes is paid quarterly in arrears on January 30, April 30, July 30 and October 30, at a rate of 5.875% per annum. The 2024 Notes mature on October 30, 2024 and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after October 30, 2017. As of October 17, 2017, the 2024 Notes were listed on the New York Stock Exchange2020.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | |
Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Gross Amount of Recognized Assets | | Gross Amount of Recognized Liabilities | | Balance Sheet Location of Net Amounts |
Foreign currency forward contract | | $ | 19,756 |
| | £ | 14,850 |
| | 8/18/2020 | | $ | 1,310 |
| | $ | — |
| | Derivative asset |
Foreign currency forward contract | | $ | 14,532 |
| | € | 13,213 |
| | 8/31/2020 | | $ | — |
| | $ | (42 | ) | | Derivative asset |
| | | | | | | | $ | 1,310 |
| | $ | (42 | ) | | |
under the trading symbol “OSLE” with a par value of $25.00 per note. Prior to October 17, 2017, the 2024 Notes were listed on the New York Stock Exchange under the trading symbol "FSCE".
The 2024 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with (regardless of whether the Company is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act and with the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring the Company to provide financialCertain information to the holders of the 2024 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 2024 Notes Indenture. The Company may repurchase the 2024 Notes in accordance with the 1940 Act and the rules promulgated thereunder. Any 2024 Notes repurchased by the Company may, at the Company's option, be surrendered to the Trustee for cancellation, but may not be reissued or resold by the Company. Any 2024 Notes surrendered for cancellation will be promptly canceled and no longer outstanding under the 2024 Notes Indenture. During the three months ended December 31, 2017 and 2016, the Company did not repurchase any of the 2024 Notes in the open market.
For each of the three months ended December 31, 2017 and December 31, 2016, the Company recorded interest expense of $1.2 million related to the 2024 Notes.
AsCompany’s foreign currency forward contracts is presented below as of December 31, 2017, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.6 million and $75.6 million, respectively.
2028 Notes
In April and May 2013, the Company issued $86.3 million in aggregate principal amount of its 6.125% unsecured 2028 Notes for net proceeds of $83.4 million after deducting underwriting commissions of $2.6 million and offering costs of $0.3 million.
The 2028 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the second supplemental indenture, dated April 4, 2013 (collectively, the "2028 Notes Indenture"), between the Company and the Trustee. The 2028 Notes are the Company's unsecured obligations and rank senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2028 Notes; equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness (including existing unsecured indebtedness that it later secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries or financing vehicles.
Interest on the 2028 Notes is paid quarterly in arrears on January 30, April 30, July 30 and October 30, at a rate of 6.125% per annum. The 2028 Notes mature on April 30, 2028 and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after April 30, 2018. As of October 17, 2017, the 2028 Notes are listed on the NASDAQ Global Select Market under the trading symbol "OCSLL" with a par value of $25.00 per note. Prior to October 17, 2017, the 2028 Notes were listed on the NASDAQ Global Select Market under the trading symbol "FSCFL."
The 2028 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring the Company to provide financial information to the holders of the 2028 Notes and the Trustee if it ceases to be subject to the reporting requirements of the Exchange Act. These covenants are subject to limitations and exceptions that are described in the 2028 Notes Indenture. The Company may repurchase the 2028 Notes in accordance with the 1940 Act and the rules promulgated thereunder. Any 2028 Notes repurchased by the Company may, at its option, be surrendered to the Trustee for cancellation, but may not be reissued or resold by the Company. Any 2028 Notes surrendered for cancellation will be promptly canceled and no longer outstanding under the 2028 Notes Indenture. During the three months ended December 31, 2017 and 2016, the Company did not repurchase any of the 2028 Notes in the open market.
For each of the three months ended December 31, 2017 and 2016, the Company recorded interest expense of $1.4 million related to the 2028 Notes.
As of December 31, 2017, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.3 million and $86.9 million, respectively.
Note 14. Secured Borrowings
See Note 2 "Secured Borrowings" for a description of the Company's accounting treatment of secured borrowings.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
As of December 31, 2017, there were $13.5 million of secured borrowings outstanding. As of December 31, 2017, secured borrowings at fair value totaled $11.6 million and the fair value of the investment that is associated with these secured borrowings was $40.6 million. These secured borrowings were the result of the Company's completion of partial loan sales totaling $22.8 million of a senior secured debt investment during the fiscal year ended September 30, 2014 that did not meet the definition of a participating interest. As a result, sale treatment was not allowed and these partial loan sales were treated as secured borrowings. The Company receives loan servicing fees as it continues to serve as administrative agent for this investment. As a result, the Company earns servicing fees in connection with the loans that were partially sold. During the three months ended December 31, 2017, there were no net repayments on secured borrowings. During the three months ended December 31, 2016, there were $4.5 million of net repayments on secured borrowings.2019.
For the three months ended December 31, 2017 and December 31, 2016, the secured borrowings bore interest at a weighted average interest rate of 7.91% and 8.94%, respectively. For the three months ended December 31, 2017 and 2016, the Company recorded interest expense of $0.3 million and $0.4 million, respectively, related to the secured borrowings. |
| | | | | | | | | | | | | | | | | | | | |
Description | | Notional Amount to be Purchased | | Notional Amount to be Sold | | Maturity Date | | Gross Amount of Recognized Assets | | Gross Amount of Recognized Liabilities | | Balance Sheet Location of Net Amounts |
Foreign currency forward contract | | $ | 22,161 |
| | £ | 17,910 |
| | 10/15/2019 | | $ | 76 |
| | $ | — |
| | Derivative asset |
Foreign currency forward contract | | $ | 19,193 |
| | € | 17,150 |
| | 11/29/2019 | | $ | 414 |
| | $ | — |
| | Derivative asset |
| | | | | | | | $ | 490 |
| | $ | — |
| | |
Note 15.14. Commitments and Contingencies
SEC Examination and Investigation
On March 23, 2016, the Division of Enforcement of the SEC sent document subpoenas and document preservation notices to the Company, FSAM, FSCO GP LLC - General Partner of Fifth Street Opportunities Fund, L.P. ("FSOF") and OCSI. The subpoenas sought production of documents relating to a variety of issues principally related to the activities of FSM, including those raised in an ordinary-course examination of FSM by the SEC’s Office of Compliance Inspections and Examinations that began in October 2015, and in the previously disclosed securities class actions and other previously disclosed litigation. The subpoenas were issued pursuant to a formal order of private investigation captioned In the Matter of the Fifth Street Group of Companies, No. HO-12925, dated March 23, 2016, which addresses (among other things) (i) the valuation of the Company's portfolio companies and investments, (ii) the expenses allocated or charged to the Company and OCSI, (iii) FSOF’s trading in the securities of publicly traded business development companies, (iv) statements to the Board of Directors, other representatives of pooled investment vehicles, investors, or prospective investors concerning the fair value of the Company's portfolio companies or investments as well as expenses allocated or charged to the Company and OCSI, (v) various issues relating to adoption and implementation of policies and procedures under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), (vi) statements and/or potential omissions in the entities’ SEC filings, (vii) the entities’ books, records, and accounts and whether they fairly and accurately reflected the entities’ transactions and dispositions of assets, and (viii) several other issues relating to corporate books and records. The formal order cites various provisions of the Securities Act of 1933, as amended, the Exchange Act and the Advisers Act, as well as rules promulgated under those Acts, as the bases of the investigation. The Company is cooperating with the Division of Enforcement investigation, has produced requested documents, and has been communicating with Division of Enforcement personnel. The Investment Adviser is not subject to these subpoenas.
Off-Balance Sheet Arrangements
The Company may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its companies. As of DecemberMarch 31, 2017,2020, the Company's only off-balance sheet arrangements consisted of $98.7$91.6 million of unfunded commitments, which was comprised of $88.0$86.7 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $9.4$3.5 million related to unfunded limited partnership interests. As of September 30, 2017,2019, the Company's only off-balance sheet arrangements consisted of $118.1$88.3 million of unfunded commitments, which was comprised of $107.3$83.5 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $9.5$3.5 million related to unfunded limited partnership interests. Such commitments are subject to itsthe portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company's Consolidated Statements of Assets and Liabilities.
A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I LLC equity interests, and limited partnership interests) as of December 31, 2017 and September 30, 2017 is shown in the table below:
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I LLC subordinated notes and LLC equity interests and limited partnership interests) as of March 31, 2020 and September 30, 2019 is shown in the table below:
|
| | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Lift Brands Holdings, Inc. | | $ | 15,000 |
| | $ | 15,000 |
|
P2 Upstream Acquisition Co. | | 10,000 |
| | 10,000 |
|
Valet Merger Sub, Inc. | | 9,326 |
| | 9,326 |
|
Edge Fitness, LLC | | 6,215 |
| | 8,353 |
|
InMotion Entertainment Group, LLC | | 5,545 |
| | 7,544 |
|
EOS Fitness Opco Holdings, LLC | | 5,000 |
| | 5,000 |
|
Dominion Diagnostics, LLC (1) | | 4,180 |
| | 4,180 |
|
Impact Sales, LLC | | 3,236 |
| | 3,234 |
|
Pingora MSR Opportunity Fund I, LP (limited partnership interest) | | 3,095 |
| | 2,760 |
|
WeddingWire, Inc. | | 3,000 |
| | 3,000 |
|
Keypath Education, Inc. | | 3,000 |
| | 3,000 |
|
Motion Recruitment Partners LLC | | 2,900 |
| | 2,900 |
|
OmniSYS Acquisition Corporation | | 2,500 |
| | 2,500 |
|
Ping Identity Corporation | | 2,500 |
| | 2,500 |
|
Datto Inc. | | 2,356 |
| | — |
|
Traffic Solutions Holdings, Inc. | | 2,248 |
| | 2,998 |
|
4 Over International, LLC | | 2,232 |
| | 2,232 |
|
New IPT, Inc. | | 2,229 |
| | 2,229 |
|
Refac Optical Group | | 2,080 |
| | 2,080 |
|
SPC Partners VI, L.P. (limited partnership interest) | | 1,862 |
| | 2,000 |
|
Metamorph US 3, LLC (1) | | 1,470 |
| | 1,470 |
|
TransTrade Operators, Inc. (1)(2) | | 1,393 |
| | 1,052 |
|
Senior Loan Fund JV 1, LLC | | 1,328 |
| | 1,328 |
|
Edmentum, Inc. (1) | | 932 |
| | 2,664 |
|
Riverside Fund V, LP (limited partnership interest) | | 539 |
| | 539 |
|
Webster Capital III, L.P. (limited partnership interest) | | 482 |
| | 736 |
|
Sterling Capital Partners IV, L.P. (limited partnership interest) | | 474 |
| | 490 |
|
Tailwind Capital Partners II, L.P. (limited partnership interest) | | 469 |
| | 391 |
|
Beecken Petty O'Keefe Fund IV, L.P. (limited partnership interest) | | 468 |
| | 472 |
|
Ministry Brands, LLC | | 375 |
| | 1,708 |
|
Moelis Capital Partners Opportunity Fund I-B, L.P. (limited partnership interest) | | 365 |
| | 365 |
|
RCP Direct II, LP (limited partnership interest) | | 364 |
| | 364 |
|
Cenegenics, LLC (1) | | 297 |
| | 297 |
|
Riverside Fund IV, LP (limited partnership interest) | | 254 |
| | 254 |
|
ACON Equity Partners III, LP (limited partnership interest) | | 231 |
| | 239 |
|
Bunker Hill Capital II (QP), LP (limited partnership interest) | | 183 |
| | 183 |
|
RCP Direct, LP (limited partnership interest) | | 178 |
| | 184 |
|
SPC Partners V, L.P. (limited partnership interest) | | 148 |
| | 159 |
|
Riverlake Equity Partners II, LP (limited partnership interest) | | 129 |
| | 129 |
|
Milestone Partners IV, LP (limited partnership interest) | | 84 |
| | 180 |
|
Baird Capital Partners V, LP (limited partnership interest) | | 54 |
| | — |
|
BeyondTrust Software, Inc. | | — |
| | 5,995 |
|
Thing5, LLC | | — |
| | 3,000 |
|
Garretson Firm Resolution Group, Inc. | | — |
| | 508 |
|
Sailpoint Technologies, Inc. | | — |
| | 1,500 |
|
Systems, Inc. | | — |
| | 3,030 |
|
Total | | $ | 98,721 |
| | $ | 118,073 |
|
|
| | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Assembled Brands Capital LLC | | $ | 33,143 |
| | $ | 35,182 |
|
WPEngine, Inc. | | 26,348 |
| | — |
|
Dominion Diagnostics, LLC | | 5,887 |
| | — |
|
Corrona, LLC | | 4,273 |
| | — |
|
PaySimple, Inc. | | 3,985 |
| | 12,250 |
|
Pingora MSR Opportunity Fund I-A, LP | | 3,500 |
| | 3,500 |
|
MRI Software LLC | | 2,857 |
| | — |
|
Accupac, Inc. | | 2,346 |
| | — |
|
Acquia Inc. | | 2,240 |
| | — |
|
New IPT, Inc. | | 2,229 |
| | 2,229 |
|
Apptio, Inc. | | 1,538 |
| | 1,538 |
|
Senior Loan Fund JV I, LLC | | 1,328 |
| | 1,328 |
|
iCIMs, Inc. | | 882 |
| | 882 |
|
Ministry Brands, LLC | | 425 |
| | 800 |
|
Coyote Buyer, LLC | | 352 |
| | — |
|
GKD Index Partners, LLC | | 231 |
| | 1,156 |
|
P2 Upstream Acquisition Co. | | — |
| | 9,000 |
|
Sorrento Therapeutics, Inc. | | — |
| | 7,500 |
|
4 Over International, LLC | | — |
| | 1,977 |
|
Mindbody, Inc. | | — |
| | 3,048 |
|
Thruline Marketing, Inc. | | — |
| | 3,000 |
|
TerSera Therapeutics, LLC | | — |
| | 4,200 |
|
PLATO Learning Inc. (1) | | — |
| | 746 |
|
Total | | $ | 91,564 |
| | $ | 88,336 |
|
___________
(1) This investment was on cash or PIK non-accrual status as of DecemberMarch 31, 20172020 and September 30, 2017.
(2) This portfolio company does not have the ability to draw on this unfunded commitment as of December 31, 2017.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)2019.
Note 16.15. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the Consolidated Financial Statements as of and for the three and six months ended DecemberMarch 31, 2017,2020, except as discussed below:
Distribution Declaration
On February 5, 2018,April 30, 2020, the Company’s Board of Directors declared a quarterly dividenddistribution of $0.085$0.095 per share, payable in cash on MarchJune 30, 20182020 to stockholders of record on MarchJune 15, 2018.2020.
Investment Advisory Agreement
On May 4, 2020, Oaktree effected the novation of the Investment Advisory Agreement to Oaktree Fund Advisors, LLC, a registered investment adviser under common control with Oaktree. Immediately following such novation, the Company and Oaktree Fund Advisors, LLC entered into a new investment advisory agreement with the same terms, including fee structure, as the Investment Advisory Agreement.
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Credit Facility Amendment
On May 6, 2020, the Company amended its revolving credit facility (i) to reduce the minimum shareholders' equity covenant from $700 million to $550 million, (ii) to increase the interest rate margin up to 2.75% on LIBOR loans or 1.75% on alternative base rate loans if the Company's minimum shareholders' equity is below $700 million depending on its senior coverage ratio and (iii) to reduce the maximum size of the facility under the "accordion" feature to the greater of $800 million or the Company's net worth on the date of such increase.
Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
ThreeSix months ended DecemberMarch 31, 20172020
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1) | | Cash Interest Rate | | Industry | | Principal | | Net Realized Gain (Loss) | | Amount of Interest, Fees or Dividends Credited in Income (2) | | Fair Value at October 1, 2017 | | Gross Additions (3) | | Gross Reductions (4) | | Fair Value at December 31, 2017 | | % of Total Net Assets |
Control Investments | | | | | | | | | | | | | | | | | | | | |
Traffic Solutions Holdings, Inc. | | | | Construction & engineering | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash 2% PIK due 4/1/2021 | | 8.70 | % | | | | $ | 36,661 |
| | $ | — |
| | $ | 1,088 |
| | $ | 36,568 |
| | $ | 186 |
| | $ | (92 | ) | | $ | 36,662 |
| | 4.5 | % |
First Lien Revolver, LIBOR+6% (1% floor) cash due 4/1/2021 | | 7.70 | % | | | | 2,000 |
| | — |
| | 37 |
| | 1,250 |
| | 750 |
| | — |
| | 2,000 |
| | 0.2 | % |
LC Facility, 6% cash due 4/1/2021 | | | | | | 4,752 |
| | — |
| | 64 |
| | 4,752 |
| | — |
| | — |
| | 4,752 |
| | 0.6 | % |
746,114 Series A Preferred Units, 10% | | | | | | — |
| | — |
| | — |
| | 7,700 |
| | — |
| | — |
| | 7,700 |
| | 0.9 | % |
746,114 Common Stock Units | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
TransTrade Operators, Inc. (7) | | | | Air freight and logistics | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, 5% cash due 12/31/2017 | | | | | | 15,973 |
| | — |
| | — |
| | 1,810 |
| | — |
| | — |
| | 1,810 |
| | 0.2 | % |
First Lien Revolver, 8% cash due 12/31/2017 | | | | | | 7,757 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
596.67 Series A Common Units | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
4,000 Series A Preferred Units in TransTrade Holdings LLC | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
5,200,000 Series B Preferred Units in TransTrade Holdings LLC | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
First Star Speir Aviation Limited (6) | | | | Airlines | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, 9% cash due 12/15/2020 | | | | | | 32,510 |
| | — |
| | 634 |
| | 41,395 |
| | 464 |
| | (9,348 | ) | | 32,511 |
| | 4.0 | % |
100% equity interest | | | | | | — |
| | — |
| | — |
| | 3,926 |
| | 3,011 |
| | — |
| | 6,937 |
| | 0.8 | % |
First Star Bermuda Aviation Limited (6) | | | | Airlines | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, 9% cash 3% PIK due 8/19/2018 | | | | | | 11,868 |
| | — |
| | 406 |
| | 11,868 |
| | — |
| | — |
| | 11,868 |
| | 1.4 | % |
100% equity interest | | | | | | — |
| | — |
| | — |
| | 2,323 |
| | 4,993 |
| | — |
| | 7,316 |
| | 0.9 | % |
Eagle Hospital Physicians, LLC | | | | Healthcare services | | | | | | | | | | | | | | | |
|
|
Earn-out | | | | | | — |
| | — |
| | — |
| | 4,986 |
| | 97 |
| | — |
| | 5,083 |
| | 0.6 | % |
Senior Loan Fund JV I, LLC (5) | | | | Multi-sector holdings | | | | | | | | | | | | | | | |
|
|
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC | | 6.52 | % | | | | 100,804 |
| | — |
| | 1,754 |
| | 101,030 |
| | — |
| | (226 | ) | | 100,804 |
| | 12.3 | % |
Class B Mezzanine Secured Deferrable Fixed Rate Notes, 15% PIK due 2036 in SLF Repack Issuer 2016 LLC | | | | | | 27,463 |
| | — |
| | 1,006 |
| | 27,641 |
| | — |
| | (178 | ) | | 27,463 |
| | 3.4 | % |
87.5% LLC equity interest | | | | | | — |
| | — |
| | — |
| | 5,525 |
| | — |
| | (645 | ) | | 4,880 |
| | 0.6 | % |
Ameritox Ltd. (7) | | | | Healthcare services | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021 | | 6.69 | % | | | | 39,438 |
| | — |
| | — |
| | 4,445 |
| | 361 |
| | (6 | ) | | 4,800 |
| | 0.6 | % |
14,090,126.4 Class A Preferred A Units in Ameritox Holdings II, LLC | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
1,602,260.83 Class B Preferred A Units in Ameritox Holdings II, LLC | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
4,930.03 Common Units in Ameritox Holdings II, LLC | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
New IPT, Inc. | | | | Oil & gas equipment services | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, LIBOR+5% (1% floor) cash due 3/17/2021 | | 6.69 | % | | | | $ | 4,107 |
| | $ | — |
| | $ | 67 |
| | $ | 4,107 |
| | $ | — |
| | $ | — |
| | $ | 4,107 |
| | 0.5 | % |
Second Lien Term Loan, LIBOR+5.1% (1% floor) cash due 9/17/2021 | | 6.79 | % | | | | 2,504 |
| | — |
| | 41 |
| | 2,504 |
| | — |
| | — |
| | 2,504 |
| | 0.3 | % |
First Lien Revolver, LIBOR+5% (1% floor) cash due 3/17/2021 | | 6.69 | % | | | | 1,009 |
| | — |
| | 18 |
| | 1,009 |
| | — |
| | — |
| | 1,009 |
| | 0.1 | % |
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | | — |
| | — |
| | — |
| | 736 |
| | 227 |
| | — |
| | 963 |
| | 0.1 | % |
AdVenture Interactive, Corp. | | | | Advertising | | | | | | | | | | | | | | | |
|
|
9,073 shares of common stock | | | | | | — |
| | — |
| | — |
| | 13,818 |
| | — |
| | (7,397 | ) | | 6,421 |
| | 0.8 | % |
Keypath Education, Inc. | | | | Advertising | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, LIBOR+7% (1% floor) cash due 4/3/2022 | | 8.69 | % | | | | 19,960 |
| | — |
| | 435 |
| | 19,960 |
| | — |
| | — |
| | 19,960 |
| | 2.4 | % |
First Lien Revolver, LIBOR+7% (1% floor) cash due 4/3/2022 | | 8.69 | % | | | | — |
| | — |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| | — | % |
9,073 Class A Units in FS AVI Holdco, LLC | | | | | | — |
| | — |
| | — |
| | 7,918 |
| | 66 |
| | — |
| | 7,984 |
| | 1.0 | % |
Total Control Investments | | | | | | $ | 306,806 |
| | $ | — |
| | $ | 5,554 |
| | $ | 305,271 |
| | $ | 10,155 |
| | $ | (17,892 | ) | | $ | 297,534 |
| | 36.3 | % |
| | | | | | | | | | | | | | | | | | | | |
Affiliate Investments | | | | | | | | | | | | | | | | | | | | |
Caregiver Services, Inc. | | | | Healthcare services | | | | | | | | | | | | | | | | |
Second Lien Term Loan, 10% cash 2% PIK due 6/30/2019 | | | | | | 9,752 |
| | — |
| | 265 |
| | 9,665 |
| | 43 |
| | — |
| | 9,708 |
| | 1.2 | % |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | | — |
| | — |
| | — |
| | 2,534 |
| | — |
| | (373 | ) | | 2,161 |
| | 0.3 | % |
AmBath/ReBath Holdings, Inc. | | | | Home improvement retail | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan B, 12.5% cash 2.5% PIK due 8/31/2018 | | | | | | 22,552 |
| | — |
| | 864 |
| | 22,957 |
| | 169 |
| | (574 | ) | | 22,552 |
| | 2.8 | % |
4,668,788 shares of Preferred Stock | | | | | | — |
| | — |
| | — |
| | 1,827 |
| | 221 |
| | — |
| | 2,048 |
| | 0.2 | % |
Total Affiliate Investments | | | | | | $ | 32,304 |
| | $ | — |
| | $ | 1,129 |
| | $ | 36,983 |
| | $ | 433 |
| | $ | (947 | ) | | $ | 36,469 |
| | 4.4 | % |
Total Control & Affiliate Investments | | | | | | $ | 339,110 |
| | $ | — |
| | $ | 6,683 |
| | $ | 342,254 |
| | $ | 10,588 |
| | $ | (18,839 | ) | | $ | 334,003 |
| | 40.8 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1) | | Cash Interest Rate | | Industry | | Principal | | Net Realized Gain (Loss) | | Amount of Interest, Fees or Dividends Credited in Income (2) | | Fair Value at October 1, 2019 | | Gross Additions (3) | | Gross Reductions (4) | | Fair Value at March 31, 2020 | | % of Total Net Assets |
Control Investments | | | | | | | | | | | | | | | | | | | | |
C5 Technology Holdings, LLC | | | | Data Processing & Outsourced Services | | | | | | | | | | | | | | | | |
829 Common Units | | | | | | | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — | % |
34,984,460.37 Preferred Units | | | | | | | | — |
| | — |
| | 34,984 |
| | — |
| | (7,346 | ) | | 27,638 |
| | 3.7 | % |
Dominion Diagnostics, LLC | | | | Health Care Services | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024 | | 6.46 | % | | | | $ | 27,799 |
| | — |
| | 172 |
| | — |
| | 27,869 |
| | (70 | ) | | 27,799 |
| | 3.7 | % |
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024 | | 6.46 | % | | | | 5,260 |
| | — |
| | 35 |
| | — |
| | 5,260 |
| | — |
| | 5,260 |
| | 0.7 | % |
30,030.8 Common Units in DD Healthcare Services Holdings, LLC | | | | | | — |
| | — |
| | — |
| | — |
| | 18,626 |
| | (8,511 | ) | | 10,115 |
| | 1.3 | % |
| | | | | | | | | | | | | | | | | | | | |
First Star Speir Aviation Limited (5) | | | | Airlines | | | | | | | | | | | | | |
|
| |
|
|
First Lien Term Loan, 9.00% cash due 12/15/2020 | | | | | | 11,510 |
| | — |
| | 600 |
| | 11,510 |
| | 42 |
| | (42 | ) | | 11,510 |
| | 1.5 | % |
100% equity interest | | | | | | — |
| | — |
| | — |
| | 4,630 |
| | — |
| | (1,465 | ) | | 3,165 |
| | 0.4 | % |
New IPT, Inc. | | | | Oil & Gas Equipment & Services | | | | | | | | | | | | | |
|
| |
|
|
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | | 6.45 | % | | | | 2,605 |
| | — |
| | 112 |
| | 3,256 |
| | — |
| | (651 | ) | | 2,605 |
| | 0.3 | % |
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021 | | 6.45 | % | | | | 1,009 |
| | — |
| | 40 |
| | 1,009 |
| | — |
| | — |
| | 1,009 |
| | 0.1 | % |
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | | | �� | — |
| | — |
| | 2,903 |
| | — |
| | (1,307 | ) | | 1,596 |
| | 0.2 | % |
Senior Loan Fund JV I, LLC (6) | | | | Multi-Sector Holdings | | | | | | | | | | | | | |
|
| |
|
|
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028 | | 8.73 | % | | | | 96,250 |
| | — |
| | 4,341 |
| | 96,250 |
| | — |
| | (4,079 | ) | | 92,171 |
| | 12.3 | % |
87.5% LLC equity interest | | | | | | | | — |
| | — |
| | 30,052 |
| | — |
| | (30,052 | ) | | — |
| | — | % |
Thruline Marketing, Inc. | | | | Advertising | | | | | | | | | | | | | | | | — | % |
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022 | | | | | | — |
| | — |
| | 257 |
| | 18,146 |
| | — |
| | (18,146 | ) | | — |
| | — | % |
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022 | | | | | | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — | % |
9,073 Class A Units in FS AVI Holdco, LLC | | | | | | | | — |
| | — |
| | 6,438 |
| | — |
| | (2,039 | ) | | 4,399 |
| | 0.6 | % |
Total Control Investments | | | | | | $ | 144,433 |
| | $ | — |
| | $ | 5,558 |
| | $ | 209,178 |
| | $ | 51,797 |
| | $ | (73,708 | ) | | $ | 187,267 |
| | 24.9 | % |
| | | | | | | | | | | | | | | | | | | | |
Affiliate Investments | | | | | | | | | | | | | | | | | | | | |
Assembled Brands Capital LLC | | | | Specialized Finance | | | | | | | | | | | | | | | | |
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023 | | 6.99 | % | | | | $ | 7,623 |
| | $ | — |
| | $ | 262 |
| | $ | 5,585 |
| | $ | 2,038 |
| | $ | (1,508 | ) | | $ | 6,115 |
| | 0.8 | % |
1,609,201 Class A Units | | | | | | | | — |
| | — |
| | 782 |
| | 135 |
| | — |
| | 917 |
| | 0.1 | % |
1,019,168.80 Preferred Units, 6% | | | | | | | | — |
| | — |
| | 1,019 |
| | 31 |
| | — |
| | 1,050 |
| | 0.1 | % |
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029 | | | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
Caregiver Services, Inc. | | | | Health Care Services | | | | | | | | | | | | | | | |
|
|
1,080,399 shares of Series A Preferred Stock, 10% | | | | | | — |
| | — |
| | — |
| | 1,784 |
| | — |
| | (452 | ) | | 1,332 |
| | 0.2 | % |
Total Affiliate Investments | | | | | | $ | 7,623 |
| | $ | — |
| | $ | 262 |
| | $ | 9,170 |
| | $ | 2,204 |
| | $ | (1,960 | ) | | $ | 9,414 |
| | 1.3 | % |
Total Control & Affiliate Investments | | | | | | $ | 152,056 |
| | $ | — |
| | $ | 5,820 |
| | $ | 218,348 |
| | $ | 54,001 |
| | $ | (75,668 | ) | | $ | 196,681 |
| | 26.1 | % |
This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________
| |
(1) | The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments. |
| |
(2) | Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories. |
| |
(3) | Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category. |
| |
(4) | Gross reductions include decreases in the cost basis of investmentinvestments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category. |
| |
(5) | First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities. |
| |
(6) | Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required). |
| |
(6) | First Star Bermuda Aviation Limited and First Star Speir Aviation Limited are wholly-owned holding companies formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding companies to be investment companies under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding companies and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companies are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities. |
| |
(7) | This investment was on cash non-accrual status as of December 31, 2017 and September 30, 2017. |
Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
ThreeSix months ended DecemberMarch 31, 20162019
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1) | | Cash Interest Rate | | Industry | | Principal | | Net Realized Gain (Loss) | | Amount of Interest, Fees or Dividends Credited in Income (2) | | Fair Value at October 1, 2015 | | Gross Additions (3) | | Gross Reductions (4) | | Fair Value at December 31, 2016 | | % of Total Net Assets |
Control Investments | | | | | | | | | | | | | | | | | | | | |
Traffic Solutions Holdings, Inc. | | | | Construction & engineering | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+7% (1% floor) cash 2% PIK due 4/1/2021 | | 8.00 | % | | | | $ | 36,278 |
| | $ | — |
| | $ | 1,050 |
| | $ | 36,328 |
| | $ | 310 |
| | $ | (360 | ) | | $ | 36,278 |
| | 3.5 | % |
First Lien Revolver, LIBOR+7% (1% floor) cash due 4/1/2021 | | 8.00 | % | | | | 1,800 |
| | — |
| | 53 |
| | 2,800 |
| | 2 |
| | (1,002 | ) | | 1,800 |
| | 0.2 | % |
LC Facility, 6% cash due 4/1/2021 | | | | | | 3,518 |
| | — |
| | 58 |
| | 3,518 |
| | 2 |
| | (2 | ) | | 3,518 |
| | 0.3 | % |
746,114 Series A Preferred Units - Granted | | | | | | — |
| | — |
| | 676 |
| | 20,094 |
| | 1,919 |
| | — |
| | 22,013 |
| | 2.1 | % |
746,114 Common Stock Units - Granted | | | | | | — |
| | — |
| | — |
| | — |
| | 378 |
| | — |
| | 378 |
| | — | % |
TransTrade Operators, Inc. (7) | | | | Air freight and logistics | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, 11% cash 3% PIK due 12/31/2017 | | | | | | 15,973 |
| | — |
| | 6 |
| | 7,046 |
| | 642 |
| | (6 | ) | | 7,682 |
| | 0.7 | % |
First Lien Revolver, 8% cash due 12/31/2017 | | | | | | 8,220 |
| | — |
| | — |
| | — |
| | 1,335 |
| | (1,335 | ) | | — |
| | — | % |
596.67 Series A Common Units - Granted | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
4,000,000 Series A Preferred Units in TransTrade Holdings LLC - Purchased | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
5,200,000 Series B Preferred Units in TransTrade Holding LLC - Purchased | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
First Star Aviation, LLC (6) | | | | Airlines | | | | | | | | | | | | | | | |
|
|
10,104,401 Common Units | | | | | | — |
| | (3,767 | ) | | — |
| | 2,413 |
| | 87 |
| | (2,500 | ) | | — |
| | — | % |
First Star Speir Aviation Limited (6) | | | | Airlines | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, 9% cash due 12/15/2020 | | | | | | 41,395 |
| | — |
| | 647 |
| | 54,214 |
| | 1,846 |
| | (14,665 | ) | | 41,395 |
| | 4.0 | % |
100% equity interest | | | | | | — |
| | — |
| | — |
| | 2,839 |
| | — |
| | (98 | ) | | 2,741 |
| | 0.3 | % |
First Star Bermuda Aviation Limited (6) | | | | Airlines | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, 9% cash 3% PIK due 8/19/2018 | | | | | | 11,868 |
| | — |
| | 267 |
| | 11,851 |
| | 58 |
| | (41 | ) | | 11,868 |
| | 1.2 | % |
100% equity interest | | | | | | — |
| | — |
| | — |
| | 5,729 |
| | (130 | ) | | (605 | ) | | 4,994 |
| | 0.5 | % |
Eagle Hospital Physicians, LLC | | | | Healthcare services | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan A, 8% PIK due 4/30/2017 | | | | | | 14,175 |
| | — |
| | 286 |
| | 13,875 |
| | 300 |
| | — |
| | 14,175 |
| | 1.4 | % |
First Lien Term Loan B, 8.1% PIK due 4/30/2017 | | | | | | 3,970 |
| | — |
| | 81 |
| | 3,887 |
| | 83 |
| | — |
| | 3,970 |
| | 0.4 | % |
First Lien Revolver, 8% cash due 4/30/2017 | | | | | | 1,913 |
| | — |
| | 43 |
| | 1,913 |
| | 19 |
| | (19 | ) | | 1,913 |
| | 0.2 | % |
4,100,000 Class A Common Units | | | | | | — |
| | — |
| | — |
| | 7,421 |
| | — |
| | (7,188 | ) | | 233 |
| | — | % |
Senior Loan Fund JV I, LLC (5) | | | | Multi-sector holdings | | | | | | | | | | | | | | | |
|
|
Subordinated Note, LIBOR+8% cash due 5/2/2021 | | | | | | — |
| | (19,857 | ) | | 2,859 |
| | 129,004 |
| | 16,546 |
| | (145,550 | ) | | — |
| | — | % |
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC | | 6.76 | % | | | | 101,030 |
| | — |
| | 171 |
| | — |
| | 101,030 |
| | — |
| | 101,030 |
| | 9.8 | % |
Class B Mezzanine Secured Deferrable Fixed Rate Notes due 2036 in SLF Repack Issuer 2016 LLC | | | | | | 24,756 |
| | — |
| | 92 |
| | — |
| | 24,756 |
| | — |
| | 24,756 |
| | 2.4 | % |
87.5% equity interest | | | | | | — |
| | — |
| | 700 |
| | 13,708 |
| | 150 |
| | — |
| | 13,858 |
| | 1.3 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company/Type of Investment (1) | | Cash Interest Rate | | Industry | | Principal | | Net Realized Gain (Loss) | | Amount of Interest, Fees or Dividends Credited in Income (2) | | Fair Value at October 1, 2018 | | Gross Additions (3) | | Gross Reductions (4) | | Fair Value at March 31, 2019 | | % of Total Net Assets |
Control Investments | | | | | | | | | | | | | | | | | | | | |
First Star Speir Aviation Limited (5) | | | | Airlines | | | | | | | | | | | | | | | | |
First Lien Term Loan, 9.00% cash due 12/15/2020 | | | | | | $ | 32,510 |
| | $ | — |
| | $ | 976 |
| | $ | 32,510 |
| | $ | 722 |
| | $ | (722 | ) | | $ | 32,510 |
| | 3.5 | % |
100% equity interest | | | | | | — |
| | — |
| | — |
| | — |
| | 967 |
| | (100 | ) | | 867 |
| | 0.1 | % |
New IPT, Inc. | | | | Oil & gas equipment services | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | | 7.60 | % | | | | 4,107 |
| | — |
| | 170 |
| | 4,107 |
| | — |
| | — |
| | 4,107 |
| | 0.4 | % |
Second Lien Term Loan, LIBOR+5.10% cash due 9/17/2021 | | 7.70 | % | | | | 601 |
| | — |
| | 39 |
| | 1,453 |
| | — |
| | (851 | ) | | 602 |
| | 0.1 | % |
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021 | | 7.60 | % | | | | 1,009 |
| | — |
| | 43 |
| | 1,009 |
| | — |
| | — |
| | 1,009 |
| | 0.1 | % |
50.087 Class A Common Units in New IPT Holdings, LLC | | | | | | — |
| | — |
| | — |
| | 2,291 |
| | 612 |
| | — |
| | 2,903 |
| | 0.3 | % |
Senior Loan Fund JV I, LLC (6) | | | | Multi-sector holdings | | | | | | | | | | | | | | | | |
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC | | | | | | — |
| | — |
| | 2,036 |
| | 99,813 |
| | — |
| | (99,813 | ) | | — |
| | — | % |
Class B Mezzanine Secured Deferrable Fixed Rate Notes, 10.00% cash due 2036 in SLF Repack Issuer 2016 LLC | | | | | | — |
| | — |
| | 707 |
| | 29,520 |
| | 67 |
| | (29,587 | ) | | — |
| | — | % |
Subordinated Note, LIBOR+7.00% cash due 12/29/2028 | | 9.51 | % | | | | 96,250 |
| | — |
| | 2,388 |
| | — |
| | 96,250 |
| | — |
| | 96,250 |
| | 10.4 | % |
87.5% LLC equity interest | | | | | | — |
| | — |
| | — |
| | 41 |
| | 37,734 |
| | (7,191 | ) | | 30,584 |
| | 3.3 | % |
Thruline Marketing, Inc. | | | | Advertising | | | | | | | | | | | | | | | | |
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022 | | 9.60 | % | | | | 18,146 |
| | — |
| | 880 |
| | 18,146 |
| | — |
| | — |
| | 18,146 |
| | 2.0 | % |
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022 | | | | | | — |
| | — |
| | 8 |
| | — |
| | — |
| | — |
| | — |
| | — | % |
9,073 Class A Units in FS AVI Holdco, LLC | | | | | | — |
| | — |
| | — |
| | 7,984 |
| | — |
| | (1,546 | ) | | 6,438 |
| | 0.7 | % |
Total Control Investments | | | | | | $ | 152,623 |
| | $ | — |
| | $ | 7,247 |
| | $ | 196,874 |
| | $ | 136,352 |
| | $ | (139,810 | ) | | $ | 193,416 |
| | 20.9 | % |
| | | | | | | | | | | | | | | | | | | | |
Affiliate Investments | | | | | | | | | | | | | | | | | | | | |
Assembled Brands Capital LLC | | | | Specialized finance | | | | | | | | | | | | | | | | |
First Lien Delayed Draw Term Loan LIBOR+6.00% cash due 10/17/2023 | | 8.60 | % | | | | $ | 1,835 |
| | $ | — |
| | $ | 44 |
| | $ | — |
| | $ | 1,835 |
| | $ | — |
| | $ | 1,835 |
| | 0.2 | % |
764,376.60 Class A Units | | | | | | — |
| | — |
| | — |
| | — |
| | 764 |
| | — |
| | 764 |
| | 0.1 | % |
583,190.81 Class B Units | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
Caregiver Services, Inc. | | | | Healthcare services | | | | | | | | | | | | | | | | |
1,080,399 shares of Series A Preferred Stock, 10.00% | | | | | | — |
| | — |
| | — |
| | 2,161 |
| | — |
| | (182 | ) | | 1,979 |
| | 0.2 | % |
Total Affiliate Investments | | | | | | $ | 1,835 |
| | $ | — |
| | $ | 44 |
| | $ | 2,161 |
| | $ | 2,599 |
| | $ | (182 | ) | | $ | 4,578 |
| | 0.5 | % |
Total Control & Affiliate Investments | | | | | | $ | 154,458 |
| | $ | — |
| | $ | 7,291 |
| | $ | 199,035 |
| | $ | 138,951 |
| | $ | (139,992 | ) | | $ | 197,994 |
| | 21.4 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Express Group Holdings LLC (7) | | | | Oil & gas equipment services | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, PRIME+6% (1% floor) cash due 9/3/2019 | | 10.75 | % | | | | $ | 12,506 |
| | $ | — |
| | $ | — |
| | $ | 1,193 |
| | $ | — |
| | $ | (1,193 | ) | | $ | — |
| | — | % |
First Lien Revolver, PRIME+3.5% (3.5% floor) cash due 3/4/2019 | | 7.00 | % | | | | 6,090 |
| | — |
| | — |
| | 6,090 |
| | — |
| | (5,211 | ) | | 879 |
| | 0.1 | % |
Last-In Revolver, PRIME+3.5% (3.5% floor) cash due 10/7/2016 | | 7.00 | % | | | | 3,000 |
| | — |
| | 53 |
| | 3,000 |
| | — |
| | — |
| | 3,000 |
| | 0.3 | % |
14,033,391 Series B Preferred Units | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
280,668 Series A Preferred Units | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
1,456,344 Common Units | | | | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
Ameritox Ltd. | | | | Healthcare services | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021 | | 6.00 | % | | | | 31,498 |
| | — |
| | 734 |
| | 31,039 |
| | 459 |
| | — |
| | 31,498 |
| | 3.1 | % |
14,090,126.4 Class A Preferred A Units in Ameritox Holdings II, LLC | | | | | | — |
| | — |
| | — |
| | 15,437 |
| | 720 |
| | — |
| | 16,157 |
| | 1.6 | % |
1,602,260.83 Class B Preferred A Units in Ameritox Holdings II, LLC | | | | | | — |
| | — |
| | — |
| | 1,755 |
| | 82 |
| | — |
| | 1,837 |
| | 0.2 | % |
4,930.03 Common Units in Ameritox Holdings II, LLC | | | | | | — |
| | — |
| | — |
| | 13,113 |
| | — |
| | (6,925 | ) | | 6,188 |
| | 0.6 | % |
Total Control Investments | | | | | | $ | 317,990 |
| | $ | (23,624 | ) | | $ | 7,776 |
| | $ | 388,267 |
| | $ | 150,594 |
| | $ | (186,700 | ) | | $ | 352,161 |
| | 34.2 | % |
Affiliate Investments | | | | | | | | | | | | | | | | | | | |
|
|
Caregiver Services, Inc. | | | | Healthcare services | | | | | | | | | | | | | | | |
|
|
Second Lien Term Loan, 10% cash 2% PIK due 6/30/2019 | | | | | | 9,573 |
| | — |
| | 293 |
| | 9,549 |
| | 49 |
| | (26 | ) | | 9,572 |
| | 0.9 | % |
1,080,399 shares of Series A Preferred Stock, 10% | | | | | | — |
| | — |
| | — |
| | 4,079 |
| | — |
| | (117 | ) | | 3,962 |
| | 0.4 | % |
AmBath/ReBath Holdings, Inc. | | | | Home improvement retail | | | | | | | | | | | | | | | |
|
|
First Lien Term Loan B, 12.5% cash 2.5% PIK due 8/31/2017 | | | | | | 24,015 |
| | — |
| | 1,398 |
| | 24,268 |
| | 416 |
| | (548 | ) | | 24,136 |
| | 2.3 | % |
4,668,788 shares of Preferred Stock | | | | | | — |
| | — |
| | — |
| | 1,873 |
| | — |
| | (82 | ) | | 1,791 |
| | 0.2 | % |
Total Affiliate Investments | | | | | | $ | 33,588 |
| | $ | — |
| | $ | 1,691 |
| | $ | 39,769 |
| | $ | 465 |
| | $ | (773 | ) | | $ | 39,461 |
| | 3.8 | % |
Total Control & Affiliate Investments | | | | | | $ | 351,578 |
| | $ | (23,624 | ) | | $ | 9,467 |
| | $ | 428,036 |
| | $ | 151,059 |
| | $ | (187,473 | ) | | $ | 391,622 |
| | 38.0 | % |
This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.Statements as of March 31, 2019 included in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019.
______________________
| |
(1) | The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments.Investments as of March 31, 2019 included in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019. |
| |
(2) | Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories. |
| |
(3) | Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, and accrued PIK interest (net of non-accrual amounts), and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category. |
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(4) | Gross reductions include decreases in the cost basis of investmentinvestments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category. |
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(5) | First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be investment companies under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companies are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entity. |
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(6) | Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required). |
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(6) | First Star Aviation, LLC, First Star Bermuda Aviation Limited and First Star Speir Aviation Limited are wholly-owned holding companies formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding companies to be investment companies under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding companies and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companies are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities. |
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(7) | This investment was on cash non-accrual status as of December 31, 2016. |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q.
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:
our future operating results and distribution projections;
the ability of Oaktree Capital Management, L.P., or Oaktree, or our Investment Adviser, to find lower-risk investments to reposition our portfolio and to implement our Investment Adviser’sOaktree's future plans with respect to our business;
the ability of Oaktree to attract and retain highly talented professionals;
our business prospects and the prospects of our portfolio companies;
the impact of the investments that we expect to make;
the ability of our portfolio companies to achieve their objectives;
our expected financings and investments;investments and additional leverage we may seek to incur in the future;
the adequacy of our cash resources and working capital;
the timing of cash flows, if any, from the operations of our portfolio companies; and
the cost or potential outcome of any litigation to which we may be a party.
In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item“Item 1A. Risk Factors”Factors” in our annual report on Form 10-K for the year ended September 30, 20172019 and elsewhere in this quarterly report on Form 10-Q.
Other factors that could cause actual results to differ materially include:
changes or potential disruptions in our operations, the economy, financial markets andor political environment;
risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or natural disasters;the COVID-19 pandemic;
future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companiesBusiness Development Companies or regulated investment companies, or RICs;
general considerations associated with the COVID-19 pandemic; and
other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, or the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Except as otherwise specified, references to the “Company,” “we,” “us,” and “our,” refer to Oaktree Specialty Lending Corporation and its consolidated subsidiaries.
All dollar amounts in tables are in thousands, except share and per share amounts percentages and as otherwise indicated.
Business Overview
We are a specialty finance company dedicatedthat looks to providingprovide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development companyBusiness Development Company under the Investment Company Act of 1940, as amended, or the 1940Investment Company Act. In addition, we have qualified and elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes.
As of October 17, 2017,March 31, 2020, we are externally managed by Oaktree a subsidiary of Oaktree Capital Group, LLC, or “OCG”, a global investment manager specializing in alternative investments, pursuant to an investment advisory agreement, between us andas amended from time to time, or the Investment Adviser, orAdvisory Agreement, between the New Investment Advisory Agreement.Company and Oaktree. Oaktree Fund Administration, LLC, or the Oaktree Administrator, or OFA, a subsidiary of our Investment Adviser, alsoOaktree, provides certain administrative and other services necessary for us to operate. Prioroperate pursuant to October 17, 2017,an administration agreement, as amended from time to time, or the Administration Agreement.
We seek to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. Our portfolio may also include certain structured finance and other non-traditional structures. We invest in companies that typically possess business models we were externally managedexpect to be resilient in the future with underlying fundamentals that will provide strength in economic downturns. We intend to deploy capital across credit and advised by Fifth Street Management LLC, or FSM or the Former Adviser,economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we were named Fifth Street Finance Corp.
We generally lendmay seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree’s credit and structuring expertise, including during the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in small and mid-sized companies, primarily in connection with investments by private equity sponsors. Our investment objectivea portfolio company. Oaktree is to maximize our portfolio’s total return by generating current income from our debt investments, and to a lesser extent, capital appreciation from our equity investments.
Our Investment Adviser intends to reposition our portfolio into investments that are better aligned with our Investment Adviser's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles. We expect that our Investment Adviser will focusgenerally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. Going forward, we expect our portfolio to include a mix of approximately 40% to 60% of first and 35% to 55% of second lien loans, including asset backed loans, unitranche loans, mezzanine loans, approximately 5% to 15% of unsecured loans and 0% to 10% of preferred equity and certain equity co-investments. Our portfolio may also include certain structured finance and other non-traditional structures. We expect to target investments of $30 million to $50 million, on average, although we may invest more or less in certain portfolio companies. We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
Oaktree intends to continue to reposition our portfolio into investments that are better aligned with Oaktree's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles. Since becoming our investment adviser, Oaktree has performed a comprehensive review of our portfolio and categorized our portfolio into core investments, non-core performing investments and underperforming investments. Certain additional information on such categorization and our portfolio composition will beis included in our investor presentation to be filedpresentations that we file with the SEC.
During Since becoming our investment adviser, Oaktree has reduced the fiscal year ending September 30, 2018,investments it has identified as non-core by over $700 million at fair value. Over time, Oaktree also intends to rotate us out of the remaining non-core investments, which were approximately $80$142 million at fair value as of March 31, 2020. Oaktree periodically reviews designations of investments with spreadsas core and non-core and may change such designations over LIBOR of less than 4.0% and, over time, to reduce our exposure to smaller investments of less than $10 million. Oaktree will seek to redeploy capital from realization of existing investments into Oaktree-originated investments with higher yields.time.
During the three months ended December 31, 2017, the integration of our operational infrastructure, including accounting, valuation, compliance and information technology processes and systems, into the Oaktree platform was completed, and we believe that we will realize synergies and cost savings, including from trade settlement and internal audit functions, as a result of this integration.
Business Environment and Developments
The opportunity set in credit is still dominated by the search for yield as central banks in Japan and Europe continue their accommodative monetary policies. This glut of capital is resulting in significant inflows into sub-investment grade credit from investors, including private equity sponsors, seeking higher spreads as investment grade and highly rated sub-investment grade credit trade at close-to-historically tight levels.
During the quarter ended December 31, 2017, the spread on the BAML High Yield Single B Index ranged between 3.34% and 3.99% and was 3.69% as of December 31, 2017. In addition, during the quarter ended December 31, 2017, the Credit Suisse Leveraged Loan Index spread ranged between 3.70% and 3.88% and was 3.75% as of December 31, 2017. The weighted average annual yield on our portfolio of 9.0% as of December 31, 2017 compares favorably in the current environment.
We believe that the fundamentalseconomic impact of middle-market companies remain strong,the COVID-19 pandemic has contributed to significant market volatility and disruption, which drovemay have lasting effects on the highest lending levelU.S. and global financial markets and have caused (and may cause further) economic uncertainties or deterioration in three years. the performance of the middle market in the United States and worldwide.
In particular, the disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market. This widening of spreads makes it more difficult for middle market businesses to access capital as lenders could become more selective in evaluating investment opportunities, equity sponsors delay transactions given earnings uncertainty and sellers are hesitant to accept lower purchase price multiples.
In this type of environment, we believe attractive risk-adjusted returns can be achieved by investingmaking loans to companies in companies that cannot efficiently access traditional debt capital markets. Wethe middle market. Given the breadth of Oaktree’s investment platform, we believe that the Company haswe have the resources and experience to source, diligence and structure investments in these companies and isare well placed to generate attractive returns for investors.
New Investment Advisory Agreement with Oaktree
Upon the closingWe have proactively taken a number of actions to evaluate and support our portfolio companies in light of the transactions,COVID-19 pandemic, including outreach to a variety of management teams and sponsors. We have established a dialogue with many of our portfolio companies and are especially focused on those that might have moderate to higher risk of material impacts from COVID-19. We believe that these efforts to identify vulnerable credits will allow us to address potential problems early and provide constructive solutions to our portfolio companies.
As of March 31, 2020, 90.6% of our debt investment portfolio (at fair value) and 90.9% of our debt investment portfolio (at cost) bore interest at floating rates indexed to the London Interbank Offered Rate, or LIBOR, and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly or monthly at the borrower’s option. As a result of the COVID-19 pandemic and the related decision of the U.S. Federal Reserve to reduce certain interest rates, LIBOR decreased in March 2020. A prolonged reduction in interest rates will result in a decrease in our total investment income and could result in a decrease in our net investment income to the extent the decreases are not offset by an increase in the spread on our floating rate investments, a decrease in our interest expense or a reduction of our incentive fee on income. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been a few issuances utilizing SOFR or the Transaction, contemplated by the Asset Purchase Agreement, or the Purchase Agreement, by and among Oaktree,Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it remains unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR. If LIBOR ceases to exist, we may need to renegotiate any credit agreements extending beyond 2021 with our Former Adviser and, for certain limited purposes, Fifth Street Asset Management Inc., or FSAM, the indirect, partial owner of our Former Adviser, and Fifth Street Holdings L.P., the direct, partial owner of our Former Adviser, on October 17, 2017, Oaktree became the investment adviser to each of Oaktree Strategic Income Corporation, or OCSI, and us, and Oaktree paid gross cash consideration of $320 million to our Former Adviser. The closing of the Transaction resulted in an assignment for purposes of the 1940 Act of our investment advisory agreement with FSM, or the Former Investment Advisory Agreement, and, as a result, its immediate termination. The material terms of the services to be provided under the New Investment Advisory Agreement, other than the fee structure, are substantially the same as the Former Investment Advisory Agreement, except that services are provided by Oaktree. See “Note 11. Related Party Transactions-New Investment Advisory Agreement” and “-Administrative Services” in the notes to the accompanying Consolidated Financial Statements.prospective portfolio
In ordercompanies that utilize LIBOR as a factor in determining the interest rate and may also need to ensurerenegotiate the terms of the Credit Facility (as defined below), which matures in 2024. Certain of the loan agreements with our portfolio companies have included fallback language in the event that LIBOR becomes unavailable. This language generally provides that the Transaction compliedadministrative agent may identify a replacement reference rate, typically with Section 15(f)the consent of (or prior consultation with) the borrower. In certain cases, the administrative agent will be required to obtain the consent of either a majority of the 1940 Act, Oaktree and our Former Adviser agreedlenders under the facility, or the consent of each lender, prior to certain conditions. First, foridentifying a period of three years after the closingreplacement reference rate. Certain of the Transaction, at least 75%loan agreements with our portfolio companies do not include any fallback language providing a mechanism for the parties to negotiate a new reference interest rate and will instead revert to the base rate in the event LIBOR ceases to exist. It remains unclear whether the cessation of LIBOR will be delayed due to COVID-19 or what form any delay may take, and there are no assurances that there will be a delay. It is also unclear what the membersduration and severity of our BoardCOVID-19 will be, and whether this will impact LIBOR transition planning. COVID-19 may also slow regulators’ and others’ efforts to develop and implement alternative reference rates, which could make LIBOR transition planning more difficult, particularly if the cessation of Directors mustLIBOR is not be interested persons of Oaktree or our Former Adviser. Second, an “unfair burden” mustdelayed but alternatives do not be imposed on us as a result of the closing of the Transaction or any express or implied terms, conditions or understandings applicable thereto during the two-year period after the closing of the Transaction.develop.
Critical Accounting Policies
Basis of Presentation
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services-Investment Companies, or ASC 946.
Investment Valuation
We report our investments for which current market values are not readily available at fair value. We value our investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follow:follows:
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using “bid”"bid" and “ask”"ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, our Investment AdviserOaktree obtains and analyzes readily available market quotations provided by independent pricing servicesvendors and brokers for all of our first lien and second lien, or senior secured, debt investments for which quotations are available. In determining the fair value of a particular investment, pricing servicesvendors and brokers use observable market information, including both binding and non-binding indicative quotations.
Our Investment AdviserWe seek to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If we are unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set threshold, we seek to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by independent pricing servicesvendors and company specific data that could affect the credit quality and/or fair valuebrokers
based on available market information, including trading activity of the investment. Investments for which market quotationssubject or similar securities, or by performing a comparable security analysis to ensure that fair values are readily available may be valued at such market quotations.reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In orderaddition to validate market quotations, our Investment Adviser looks at a numberongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, we do not adjust any of factors to determine ifthe prices received from these sources.
If the quotations obtained from pricing vendors or brokers are representative of fair value, including the source and nature of the quotations. Our Investment Adviser doesdetermined to not adjust the prices unless it has a reason to believe market quotationsbe reliable or are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently causing a quoted purchase or sale price to become stale or in the event of a “fire sale” by a distressed seller. In these instances,readily available, we value such investments by using the valuation procedure that we use with respect to assets for which market quotations are not readily available (as discussed below).
If the quotation provided by the pricing service is based on only one or two market sources, we perform additional procedures to corroborate such information, which may include the market yield technique discussed below and a quantitative and qualitative assessmentany of the credit quality and market trends affecting the portfolio company.
We perform detailed valuations of our debt and equity investments for which market quotations are not readily available or are deemed not to represent fair value of the investments. We typically use three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that we are deemed to control under the 1940Investment Company Act. To estimate the EV of a portfolio company, the Investment AdviserOaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. The Investment AdviserOaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase price multiplesprices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company’s assets and (vii) offers from third parties to buy the portfolio company. We may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded transactions and industry-specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
We estimate the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
Our Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of our investments:
The quarterly valuation process begins with each portfolio company or investment being initially valued by our Investment Adviser’sOaktree’s valuation team in conjunction with the Investment Adviser’sOaktree’s portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of our Investment Adviser;Oaktree;
Separately, independent valuation firms engaged by our Board of Directors prepare valuations of our investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to us and provide such reports to our Investment AdviserOaktree and the Audit Committee of our Board of Directors;
The Investment AdviserOaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
The Audit Committee reviews the preliminary valuations with our Investment Adviser,Oaktree, and our Investment AdviserOaktree responds and supplements the preliminary valuations to reflect any discussions between our Investment AdviserOaktree and the Audit Committee;
The Audit Committee makes a recommendation to our full Board of Directors regarding the fair value of the investments in our portfolio; and
Our Board of Directors discusses valuations and determines the fair value of each investment in our portfolio.
The fair value of our investments as of DecemberMarch 31, 20172020 and September 30, 20172019 was determined in good faith by our Board of Directors. Our Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the
determination of the fair value of a portion of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. As of DecemberMarch 31, 2017, 69.2%2020, 92.4% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms. However, our Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
As of DecemberMarch 31, 20172020 and September 30, 2017,2019, approximately 94.7%92.7% and 95.4%97.1%, respectively, of our total assets represented investments at fair value.
Revenue Recognition
Interest and Dividend Income
Interest income, adjusted for accretion of original issue discount, or OID, is recorded on thean accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations. As of DecemberMarch 31, 2017,2020, there were eightthree investments on which we had stopped accruing cash and/or payment in kind, or PIK, interest or OID income.
In connection with our investment in a portfolio company, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
We generally recognize dividend incomeFor our secured borrowings, the interest earned on the ex-dividend date. Distributions receivedentire loan balance is recorded within interest income and the interest earned by the buyer from equity investments are evaluated to determine if the distribution should bepartial loan sales is recorded as dividend income or a return of capital. Generally, we will not record distributions from such equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reductionwithin interest expense in the cost basisConsolidated Statements of the investment.
Fee Income
We receive a variety of fees in the ordinary course of business, including servicing, advisory, amendment, structuring and prepayment fees, which are classified as fee income and recognized as they are earned.
We have also structured exit fees across certain of our portfolio investments to be received upon the future exit of those investments. Exit fees are payable upon the exit of a debt security. These fees are to be paid to us upon the sooner to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. A percentage of these fees is included in net investment income over the life of the loan. As of December 31, 2017, we had a receivable for $1.5 million in aggregate exit fees of one portfolio investment upon the future exit of this investment.Operations.
PIK Interest Income
Our investments in debt securities may contain PIK interest provisions. PIK interest, which typically represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Based on this and other information, we determine whether to cease accruing PIK interest on a loan or debt security when it is determined that PIK interest is no longer collectible. Our determination to cease accruing PIK interest on a loan or debt security is generally made well before our full write-down of sucha loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of ourthe loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our Consolidated Financial Statements and, as a result, increases the cost bases of these investmentsincluding for purposes of computing the capital gains incentive fee payable by us to our Investment Adviser.
Oaktree. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our stockholders, as distributions, even though we have not yet collected the cash and may never do so. Accumulated PIK interest was $70.2 million,
Fee Income
Oaktree may provide financial advisory services to portfolio companies and, in return, we may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by us upon the investment closing date. We may also receive additional
fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or 5.0%, of the fair value of our portfolio of investments as of December 31, 2017 and $69.4 million, or 4.5%, of fair valueservices are rendered.
We have also structured exit fees across certain of our portfolio investments to be received upon the future exit of those investments. These fees are typically paid to us upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
We generally recognize dividend income on the record date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of September 30, 2017. The net increases in loan balancescapital. Generally, we will not record distributions from such equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a resultreturn of contractual PIK arrangementscapital are separately identifiedrecorded as a reduction in our Consolidated Statementsthe cost basis of Cash Flows.the investment.
Portfolio Composition
Our investments principally consist of loans, purchasedcommon and preferred equity investments and equity grantswarrants in privately-held companies and SLFSenior Loan Fund JV I, LLC, or SLF JV I. Our loans are typically secured by a first, second or subordinated lien on the assets of the portfolio company and generally have terms of up to ten years (but an expected average life of between three and four years). We believe the environment for direct lending remains active, and, as a result, a number of our portfolio companies were able to refinance and repay their loans during the three months ended December 31, 2017.
During the threesix months ended DecemberMarch 31, 2017,2020, we originated $183.0$407.1 million of investment commitments in 1341 new and one12 existing portfolio companies and funded $200.2$387.9 million of investments.
During the threesix months ended DecemberMarch 31, 2017,2020, we received $196.4$251.5 million in connection with the full repayments andof proceeds from prepayments, exits, of nine of our investments and an additional $88.4 million in connection with other paydowns and sales of investments.and exited 17 portfolio companies.
A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Cost: | | | | | | | | |
Senior secured debt | | 72.44 | % | | 74.73 | % | | 77.94 | % | | 77.35 | % |
Subordinated debt | | 7.70 |
| | 6.42 |
| | 6.37 |
| | 6.88 |
|
Debt investments in SLF JV I | | 7.65 |
| | 7.32 |
| | 5.91 |
| | 6.36 |
|
Common equity and warrants | | | 4.32 |
| | 3.48 |
|
LLC equity interests of SLF JV I | | 0.96 |
| | 0.92 |
| | 3.03 |
| | 3.26 |
|
Purchased equity | | 6.86 |
| | 6.40 |
| |
Equity grants | | 2.91 |
| | 2.78 |
| |
Limited partnership interests | | 1.48 |
| | 1.43 |
| |
Preferred equity | | | 2.43 |
| | 2.67 |
|
Total | | 100.00 | % | | 100.00 | % | | 100.00 | % | | 100.00 | % |
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Fair value: | | | | | | | | |
Senior secured debt | | 75.84 | % | | 78.01 | % | | 81.93 | % | | 78.64 | % |
Debt investments in SLF JV I | | | 6.62 |
| | 6.69 |
|
Subordinated debt | | 6.95 |
| | 6.06 |
| | 5.75 |
| | 5.65 |
|
Debt investments in SLF JV I | | 9.06 |
| | 8.35 |
| |
Common equity and warrants | | | 3.45 |
| | 4.10 |
|
Preferred equity | | | 2.25 |
| | 2.82 |
|
LLC equity interests of SLF JV I | | 0.34 |
| | 0.36 |
| | — |
| | 2.10 |
|
Purchased equity | | 5.49 |
| | 5.10 |
| |
Equity grants | | 0.50 |
| | 0.45 |
| |
Limited partnership interests | | 1.82 |
| | 1.67 |
| |
Total | | 100.00 | % | | 100.00 | % | | 100.00 | % | | 100.00 | % |
The industry composition of our portfolio at cost and fair value as a percentage of total investments was as follows:
|
| | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Cost: | | | | |
Healthcare services | | 12.48 | % | | 11.98 | % |
Internet software & services | | 11.95 |
| | 15.37 |
|
Multi-sector holdings (1) | | 10.32 |
| | 9.87 |
|
Healthcare equipment | | 5.94 |
| | 5.67 |
|
Data processing & outsourced services | | 4.81 |
| | 4.42 |
|
Environmental & facilities services | | 4.15 |
| | 2.84 |
|
Construction & engineering | | 4.10 |
| | 3.86 |
|
Pharmaceuticals | | 3.63 |
| | 3.46 |
|
Advertising | | 3.32 |
| | 4.82 |
|
Education services | | 3.09 |
| | 2.85 |
|
Airlines | | 3.03 |
| | 3.28 |
|
Specialty stores | | 2.77 |
| | 3.33 |
|
Integrated telecommunication services | | 2.45 |
| | 1.75 |
|
Technology distributors | | 2.04 |
| | — |
|
Leisure facilities | | 1.96 |
| | 1.76 |
|
Oil & gas refining & marketing | | 1.95 |
| | — |
|
Air freight and logistics | | 1.94 |
| | 1.85 |
|
Housewares & specialties | | 1.78 |
| | 1.70 |
|
Oil & gas equipment services | | 1.64 |
| | 1.57 |
|
Consumer electronics | | 1.48 |
| | 1.32 |
|
Home improvement retail | | 1.35 |
| | 1.31 |
|
Auto parts & equipment | | 1.26 |
| | 1.21 |
|
Oil & gas exploration & production | | 1.07 |
| | — |
|
Research & consulting services | | 1.02 |
| | 2.16 |
|
Diversified support services | | 0.99 |
| | 1.29 |
|
Healthcare technology | | 0.86 |
| | — |
|
Security & alarm services | | 0.79 |
| | 0.75 |
|
Real estate services | | 0.77 |
| | 0.74 |
|
Other diversified financial services | | 0.68 |
| | 0.69 |
|
Casinos & gaming | | 0.67 |
| | 1.33 |
|
Commodity chemicals | | 0.65 |
| | — |
|
Healthcare distributors | | 0.53 |
| | — |
|
Precious metals & minerals | | 0.44 |
| | 0.42 |
|
Trucking | | 0.42 |
| | 0.40 |
|
Thrift & mortgage finance | | 0.41 |
| | 0.41 |
|
Distributors | | 0.39 |
| | 0.85 |
|
Industrial machinery | | 0.39 |
| | 0.86 |
|
Commercial printing | | 0.36 |
| | 0.34 |
|
Apparel, accessories & luxury goods | | 0.31 |
| | 0.29 |
|
Wireless telecommunication services | | 0.30 |
| | — |
|
Restaurants | | 0.29 |
| | 0.28 |
|
Application software | | 0.29 |
| | 2.93 |
|
General merchandise stores | | 0.25 |
| | — |
|
Food retail | | 0.25 |
| | 0.24 |
|
IT consulting & other services | | 0.24 |
| | 0.23 |
|
Specialized finance | | 0.19 |
| | 0.18 |
|
Human resources & employment services | | — |
| | — |
|
Hypermarkets & super centers | | — |
| | 0.68 |
|
Computer & electronics retail | | — |
| | 0.36 |
|
Multi-utilities | | — |
| | 0.35 |
|
Total | | 100.00 | % | | 100.00 | % |
|
| | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Cost: | | | | |
Application Software | | 11.97 | % | | 8.73 | % |
Multi-Sector Holdings (1) | | 9.73 |
| | 9.67 |
|
Data Processing & Outsourced Services | | 6.50 |
| | 6.46 |
|
Health Care Services | | 4.44 |
| | 6.62 |
|
Biotechnology | | 4.40 |
| | 5.43 |
|
Pharmaceuticals | | 3.89 |
| | 3.92 |
|
Auto Parts & Equipment | | 3.59 |
| | 2.82 |
|
Specialized Finance | | 3.42 |
| | 3.52 |
|
Personal Products | | 3.28 |
| | 0.00 |
|
Property & Casualty Insurance | | 3.14 |
| | 4.83 |
|
Specialty Chemicals | | 2.76 |
| | 2.10 |
|
Research & Consulting Services | | 2.44 |
| | 2.30 |
|
Real Estate Services | | 2.41 |
| | 2.60 |
|
Aerospace & Defense | | 2.25 |
| | 2.23 |
|
Health Care Technology | | 2.24 |
| | 3.37 |
|
Systems Software | | 2.07 |
| | 2.10 |
|
Oil & Gas Storage & Transportation | | 1.94 |
| | 0.77 |
|
Internet Services & Infrastructure | | 1.93 |
| | 2.15 |
|
Alternative Carriers | | 1.92 |
| | 1.94 |
|
Oil & Gas Refining & Marketing | | 1.86 |
| | 2.01 |
|
Managed Health Care | | 1.69 |
| | 1.83 |
|
Specialized REITs | | 1.50 |
| | 0.55 |
|
Education Services | | 1.42 |
| | 1.04 |
|
Advertising | | 1.41 |
| | 2.80 |
|
Airport Services | | 1.38 |
| | — |
|
Independent Power Producers & Energy Traders | | 1.35 |
| | — |
|
Integrated Telecommunication Services | | 1.31 |
| | 2.23 |
|
Electrical Components & Equipment | | 1.29 |
| | 1.40 |
|
General Merchandise Stores | | 1.17 |
| | 1.25 |
|
Diversified Support Services | | 1.15 |
| | 1.24 |
|
Apparel, Accessories & Luxury Goods | | 1.08 |
| | 1.20 |
|
Industrial Machinery | | 0.99 |
| | 1.13 |
|
Health Care Distributors | | 0.97 |
| | 1.49 |
|
IT Consulting & Other Services | | 0.92 |
| | 0.99 |
|
Movies & Entertainment | | 0.82 |
| | 1.25 |
|
Construction & Engineering | | 0.81 |
| | 1.55 |
|
Oil & Gas Equipment & Services | | 0.70 |
| | 0.80 |
|
Airlines | | 0.65 |
| | 0.70 |
|
Trading Companies & Distributors | | 0.63 |
| | 0.68 |
|
Restaurants | | 0.57 |
| | 0.20 |
|
Commercial Printing | | 0.49 |
| | 0.40 |
|
Food Retail | | 0.42 |
| | 0.96 |
|
Health Care Facilities | | 0.22 |
| | — |
|
Distributors | | 0.21 |
| | — |
|
Specialty Stores | | 0.17 |
| | 0.09 |
|
Construction Materials | | 0.13 |
| | — |
|
Leisure Facilities | | 0.12 |
| | 0.12 |
|
Building Products | | 0.10 |
| | — |
|
Communications Equipment | | 0.08 |
| | — |
|
Thrifts & Mortgage Finance | | 0.06 |
| | 0.08 |
|
Other Diversified Financial Services | | 0.01 |
| | 0.01 |
|
Interactive Media & Services | | — |
| | 1.44 |
|
Household Appliances | | — |
| | 0.52 |
|
Environmental & Facilities Services | | — |
| | 0.39 |
|
Human Resource & Employment Services | | — |
| | 0.05 |
|
Department Stores | | — |
| | 0.04 |
|
Total | | 100.00 | % | | 100.00 | % |
|
| | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Fair value: | | | | |
Internet software & services | | 13.71 | % | | 17.20 | % |
Multi-sector holdings (1) | | 11.58 |
| | 10.67 |
|
Healthcare services | | 5.41 |
| | 6.09 |
|
Data processing & outsourced services | | 5.04 |
| | 4.43 |
|
Environmental & facilities services | | 4.94 |
| | 3.29 |
|
Pharmaceuticals | | 4.45 |
| | 4.07 |
|
Airlines | | 4.14 |
| | 3.86 |
|
Healthcare equipment | | 4.00 |
| | 4.73 |
|
Construction & engineering | | 3.61 |
| | 3.26 |
|
Advertising | | 3.25 |
| | 5.43 |
|
Specialty stores | | 3.22 |
| | 3.69 |
|
Education services | | 2.52 |
| | 2.48 |
|
Integrated telecommunication services | | 2.51 |
| | 2.03 |
|
Leisure facilities | | 2.45 |
| | 2.11 |
|
Technology distributors | | 2.42 |
| | — |
|
Oil & gas refining & marketing | | 2.33 |
| | — |
|
Housewares & specialties | | 2.11 |
| | 1.93 |
|
Oil & gas equipment services | | 2.02 |
| | 1.84 |
|
Consumer electronics | | 1.83 |
| | 1.56 |
|
Home improvement retail | | 1.74 |
| | 1.61 |
|
Auto parts & equipment | | 1.53 |
| | 1.41 |
|
Research & consulting services | | 1.33 |
| | 2.50 |
|
Oil & gas exploration & production | | 1.26 |
| | — |
|
Diversified support services | | 1.14 |
| | 1.46 |
|
Healthcare technology | | 1.03 |
| | — |
|
Security & alarm services | | 0.92 |
| | 0.85 |
|
Real estate services | | 0.90 |
| | 0.84 |
|
Casinos & gaming | | 0.81 |
| | 1.52 |
|
Commodity chemicals | | 0.77 |
| | — |
|
Other diversified financial services | | 0.77 |
| | 0.76 |
|
Healthcare distributors | | 0.64 |
| | — |
|
Precious metals & minerals | | 0.53 |
| | 0.48 |
|
Trucking | | 0.50 |
| | 0.46 |
|
Application software | | 0.46 |
| | 3.50 |
|
Distributors | | 0.46 |
| | 0.96 |
|
Industrial machinery | | 0.46 |
| | 0.97 |
|
Commercial printing | | 0.43 |
| | 0.39 |
|
Leisure products | | 0.42 |
| | 0.38 |
|
Thrift & mortgage finance | | 0.40 |
| | 0.40 |
|
Wireless telecommunication services | | 0.36 |
| | — |
|
Restaurants | | 0.34 |
| | 0.32 |
|
General Merchandise Stores | | 0.32 |
| | — |
|
Food retail | | 0.30 |
| | 0.28 |
|
IT consulting & other services | | 0.28 |
| | 0.25 |
|
Specialized finance | | 0.23 |
| | 0.21 |
|
Air freight and logistics | | 0.13 |
| | 0.12 |
|
Human resources & employment services | | — |
| | — |
|
Hypermarkets & super centers | | — |
| | 0.75 |
|
Computer & electronics retail | | — |
| | 0.42 |
|
Multi-utilities | | — |
| | 0.41 |
|
Apparel, accessories & luxury goods | | — |
| | 0.08 |
|
Total | | 100.00 | % | | 100.00 | % |
|
| | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Fair value: | | | | |
Application Software | | 13.02 | % | | 9.00 | % |
Multi-Sector Holdings (1) | | 7.53 |
| | 8.94 |
|
Data Processing & Outsourced Services | | 6.51 |
| | 6.83 |
|
Biotechnology | | 5.20 |
| | 5.96 |
|
Health Care Services | | 4.55 |
| | 4.06 |
|
Pharmaceuticals | | 4.24 |
| | 4.18 |
|
Personal Products | | 3.70 |
| | — |
|
Specialized Finance | | 3.56 |
| | 3.58 |
|
Auto Parts & Equipment | | 3.29 |
| | 2.82 |
|
Property & Casualty Insurance | | 3.26 |
| | 5.16 |
|
Research & Consulting Services | | 2.56 |
| | 2.60 |
|
Health Care Technology | | 2.55 |
| | 3.64 |
|
Real Estate Services | | 2.50 |
| | 2.75 |
|
Specialty Chemicals | | 2.41 |
| | 1.64 |
|
Systems Software | | 2.21 |
| | 2.19 |
|
Internet Services & Infrastructure | | 2.13 |
| | 2.26 |
|
Oil & Gas Storage & Transportation | | 2.12 |
| | 0.83 |
|
Aerospace & Defense | | 2.12 |
| | 2.35 |
|
Alternative Carriers | | 1.87 |
| | 2.06 |
|
Oil & Gas Refining & Marketing | | 1.85 |
| | 2.20 |
|
Managed Health Care | | 1.73 |
| | 1.93 |
|
Specialized REITs | | 1.61 |
| | 0.57 |
|
Airport Services | | 1.55 |
| | — |
|
Independent Power Producers & Energy Traders | | 1.52 |
| | — |
|
Electrical Components & Equipment | | 1.31 |
| | 1.39 |
|
Advertising | | 1.24 |
| | 2.59 |
|
Diversified Support Services | | 1.18 |
| | 1.30 |
|
Airlines | | 1.05 |
| | 1.12 |
|
Integrated Telecommunication Services | | 1.05 |
| | 2.01 |
|
Industrial Machinery | | 1.02 |
| | 1.17 |
|
General Merchandise Stores | | 1.00 |
| | 1.18 |
|
Health Care Distributors | | 0.92 |
| | 1.53 |
|
IT Consulting & Other Services | | 0.86 |
| | 0.96 |
|
Apparel, Accessories & Luxury Goods | | 0.82 |
| | 0.92 |
|
Movies & Entertainment | | 0.75 |
| | 1.29 |
|
Construction & Engineering | | 0.75 |
| | 1.67 |
|
Oil & Gas Equipment & Services | | 0.64 |
| | 0.95 |
|
Trading Companies & Distributors | | 0.63 |
| | 0.72 |
|
Commercial Printing | | 0.55 |
| | 0.41 |
|
Education Services | | 0.50 |
| | — |
|
Food Retail | | 0.50 |
| | 1.04 |
|
Restaurants | | 0.46 |
| | 0.19 |
|
Health Care Facilities | | 0.24 |
| | — |
|
Distributors | | 0.24 |
| | — |
|
Leisure Facilities | | 0.22 |
| | 0.33 |
|
Construction Materials | | 0.13 |
| | — |
|
Building Products | | 0.11 |
| | — |
|
Specialty Stores | | 0.11 |
| | — |
|
Communications Equipment | | 0.10 |
| | — |
|
Thrifts & Mortgage Finance | | 0.03 |
| | 0.05 |
|
Interactive Media & Services | | — |
| | 1.56 |
|
Leisure Products | | — |
| | 1.05 |
|
Household Appliances | | — |
| | 0.53 |
|
Environmental & Facilities Services | | — |
| | 0.41 |
|
Human Resource & Employment Services | | — |
| | 0.05 |
|
Department Stores | | — |
| | 0.03 |
|
Total | | 100.00 | % | | 100.00 | % |
___________________
| |
(1) | This industry includes our investmentinvestments in SLF JV I.I, collateral loan obligations and certain limited partnership interests. |
Loans and Debt Securities on Non-Accrual Status
During the three months ended March 31, 2020, with the exception of one portfolio company that modified its scheduled interest payment to PIK in order to preserve liquidity, all of our portfolio companies made their scheduled interest payments.
During the three months ended March 31, 2020, two debt investments were added to cash non-accrual status after experiencing price deterioration in the quarter. As of each of DecemberMarch 31, 20172020 and September 30, 2017,2019, there were eightthree investments on which we had stopped accruing cash and/or PIK interest or OID income.
The percentages of our debt investments at cost and fair value by accrual status as of DecemberMarch 31, 20172020 and September 30, 20172019 were as follows:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
| | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio | | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio | | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio | | Cost | | % of Debt Portfolio | | Fair Value | | % of Debt Portfolio |
Accrual | | $ | 1,258,056 |
| | 85.49 | % | | $ | 1,258,658 |
| | 96.81 | % | | $ | 1,344,535 |
| | 86.46 | % | | $ | 1,357,794 |
| | 95.29 | % | | $ | 1,443,128 |
| | 98.22 | % | | $ | 1,306,989 |
| | 99.55 | % | | $ | 1,311,849 |
| | 95.72 | % | | $ | 1,305,718 |
| | 99.79 | % |
PIK non-accrual (1) | | 12,661 |
| | 0.86 |
| | — |
| | — |
| | 10,227 |
| | 0.66 |
| | 379 |
| | 0.03 |
| | 12,661 |
| | 0.86 |
| | — |
| | — |
| | 12,661 |
| | 0.92 |
| | — |
| | — |
|
Cash non-accrual (2) | | 200,859 |
| | 13.65 |
| | 41,457 |
| | 3.19 |
| | 200,210 |
| | 12.88 |
| | 66,636 |
| | 4.68 |
| | 13,572 |
| | 0.92 |
| | 5,864 |
| | 0.45 |
| | 46,107 |
| | 3.36 |
| | 2,706 |
| | 0.21 |
|
Total | | $ | 1,471,576 |
| | 100.00 | % | | $ | 1,300,115 |
| | 100.00 | % | | $ | 1,554,972 |
| | 100.00 | % | | $ | 1,424,809 |
| | 100.00 | % | | $ | 1,469,361 |
| | 100.00 | % | | $ | 1,312,853 |
| | 100.00 | % | | $ | 1,370,617 |
| | 100.00 | % | | $ | 1,308,424 |
| | 100.00 | % |
___________________
| |
(1) | PIK non-accrual status is inclusive of other non-cash income, where applicable. |
| |
(2) | Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable. |
Senior Loan Fund JV I, LLC
In May 2014, we entered into a limited liability company, or LLC, agreement with Trinity Universal Insurance Company, a subsidiary of Kemper Corporation, or Kemper, to form SLF JV I. On July 1, 2014, SLF JV I began investingWe co-invest in senior secured loans of middle-market companies and other corporate debt securities. We co-invest in these securities with Kemper through our investment in SLF JV I. SLF JV I is managed by a four person boardBoard of directors,Directors, two of whom are selected by us and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by us and one representative selected by Kemper (with approval from a representative of each required). Since we do not have a controlling financial interest in SLF JV I, we do not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to us and Kemper by SLF JV I. On December 28, 2018, we and Kemper directed the redemption of our holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which consisted of equity interests of SLF JV I Funding LLC, or the Equity Interests, were distributed in-kind to each of us and Kemper, based upon our respective holdings of mezzanine notes. Upon such distribution, we and Kemper each then directed that a portion of our respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I. SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I, or the SLF JV 1 Subordinated Notes, and the mezzanine notes issued by SLF Repack Issuer 2016, LLC, or the SLF Repack Notes, collectively are referred to as the SLF JV I Notes. Prior to their redemption on December 28, 2018, the SLF Repack Notes consisted of Class A mezzanine senior secured deferrable floating rate notes and Class B mezzanine senior secured deferrable fixed rate notes, or, collectively,notes. The SLF JV I Subordinated Notes are (and the mezzanine notes, issued to us and Kemper by SLF Repack Issuer 2016 LLC, a wholly-owned subsidiaryNotes were, prior to their redemption) senior in right of payment to SLF JV I. The mezzanine notes mature on October 12, 2036.I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of DecemberMarch 31, 20172020 and September 30, 2017,2019, we and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I. As of December 31, 2017I and September 30, 2017, we and Kemper owned 87.5% and 12.5%, respectively, of the outstanding mezzanine notes.
SLF JV I's portfolio consisted of middle-market and other corporate debt securities of 34 and 32 "eligible portfolio companies" (as defined in the Section 2(a)(46) of the 1940 Act) as of December 31, 2017 and September 30, 2017, respectively. The portfolio companies in SLF JV I are in industries similar to those in which we may invest directly.Subordinated Notes.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch, or, as amended, the Deutsche Bank I facility,Facility, which as of December 31, 2017 permitted up to $200.0$250.0 million of borrowings (subject to borrowing base and other limitations) as of DecemberMarch 31, 20172020 and September 30, 2017. As of December 31, 2017, the stated maturity date of the Deutsche Bank I facility was July 1, 2023, and borrowings2019. Borrowings under the Deutsche Bank I facility bear interest atFacility are secured by all of the assets of SLF JV I Funding LLC, a rate equal to 3-month London Interbank Offered Rate, or LIBOR, plus 2.25% per annum duringspecial purpose financing subsidiary of SLF JV I. As of March 31, 2020, the reinvestment period and at a rate equal to LIBOR plus 2.40% per annum during the amortization period. The reinvestment period of the Deutsche Bank I Facility expires on July 7, 2018. There was $105.1 millionscheduled to expire June 28, 2021 and $71.5 million outstanding underthe maturity date for the Deutsche Bank I facility as of December 31, 2017 and September 30, 2017, respectively.
Prior to December 21, 2017, SLF JV I also had an additional $200.0 million senior credit facility with Deutsche Bank AG, New York Branch, or the Deutsche Bank II facility. Effective December 21, 2017, SLF JV I merged its financing subsidiaries and, in connection with such merger, terminated the Deutsche Bank II facility.Facility was June 29, 2026. As of September 30, 2017, there were $41.6 million of borrowings outstanding under the Deutsche Bank II facility.
As of DecemberMarch 31, 2017,2020, borrowings under the Deutsche Bank I facility are secured by allFacility accrued interest at a rate equal to the 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility, $193.9 million and $170.2 million of the assetsborrowings were outstanding as of the special purpose financing vehicle of SLF JV I.March 31, 2020 and September 30, 2019, respectively.
As of DecemberMarch 31, 20172020 and September 30, 2017,2019, SLF JV I had total assets of $284.5$329.6 million and $276.8$360.9 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 53 and 51 portfolio companies as of March 31, 2020 and September 30, 2019,
respectively. The portfolio companies in SLF JV I are in industries similar to those in which we may invest directly. As of DecemberMarch 31, 2017,2020, our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of $4.9$92.2 million in aggregate at fair value, and Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes of approximately $100.8 million and $27.5 million, at fair value, respectively.value. As of September 30, 2017,2019, our investment in SLF JV I consisted of LLC equity interests of $5.5 million, at fair value, and Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate
notes of $101.0 million and $27.6 million, at fair value, respectively. In connection with the restructuring of our and Kemper’s investment in SLF JV I Subordinated Notes of $126.3 million in December 2016, we and Kemper exchanged our holdings of subordinated notes of SLF JV I for the mezzanine notes issued by SLF Repack Issuer 2016 LLC, a newly formed, wholly-owned, special purpose issuer subsidiary of SLF JV I, which are secured by SLF JV I’s LLC equity interests in the special purpose entities serving as borrowers under the Deutsche Bank I facility described above. The mezzanine notes are senior in right of payment to the SLF JV I LLC equity interests and any contributions we make to fund investments of SLF JV I through SLF Repack Issuer 2016 LLC.aggregate at fair value.
As of each of DecemberMarch 31, 20172020 and September 30, 2017,2019, we and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from us. As of DecemberMarch 31, 20172020 and September 30, 2017,2019, we and Kemper had the option to fund additional mezzanine notes,SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each of DecemberMarch 31, 20172020 and September 30, 2017,2019, we had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.
Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of DecemberMarch 31, 20172020 and September 30, 2017:2019:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Senior secured loans (1) | | $249,967 | | $245,063 | | $337,016 | | $340,960 |
Weighted average interest rate on senior secured loans (2) | | 7.81% | | 7.7% | | 5.54% | | 6.57% |
Number of borrowers in SLF JV I | | 34 | | 32 | | 53 | | 51 |
Largest exposure to a single borrower (1) | | $18,251 | | $18,374 | | $10,686 | | $10,835 |
Total of five largest loan exposures to borrowers (1) | | $77,991 | | $82,728 | | $51,441 | | $50,510 |
__________________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans.loans at fair value.
SLF JV I Portfolio as of DecemberMarch 31, 20172020
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
AdVenture Interactive, Corp. (3) | | Advertising | | 927 Common Stock Shares | |
| |
| | | |
| | $ | 1,088 |
| | $ | 656 |
|
Allied Universal Holdco LLC (3) | | Security & alarm services | | First Lien | | 7/28/2022 | | LIBOR+3.75% (1% floor) | | 5.44 | % | | $ | 6,965 |
| | 7,019 |
| | 6,920 |
|
Ameritox Ltd. (3)(5) | | Healthcare services | | First Lien | | 4/11/2021 | | LIBOR+5% (1% floor) 3% PIK | | 6.69 | % | | 5,926 |
| | 5,638 |
| | 721 |
|
| | | | 301,913.06 Class B Preferred Units | | | | | | | | | | 302 |
| | — |
|
| | | | 928.96 Class A Common Units | | | | | | | | | | 5,474 |
| | — |
|
Total Ameritox Ltd. | | | | | | | | | | | | 5,926 |
| | 11,414 |
| | 721 |
|
Asset International, Inc. | | Research & Consulting Services | | First Lien | | 12/29/2024 | | LIBOR+4.5% (1% floor) | | 6.19 | % | | 7,000 |
| | 6,860 |
| | 6,860 |
|
BJ's Wholesale Club, Inc. | | Hypermarkets & super centers | | First Lien | | 1/26/2024 | | LIBOR+3.75% (1% floor) | | 4.95 | % | | 4,975 |
| | 4,981 |
| | 4,902 |
|
Chloe Ox Parent LLC | | Healthcare services | | First Lien | | 12/14/2024 | | LIBOR+5% (1% floor) | | 6.64 | % | | 10,000 |
| | 9,900 |
| | 10,037 |
|
Compuware Corporation | | Internet software & services | | First Lien B3 | | 12/15/2021 | | LIBOR+4.25% (1% floor) | | 5.63 | % | | 11,126 |
| | 11,019 |
| | 11,213 |
|
DFT Intermediate LLC | | Specialized finance | | First Lien | | 3/1/2023 | | LIBOR+5.5% (1% floor) | | 6.85 | % | | 10,669 |
| | 10,433 |
| | 10,592 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Access CIG, LLC | First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025 | 5.53 | % | Diversified Support Services | $ | 9,253 |
| | $ | 9,213 |
| | $ | 7,622 |
| |
AdVenture Interactive, Corp. | 927 shares of common stock | | Advertising | | | 1,390 |
| | 1,312 |
| (4) |
AI Convoy (Luxembourg) S.À.R.L. | First Lien Term Loan, LIBOR+3.50% cash due 1/18/2027 | 5.34 | % | Aerospace & Defense | 9,200 |
| | 9,154 |
| | 8,257 |
| |
AI Ladder (Luxembourg) Subco S.a.r.l. | First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025 | 5.49 | % | Electrical Components & Equipment | 6,092 |
| | 5,953 |
| | 5,137 |
| (4) |
Altice France S.A. | First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 4.70 | % | Integrated Telecommunication Services | 9,709 |
| | 9,398 |
| | 9,296 |
| |
Alvogen Pharma US, Inc. | First Lien Term Loan, LIBOR+5.25% cash due 12/31/2023 | 6.32 | % | Pharmaceuticals | 9,879 |
| | 9,586 |
| | 8,594 |
|
|
Anastasia Parent, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025 | 5.20 | % | Personal Products | 2,843 |
| | 2,360 |
| | 1,658 |
| |
Apptio, Inc. | First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025 | 8.25 | % | Application Software | 4,615 |
| | 4,542 |
| | 4,398 |
| (4) |
| First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 | | Application Software | — |
| | (6 | ) | | (18 | ) | (4)(5) |
Total Apptio, Inc. | | | | | | 4,536 |
| | 4,380 |
| |
Aurora Lux Finco S.À.R.L. | First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026 | 7.00 | % | Airport Services | 6,500 |
| | 6,344 |
| | 6,111 |
| (4) |
Blackhawk Network Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025 | 3.99 | % | Data Processing & Outsourced Services | 9,825 |
| | 9,807 |
| | 8,134 |
| |
Boxer Parent Company Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 5.24 | % | Systems Software | 7,571 |
| | 7,483 |
| | 6,366 |
| (4) |
Brazos Delaware II, LLC | First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025 | 4.92 | % | Oil & Gas Equipment & Services | 7,369 |
| | 7,342 |
| | 3,887 |
| |
C5 Technology Holdings, LLC | 171 Common Units | | Data Processing & Outsourced Services | | | — |
| | — |
| (4) |
| 7,193,539.63 Preferred Units | | | | | 7,194 |
| | 5,683 |
| (4) |
Total C5 Technology Holdings, LLC | | | | | | 7,194 |
| | 5,683 |
| |
CITGO Petroleum Corp. | First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024 | 6.00 | % | Oil & Gas Refining & Marketing | 7,920 |
| | 7,841 |
| | 7,009 |
| (4) |
Connect U.S. Finco LLC | First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026 | 5.49 | % | Alternative Carriers | 8,367 |
| | 8,162 |
| | 6,746 |
| (4) |
Curium Bidco S.à.r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 5.07 | % | Biotechnology | 5,970 |
| | 5,925 |
| | 5,672 |
| |
Dcert Buyer, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/16/2026 | 4.99 | % | Internet Services & Infrastructure | 8,000 |
| | 7,980 |
| | 7,193 |
| |
Dealer Tire, LLC | First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025 | 5.24 | % | Distributors | 948 |
| | 904 |
| | 788 |
| (4) |
Delta 2 (Lux) S.à.r.l. | First Lien Term Loan, LIBOR+2.50% cash due 2/1/2024 | 3.50 | % | Movies & Entertainment | 5,167 |
| | 4,649 |
| | 4,665 |
| |
Ellie Mae, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 4/17/2026 | 5.20 | % | Application Software | 4,974 |
| | 4,950 |
| | 4,372 |
| |
eResearch Technology, Inc. | First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027 | 5.95 | % | Application Software | 7,500 |
| | 7,425 |
| | 6,653 |
|
|
Frontier Communications Corporation | First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024 | 5.21 | % | Integrated Telecommunication Services | 7,162 |
| | 7,068 |
| | 6,846 |
|
|
GFL Environmental, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 5/30/2025 | 4.00 | % | Environmental & Facilities Services | 718 |
| | 663 |
| | 700 |
| |
Gigamon, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024 | 5.25 | % | Systems Software | 7,820 |
| | 7,767 |
| | 6,726 |
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
Digital River, Inc. | | Internet software & services | | First Lien | | 2/12/2021 | | LIBOR+6.5% (1% floor) | | 8.08 | % | | $ | 2,775 |
| | $ | 2,786 |
| | $ | 2,782 |
|
Dodge Data & Analytics LLC (3) | | Data processing & outsourced services | | First Lien | | 10/31/2019 | | LIBOR+8.75% (1% floor) | | 10.13 | % | | 9,199 |
| | 9,228 |
| | 9,116 |
|
DTZ U.S. Borrower, LLC (3) | | Real estate services | | First Lien | | 11/4/2021 | | LIBOR+3.25% (1% floor) | | 4.94 | % | | 6,946 |
| | 6,978 |
| | 6,867 |
|
Edge Fitness, LLC | | Leisure facilities | | First Lien | | 12/31/2019 | | LIBOR+7.75% (1% floor) | | 9.05 | % | | 10,600 |
| | 10,601 |
| | 10,600 |
|
EOS Fitness Opco Holdings, LLC (3) | | Leisure facilities | | First Lien | | 12/30/2019 | | LIBOR+8.75% (0.75% floor) | | 10.12 | % | | 18,251 |
| | 18,078 |
| | 18,433 |
|
Everi Payments Inc. | | Casinos & gaming | | First Lien | | 5/9/2024 | | LIBOR+4.5% (1% floor) | | 4.98 | % | | 4,975 |
| | 4,952 |
| | 5,032 |
|
Falmouth Group Holdings Corp. | | Specialty chemicals | | First Lien | | 12/13/2021 | | LIBOR+6.75% (1% floor) | | 8.44 | % | | 4,528 |
| | 4,497 |
| | 4,528 |
|
Garretson Resolution Group, Inc. | | Diversified support services | | First Lien | | 5/22/2021 | | LIBOR+6.5% (1% floor) | | 8.19 | % | | 5,797 |
| | 5,780 |
| | 5,432 |
|
Gigamon Inc. | | Systems software | | First Lien | | 12/18/2024 | | LIBOR+4.5% (1% floor) | | 6.03 | % | | 8,000 |
| | 7,920 |
| | 7,960 |
|
InMotion Entertainment Group, LLC (3) | | Consumer electronics | | First Lien | | 10/1/2021 | | LIBOR+7.25% (1.25% floor) | | 8.95 | % | | 8,750 |
| | 8,769 |
| | 8,750 |
|
| | | | First Lien B | | 10/1/2021 | | LIBOR+7.25% (1.25% floor) | | 8.95 | % | | 8,750 |
| | 8,660 |
| | 8,750 |
|
Total InMotion Entertainment Group, LLC | | | | | | | | | | | | 17,500 |
| | 17,429 |
| | 17,500 |
|
Keypath Education, Inc. (3) | | Advertising | | First Lien | | 4/3/2022 | | LIBOR+7% (1.00% floor) | | 8.69 | % | | 2,040 |
| | 2,039 |
| | 2,040 |
|
| | | | 927 shares Common Stock | | | | | | | | | | 1,391 |
| | 815 |
|
| | | | | | | | | | | | 2,040 |
| | 3,430 |
| | 2,855 |
|
Lift Brands, Inc. (3) | | Leisure facilities | | First Lien | | 12/23/2019 | | LIBOR+7.5% (1% floor) | | 9.19 | % | | 18,149 |
| | 18,132 |
| | 18,149 |
|
Metamorph US 3, LLC (3)(5) | | Internet software & services | | First Lien | | 12/1/2020 | | LIBOR+5.5% (1% floor) 2% PIK | | 7.07 | % | | 9,942 |
| | 9,232 |
| | 3,775 |
|
Motion Recruitment Partners LLC | | Human resources & employment services | | First Lien | | 2/13/2020 | | LIBOR+6% (1% floor) | | 7.57 | % | | 4,298 |
| | 4,255 |
| | 4,303 |
|
NAVEX Global, Inc. | | Internet software & services | | First Lien | | 11/19/2021 | | LIBOR+4.75% (1% floor) | | 5.82 | % | | 5,944 |
| | 5,911 |
| | 5,974 |
|
New IPT, Inc. (3) | | Oil & gas equipment & services | | First Lien | | 3/17/2021 | | LIBOR+5% (1% floor) | | 6.69 | % | | 1,794 |
| | 1,794 |
| | 1,794 |
|
| | | | Second Lien | | 9/17/2021 | | LIBOR+5.1% (1% floor) | | 6.79 | % | | 1,094 |
| | 1,094 |
| | 1,094 |
|
| | | | 21.876 Class A Common Units | | | | | | | |
| | — |
| | 420 |
|
Total New IPT, Inc. | | | | | | | | | | | | 2,888 |
| | 2,888 |
| | 3,308 |
|
Novetta Solutions, LLC | | Internet software & services | | First Lien | | 9/30/2022 | | LIBOR+5% (1% floor) | | 6.70 | % | | 6,102 |
| | 6,053 |
| | 5,937 |
|
OmniSYS Acquisition Corporation (3) | | Diversified support services | | First Lien | | 11/21/2018 | | LIBOR+7.5% (1% floor) | | 9.19 | % | | 10,896 |
| | 10,899 |
| | 10,873 |
|
Refac Optical Group (3) | | Specialty stores | | First Lien A | | 9/30/2018 | | LIBOR+8% | | 9.56 | % | | 4,111 |
| | 4,098 |
| | 4,111 |
|
Salient CRGT, Inc. (3) | | IT consulting & other services | | First Lien | | 2/28/2022 | | LIBOR+5.75% (1% floor) | | 7.32 | % | | 2,405 |
| | 2,364 |
| | 2,426 |
|
Scientific Games International, Inc. (3) | | Casinos & gaming | | First Lien | | 8/14/2024 | | LIBOR+3.25% | | 4.67 | % | | 6,615 |
| | 6,583 |
| | 6,677 |
|
SHO Holding I Corporation | | Footwear | | First Lien | | 10/27/2022 | | LIBOR+5% (1% floor) | | 6.42 | % | | 8,573 |
| | 8,545 |
| | 8,273 |
|
TravelClick, Inc. (3) | | Internet software & services | | Second Lien | | 11/6/2021 | | LIBOR+7.75% (1% floor) | | 9.32 | % | | 5,127 |
| | 5,127 |
| | 5,153 |
|
TV Borrower US, LLC | | Integrated telecommunications services | | First Lien | | 2/22/2024 | | LIBOR+4.75% (1% floor) | | 6.44 | % | | 2,034 |
| | 2,025 |
| | 2,045 |
|
Valet Merger Sub, Inc. (3) | | Environmental & facilities services | | First Lien | | 9/24/2021 | | LIBOR+7% (1% floor) | | 8.57 | % | | 12,965 |
| | 12,838 |
| | 12,965 |
|
Vubiquity, Inc. | | Application software | | First Lien | | 8/12/2021 | | LIBOR+5.5% (1% floor) | | 7.19 | % | | 2,646 |
| | 2,630 |
| | 2,626 |
|
| | | | | | | | | | | | $ | 249,967 |
| | $ | 255,973 |
| | $ | 239,601 |
|
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
GoodRx, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025 | 3.74 | % | Interactive Media & Services | $ | 8,592 |
| | $ | 8,470 |
| | $ | 8,119 |
| |
Guidehouse LLP | Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026 | 8.99 | % | Research & Consulting Services | 6,000 |
| | 5,977 |
| | 5,190 |
| (4) |
Helios Software Holdings, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025 | 5.32 | % | Systems Software | 3,990 |
| | 3,950 |
| | 3,438 |
| |
Intelsat Jackson Holdings S.A. | First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023 | 5.68 | % | Alternative Carriers | 10,686 |
| | 10,563 |
| | 9,905 |
|
|
KIK Custom Products Inc. | First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023 | 5.00 | % | Household Products | 8,000 |
| | 7,976 |
| | 7,237 |
|
|
Mindbody, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 8.00 | % | Internet Services & Infrastructure | 4,524 |
| | 4,450 |
| | 4,185 |
| (4) |
| First Lien Revolver, LIBOR+7.00% cash due 2/14/2025 | 8.07 | % | Internet Services & Infrastructure | 476 |
| | 468 |
| | 440 |
| (4) |
Total Mindbody, Inc. | | | | | | 4,918 |
| | 4,625 |
| |
MRI Software LLC | First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026 | 6.57 | % | Application Software | 3,411 |
| | 3,379 |
| | 3,019 |
| (4) |
| First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026 | | Application Software | — |
| | (4 | ) | | (68 | ) | (4)(5) |
| First Lien Revolver, LIBOR+5.50% cash due 2/10/2026 | 6.57 | % | Application Software | 169 |
| | 166 |
| | 130 |
| (4)(5) |
Total MRI Software LLC | | | | | | 3,541 |
| | 3,081 |
| |
Navicure, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/22/2026 | 4.99 | % | Health Care Technology | 6,000 |
| | 5,970 |
| | 5,565 |
|
|
New IPT, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | 6.45 | % | Oil & Gas Equipment & Services | 1,138 |
| | 1,138 |
| | 1,138 |
| (4) |
| 21.876 Class A Common Units in New IPT Holdings, LLC | | Oil & Gas Equipment & Services | | | — |
| | 697 |
| (4) |
Total New IPT, Inc. | | | | | | 1,138 |
| | 1,835 |
| |
Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025 | 5.57 | % | Electrical Components & Equipment | 6,860 |
| | 6,835 |
| | 5,831 |
|
|
Novetta Solutions, LLC | First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022 | 6.00 | % | Application Software | 5,962 |
| | 5,935 |
| | 5,315 |
|
|
OEConnection LLC | First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026 | 5.45 | % | Application Software | 7,271 |
| | 7,234 |
| | 5,871 |
| |
| First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026 | | Application Software | — |
| | (3 | ) | | (133 | ) | (5) |
Total OEConnection LLC | | | | | | 7,231 |
| | 5,738 |
| |
Olaplex, Inc. | First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026 | 7.50 | % | Personal Products | 5,000 |
| | 4,904 |
| | 4,675 |
| (4) |
| First Lien Revolver, LIBOR+6.50% cash due 1/8/2025 | 7.50 | % | Personal Products | 540 |
| | 530 |
| | 505 |
| (4) |
Total Olaplex, Inc. | | | | | | 5,434 |
| | 5,180 |
| |
Quikrete Holdings, Inc. | First Lien Term Loan, LIBOR+2.50% cash due 2/1/2027 | 3.49 | % | Construction Materials | 2,280 |
| | 2,106 |
| | 2,109 |
| |
Sabert Corporation | First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026 | 5.50 | % | Metal & Glass Containers | 4,350 |
| | 4,307 |
| | 4,046 |
| |
Salient CRGT, Inc. | First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022 | 7.57 | % | Aerospace & Defense | 2,173 |
| | 2,156 |
| | 1,793 |
| (4) |
Scientific Games International, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024 | 3.74 | % | Casinos & Gaming | 6,483 |
| | 6,461 |
| | 5,262 |
|
|
SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022 | 6.78 | % | Footwear | 8,376 |
| | 8,362 |
| | 6,575 |
|
|
Signify Health, LLC | First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024 | 5.95 | % | Health Care Services | 9,800 |
| | 9,732 |
| | 8,232 |
|
|
Star US Bidco LLC | First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027 | 5.94 | % | Industrial Machinery | 2,973 |
| | 2,943 |
| | 2,587 |
| |
Sirva Worldwide, Inc. | First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025 | 6.49 | % | Diversified Support Services | 4,844 |
| | 4,771 |
| | 3,633 |
| |
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Sunshine Luxembourg VII SARL | First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026 | 5.32 | % | Personal Products | $ | 7,980 |
| | $ | 7,940 |
| | $ | 7,262 |
| (4) |
Supermoose Borrower, LLC | First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025 | 5.20 | % | Application Software | 4,913 |
| | 4,566 |
| | 3,960 |
| (4) |
Surgery Center Holdings, Inc. | First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024 | 4.25 | % | Health Care Facilities | 4,987 |
| | 4,966 |
| | 3,868 |
| (4) |
Thruline Marketing, Inc. | 927 Class A Units in FS AVI Holdco, LLC | | Advertising | | | 949 |
| | 449 |
| (4) |
Thunder Finco (US), LLC | First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026 | 5.24 | % | Movies & Entertainment | 8,000 |
| | 7,920 |
| | 6,260 |
| |
Uber Technologies, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025 | 5.00 | % | Application Software | 10,509 |
| | 10,440 |
| | 9,887 |
| (4) |
UFC Holdings, LLC | First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026 | 4.25 | % | Movies & Entertainment | 4,831 |
| | 4,787 |
| | 4,306 |
| (4) |
Veritas US Inc. | First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023 | 5.95 | % | Application Software | 6,859 |
| | 6,826 |
| | 5,941 |
| (4) |
Verscend Holding Corp. | First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025 | 5.49 | % | Health Care Technology | 4,133 |
| | 4,099 |
| | 3,926 |
|
|
VM Consolidated, Inc. | First Lien Term Loan, LIBOR+3.25% cash due 2/28/2025 | 4.24 | % | Data Processing & Outsourced Services | 10,542 |
| | 10,554 |
| | 9,593 |
| (4) |
WideOpenWest Finance, LLC | First Lien Term Loan, LIBOR+3.25% cash due 8/18/2023 | 4.25 | % | Cable & Satellite | 962 |
| | 867 |
| | 897 |
| |
WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 9.53 | % | Aerospace & Defense | 6,000 |
| | 5,953 |
| | 4,120 |
| (4) |
| | | | $ | 337,016 |
| | $ | 341,737 |
| | $ | 299,572 |
| |
__________________
(1) Represents the current interest rate as of DecemberMarch 31, 2017.2020. All interest rates are payable in cash, unless otherwise noted.
(2) Represents the current determination of fair value as of December 31, 2017 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.
(3) This investment is held by both us and SLF JV I as of December 31, 2017.
(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement.
(5) This investment was onagreement and the cash non-accrual status as of December 31, 2017. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.
SLF JV I Portfolio as of September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
AdVenture Interactive, Corp. (3) | | Advertising | | 927 Common Stock Shares | | | | | | | | | | $ | 1,088 |
| | $ | 1,412 |
|
Allied Universal Holdco LLC (3) | | Security & alarm services | | First Lien | | 7/28/2022 | | LIBOR+3.75% (1% floor) | | 5.08 | % | | $ | 6,982 |
| | 7,040 |
| | 6,976 |
|
Ameritox Ltd. (3)(5) | | Healthcare services | | First Lien | | 4/11/2021 | | LIBOR+5% (1% floor) 3% PIK | | 6.33 | % | | 5,759 |
| | 5,638 |
| | 668 |
|
| | | | 301,913.06 Class B Preferred Units | | | | | | | | | | 302 |
| | — |
|
| | | | 928.96 Class A Common Units | | | | | | | | | | 5,474 |
| | — |
|
Total Ameritox, Ltd. | | | | | | | | | | | | 5,759 |
| | 11,414 |
| | 668 |
|
BeyondTrust Software, Inc. (3) | | Application software | | First Lien | | 9/25/2019 | | LIBOR+7% (1% floor) | | 8.33 | % | | 15,330 |
| | 15,231 |
| | 15,329 |
|
BJ's Wholesale Club, Inc. (3) | | Hypermarkets & super centers | | First Lien | | 1/26/2024 | | LIBOR+3.75% (1% floor) | | 4.99 | % | | 4,988 |
| | 4,993 |
| | 4,793 |
|
Compuware Corporation | | Internet software & services | | First Lien B3 | | 12/15/2021 | | LIBOR+4.25% (1% floor) | | 5.49 | % | | 11,154 |
| | 11,041 |
| | 11,293 |
|
DFT Intermediate LLC (3) | | Specialized finance | | First Lien | | 3/1/2023 | | LIBOR+5.5% (1% floor) | | 6.74 | % | | 10,723 |
| | 10,474 |
| | 10,652 |
|
Digital River, Inc. | | Internet software & services | | First Lien | | 2/12/2021 | | LIBOR+6.5% (1% floor) | | 7.82 | % | | 4,524 |
| | 4,541 |
| | 4,546 |
|
Dodge Data & Analytics LLC (3) | | Data processing & outsourced services | | First Lien | | 10/31/2019 | | LIBOR+8.75% (1% floor) | | 10.13 | % | | 9,339 |
| | 9,372 |
| | 8,744 |
|
DTZ U.S. Borrower, LLC (3) | | Real estate services | | First Lien | | 11/4/2021 | | LIBOR+3.25% (1% floor) | | 4.57 | % | | 6,964 |
| | 6,998 |
| | 6,990 |
|
Edge Fitness, LLC | | Leisure facilities | | First Lien | | 12/31/2019 | | LIBOR+7.75% (1% floor) | | 9.05 | % | | 10,600 |
| | 10,602 |
| | 10,600 |
|
EOS Fitness Opco Holdings, LLC (3) | | Leisure facilities | | First Lien | | 12/30/2019 | | LIBOR+8.75% (0.75% floor) | | 9.99 | % | | 18,374 |
| | 18,182 |
| | 18,557 |
|
Everi Payments Inc.(3) | | Casinos & gaming | | First Lien | | 5/9/2024 | | LIBOR+4.5% (1% floor) | | 5.74 | % | | 4,988 |
| | 4,964 |
| | 5,039 |
|
Falmouth Group Holdings Corp. | | Specialty chemicals | | First Lien | | 12/13/2021 | | LIBOR+6.75% (1% floor) | | 8.08 | % | | 4,610 |
| | 4,578 |
| | 4,610 |
|
Garretson Resolution Group, Inc. | | Diversified support services | | First Lien | | 5/22/2021 | | LIBOR+6.5% (1% floor) | | 7.83 | % | | 5,836 |
| | 5,818 |
| | 5,766 |
|
InMotion Entertainment Group, LLC (3) | | Consumer electronics | | First Lien | | 10/1/2018 | | LIBOR+7.75% (1.25% floor) | | 9.09 | % | | 8,875 |
| | 8,884 |
| | 8,875 |
|
| | | | First Lien B | | 10/1/2018 | | LIBOR+7.75% (1.25% floor) | | 9.09 | % | | 8,875 |
| | 8,828 |
| | 8,871 |
|
Total InMotion Entertainment Group, LLC | | | | | | | | | | | | 17,750 |
| | 17,712 |
| | 17,746 |
|
Keypath Education, Inc. (3) | | Advertising | | First Lien | | 4/3/2022 | | LIBOR+7% (1.00% floor) | | 8.33 | % | | 2,040 |
| | 2,040 |
| | 2,039 |
|
| | | | 927 shares Common Stock | | | | | | | | | | 1,391 |
| | 809 |
|
| | | | | | | | | | | | 2,040 |
| | 3,431 |
| | 2,848 |
|
Lift Brands, Inc. (3) | | Leisure facilities | | First Lien | | 12/23/2019 | | LIBOR+7.5% (1% floor) | | 8.83 | % | | 18,276 |
| | 18,257 |
| | 18,275 |
|
Metamorph US 3, LLC (3)(5) | | Internet software & services | | First Lien | | 12/1/2020 | | LIBOR+5.5% (1% floor) 2% PIK | | 6.74 | % | | 9,969 |
| | 9,481 |
| | 3,786 |
|
Motion Recruitment Partners LLC | | Human resources & employment services | | First Lien | | 2/13/2020 | | LIBOR+6% (1% floor) | | 7.24 | % | | 4,330 |
| | 4,281 |
| | 4,330 |
|
NAVEX Global, Inc. | | Internet software & services | | First Lien | | 11/19/2021 | | LIBOR+4.75% (1% floor) | | 5.49 | % | | 5,959 |
| | 5,925 |
| | 5,982 |
|
New IPT, Inc. (3) | | Oil & gas equipment & services | | First Lien | | 3/17/2021 | | LIBOR+5% (1% floor) | | 6.33 | % | | 1,794 |
| | 1,794 |
| | 1,794 |
|
| | | | Second Lien | | 9/17/2021 | | LIBOR+5.1% (1% floor) | | 6.43 | % | | 1,094 |
| | 1,094 |
| | 1,094 |
|
| | | | 21.876 Class A Common Units | | | | | | | | | | — |
| | 321 |
|
Total New IPT, Inc. | | | | | | | | | | | | 2,888 |
| | 2,888 |
| | 3,209 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
Portfolio Company | | Industry | | Investment Type | | Maturity Date | | Current Interest Rate(1)(4) | | Cash Interest Rate | | Principal | | Cost | | Fair Value (2) |
Novetta Solutions, LLC | | Internet software & services | | First Lien | | 9/30/2022 | | LIBOR+5% (1% floor) | | 6.34 | % | | $ | 6,118 |
| | $ | 6,066 |
| | $ | 5,950 |
|
OmniSYS Acquisition Corporation (3) | | Diversified support services | | First Lien | | 11/21/2018 | | LIBOR+7.5% (1% floor) | | 8.83 | % | | 10,896 |
| | 10,900 |
| | 10,833 |
|
Refac Optical Group (3) | | Specialty stores | | First Lien A | | 9/30/2018 | | LIBOR+8% | | 9.23 | % | | 4,623 |
| | 4,605 |
| | 4,623 |
|
Salient CRGT, Inc. (3) | | IT consulting & other services | | First Lien | | 2/28/2022 | | LIBOR+5.75% (1% floor) | | 6.99 | % | | 2,457 |
| | 2,412 |
| | 2,440 |
|
Scientific Games International, Inc. (3) | | Casinos & gaming | | First Lien | | 8/14/2024 | | LIBOR+3.25% (1% floor) | | 4.58 | % | | 6,632 |
| | 6,598 |
| | 6,651 |
|
SHO Holding I Corporation | | Footwear | | First Lien | | 10/27/2022 | | LIBOR+5% (1% floor) | | 6.24 | % | | 8,594 |
| | 8,566 |
| | 8,487 |
|
TravelClick, Inc. (3) | | Internet software & services | | Second Lien | | 11/6/2021 | | LIBOR+7.75% (1% floor) | | 8.99 | % | | 5,127 |
| | 5,127 |
| | 5,153 |
|
TV Borrower US, LLC | | Integrated telecommunications services | | First Lien | | 2/22/2024 | | LIBOR+4.75% (1% floor) | | 6.08 | % | | 3,582 |
| | 3,565 |
| | 3,607 |
|
Valet Merger Sub, Inc. (3) | | Environmental & facilities services | | First Lien | | 9/24/2021 | | LIBOR+7% (1% floor) | | 8.24 | % | | 12,998 |
| | 12,862 |
| | 12,998 |
|
Vubiquity, Inc. | | Application software | | First Lien | | 8/12/2021 | | LIBOR+5.5% (1% floor) | | 6.83 | % | | 2,653 |
| | 2,636 |
| | 2,633 |
|
| | | | | | | | | | | | $ | 245,063 |
| | $ | 251,648 |
| | $ | 235,526 |
|
___________________
(1) Represents the current interest rate as of September 30, 2017.period end. All the LIBOR shown above is in U.S. dollars. As of March 31, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45% and the 180-day LIBOR at 1.07%. Most loans include an interest rates are payable in cash, unless otherwise noted.floor, which generally ranges from 0% to 1%.
(2)(3) Represents the current determination of fair value as of September 30, 2017March 31, 2020 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.
(3)(4) This investment is held by both us and SLF JV I as of March 31, 2020.
(5) Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
SLF JV I Portfolio as of September 30, 2017.2019
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Access CIG, LLC | First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025 | 6.07 | % | Diversified support services | $ | 9,300 |
| | $ | 9,256 |
| | $ | 9,201 |
| |
AdVenture Interactive, Corp. | 927 shares of common stock | | Advertising | | | 1,390 |
| | 1,295 |
| (4) |
AI Ladder (Luxembourg) Subco S.a.r.l. | First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025 | 6.60 | % | Electrical components & equipment | 6,145 |
| | 5,992 |
| | 5,659 |
| (4) |
Air Newco LP | First Lien Term Loan, LIBOR+4.75% cash due 5/31/2024 | 6.79 | % | IT consulting & other services | 9,900 |
| | 9,875 |
| | 9,916 |
| |
AL Midcoast Holdings LLC | First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025 | 7.60 | % | Oil & gas storage & transportation | 9,900 |
| | 9,801 |
| | 9,764 |
| |
Altice France S.A. | First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026 | 6.03 | % | Integrated telecommunication services | 7,444 |
| | 7,282 |
| | 7,439 |
| |
Alvogen Pharma US, Inc. | First Lien Term Loan, LIBOR+4.75% cash due 4/1/2022 | 6.79 | % | Pharmaceuticals | 7,656 |
| | 7,656 |
| | 6,963 |
| |
Apptio, Inc. | First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025 | 9.56 | % | Application software | 4,615 |
| | 4,534 |
| | 4,530 |
| (4) |
| First Lien Revolver, LIBOR+7.25% cash due 1/10/2025 | | Application software | — |
| | (7 | ) | | (7 | ) | (4)(5) |
Total Apptio, Inc. | | | | | | 4,527 |
| | 4,523 |
| |
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Blackhawk Network Holdings, Inc. | First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025 | 5.04 | % | Data processing & outsourced services | $ | 9,875 |
| | $ | 9,855 |
| | $ | 9,858 |
| |
Boxer Parent Company Inc. | First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025 | 6.29 | % | Systems software | 7,609 |
| | 7,518 |
| | 7,336 |
| (4) |
Brazos Delaware II, LLC | First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025 | 6.05 | % | Oil & gas equipment & services | 7,406 |
| | 7,376 |
| | 6,855 |
| |
C5 Technology Holdings, LLC | 171 Common Units | | Data Processing & Outsourced Services | | | — |
| | — |
| (4) |
| 7,193,539.63 Preferred Units | | | | | 7,194 |
| | 7,194 |
| (4) |
Total C5 Technology Holdings, LLC | | | | | | 7,194 |
| | 7,194 |
| |
Cast & Crew Payroll, LLC | First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026 | 6.05 | % | Application software | 4,975 |
| | 4,925 |
| | 5,018 |
| |
CITGO Petroleum Corp. | First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024 | 7.10 | % | Oil & gas refining & marketing | 7,960 |
| | 7,880 |
| | 8,010 |
| (4) |
Connect U.S. Finco LLC | First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026 | 7.10 | % | Alternative Carriers | 8,000 |
| | 7,840 |
| | 7,888 |
| (4) |
Curium Bidco S.à r.l. | First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026 | 6.10 | % | Biotechnology | 6,000 |
| | 5,955 |
| | 6,030 |
| |
Dcert Buyer, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026 | 6.26 | % | Internet services & infrastructure | 8,000 |
| | 7,980 |
| | 7,985 |
| |
DigiCert, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024 | 6.04 | % | Internet services & infrastructure | 8,250 |
| | 8,148 |
| | 8,249 |
| (4) |
Ellie Mae, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026 | 6.04 | % | Application software | 5,000 |
| | 4,975 |
| | 5,015 |
| |
Everi Payments Inc. | First Lien Term Loan, LIBOR+3.00% cash due 5/9/2024 | 5.04 | % | Casinos & gaming | 4,764 |
| | 4,742 |
| | 4,776 |
| |
Falmouth Group Holdings Corp. | First Lien Term Loan, LIBOR+6.75% cash due 12/14/2021 | 8.95 | % | Specialty chemicals | 4,938 |
| | 4,909 |
| | 4,910 |
| |
Frontier Communications Corporation | First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024 | 5.80 | % | Integrated telecommunication services | 6,473 |
| | 6,400 |
| | 6,471 |
| |
Gentiva Health Services, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025 | 5.81 | % | Healthcare services | 7,920 |
| | 7,801 |
| | 7,974 |
| |
Gigamon, Inc. | First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024 | 6.29 | % | Systems software | 7,860 |
| | 7,801 |
| | 7,644 |
| |
GoodRx, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025 | 4.81 | % | Interactive media & services | 7,852 |
| | 7,835 |
| | 7,862 |
| |
Guidehouse LLP | Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026 | 9.54 | % | Research & consulting services | 6,000 |
| | 5,975 |
| | 5,925 |
| (4) |
Indivior Finance S.a.r.l. | First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022 | 6.76 | % | Pharmaceuticals | 7,898 |
| | 7,797 |
| | 7,272 |
| |
Intelsat Jackson Holdings S.A. | First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023 | 5.80 | % | Alternative Carriers | 10,000 |
| | 9,891 |
| | 10,042 |
| |
KIK Custom Products Inc. | First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023 | 6.26 | % | Household products | 8,000 |
| | 7,972 |
| | 7,610 |
| |
McDermott Technology (Americas), Inc. | First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025 | 7.10 | % | Oil & gas equipment & services | 4,187 |
| | 4,119 |
| | 2,676 |
| |
Mindbody, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025 | 9.06 | % | Internet services & infrastructure | 4,524 |
| | 4,443 |
| | 4,438 |
| (4) |
| First Lien Revolver, LIBOR+7.00% cash due 2/15/2025 | | Internet services & infrastructure | — |
| | (9 | ) | | (9 | ) | (4)(5) |
Total Mindbody, Inc. | | | | | | 4,434 |
| | 4,429 |
| |
Navicure, Inc. | First Lien Term Loan, LIBOR+3.75% cash due 9/18/2026 | 6.13 | % | Healthcare technology | 6,000 |
| | 5,970 |
| | 6,008 |
| |
New IPT, Inc. | First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021 | 7.10 | % | Oil & gas equipment & services | 1,422 |
| | 1,422 |
| | 1,422 |
| (4) |
| 21.876 Class A Common Units in New IPT Holdings, LLC | | Oil & gas equipment & services | | | — |
| | 1,268 |
| (4) |
Total New IPT, Inc. | | | | | | 1,422 |
| | 2,690 |
| |
Northern Star Industries Inc. | First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025 | 6.56 | % | Electrical components & equipment | 6,895 |
| | 6,868 |
| | 6,792 |
| |
|
| | | | | | | | | | | | | | | | |
Portfolio Company | Investment Type | Cash Interest Rate (1)(2) | Industry | Principal | | Cost | | Fair Value (3) | Notes |
Novetta Solutions, LLC | First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022 | 7.05 | % | Application software | $ | 5,993 |
| | $ | 5,961 |
| | $ | 5,882 |
| |
OCI Beaumont LLC | First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025 | 6.10 | % | Commodity chemicals | 7,880 |
| | 7,872 |
| | 7,890 |
| |
OEConnection LLC | First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026 | 6.13 | % | Application software | 7,312 |
| | 7,275 |
| | 7,298 |
| |
| First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026 | | Application software | — |
| | (3 | ) | | (1 | ) | (5) |
Total OEConnection LLC | | | | | | 7,272 |
| | 7,297 |
| |
Red Ventures, LLC | First Lien Term Loan, LIBOR+3.00% cash due 11/8/2024 | 5.04 | % | Interactive media & services | 3,990 |
| | 3,971 |
| | 4,011 |
| |
Salient CRGT, Inc. | First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022 | 8.05 | % | Aerospace & defense | 2,205 |
| | 2,183 |
| | 2,094 |
| (4) |
Scientific Games International, Inc. | First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024 | 4.79 | % | Casinos & gaming | 6,516 |
| | 6,491 |
| | 6,470 |
| |
SHO Holding I Corporation | First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022 | 7.26 | % | Footwear | 8,420 |
| | 8,403 |
| | 7,999 |
| |
Signify Health, LLC | First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024 | 6.60 | % | Healthcare services | 9,850 |
| | 9,775 |
| | 9,838 |
| |
Sirva Worldwide, Inc. | First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025 | 7.54 | % | Diversified support services | 4,906 |
| | 4,833 |
| | 4,759 |
| |
Sunshine Luxembourg VII SARL | First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026 | 6.59 | % | Personal products | 8,000 |
| | 7,960 |
| | 8,048 |
| |
Thruline Marketing, Inc. | First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022 | 9.10 | % | Advertising | 1,854 |
| | 1,851 |
| | 1,854 |
| (4) |
| 927 Class A Units in FS AVI Holdco, LLC | | Advertising | | | 1,088 |
| | 658 |
| (4) |
Total Thruline Marketing, Inc. | | | | | | 2,939 |
| | 2,512 |
| |
Triple Royalty Sub LLC | Fixed Rate Bond 144A 9.0% Toggle PIK cash due 4/15/2033 | | Pharmaceuticals | 5,000 |
| | 5,000 |
| | 5,175 |
| |
Uber Technologies, Inc. | First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025 | 6.03 | % | Application software | 9,875 |
| | 9,836 |
| | 9,836 |
| (4) |
UFC Holdings, LLC | First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026 | 5.30 | % | Movies & entertainment | 4,489 |
| | 4,489 |
| | 4,506 |
| |
Uniti Group LP | First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022 | 7.04 | % | Specialized REITs | 6,401 |
| | 6,221 |
| | 6,256 |
| (4) |
Valeant Pharmaceuticals International Inc. | First Lien Term Loan, LIBOR+2.75% cash due 11/27/2025 | 4.79 | % | Pharmaceuticals | 1,772 |
| | 1,764 |
| | 1,778 |
| |
Veritas US Inc. | First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023 | 6.60 | % | Application software | 6,894 |
| | 6,856 |
| | 6,534 |
| (4) |
Verra Mobility, Corp. | First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025 | 5.79 | % | Data processing & outsourced services | 10,835 |
| | 10,849 |
| | 10,894 |
| |
WP CPP Holdings, LLC | Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026 | 10.01 | % | Aerospace & defense | 6,000 |
| | 5,949 |
| | 5,974 |
| (4) |
| | | | $ | 340,960 |
| | $ | 347,985 |
| | $ | 345,032 |
| |
__________________
(1) Represents the current interest rate as of September 30, 2019. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR andand/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement.agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2019, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(5) This investment is on cash non-accrual status(3) Represents the current determination of fair value as of September 30, 2017. Cash non-accrual status2019 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is inclusivenot included in our Board of PIKDirectors' valuation process described elsewhere herein.
(4) This investment was held by both us and other non-cashSLF JV I as of September 30, 2019.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income where applicable.which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
Both
As of March 31, 2020, the cost and fair value of our debt investments in the Class A mezzanine secured deferrable floating rate notes of SLF JV I held by us were $100.8$96.3 million and $101.0$92.2 million, as of December 31, 2017 and September 30, 2017, respectively. We earned cash interest of $1.8 million and $0.2 million on our investments in these notes for the three months ended December 31, 2017 and December 31, 2016, respectively. Both the cost and fair value of our debt investment in the Class B mezzanine secured deferrable fixed rate notes of SLF JV I held by us were $27.5 million and $27.6$96.3 million as of December 31, 2017 and September 30, 2017, respectively.2019. We earned PIK interest income of $1.0$2.1 million and $4.3 million on our investments in these notesthe SLF JV I Subordinated Notes for the three and six months ended DecemberMarch 31, 2017. Prior to their repayment,2020, respectively. We earned interest income of $2.3 million and $5.1 million on our investments in the subordinated notes of SLF JV I boreNotes for the
three and six months ended March 31, 2019, respectively. The SLF JV I Subordinated Notes bear interest at a rate of one-month LIBOR plus 8.0%7.0% per annum and we earned interest income of $2.9 millionmature on our investments in these notes for the three months ended December 31, 2016. 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by us was $16.2$49.3 million and $4.9$0.0 million, respectively, as of DecemberMarch 31, 2017,2020, and $16.2$49.3 million and $5.5$30.1 million, respectively, as of September 30, 2017.2019. We did not earn any dividend income for the three and six months ended DecemberMarch 31, 20172020 and earned dividend income of $0.7 million for the three months ended December 31, 2016,2019 with respect to our investment in the LLC equity interests.interests of SLF JV I. The LLC equity interests of SLF JV I are dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of DecemberMarch 31, 20172020 and September 30, 20172019 and for the three and six months ended DecemberMarch 31, 20172020 and December 31, 2016:2019:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
Selected Balance Sheet Information: | | | | | | | | |
Investments in loans at fair value (cost December 31, 2017: $255,973; cost September 30, 2017: $251,648) | | $ | 239,601 |
| | $ | 235,526 |
| |
Receivables from secured financing arrangements at fair value (cost December 31, 2017: $9,787; cost September 30, 2017: $9,783) | | 8,334 |
| | 8,305 |
| |
Investments at fair value (cost March 31, 2020: $341,737; cost September 30, 2019: $347,985) | | | $ | 299,572 |
| | $ | 345,032 |
|
Cash and cash equivalents | | 28,386 |
| | 24,389 |
| | 14,039 |
| | 3,674 |
|
Restricted cash | | 4,100 |
| | 5,097 |
| | 5,242 |
| | 5,242 |
|
Other assets | | 4,117 |
| | 3,485 |
| | 10,783 |
| | 6,912 |
|
Total assets | | $ | 284,538 |
| | $ | 276,802 |
| | $ | 329,636 |
| | $ | 360,860 |
|
| | | | | | | | |
Senior credit facilities payable | | $ | 105,053 |
| | $ | 113,053 |
| |
Debt securities payable at fair value (proceeds December 31, 2017: $146,572; proceeds September 30, 2017: $147,052) | | 146,572 |
| | 147,052 |
| |
Senior credit facility payable | | | $ | 193,910 |
| | $ | 170,210 |
|
Debt securities payable at fair value (proceeds March 31, 2020: $110,000; proceeds September 30, 2019: $110,000) | | | 105,339 |
| | 110,000 |
|
Other liabilities | | 27,407 |
| | 10,383 |
| | 30,387 |
| | 46,303 |
|
Total liabilities | | 279,032 |
| | 270,488 |
| | 329,636 |
| | 326,513 |
|
Members' equity | | 5,506 |
| | 6,314 |
| | — |
| | 34,347 |
|
Total liabilities and members' equity | | $ | 284,538 |
| | $ | 276,802 |
| | $ | 329,636 |
| | $ | 360,860 |
|
| | | | Three months ended December 31, 2017 | | Three months ended December 31, 2016 | | Three months ended March 31, 2020 | | Three months ended March 31, 2019 | | Six months ended March 31, 2020 | | Six months ended March 31, 2019 |
Selected Statements of Operations Information: | | | | | | | | | | | | |
Interest income | | $ | 4,728 |
| | $ | 6,759 |
| | $ | 5,546 |
| | $ | 5,551 |
| | $ | 10,939 |
| | $ | 10,989 |
|
Other income | | — |
| | 308 |
| | 291 |
| | 80 |
| | 297 |
| | 89 |
|
Total investment income | | 4,728 |
| | 7,067 |
| | 5,837 |
| | 5,631 |
| | 11,236 |
| | 11,078 |
|
Interest expense | | 5,145 |
| | 6,014 |
| | 4,493 |
| | 4,709 |
| | 9,134 |
| | 9,863 |
|
Other expenses | | 161 |
| | 408 |
| | 64 |
| | 276 |
| | 131 |
| | 326 |
|
Total expenses (1) | | 5,306 |
| | 6,422 |
| | 4,557 |
| | 4,985 |
| | 9,265 |
| | 10,189 |
|
Net unrealized depreciation | | (226 | ) | | (22,473 | ) | |
Net realized gain (loss) | | (4 | ) | | 22,708 |
| |
Net unrealized appreciation (depreciation) | | | (37,491 | ) | | 4,576 |
| | (34,550 | ) | | 1,120 |
|
Net realized gains (losses) | | | (615 | ) | | 19 |
| | (1,767 | ) | | (4,986 | ) |
Net income (loss) | | $ | (808 | ) | | $ | 880 |
| | $ | (36,826 | ) | | $ | 5,241 |
| | $ | (34,346 | ) | | $ | (2,977 | ) |
__________
(1) There are no management fees or incentive fees charged at SLF JV I.
SLF JV I has elected to fair value the debt securities issued to us and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option, or ASC 825.. The debt securities are valued based on the total assets less the total liabilities senior to the mezzanine notes of SLF JV I in an amount not exceeding par under the enterprise value technique.
During the three and six months ended DecemberMarch 31, 20172020 and December 31, 2016,2019, we did not sell any senior secured debt investments to SLF JV I.
Discussion and Analysis of Results and Operations
Results of Operations
The principal measure of our financial performance is the netNet increase (decrease) in net assets resulting from operations which includes net investment income, net realized gain (loss)gains (losses) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends and fees and other investment income and totalnet expenses. Net realized gain (loss) on investments and secured borrowingsgains (losses) is the difference between the proceeds received from dispositions of portfolio investmentsinvestment related assets and secured borrowings
liabilities and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment portfoliorelated assets and secured borrowingsliabilities carried at fair value during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
Comparison of three and six months ended DecemberMarch 31, 20172020 and DecemberMarch 31, 20162019
Total Investment Income
Total investment income includes interest on our investments, fee income and other investmentdividend income.
Total investment income for the for the three months ended DecemberMarch 31, 20172020 and DecemberMarch 31, 20162019 was $33.9$34.2 million and $51.8$38.2 million, respectively. For the three months ended DecemberMarch 31, 2017,2020, this amount primarily consisted of $31.8 million of interest income from portfolio investments (which included $1.9 million of PIK interest), $1.0$2.1 million of fee income and $0.3 million of dividend income. For the three months ended March 31, 2019, this amount consisted of $36.6 million of interest income from portfolio investments (which included $2.3 million of PIK interest), $1.1 million of fee income and $0.5 million of dividend income. The decrease of $4.1 million, or 10.7%, in our total investment income for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was due primarily to a $4.7 million decrease in interest income, which was attributable to lower levels of OID accretion, primarily attributable to $4.3 million of OID accretion related to one of our investments during the three months ended March 31, 2019, and decreases in LIBOR on our floating rate investments.
Total investment income for the six months ended March 31, 2020 and March 31, 2019 was $65.1 million and $76.5 million, respectively. For the six months ended March 31, 2020, this amount consisted of $61.4 million of interest income from portfolio investments (which included $3.1 million of PIK interest), $3.1 million of fee income and $0.6 million of dividend income. For the six months ended March 31, 2019, this amount consisted of $73.2 million of interest income from portfolio investments (which included $3.1 million of PIK interest), $2.3 million of fee income and $1.0 million of dividend income. For the three months ended December 31, 2016, this amount primarily consisted of $46.7 million of interest income from portfolio investments (which included $2.8 million of PIK interest), $3.6 million of fee income and $1.5 million of dividend income.
The decrease of $17.9$11.4 million, or 14.9%, in our total investment income for the threesix months ended DecemberMarch 31, 2017,2020, as compared to the threesix months ended DecemberMarch 31, 2016,2019, was due primarily to a $14.9$11.8 million decrease in interest income, which was attributable to a decrease inlower levels of OID accretion, primarily the sizeresult of $9.9 million of OID accretion related to one of our investment portfolio, a $2.5 million decrease in fee income, which was attributable to a higher number of advisory and structuring fees earnedinvestments during the threesix months ended DecemberMarch 31, 2016,2019, and a $0.4 million decreasedecreases in dividend income, which was attributable to lower dividend income earnedLIBOR on our investments in SLF JV I in the current quarter.floating rate investments.
Expenses
Net expenses (expenses net of fee waivers and insurance recoveries)waivers) for the three months ended DecemberMarch 31, 20172020 and DecemberMarch 31, 20162019 were $20.6$11.3 million and $28.5$20.5 million, respectively. Net expenses decreased for the three months ended DecemberMarch 31, 2017,2020, as compared to the three months ended DecemberMarch 31, 2016,2019, by $7.9$9.2 million, or 27.8%44.8%, due primarily to a $3.0$7.7 million decrease in base management fees and incentive fees (net of fee waivers), which was attributable to a reduction in$6.6 million reversal of previously accrued Part II incentive fees as a result of unrealized depreciation on investments during the size of our portfolioquarter and lower Part I incentive fees due to lower investment income, and a reduction$1.8 million decrease in interest expense primarily driven by decreases to LIBOR, partially offset by a $0.2 million increase in professional fees.
Net expenses (expenses net of fee waivers) for the six months ended March 31, 2020 and March 31, 2019 were $34.5 million and $41.5 million, respectively. Net expenses decreased for the six months ended March 31, 2020, as compared to the six months ended March 31, 2019, by $7.0 million, or 17.0%, due primarily to a $2.4 million decrease in base management fees and incentive fees (net of fee rate under the New Investment Advisory Agreement,waivers), which was attributable to a $3.3$1.7 million decrease in Part I incentive fees which was attributable(net of waivers) due to a reversal of previously waived fees of $0.6 million in the prior period and lower pre-incentive fee net investment income during the current period and a $0.4 million decrease in base management fees due to a decrease in the current quartersize of the investment portfolio at fair value, and a $3.6$4.1 million decrease in interest expense attributableresulting from decreases to lower levels of outstanding debt inLIBOR during the current quarter, partially offset by a $1.8 million increase in professional fees.period.
Net Investment Income
As a result of the $17.9$4.1 milliondecrease in total investment income and the $7.9$9.2 million decrease in net expenses, net investment income for the three months ended DecemberMarch 31, 2017 decreased2020 increased by $10.0$5.1 million, or 42.8%29.0%, compared to the three months ended DecemberMarch 31, 2016.2019.
As a result of the $11.4 million decrease in total investment income and the $7.0 million decrease in net expenses, net investment income for the six months ended March 31, 2020 decreased by $4.3 million, or 12.4%, compared to the six months ended March 31, 2019.
Realized Gain (Loss) on Investments and Secured Borrowings
Realized gain (loss) isgains or losses are measured by the difference between the net proceeds received from dispositionsthe sale or redemption of portfolio investments, and secured borrowings and their stated costs.foreign currency and the cost basis without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with our determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
Realized losses on investments and secured borrowings decreased from $23.1 million forDuring the three months ended DecemberMarch 31, 2016 to $0.32020 and 2019, we recorded aggregate net realized gains (losses) of $(26.5) million forand $25.2 million, respectively, primarily in connection with the threeexits or restructurings of various investments. During the six months ended DecemberMarch 31, 2017. For2020 and 2019, we recorded aggregate net realized gains (losses) of $(23.2) million and $43.2 million, respectively, in connection with the three months ended December 31, 2016, realized losses were driven primarily by the restructuring our investment in SLF JV I and the dispositionexits or restructurings of our investment in First Star Aviation, LLC.
various investments. See “Note“Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation on Investments and Secured Borrowings”” in the notes to the accompanying Consolidated Financial Statements for more details regarding investment realization events for the three and six months ended DecemberMarch 31, 20172020 and December 31, 2016.2019.
Net Unrealized Appreciation (Depreciation) on Investments and Secured Borrowings
Net unrealized appreciation or depreciation is the net change in the fair value of our investments, and secured borrowings and foreign currency during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Net unrealized depreciation on investments and secured borrowings decreased from $74.4 million forDuring the three months ended DecemberMarch 31, 2016 to $43.52020 and 2019, we recorded net unrealized appreciation (depreciation) of $(163.5) million forand $21.5 million, respectively. For the three months ended DecemberMarch 31, 2017. Net2020, this consisted of $(139.8) million of net unrealized depreciation foron debt investments and $(54.4) million of net unrealized depreciation on equity investments, partially offset by $28.4 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses) and $2.2 million of net unrealized appreciation of foreign currency forward contracts. The unrealized depreciation on debt and equity investments during the three months ended DecemberMarch 31, 20172020 was primarilylargely due to increased market volatility and wider credit spreads resulting from the resultonset of significant write-downsthe COVID-19 pandemic in March 2020 and the direct impact of the COVID-19 pandemic on certain of our investment portfolio companies, including $39.9 millionthe impact of aggregate write-downs on three investments. Net unrealized depreciation forleverage at the SLF JV I.
For the three months ended DecemberMarch 31, 2016 was primarily the result2019, this consisted of significant write-downs on our investment portfolio, including $82.9$22.3 million of aggregate write-downsnet unrealized appreciation on fourequity investments, $3.6 million of net unrealized appreciation on debt investments and $0.8 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(5.2) million of net unrealized depreciation related to exited investments (a portion of which results in a reclassification to realized gains).
During the six months ended March 31, 2020 and 2019, we recorded net unrealized appreciation (depreciation) of $(160.7) million and $14.5 million, respectively. For the six months ended March 31, 2020, this consisted of $(134.0) million of net unrealized depreciation on debt investments and $(50.0) million of net unrealized depreciation on equity investments, partially offset by $22.5 million of net reclassificationsunrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses (resulting in unrealized appreciation).
See “Note 9. Realized Gains or Losseslosses) and Net Unrealized Appreciation or Depreciation on Investments and Secured Borrowings” in the Consolidated Financial Statements for more details regarding$0.8 million of net unrealized appreciation (depreciation)of foreign currency forward contracts.
For the six months ended March 31, 2019, this consisted of $24.2 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $14.0 million of net unrealized appreciation on equity investments and secured borrowings for the three months ended December 31, 2017 and December 31, 2016.
$0.4 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(24.1) million of net unrealized depreciation on debt investments.
Financial Condition, Liquidity and Capital Resources
We have a number of alternatives available to fund our investment portfolio and our operations, including raising equity, increasing or refinancing debt and funding from operational cash flow. Additionally,We generally expect to generate liquidity wefund the growth of our investment portfolio through additional debt and equity capital, which may reduce investment size by syndicatinginclude securitizing a portion of any given transaction.our investments. We cannot assure you, however, that our efforts to grow our portfolio will be successful. For example, our common stock has generally traded at prices below net asset value for the past several years, and we are currently limited in our ability to raise additional equity at prices below the then-current net asset value per share. We intend to continue to generate cash primarily from cash flows from operations, including interest earned, and future borrowings. We may also from time to time issue securities in public or private offerings, which offerings will depend on future market conditions, funding needs and other factors. We intend to fund our future distribution obligations through operating cash flow or with funds obtained through future equity and debt offerings or credit facilities, as we deem appropriate.
In the future, we may also securitize a portion of our investments to the extent permitted by applicable law and regulation. To securitize investments, we would likely create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. We would then sell interests in the subsidiary on a non-recourse basis to purchasers and we would retain all or a portion of the equity in the subsidiary.
Our primary uses of funds are investments in our targeted asset classes and cash distributions to holders of our common stock. We may from time to time repurchase or redeem some or all of our outstanding notes in open-market transactions, privately negotiated transactions or otherwise. We generally expectAt a special meeting of our stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us effective as of June 29, 2019. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity as compared to $1 of debt for each $1 of equity. As of March 31, 2020, we had $704.8 million in senior securities and our asset coverage ratio was 205.9%. During the quarter, we increased our target a debt to equity ratio offrom 0.70x to 0.85x to 0.85x to 1.0x (i.e., one dollar of equity for each $0.70$0.85 to $0.85$1.00 of debt outstanding).
Although as we may fundplan to continue to opportunistically deploy capital into the growth of our investment portfolio through equity offerings, our plans to do so may not be successful. In this regard, because our common stock has at times traded at a price below our then-current net asset value per share (which has primarily been the case for several years) and we are limited in our ability to sell our common stock at a price below net asset value per share, we are currently limited in our ability to raise equity capital absent stockholder approval to issue shares of our common stock at prices below the then-current net asset value per share.markets.
For the threesix months ended DecemberMarch 31, 2017,2020, we experienced a net decreaseincrease in cash and cash equivalents of $7.6$74.1 million. During that period, we received $67.2used $121.6 million of net cash from operating activities, primarily from $286.0funding $379.2 million of investments, a $21.0 million of net decrease in payables from unsettled transactions, partially offset by $251.5 million of principal payments, PIK payments and sale proceeds received and the cash activities related to $13.3$30.7 million of net investment income, partially offset by funding $200.2 million of investments and net revolvers.income. During the same period, net cash usedprovided by financing activities was $74.8$195.7 million, primarily consisting of $51.0$90.0 million of net repaymentsborrowings under our credit facilities, $17.3the Credit Facility (as defined below) and $136.2 million net incurrence of unsecured notes, partially offset by $25.8 million of cash distributions paid to our stockholders, $6.2$3.7 million of payments of deferred financing costs paid and $0.3$1.0 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
For the threesix months ended DecemberMarch 31, 2016,2019, we experienced a net increasedecrease in cash and cash equivalents and restricted cash of $61.9$0.3 million. During that period, we received $179.1$74.7 million of net cash from operating activities, primarily from $225.5$329.0 million of principal payments, PIK payments and sale proceeds received and the cash activities related to $23.3$35.0 million of net investment income, partially offset by funding $104.2$270.3 million of investments and net revolvers.investments. During the same period, net cash used byin financing activities was $117.2$75.1 million, primarily consisting of $74.9$183.8 million of net borrowings under the Credit Facility (as defined below), $228.8 million of repayments under our credit facilities, $24.0of unsecured notes,$0.7 million of repayments of secured borrowings, $26.1 million of cash distributions paid to our stockholders $12.5 million of repurchases of common stock under stock repurchase program, $4.5 million of repayments of secured borrowings and $1.3$0.7 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
As of DecemberMarch 31, 2017,2020, we had $45.8$89.5 million in cash and cash equivalents, (including $0.3 million of restricted cash), portfolio investments (at fair value) of $1.4 billion, $9.1$6.2 million of interest, dividends and fees receivable, $24.6$295.2 of undrawn capacity on the Credit Facility (subject to borrowing base and other limitations), $34.0 million of net payables from unsettled transactions, $205.0$404.8 million of borrowings outstanding under our credit facilities, $406.5Credit Facility, $293.9 million of unsecured notes payable (net of unamortized financing costs), $11.6 million of secured borrowings (at fair value)costs and unaccreted discount) and unfunded commitments to portfolio companies of $98.7$91.6 million. As of March 31, 2020, we have analyzed cash and cash equivalents, availability under the Credit Facility, the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believe our liquidity and capital resources are sufficient to take advantage of market opportunities in the current economic climate.
As of September 30, 2017,2019, we had $59.9$15.4 million in cash and cash equivalents, (including $6.9 million of restricted cash), portfolio investments (at fair value) of $1.5$1.4 billion, $6.9$11.2 million of interest, dividends and fees receivable, $58.7$385.2 of undrawn capacity on the Credit Facility (subject to borrowing base and other limitations), $55.0 million of net payables from unsettled transactions, $256.0$314.8 million of borrowings outstanding under our credit facilities, $406.1Credit Facility, $158.5 million of unsecured notes payable (net of unamortized financing costs), $13.3 million of secured borrowings (at fair value) and unfunded commitments of $118.1$88.3 million. As of September 30, 2017, included in restricted cash was $6.8 million that was held at U.S. Bank, National Association in connection with our credit facility with Sumitomo Mitsui Banking Corporation, or SMBC.
Significant Capital Transactions
The following table reflects the distributions per share that our Board of Directors has declared,we have paid, including shares issued under our DRIP, on our common stock since October 1, 2016:2017:
|
| | | | | | | | | | | | | | | |
Date Declared | | Record Date | | Payment Date | | Amount per Share | | Cash Distribution | | DRIP Shares Issued (1) | | DRIP Shares Value |
August 3, 2016 | | October 14, 2016 | | October 31, 2016 | | $ | 0.06 |
| | $ 8.2 million | | 81,391 |
| | $ 0.4 million |
August 3, 2016 | | November 15, 2016 | | November 30, 2016 | | 0.06 |
| | 8.2 million | | 80,962 |
| | 0.4 million |
October 18, 2016 | | December 15, 2016 | | December 30, 2016 | | 0.06 |
| | 7.7 million | | 70,316 |
| | 0.4 million |
October 18, 2016 | | January 13, 2017 | | January 31, 2017 | | 0.06 |
| | 8.0 million | | 73,940 |
| | 0.4 million |
October 18, 2016 | | February 15, 2017 | | February 28, 2017 | | 0.06 |
| | 8.0 million | | 86,120 |
| | 0.4 million |
February 6, 2017 | | March 15, 2017 | | March 31, 2017 | | 0.02 |
| | 2.7 million | | 27,891 |
| | 0.1 million |
February 6, 2017 | | June 15, 2017 | | June 30, 2017 | | 0.02 |
| | 2.7 million | | 20,502 |
| | 0.1 million |
February 6, 2017 | | September 15, 2017 | | September 29, 2017 | | 0.125 |
| | 17.0 million | | 118,992 |
| | 0.7 million |
August 7, 2017 | | December 15, 2017 | | December 29, 2017 | | 0.125 |
| | 17.3 million | | 58,456 |
| | 0.3 million |
|
| | | | | | | | | | | | | | | |
Date Declared | | Record Date | | Payment Date | | Amount per Share | | Cash Distribution | | DRIP Shares Issued (1) | | DRIP Shares Value |
August 7, 2017 | | December 15, 2017 | | December 29, 2017 | | $ | 0.125 |
| | $ 17.3 million | | 58,456 |
| | $ 0.3 million |
February 5, 2018 | | March 15, 2018 | | March 30, 2018 | | 0.085 |
| | 11.5 million | | 122,884 |
| | 0.5 million |
May 3, 2018 | | June 15, 2018 | | June 29, 2018 | | 0.095 |
| | 13.0 million | | 87,283 |
| | 0.4 million |
August 1, 2018 | | September 15, 2018 | | September 28, 2018 | | 0.095 |
| | 13.2 million | | 34,575 |
| | 0.2 million |
November 19, 2018 | | December 17, 2018 | | December 28, 2018 | | 0.095 |
| | 13.0 million | | 87,429 |
| | 0.4 million |
February 1, 2019 | | March 15, 2019 | | March 29, 2019 | | 0.095 |
| | 13.1 million | | 59,603 |
| | 0.3 million |
May 3, 2019 | | June 14, 2019 | | June 28, 2019 | | 0.095 |
| | 13.1 million | | 61,093 |
| | 0.3 million |
August 2, 2019 | | September 13, 2019 | | September 30, 2019 | | 0.095 |
| | 13.1 million | | 61,205 |
| | 0.3 million |
November 12, 2019 | | December 13, 2019 | | December 31, 2019 | | 0.095 |
| | 12.9 million | | 87,747 |
| | 0.5 million |
January 31, 2020 | | March 13, 2020 | | March 31, 2020 | | 0.095 |
| | 12.9 million | | 157,523 |
| | 0.5 million |
______________
| |
(1) | Shares were purchased on the open market and distributed. |
On November 28, 2016, our Board of Directors approved a common stock repurchase program authorizing us to repurchase up to $12.5 million in the aggregate of our outstanding common stock through November 28, 2017. Common stock repurchases under the program were made in the open market. During the three months ended December 31, 2016, we repurchased 2,298,247 shares of
our common stock for $12.5 million, including commissions, under the common stock repurchase program. This authorization has been fully utilized.
Indebtedness
See “Note“Note 6. Borrowings”Borrowings” in the Consolidated Financial Statements for more details regarding our indebtedness and secured borrowings.indebtedness.
SBIC SubsidiariesCredit Facility
As of DecemberMarch 31, 20172020 and September 30, 2017, Fifth Street Mezzanine Partners IV, L.P., or FSMP IV, and Fifth Street Mezzanine Partners V, L.P., or FSMP V, had no U.S. Small Business Administration, or SBA, -guaranteed debentures outstanding, and we had commenced actions to surrender2019, (i) the license for FSMP IV and FSMP V to the SBA. During the year ended September 30, 2017, FSMP IV and FSMP V repaid all SBA-guaranteed debentures outstanding. On January 17, 2018, the SBA approved FSMP IV's and FSMP V's requests to surrender its licenses. Following surrendersize of the SBIC licenses of FSMP IV and FSMP V to the SBA, we intend to redeploy the cash previously held at these subsidiaries.
For the three months ended December 31, 2016, we recorded aggregate interest expense of $2.2 million related to the SBA-guaranteed debentures of both small business investment company subsidiaries.
ING Facility
On November 30, 2017, the Company entered into aour senior secured revolving credit facility, or, as amended and restated, the ING facility,Credit Facility, pursuant to a Senior Secured Revolving Credit Agreement, or the ING Credit Agreement,senior secured revolving credit agreement, with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. As of December 31, 2017, the ING facility permits up to $600agents, was $700 million of borrowings and includes(with an “accordion” feature that permits us, under certain circumstances, to increase the size of the facility up to $800 million. Borrowings under$1.02 billion), (ii) the ING Credit Agreement bearperiod during which we may make drawings will expire on February 25, 2023 and the maturity date is February 25, 2024 and (iii) the interest at a rate equal to, at our election, eithermargin for (a) LIBOR (1-loans (which may be 1-, 2-, 3- or 6-month, at our option) plus a margin ofwas 2.00% (which can be increased up to 2.25%) and (b) alternate base rate loans was 1.00% (which can be increased up to 1.25%), 2.50% or 2.75% per annumeach depending on our senior debt coverage ratio.
On December 13, 2019, we amended the Credit Facility to (1) reduce the required ratio as calculated underof total assets (less total liabilities) to total indebtedness of us and our subsidiaries (subject to certain exceptions), from 1.65 to 1.00 to 1.50 to 1.00 and (2) modify the ING Credit Agreement, with no LIBOR floor or (b) an alternate base rate plus a margindefinition of 1.25%, 1.50% or 1.75% per annum depending on the Company’s senior debtAdvance Rate to reference asset coverage ratio as calculated under the ING Credit Agreement. The period during which we may make drawings under the ING facility expires on November 29, 2020, or the Revolving Termination Date, and the final maturity date of the facility will be one year following the Revolving Termination Date.1.50 to 1.00, rather than 1.65 to 1.00.
Each loan or letter of credit originated or assumed under the ING facilityCredit Facility is subject to the satisfaction of certain conditions. Borrowings under the Credit Facility are subject to the facility’s various covenants and the leverage restrictions contained in the Investment Company Act. We cannot be assured that we will be able to borrow funds under the ING facilityCredit Facility at any particular time or at all.
The following table describes significant financial covenants, as of DecemberMarch 31, 2017,2020, with which we must comply under the ING facilityCredit Facility on a quarterly basis:
|
| | | | | | |
Financial Covenant | | Description | | Target Value | | December 31, 2019 Reported Value (1) |
Minimum shareholders' equity | | Net assets shall not be less than the greater of (a) 40% of total assets and (b) $700 million plus 50% of the aggregate net proceeds of all sales of equity interests after November 30, 2017 | | $700 million | | $931 million |
Asset coverage ratio | | Asset coverage ratio shall not be less than 2.00:the greater of 1.50:1 and the statutory test applicable to us | | 1.50:1 | | 2.72:1 |
Interest coverage ratio | | Interest coverage ratio shall not be less than 2.00:1 | | 2.00:1 | | 2.89:1 |
Minimum net worth | | Net worth shall not be less than $650$600 million | | $600 million | | $887 million |
___________
(1) As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Quarterly Report on Form 10-Q for the quarter ended December 31, 2019. We were in compliance with all financial covenants under the ING facilityCredit Facility based on the financial information contained in this Quarterly Report on Form 10-Q for the three months ended December 31, 2017.10-Q.
From May 27, 2010 through November 30, 2017, we were party to a secured syndicated revolving credit facility with certain lenders party thereto from time to time and ING Capital LLC, as administrative agent, or, as amended, the Prior ING Facility. In connection with the entry into the ING Credit Agreement, we repaid all outstanding borrowings under the Prior ING Facility following which the Prior ING Facility was terminated. Obligations under the Prior ING Facility would have otherwise matured on August 6, 2018. As of DecemberMarch 31, 2017,2020 and September 30, 2019, we had $205.0$404.8 million and $314.8 million of borrowings outstanding under the ING facility,Credit Facility, respectively, which had a fair value of $205.0 million.$404.8 million and $314.8 million, respectively. Our borrowings under the ING facility bore interest at a weighted average interest rate of 3.961% for the period from November 30, 2017 to December 31, 2017. As of December 31, 2016, we had $402.5 million of borrowings outstanding under the Prior ING Facility. Our borrowings under the Prior INGCredit Facility bore interest at a weighted average interest rate of 3.705%3.806% and 2.945%4.688% for the period from October 1, 2017 to November 30, 2017 and the threesix months ended DecemberMarch 31, 2016,2020 and 2019, respectively.
For the three and six months ended DecemberMarch 31, 2017,2020, we recorded interest expense (inclusive of $2.7fees) of $4.2 million and $8.2 million, respectively, related to the Credit Facility. For the three and six months ended March 31, 2019, we recorded interest expense (inclusive of fees) of $4.3 million and $7.5 million in the aggregate, related to the Prior ING Facility and the ING facility. For the three months ended December 31, 2016, we recorded interest expense of $4.2 million related to the Prior INGCredit Facility.
Sumitomo Facility2025 Notes
On September 16, 2011,February 25, 2020, we issued $300.0 million in aggregate principal amount of our consolidated wholly-owned bankruptcy remote, special purpose subsidiary, or Funding II, entered into a credit facility,3.500% notes due 2025, or the Sumitomo facility, with SMBC, an affiliate2025 Notes, for net proceeds of Sumitomo Mitsui Financial Group, Inc., as administrative agent,$293.8 million after deducting OID of $2.5 million, underwriting commissions and eachdiscounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the lenders from time to time party thereto. Prior to November 24, 2017, the Sumitomo facility permitted up to $125 million of borrowings (subject to collateral requirements). Borrowings under the Sumitomo facility bore interest at a rate of either (i) LIBOR (1-month) plus 2.00% per annum, with no LIBOR floor, if the borrowings under the Sumitomo facility were greater than 35% of the aggregate available borrowings under the Sumitomo facility or (ii) LIBOR (1-month) plus 2.25% per annum, if the borrowings under the Sumitomo facility were less than or equal to 35% of the aggregate available borrowings under the Sumitomo facility. On November 24, 2017, Funding II, as the borrower under the Sumitomo facility, repaid all outstanding borrowings thereunder, following which the Sumitomo facility was terminated. Obligations under the Sumitomo facility would have otherwise matured on the earlier of August 6, 2018 or the date on which the Prior ING Facility was repaid, refinanced or terminated. As of December 31, 2017, the Company had no borrowings outstanding under the Sumitomo facility.
Our borrowings under the Sumitomo facility bore interest at a weighted average interest rate of 3.501% and 2.784% for the period from October 1, 2017 through termination on November 24, 2017 and the three months ended December 31, 2016, respectively. For the three months ended December 31, 2017 and December 31, 2016, we recorded interest expense of $0.7 million and $0.6 million, respectively, related to the Sumitomo facility.
2019 Notesnotes.
For each of the three and six months ended DecemberMarch 31, 2017 and December 31, 2016,2020, we recorded interest expense of $3.3$1.1 million related to the 2025 Notes. As of March 31, 2020, there were $300.0 million of 2025 Notes outstanding, which had a carrying value and fair value of $293.9 million and $274.5 million, respectively.
2019 Notes
For the three and six months ended March 31, 2019, we recorded interest expense of $2.1 million and $5.1 million (inclusive of fees), respectively, related to our 4.875% unsecured notes due 2019, or the 2019 Notes. DuringThe 2019 Notes matured on March 1, 2019 and were fully repaid during the three months ended DecemberMarch 31, 20172019. As of March 31, 2020 and December 31, 2016, we did not repurchase any of theSeptember 30, 2019, there were no 2019 Notes in the open market.
As of December 31, 2017, there were $250.0 million of 2019 Notes outstanding, which had a carrying value and fair value of $248.6 million and $250.7 million, respectively.outstanding.
2024 Notes
For each of the three and six months ended DecemberMarch 31, 2017 and December 31, 2016,2020, we recorded interest expense of $1.2$0.8 million and $1.9 million (inclusive of fees), respectively, related to our 5.875% unsecured notes due 2024, or the 2024 Notes. DuringFor the three and six months ended DecemberMarch 31, 20172019, the Company recorded interest expense of $1.2 million and December 31, 2016,$2.3 million (inclusive of fees), respectively, related to the 2024 Notes.
On March 2, 2020, we did not repurchase anyredeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes induring the open market.
three and six months ended March 31, 2020. As of DecemberMarch 31, 2017,2020, there were no 2024 Notes outstanding. As of September 30, 2019, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.6$73.9 million and $75.6$77.4 million, respectively. As of December 31, 2017, the 2024 Notes were listed on the New York Stock Exchange under the trading symbol “OSLE” with a par value of $25.00 per note.
2028 Notes
For each of the three and six months ended DecemberMarch 31, 2017 and December 31, 2016,2020, we recorded interest expense of $1.4$1.1 million and $2.5 million (inclusive of fees), respectively, related to our 6.125% unsecured notes due 2028, or the 2028 Notes. DuringFor the three and six months ended DecemberMarch 31, 20172019, we recorded interest expense of $1.4 million and December 31, 2016,$2.7 million (inclusive of fees), respectively, related to the 2028 Notes.
On March 13, 2020, we did not repurchase anyredeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes induring the open market.
three and six months ended March 31, 2020. As of DecemberMarch 31, 2017,2020, there were no 2028 Notes
outstanding. As of September 30, 2019, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.3$84.6 million and $86.9$87.6 million, respectively. As of December 31, 2017, the 2028 Notes were listed on the NASDAQ Global Select Market under the trading symbol “OCSLL” with a par value of $25.00 per note.
Secured Borrowings
We follow the guidance in ASC Topic 860, Transfers and Servicing when accounting for loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a "participating interest," as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on our Consolidated Statements of Assets and Liabilities and the proceeds are recorded as a secured borrowing until the definition is met. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value.
As of December 31, 2017, there were $13.5 million of secured borrowings outstanding. As of December 31, 2017, secured borrowings at fair value totaled $11.6 million and the fair value of the loan that is associated with these secured borrowings was $40.6 million. These secured borrowings were the result of the completion of partial loan sales totaling $22.8 million of a senior secured debt investment during the fiscal year ended September 30, 2014 that did not meet the definition of a participating interest. As a result, sale treatment was not allowed and these partial loan sales were treated as secured borrowings. During the three months ended December 31, 2017, there were no net repayments on secured borrowings. During the three months ended December 31, 2016, there were $4.5 million of net repayments on secured borrowings.
For the three months ended December 31, 2017 and December 31, 2016, the secured borrowings bore interest at a weighted average interest rate of 7.91% and 8.94%, respectively. For the three months ended December 31, 2017 and December 31, 2016, we recorded interest expense of $0.3 million and $0.4 million, respectively, related to the secured borrowings.
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of DecemberMarch 31, 2017,2020, our only off-balance sheet arrangements consisted of $98.7$91.6 million of unfunded commitments, which was comprised of $88.0$86.7 million to provide debt financing to certain of our portfolio companies, $1.3 million to provide equity financing to SLF JV I and $9.4$3.5 million related to unfunded limited partnership interests. As of September 30, 2017,2019, our only off-balance sheet arrangements consisted of $118.1$88.3 million of unfunded commitments, which was comprised of $107.3$83.5 million to provide debt financing to certain of ourits portfolio companies, $1.3 million to provide equity financing to SLF JV I and $9.5$3.5 million related to unfunded limited partnership interests. Such commitments are subject to our portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in our Consolidated Statements of Assets and Liabilities.
A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I subordinated notes and LLC equity interests, and limited partnership interests) as of DecemberMarch 31, 20172020 and September 30, 20172019 is shown in the table below:
|
| | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
Lift Brands Holdings, Inc. | | $ | 15,000 |
| | $ | 15,000 |
|
P2 Upstream Acquisition Co. | | 10,000 |
| | 10,000 |
|
Valet Merger Sub, Inc. | | 9,326 |
| | 9,326 |
|
Edge Fitness, LLC | | 6,215 |
| | 8,353 |
|
InMotion Entertainment Group, LLC | | 5,545 |
| | 7,544 |
|
EOS Fitness Opco Holdings, LLC | | 5,000 |
| | 5,000 |
|
Dominion Diagnostics, LLC (1) | | 4,180 |
| | 4,180 |
|
Impact Sales, LLC | | 3,236 |
| | 3,234 |
|
Pingora MSR Opportunity Fund I, LP (limited partnership interest) | | 3,095 |
| | 2,760 |
|
WeddingWire, Inc. | | 3,000 |
| | 3,000 |
|
Keypath Education, Inc. | | 3,000 |
| | 3,000 |
|
Motion Recruitment Partners LLC | | 2,900 |
| | 2,900 |
|
OmniSYS Acquisition Corporation | | 2,500 |
| | 2,500 |
|
Ping Identity Corporation | | 2,500 |
| | 2,500 |
|
Datto Inc. | | 2,356 |
| | — |
|
Traffic Solutions Holdings, Inc. | | 2,248 |
| | 2,998 |
|
4 Over International, LLC | | 2,232 |
| | 2,232 |
|
New IPT, Inc. | | 2,229 |
| | 2,229 |
|
Refac Optical Group | | 2,080 |
| | 2,080 |
|
SPC Partners VI, L.P. (limited partnership interest) | | 1,862 |
| | 2,000 |
|
Metamorph US 3, LLC (1) | | 1,470 |
| | 1,470 |
|
TransTrade Operators, Inc. (1)(2) | | 1,393 |
| | 1,052 |
|
Senior Loan Fund JV 1, LLC | | 1,328 |
| | 1,328 |
|
Edmentum, Inc. (1) | | 932 |
| | 2,664 |
|
Riverside Fund V, LP (limited partnership interest) | | 539 |
| | 539 |
|
Webster Capital III, L.P. (limited partnership interest) | | 482 |
| | 736 |
|
Sterling Capital Partners IV, L.P. (limited partnership interest) | | 474 |
| | 490 |
|
Tailwind Capital Partners II, L.P. (limited partnership interest) | | 469 |
| | 391 |
|
Beecken Petty O'Keefe Fund IV, L.P. (limited partnership interest) | | 468 |
| | 472 |
|
Ministry Brands, LLC | | 375 |
| | 1,708 |
|
Moelis Capital Partners Opportunity Fund I-B, L.P. (limited partnership interest) | | 365 |
| | 365 |
|
RCP Direct II, LP (limited partnership interest) | | 364 |
| | 364 |
|
Cenegenics, LLC (1) | | 297 |
| | 297 |
|
Riverside Fund IV, LP (limited partnership interest) | | 254 |
| | 254 |
|
ACON Equity Partners III, LP (limited partnership interest) | | 231 |
| | 239 |
|
Bunker Hill Capital II (QP), LP (limited partnership interest) | | 183 |
| | 183 |
|
RCP Direct, LP (limited partnership interest) | | 178 |
| | 184 |
|
SPC Partners V, L.P. (limited partnership interest) | | 148 |
| | 159 |
|
Riverlake Equity Partners II, LP (limited partnership interest) | | 129 |
| | 129 |
|
Milestone Partners IV, LP (limited partnership interest) | | 84 |
| | 180 |
|
Baird Capital Partners V, LP (limited partnership interest) | | 54 |
| | — |
|
BeyondTrust Software, Inc. | | — |
| | 5,995 |
|
Thing5, LLC | | — |
| | 3,000 |
|
Garretson Firm Resolution Group, Inc. | | — |
| | 508 |
|
Sailpoint Technologies, Inc. | | — |
| | 1,500 |
|
Systems, Inc. | | — |
| | 3,030 |
|
Total | | $ | 98,721 |
| | $ | 118,073 |
|
|
| | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
Assembled Brands Capital LLC | | $ | 33,143 |
| | $ | 35,182 |
|
WPEngine, Inc. | | 26,348 |
| | — |
|
Dominion Diagnostics, LLC | | 5,887 |
| | — |
|
Corrona, LLC | | 4,273 |
| | — |
|
PaySimple, Inc. | | 3,985 |
| | 12,250 |
|
Pingora MSR Opportunity Fund I-A, LP | | 3,500 |
| | 3,500 |
|
MRI Software LLC | | 2,857 |
| | — |
|
Accupac, Inc. | | 2,346 |
| | — |
|
Acquia Inc. | | 2,240 |
| | — |
|
New IPT, Inc. | | 2,229 |
| | 2,229 |
|
Apptio, Inc. | | 1,538 |
| | 1,538 |
|
Senior Loan Fund JV I, LLC | | 1,328 |
| | 1,328 |
|
iCIMs, Inc. | | 882 |
| | 882 |
|
Ministry Brands, LLC | | 425 |
| | 800 |
|
Coyote Buyer, LLC | | 352 |
| | — |
|
GKD Index Partners, LLC | | 231 |
| | 1,156 |
|
P2 Upstream Acquisition Co. | | — |
| | 9,000 |
|
Sorrento Therapeutics, Inc. | | — |
| | 7,500 |
|
4 Over International, LLC | | — |
| | 1,977 |
|
Mindbody, Inc. | | — |
| | 3,048 |
|
Thruline Marketing, Inc. | | — |
| | 3,000 |
|
TerSera Therapeutics, LLC | | — |
| | 4,200 |
|
PLATO Learning Inc. (1) | | — |
| | 746 |
|
Total | | $ | 91,564 |
| | $ | 88,336 |
|
___________
(1) This investment was on cash or PIK non-accrual status as of DecemberMarch 31, 20172020 and September 30, 2017.
(2) This portfolio company does not have the ability to draw on this unfunded commitment as of December 31, 2017.
2019.
Contractual Obligations
The following table reflects information pertaining to our principal debt outstanding under the ING facility, the Sumitomo facility, the 2019Credit Facility, 2025 Notes, the 2024 Notes theand 2028 Notes and our secured borrowings:Notes:
|
| | | | | | | | | | | | | | | | |
| | Debt Outstanding as of September 30, 2017 | | Debt Outstanding as of December 31, 2017 | | Weighted average debt outstanding for the three months ended December 31, 2017 | | Maximum debt outstanding for the three months ended December 31, 2017 |
ING facility (1) | | $ | 226,495 |
| | $ | 205,000 |
| | $ | 209,449 |
| | $ | 226,495 |
|
Sumitomo facility | | 29,500 |
| | — |
| | 17,636 |
| | 29,500 |
|
2019 Notes | | 250,000 |
| | 250,000 |
| | 250,000 |
| | 250,000 |
|
2024 Notes | | 75,000 |
| | 75,000 |
| | 75,000 |
| | 75,000 |
|
2028 Notes | | 86,250 |
| | 86,250 |
| | 86,250 |
| | 86,250 |
|
Secured borrowings | | 13,489 |
| | 13,489 |
| | 13,489 |
| | 13,489 |
|
Total debt | | $ | 680,734 |
| | $ | 629,739 |
| | $ | 651,824 |
| |
|
|
| | | | | | | | | | | | | | | | |
| | Debt Outstanding as of September 30, 2019 | | Debt Outstanding as of March 31, 2020 | | Weighted average debt outstanding for the six months ended March 31, 2020 | | Maximum debt outstanding for the six months ended March 31, 2020 |
Credit Facility | | $ | 314,825 |
| | $ | 404,825 |
| | $ | 358,005 |
| | $ | 424,825 |
|
2025 Notes | | — |
| | 300,000 |
| | 57,377 |
| | 300,000 |
|
2024 Notes | | 75,000 |
| | — |
| | 63,115 |
| | 75,000 |
|
2028 Notes | | 86,250 |
| | — |
| | 77,766 |
| | 86,250 |
|
Total debt | | $ | 476,075 |
| | $ | 704,825 |
| | $ | 556,263 |
| |
|
___________
(1) Includes the Prior ING facility for periods prior to November 30, 2017.
The following table reflects our contractual obligations arising from the ING facility, our secured borrowings, our 2019 Notes, our 2024 NotesCredit Facility and our 2028the 2025 Notes:
|
| | | | | | | | | | | | | | | | | | | | |
| | Payments due by period as of December 31, 2017 |
Contractual Obligations | | Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years |
ING facility | | $ | 205,000 |
| | $ | — |
| | $ | — |
| | $ | 205,000 |
| | $ | — |
|
Interest due on ING facility | | 30,048 |
| | 7,675 |
| | 15,350 |
| | 7,023 |
| | — |
|
Secured borrowings | | 13,489 |
| | — |
| | 13,489 |
| | — |
| | — |
|
Interest due on secured borrowings | | 1,688 |
| | 607 |
| | 1,081 |
| | — |
| | — |
|
2019 Notes | | 250,000 |
| | — |
| | 250,000 |
| | — |
| | — |
|
Interest due on 2019 Notes | | 14,191 |
| | 12,188 |
| | 2,003 |
| | — |
| | — |
|
2024 Notes | | 75,000 |
| | — |
| | — |
| | — |
| | 75,000 |
|
Interest due on 2024 Notes | | 30,119 |
| | 4,406 |
| | 8,813 |
| | 8,813 |
| | 8,087 |
|
2028 Notes | | 86,250 |
| | — |
| | — |
| | — |
| | 86,250 |
|
Interest due on 2028 Notes | | 54,608 |
| | 5,283 |
| | 10,566 |
| | 10,566 |
| | 28,193 |
|
Total | | $ | 760,393 |
| | $ | 30,159 |
| | $ | 301,302 |
| | $ | 231,402 |
| | $ | 197,530 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | Payments due by period as of March 31, 2020 |
Contractual Obligations | | Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years |
Credit Facility | | $ | 404,825 |
| | $ | — |
| | $ | — |
| | $ | 404,825 |
| | $ | — |
|
Interest due on Credit Facility | | 44,622 |
| | 11,429 |
| | 22,859 |
| | 10,334 |
| | — |
|
2025 Notes | | 300,000 |
| | — |
| | — |
| | 300,000 |
| | — |
|
Interest due on 2025 Notes | | 51,551 |
| | 10,500 |
| | 21,000 |
| | 20,051 |
| | — |
|
Total | | $ | 800,998 |
| | $ | 21,929 |
| | $ | 43,859 |
| | $ | 735,210 |
| | $ | — |
|
Regulated Investment Company Status and Distributions
We have qualified and elected to be treated as a RIC under Subchapter M of the Code.Code for tax purposes. As long as we continue to qualify as a RIC, we will not be subject to tax on our investment company taxable income (determined without regard to any deduction for dividends paid) or realized net capital gains, to the extent that such taxable income or gains is distributed, or deemed to be distributed as dividends, to stockholders on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation. Distributions declared and paid by us in a taxable year may differ from taxable income for that taxable year as such distributions may include the distribution of taxable income derived from the current taxable year or the distribution of taxable income derived from the prior taxable year carried forward into and distributed in the current taxable year. Distributions also may include returns of capital.
To maintain RIC tax treatment, we must, among other things, distribute dividends, with respect to each taxable year, of an amount at least equal to 90% of our investment company taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any), determined without regard to any deduction for dividends paid. As a RIC, we are also subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. We anticipate timely
distribution of our taxable income in accordance with tax rules. We did not incur a U.S. federal excise tax for calendar years 20152018 and 2016 and do not expect to incur a U.S. federal excise tax for the calendar year 2017.2019. We may incur a federal excise tax in future years.
We intend to distribute at least 90% of our annual taxable income (which includes our taxable interest and fee income) to our stockholders. The covenants contained in the ING facilityCredit Facility may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement associated with our ability to be subject to tax as a RIC. In addition, we may retain for investment some or all of our net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal and taxable year fall below the total amount of our dividend distributions for that fiscal and taxable year, a portion of those distributions may be deemed a return of capital to our stockholders.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a business development companyBusiness Development Company under the 1940Investment Company Act and due to provisions in our credit facilities and debt instruments. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
A RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder elects to receive his or her entire distribution in either cash or stock of the RIC, subject to certain limitations regarding the aggregate amount of cash to be distributed to all stockholders. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock. We have no current intention of paying dividends in shares of our stock in accordance with these guidelines.
We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from U.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. The following table, which may be subject to change as we finalize our annual tax filings, lists the percentage of qualified net interest income and qualified short-term capital gains as offor the year ended September 30, 2017, the Company's2019, our last tax year end.
|
| | | | | |
Year Ended | | Qualified Net Interest Income | Qualified Short-Term Capital Gains |
September 30, 20172019 | | 85.889.6 | % | — |
|
We have adopted a DRIP that provides for the reinvestment of any distributions that we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash distribution, then our stockholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving a cash distribution. If our shares are trading at a premium to net asset value, we typically issue new shares to implement the DRIP, with such shares issued at the greater of the most recently computed net asset value per share of our common stock or 95% of the current market value per share of our common stock on the payment date for such distribution. If our shares are trading at a discount to net asset value, we typically purchase shares in the open market in connection with our obligations under the DRIP.
Related Party Transactions
We have entered into the New Investment Advisory Agreement with our Investment AdviserOaktree and the New Administration Agreement with Oaktree Administrator, a wholly-owned subsidiary of the Investment Adviser.Oaktree. Mr. John B. Frank, an interested member of our Board of Directors, has an indirect pecuniary interest in our Investment Adviser. The Investment AdviserOaktree. Oaktree is a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act that is partially and indirectly owned by OCG. See “Note“Note 11. Related Party Transactions-NewTransactions – Investment Advisory Agreement”Agreement” and “-Administrative Services”“– Administrative Services” in the notes to the accompanying Consolidated Financial Statements.
Prior to October 17, 2017, we were externally managed and advised by our Former Adviser, and our administrator was our Former Administrator, a wholly-owned subsidiaryOaktree has voluntarily deferred the payment of our Former Adviser. Messrs. Bernard D. Berman, Patrick J. Dalton, Ivelin M. Dimitrov, Alexander C. Frank, Todd G. Owens and Sandeep K. Khorana, each an interested member of our Board of Directors for all or a portion of our fiscal yearPart I incentive fees earned during the three months ended September 30, 2017 and prior to October 17, 2017, had a direct or indirect pecuniary interest in our Former Adviser. See “Note 11. Related Party Transactions-Former Investment Advisory Agreements” and “-Administrative Services” in the notes to the accompanying Consolidated Financial Statements.March 31, 2020.
Recent Developments
Distribution Declaration
On February 5, 2018,April 30, 2020, our Board of Directors declared a quarterly dividenddistribution of $0.085$0.095 per share, payable in cash on MarchJune 30, 20182020 to stockholders of record on MarchJune 15, 2018.2020.
Investment Advisory Agreement
On May 4, 2020, Oaktree effected the novation of the Investment Advisory Agreement to Oaktree Fund Advisors, LLC, a registered investment adviser under common control with Oaktree. Immediately following such novation, we and Oaktree Fund Advisors, LLC
Recently Issued Accounting Standardsentered into a new investment advisory agreement with the same terms, including fee structure, as the Investment Advisory Agreement.
See “Note 2. Significant Accounting Policies”Investment Portfolio Activity
From April 1, 2020 to April 30, 2020, originations totaled $132 million with a weighted average yield of 10.6% and were primarily comprised of opportunistic purchases made in both the Consolidated Financial Statements for a descriptionprivate and public markets. Of these new investment commitments, 50% were first lien loans, 5% were second lien loans and 45% were subordinated debt investments.
Liquidity
As of recent accounting pronouncements, including the expected datesApril 30, 2020, we had $68 million of adoptioncash and the anticipated impactcash equivalents and $260 million of undrawn capacity on our Consolidated Financial Statements.credit facility (subject to borrowing base and other limitations). Unfunded investment commitments were $122 million as of April 30, 2020, with approximately $76 million that can be drawn immediately as the remaining amount is subject to certain milestones that must be met by portfolio companies.
Credit Facility Amendment
On May 6, 2020, we amended our revolving credit facility (i) to reduce the minimum shareholders' equity covenant from $700 million to $550 million, (ii) to increase the interest rate margin up to 2.75% on LIBOR loans or 1.75% on alternative base rate loans if our minimum shareholders' equity is below $700 million depending on our senior coverage ratio and (iii) to reduce the maximum size of the facility under the "accordion" feature to the greater of $800 million or our net worth on the date of such increase.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.
Valuation Risk
Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors, with the assistance of the Audit Committee and Oaktree. There is no single standard for determining fair value in good faith and valuation methodologies involve a significant degree of management judgment. In addition, our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments. Accordingly, valuations by us do not necessarily represent the amounts which may eventually be realized from sales or other dispositions of investments. Estimated fair values may differ from the values that would have been used had a ready market for the investment existed, and the differences could be material to the financial statements.
Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments, cash and cash equivalents and idle fundsfund investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent our debt investments include floating interest rates. In addition, our investments are carried at fair value as determined in good faith by our Board of Directors in accordance with the 1940 Act. Our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments.
As of DecemberMarch 31, 2017, 82.4%2020, 90.6% of our debt investment portfolio (at fair value) and 80.5%90.9% of our debt investment portfolio (at cost) bore interest at floating rates. The composition of our floating rate debt investments by cash interest rate floor (excluding PIK) as of DecemberMarch 31, 20172020 and September 30, 20172019 was as follows:
|
| | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
($ in thousands) | | Fair Value | | % of Floating Rate Portfolio | | Fair Value | | % of Floating Rate Portfolio |
Under 1% | | $ | 189,683 |
| | 17.71 | % | | $ | 201,365 |
| | 16.91 | % |
1% to under 2% | | 881,158 |
| | 82.29 |
| | 989,575 |
| | 83.09 |
|
2% to under 3% | | — |
| | — |
| | — |
| | — |
|
3% and over | | — |
| | — |
| | — |
| | — |
|
Total | | $ | 1,070,841 |
| | 100.00 | % | | $ | 1,190,940 |
| | 100.00 | % |
|
| | | | | | | | | | | | | | |
| | March 31, 2020 | | September 30, 2019 |
($ in thousands) | | Fair Value | | % of Floating Rate Portfolio | | Fair Value | | % of Floating Rate Portfolio |
0% | | $ | 489,126 |
| | 41.1 | % | | $ | 489,464 |
| | 41.6 | % |
>0% and <1% | | 785 |
| | 0.1 | % | | — |
| | — | % |
1% | | 699,954 |
| | 58.8 | % | | 685,995 |
| | 58.4 | % |
Total Floating Rate Investments | | $ | 1,189,865 |
| | 100.0 | % | | $ | 1,175,459 |
| | 100.0 | % |
Based on our Consolidated Statement of Assets and Liabilities as of DecemberMarch 31, 2017,2020, the following table shows the approximate annualized net increase (decrease) in components of net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investment and capital structure:structure. However, there can be no assurances our portfolio companies will be able to meet their contractual obligations at any or all levels on increases in interest rates.
| | ($ in thousands) | | | | | | | | | | | | |
Basis point increase(1) | | Interest income | | Interest expense | | Net increase (decrease) | | Increase in Interest Income | | (Increase) in Interest Expense | | Net increase (decrease) in net assets resulting from operations |
300 | | 31,300 |
| | (6,100 | ) | | 25,200 |
| |
250 | | | $ | 33,773 |
| | $ | (10,121 | ) | | $ | 23,652 |
|
200 | | 20,800 |
| | (3,900 | ) | | 16,900 |
| | 27,018 |
| | (8,097 | ) | | 18,921 |
|
150 | | | 20,264 |
| | (6,072 | ) | | 14,192 |
|
100 | | 10,200 |
| | (1,800 | ) | | 8,400 |
| | 13,509 |
| | (4,048 | ) | | 9,461 |
|
50 | | | 6,755 |
| | (2,024 | ) | | 4,731 |
|
| | Basis point decrease (1) | | Interest Income | | Interest Expense | | Net increase (decrease) | | (Decrease) in Interest Income | | Decrease in Interest Expense | | Net increase (decrease) in net assets resulting from operations |
50 | | | $ | (4,183 | ) | | $ | 2,024 |
| | $ | (2,159 | ) |
100 | | (7,800 | ) | | 2,200 |
| | (5,600 | ) | | (6,782 | ) | | 3,333 |
| | (3,449 | ) |
150 | | | (7,303 | ) | | 3,333 |
| | (3,970 | ) |
200 (1) | | | (7,309 | ) | | 3,333 |
| | (3,976 | ) |
| |
(1) | A decline in interest rates of 200 basis points or greater would not have a material incremental impact on our Consolidated Financial Statements as compared to a 100 basis point decrease. |
__________
(1) The effect of a greater than 200 basis point decrease is limited by interest rate floors on certain investments.
We regularly measure exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on this review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. The following table shows a comparison of the interest rate base for our interest-bearing cash and outstanding investments, at principal, and our outstanding borrowings as of DecemberMarch 31, 20172020 and September 30, 2017:2019:
| | | | December 31, 2017 | | September 30, 2017 | | March 31, 2020 | | September 30, 2019 |
($ in thousands) | | Interest Bearing Cash and Investments | | Borrowings | | Interest Bearing Cash and Investments | | Borrowings | | Interest Bearing Cash and Investments | | Borrowings | | Interest Bearing Cash and Investments | | Borrowings |
Money market rate | | $ | 45,754 |
| | $ | — |
| | $ | 59,913 |
| | $ | — |
| | $ | 82,928 |
| | $ | — |
| | $ | 9,611 |
| | $ | — |
|
Prime rate | | 2,756 |
| | — |
| | 1,061 |
| | — |
| | 1,221 |
| | — |
| | 48,036 |
| | 14,000 |
|
LIBOR | | | | | | | | | | | | | | | | |
30 day | | 41,802 |
| | 205,000 |
| | 42,165 |
| | 255,993 |
| | 718,343 |
| | 404,825 |
| | 686,880 |
| | 300,825 |
|
60 day | | | 9,000 |
| | — |
| | 9,000 |
| | — |
|
90 day | | 1,168,248 |
| | 13,489 |
| | 1,254,246 |
| | 13,491 |
| | 423,728 |
| | — |
| | 402,603 |
| | — |
|
180 day | | | 167,265 |
| | — |
| | 20,967 |
| | — |
|
EURIBOR | | | | | | | | | |
30 day | | | 20,015 |
| | — |
| | 19,078 |
| | — |
|
UK LIBOR | | | | | | | | | |
30 day | | | 22,319 |
| | — |
| | 22,181 |
| | — |
|
Fixed rate | | 298,287 |
| | 411,250 |
| | 290,427 |
| | 411,250 |
| | 135,797 |
| | 300,000 |
| | 185,809 |
| | 161,250 |
|
Total | | $ | 1,556,847 |
| | $ | 629,739 |
| | $ | 1,647,812 |
| | $ | 680,734 |
| | $ | 1,580,616 |
| | $ | 704,825 |
| | $ | 1,404,165 |
| | $ | 476,075 |
|
Item 4. Controls and Procedures
Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of DecemberMarch 31, 2017.2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of DecemberMarch 31, 2017,2020, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, in timely identifying, recording, processing, summarizing and reporting any material information relating to us that is required to be disclosed in the reports we file or submit under the Exchange Act.
Effective October 17, 2017, Oaktree became our investment adviser. During the three months ended December 31, 2017 in connection with Oaktree assuming its role as our investment adviser, we adopted new controls and procedures, including formalized policies and procedures and controls over the validation of portfolio company data. As a result of the adoption of such controls and procedures and the changes to our internal controls and procedures that resulted during the three months ended December 31, 2017, management has determined that, as of December 31, 2017, the previously disclosed material weakness in our internal control over financial reporting had been remediated.
Other than the changes described above, thereThere were no changes in our internal control over financial reporting that occurred during the first fiscal quarter of 2018three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, we are currently not a party to any pending material legal proceedings except as described below.
SEC Examination and Investigation
On March 23, 2016, the Division of Enforcement of the SEC sent document subpoenas and document preservation notices to us, FSAM, FSCO GP LLC - General Partner of Fifth Street Opportunities Fund, L.P., or FSOF, and OCSI. The subpoenas sought production of documents relating to a variety of issues principally related to the activities of our Former Adviser, including those raised in an ordinary-course examination of the Former Adviser by the SEC’s Office of Compliance Inspections and Examinations that began in October 2015, and in the previously disclosed securities class actions and other previously disclosed litigation. The subpoenas were issued pursuant to a formal order of private investigation captioned In the Matter of the Fifth Street Group of Companies, No. HO-12925, dated March 23, 2016, which addresses (among other things) (i) the valuation of our portfolio companies and investments, (ii) the expenses allocated or charged to us and OCSI, (iii) FSOF’s trading in the securities of publicly traded business development companies, (iv) statements to our board of directors, other representatives of pooled investment vehicles, investors, or prospective investors concerning the fair value of our portfolio companies or investments as well as expenses allocated or charged to us and OCSI, (v) various issues relating to adoption and implementation of policies and procedures under the Advisers Act, (vi) statements and/or potential omissions in the entities’ SEC filings, (vii) the entities’ books, records, and accounts and whether they fairly and accurately reflected the entities’ transactions and dispositions of assets, and (viii) several other issues relating to corporate books and records. The formal order cites various provisions of the Securities Act of 1933, as amended, the Exchange Act and the Advisers Act, as well as rules promulgated under those Acts, as the bases of the investigation. We are cooperating with the Division of Enforcement investigation, have produced requested documents, and have been communicating with Division of Enforcement personnel. Our Investment Adviser is not subject to these subpoenas.proceedings.
Item 1A. Risk Factors
There
Except as set forth below, there have been no material changes during the three and six months ended DecemberMarch 31, 20172020 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2017.2019.
Global economic, political and market conditions caused by the current public health crisis have (and in the future could further) adversely affect our business, results of operations and financial condition and those of our portfolio companies.
A novel strain of coronavirus initially appeared in China in late 2019 and has rapidly spread to other countries, including the United States. In an attempt to slow the spread of the coronavirus, governments in major jurisdictions, including the United States, the United Kingdom, France, Italy, South Korea and China, have placed restrictions on travel, issued “stay at home” orders and ordered the temporary closure of certain businesses, such as factories and retail stores. As such restrictions and closures have impacted supply chains, consumer demand and/or the operations of many business, uncertainty surrounding the full economic impact of the coronavirus pandemic has contributed to significant market volatility and disruption, which may have long-term effects on the U.S. and global financial markets and have caused (and may cause further) economic uncertainties or deterioration in the United States and worldwide.
Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market. These and any other unfavorable economic conditions created by the coronavirus and related restrictions and closures could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have negatively impacted the fair value of the investments that we hold and could limit our investment originations (including as a result of the investment professionals of our investment adviser diverting their time to the restructuring of certain investments), negatively impact our operating results and limit our ability to grow. In addition, our success depends in substantial part on the management, skill and acumen of our investment adviser, whose operations may be adversely impacted, including through quarantine measures and travel restrictions imposed on its investment professionals or service providers, or any related health issues of such investment professionals or service providers.
In addition, the restrictions and closures and related market conditions have resulted in certain of our portfolio companies halting or significantly curtailing operations and have negatively affected the supply chains of certain of our portfolio companies. The financial results of middle-market companies, like those in which we invest, have experienced deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults, and further deterioration will further depress the outlook for those companies. Further, adverse economic conditions have decreased and may in the future decrease the value of collateral securing some of our loans and the value of our equity investments. Such conditions have required and may in the future require us to modify the payment terms of our investments, including changes in PIK interest provisions and/or cash interest rates. The performance of certain of our portfolio companies has been, and in the future may be, negatively impacted by these economic or other conditions, which can result in our receipt of reduced interest income from our portfolio companies and/or realized and unrealized losses related to our investments, and, in turn, may adversely affect distributable income and have a material adverse effect on our results of operations.
As the potential impact of the coronavirus remains difficult to predict, the extent to which the coronavirus could negatively affect our and our portfolio companies’ operating results or the duration of any potential business or supply-chain disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments regarding the duration and severity of the coronavirus and the actions taken by governments and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control.
As a result of the COVID-19 pandemic and related government actions, certain of our portfolio companies are distressed, and we have opportunistically acquired the securities and obligations of distressed companies. These and future investments in distressed companies are 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.
We have acquired, and may in the future acquire, the securities and other obligations of distressed or bankrupt companies, including opportunistic acquisitions during the COVID-19 pandemic. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, when we invest in distressed debt, our ability to achieve current income for our stockholders may be diminished, particularly where the portfolio company has negative EBITDA.
We also are subject to significant uncertainty as to when and in what manner and for what value the distressed debt we acquire will eventually be satisfied whether through a refinancing, restructuring, liquidation, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation. In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt held by us, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.
Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
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| | Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 filed with Registrant’s Form 8-A (File No. 001-33901) filed on January 2, 2008).
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| | Certificate of Amendment to the Registrant’s Restated Certificate of Incorporation (Incorporated by reference to Exhibit (a)(2) filed with Registrant’s Registration Statement on Form N-2 (File No. 333-146743) filed on June 6, 2008).
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| | Certificate of Correction to the Certificate of Amendment to the Registrant’s Restated Certificate of Incorporation (Incorporated by reference to Exhibit (a)(3) filed with Registrant’s Registration Statement on Form N-2 (File No. 333-146743) filed on June 6, 2008).
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| | Certificate of Amendment to Registrant’s Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 filed with Registrant’s Quarterly Report on Form 10-Q (File No. 001-33901) filed on May 5, 2010). |
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| | Certificate of Amendment to Registrant’s Certificate of Incorporation (Incorporated by reference to Exhibit (a)(5) filed with the Registrant’s Registration Statement on Form N-2 (File No. 333-180267) filed on April 2, 2013). |
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| | Certificate of Amendment to the Restated Certificate of Incorporation of the Company, dated as of October 17, 2017 (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017). |
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| | Third Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1 filed with Registrant’s Form 8-K (File No. 001-33901) filed on September 2, 2016). |
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| | Fourth Amended and Restated Bylaws of Oaktree Specialty Lending Corporation, effective as of January 29, 2018 (Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on January 29, 2018) |
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| | FourthFifth Supplemental Indenture, dated as of October 17, 2017,February 25, 2020, relating to the 3.500% Notes due 2025, between Registrantthe Company and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017)February 25, 2020). |
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| | Form of Note relating to the 4.875%3.500% Notes due 2019, between Registrant and Deutsche Bank Trust Company Americas,2025 (included as trustee (Incorporated by referenceExhibit A to Exhibit 4.2 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017). |
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| | Form of Note relating to the 5.875% Notes due 2024, between Registrant and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.3 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017). |
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| | Form of Note relating to the 6.125% Notes due 2028, between Registrant and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.4 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017)4.1 hereto). |
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| | Investment Advisory Agreement, dated as of October 17, 2017,May 4, 2020, by and between the RegistrantCompany and Oaktree Capital Management, L.P. (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017).Fund Advisors, LLC. |
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| | Administration Agreement, dated as of October 17, 2017, between the Registrant and Oaktree Fund Administration, LLC (Incorporated by reference to Exhibit 10.2 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017). |
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| | Pledge Agreement, dated as of October 17, 2017, between the Registrant and Fifth Street Holdings L.P. (Incorporated by reference to Exhibit 10.3 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on October 17, 2017). |
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| | Amendment No. 92 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of November 17, 2017,May 6, 2020, among the Registrant, FSFC Holdings, Inc., Fifth Street Fund of Funds LLC,Company, as Borrower, the lenders party thereto from time to time and ING Capital LLC, as administrative agent for the lenders party thereto (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on November 22, 2017).thereunder. |
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| | Senior Secured Revolving Credit Agreement, dated as of November 30, 2017, among the Registrant, as Borrower, the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents (Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K (File No. 814-00755) filed on December 1, 2017). |
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| | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
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| | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
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| | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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| | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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OAKTREE SPECIALTY LENDING CORPORATION |
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By: | | /s/ Edgar LeeArmen Panossian |
| | Edgar LeeArmen Panossian
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| | Chief Executive Officer |
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By: | | /s/ Mel Carlisle |
| | Mel Carlisle
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| | Chief Financial Officer and Treasurer |
Date: February 7, 2018
May 6, 2020