Item 1.01. Entry into a Material Definitive Agreement.
On July 26, 2019 (the “Closing Date”), Oaktree Strategic Income II, Inc. (the “Company”) and OSI 2 Senior Lending SPV, LLC (“OSI 2 SPV”), a wholly-owned and consolidated subsidiary of the Company, entered into a loan and security agreement (the “Loan Agreement”) with the lenders from time to time party thereto and the other parties referenced below. Under the terms of the Loan Agreement, the Company serves as the collateral manager and seller and OSI 2 SPV serves as borrower with Citibank, N.A., as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent.
The Loan Agreement provides for a senior secured revolving credit facility (the “SPV Facility”) of up to $100 million (the “Maximum Commitment”) in aggregate principal amount, subject to the lesser of (i) the borrowing base, which is an amount based on advance rates that vary depending on the class of assets and the value assigned to such assets under the Loan Agreement and (ii) the Maximum Commitment. The SPV Facility has a three year reinvestment period (the “Reinvestment Period”) during which advances may be made and matures five years from the Closing Date. Following the Reinvestment Period, OSI 2 SPV will be required to make certain mandatory amortization payments. Borrowings under the SPV Facility bear interest payable quarterly at a rate per year equal to (a) in the case of a lender that is identified as a conduit lender under the Loan Agreement, the lesser of (i) the applicable commercial paper rate for such conduit lender and (ii) the London Interbank Offered Rate for a three month maturity (“LIBOR”) and (b) for all other lenders under the SPV Facility, LIBOR, plus, in each case, an applicable spread. During the Reinvestment Period, the applicable spread is the greater of (i) a weighted average rate of (x) 1.65% per year for broadly syndicated loans and (y) 2.25% per year for all other eligible loans and (ii) 1.85%. After the Reinvestment Period, the applicable spread is 3.00% per year. There is also anon-usage fee of (i) 0.40% per year for the first six months following the Closing Date (the“Ramp-Up Period”) and (ii) 0.50% per year thereafter, in each case, on the unused portion of the SPV Facility, payable quarterly; provided that if after theRamp-Up Period the unused portion of the SPV Facility is greater than 30% of the commitments under the SPV Facility, thenon-usage fee will be based on an unused portion of 30% of the commitments under the SPV Facility.
The SPV Facility is secured by a first priority security interest in substantially all of OSI 2 SPV’s assets.
As part of the SPV Facility, OSI 2 SPV will be subject to certain limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by OSI 2 SPV including, but not limited to, restrictions on sector concentrations, loan size, tenor and minimum investment ratings (or estimated ratings). The SPV Facility also contains certain requirements relating to interest coverage, collateral quality and portfolio performance, certain violations of which could result in the acceleration of the amounts due under the SPV Facility.
Under the SPV Facility, the Company and OSI 2 SPV, as applicable, have made customary representations and warranties, and are required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar credit facilities.
OSI 2 SPV’s borrowings arenon-recourse to the Company but are considered borrowings of the Company for purposes of complying with the asset coverage requirements under the Investment Company Act of 1940, as amended.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is hereby incorporated by reference to this Item 2.03.
