OCSL - Earnings call transcript Q1 2018 | Oaktree Specialty Lending Corporation

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Operator

Welcome, and thank you for joining Oaktree Specialty Lending Corporation's First Quarter 2018 Conference Call. Today's conference call is being recorded. [Operator Instructions] Now I would like to introduce Michael Mosticchio of Investor Relations, who will host today's conference call. Mr. Mosticchio, you may begin.

Michael Mosticchio

Results. welcome today's of Specialty call first XXXX and joined who Lending operator, quarter for us to Financial you, to you all have Corporation's Thank discuss Oaktree

morning, Our and this earnings can on website of accessed Investors be we at, release, issued oaktreespecialtylending.com. call the presentation that which slide accompanies section our the this

Chief Pendo. Our are Oaktree and and Edgar Officer, Investment Financial speakers Specialty Officer Officer Matt today Lee; Mel Treasurer, Operating and Carlisle; Chief Lending's Chief Officer, Chief Executive

We to their happy will remarks. prepared following be comments your take

Before our our we with forward-looking our you and begin, I things, want views operating future to statements comments remind that performance. respect current other financial include today among results to, will reflecting

announce section any its Oaktree Specialty Investors note fund. corporate Investors that investors, Lee. in uses the it the Edgar website revise duty and and should forward-looking Lending others an turn Officer, remind filings on statements that our the any Company to Accordingly, nothing like on to refer Oaktree to could others to to to statements. sell a update material oaktreespecialtylending.com. no solicitation We like to Please constitutes encourages media its information. to for for or I'd actual any implied also Chief of interest you from the to I information Executive would offer purchase or now Our shares results With the call differ reason. any call SEC of review that corporate the materially undertake this that, forward-looking website in an these at offer discussion our factors. those of or expressed over

Edgar Lee

of will an to we welcome, quarter our and OCSL earnings on overview call. Mike, begin I progress first XX. managing began you, since October everyone, with our Thank

provide structure. a portfolio. Then will the review results capital Carlisle and will our review of financial Next, Mel I

return equity. Matt Finally, to enhance our portfolio's plans dividend will our the on discuss Pendo and

presentation, made we earnings key that are time we a began Lending, of in of the short progress on we noted the since have in report great pleased Specialty As two Page areas. number to Oaktree managing

million XX, XXXX, of since First, and we January investments through end XXXX. monetized $XXX the September of

Importantly, of basis of within XX, XXXX, points September our were average values. XX on executed fair these all sales

originated during investments. of the across Second, quarter, these made in and million first investments industry were lien XX% new we sectors, loans. $XXX were These XX of

was for savings pleased our that Fourth, information compliance systems Third, in infrastructure integration financial transition. financial and enhanced valuation, September credit had efforts of by Oaktree's Sumitomo and to OCSL flexibility This our by thank an material accounting, should the related lowered we to everyone internal easy we we we operational integrating their existed reporting technology, and XXXX. smooth a task, at million facility not facility. credit since terminating Oaktree that new into borrowing $XXX and platform. integration as a achieving control our this integration, related report am weakness Completing and included overtime. closing to costs I remediated to cost part and over upgraded lead a processes also the

merged investment. joint on returns improve which should at venture its JV Kemper and costs In addition, our decrease with our credit the facilities,

we our take of look accomplishments, long-term with advantage other further that pleased are and enhance We value. to opportunities will shareholder believe

at XX. will investments of $X.X value which or The Approximately in a debt a debt invested had us weighted investment million. $XX diverse second market million in believe sized, September yield stable approach lien our generating in provide to and first from of future less non-core our the loans. our lien last with a XX the was be XX, over segmenting which, of given to Page Overall, debt in a portfolio environment. X%, thought well line we our well helpful portfolio reflecting on the performed quarter position share average The we this debt XX $XX $XX of portfolio maintain fair expect operating investments the event Part our instruments, and we of investments, average to of loans total trends. first goal summary December high-conviction dislocation. X, of to Turning portfolio the X.X% loans of total billion. investing the evenly investments, debt XX% to with efforts with fair portfolio quarter in over categories: securities. debt The two market And, was more was in which at million, million a were XX% approach $XX the was investments as improving XX% reduce than exposure would of the portfolio XX% to were core; conservative time. into floating-rate In was is we and value. down primary below with majority you. approximately were

significant We which the or align to investment do with resources objectives. have dedicated philosophy not long-term noncore Oaktree's monetizing investments

X, based to investments we intend are we management to company as our that to As and that and profile have exit over hold attractive speaking, that their we investments you the portfolio will return underperforming. classified identified those or investments investments see non-core performing on We non-core described that Page Generally our time. with risk core on strategy. we further intend align core are

that category up $XXX million recommitted or the As adviser. includes becoming portfolio. investments investment made the since $XXX of to XX, of of December investments million core Oaktree originated This

category being invested value. in XX% approximately investment these borrowers half represents of in of of which performing. companies core investments XX. the now was XX, The of September our XX%. In over million $XXX addition, portfolio, or Since December million have increasing of Strategic by Credit grown meaningfully, fair lent X as funds and investments. at as core remaining OCSL's portfolio $XXX represented the same non-core, accounts Despite categorized to non-core are portfolio half The the

with XX% of or million approximately meaningful investments non-core non-core the quarter, monetized the experienced performing QX. During investment $XXX portfolio in a reduction,

Importantly, we investments. on investments provide X, within XX marks. exited non-core details On performing on average, we Page their points of additional previous value these basis fair the

mentioned earlier, performing stable amounts these relatively increasing and exhibiting to trends. leverage low As revenue have are well, are and EBITDA investments of

However, these any investment objectives of due reasons, levels. align long-term company's Oaktree's not with such to do investments overall the number concentration portfolio or size as

a not As retain to investments the these result, term. we do intend long over

of As interests. million million portfolio and limited XX, of investments, non-core of $XXX $XXX the million December in investments equity $XXX including partnership and performing debt held

$XX $XXX less-liquid debt million quoted are investments. remaining loans, the and Another million are publicly liquid

of portion believe investments XX%, to before XXXX alone. will monetized XXXX meaningful category refinancings can robust exit these portion a last in of be conditions. is we monetize and a exploring to debt these million, by investments this investments of be liquid, While of paths believe these less investments. $XX sales, in of Already, With context especially currently exited or through the non-core respect performing current several asset January we are market of we end XXXX, able some and the we meaningful positions investments, equity partnership of to limited and the

to teams borrowers to their and sheet remaining options, as non-core to million are or underperforming Page of in respect an the continue to of financial ongoing sales, these discuss restructurings, Roughly companies, advisors processes. was portfolio exit With X, other of half including in investments. asset $XXX we with the active management balance opportunities. maintain sale XX, December Turning dialogue

We continue positions. believe is value there these to significant in

of first industries. $XX Page highlighted company, million we These one XX% and the As XX were other which XX% and in portfolio includes investments. were quarter, investment loans, on diversified X, lien commitments, million of were during second funds. of Oaktree's co-investments loans XX% investments existing were $XXX lien originated new these investments unsecured across XX with

deal amount market, lower private years, structures. taking measured, are credit, tremendous the been has a of few approach characterized which investing. a in and environment has highly In yields this challenging to a past by competitive, capital we conservative Over created borrower-friendly raised aggressive

relative profiles, dynamics amount yield more the are of investments. to provide their underlying Longer We monetizing us continue attractive with will more to significant allow generating and a become cash will portfolio. term, we returns number non-core deploy we balanced opportunities opportunities, which of to to pursue which from risk market enhance anticipate investment attractive the of overall a meaningfully investment

Lastly, discuss portfolio objectives. long-term I'd our like to

is goal We portfolio high investments. a diverse, quality of create to opportunities. Our to look well-structured, appropriately-priced in lend

loans both sponsor sheets. in in markets industries and that the private will in levered invest support non-sponsor and We balance can

Chief reposition emphasizes senior to the $XX a $XX detail. be We I'd the Financial market we like our that we would lending. these of targets may call financial million I'd vast and second to anticipate secured of portfolio depending and comprised investments majority million that Mel over As in Carlisle, like And of more note to loans. environment. the Treasurer size portfolio, in on turn results first to to the now mix discuss lien to are Officer and the targeting vary

Mel Carlisle

million Thank the quarter income diluted were Total investments. in due and Edgar. portfolio the per size the total $X.XX million quarter. Net lower-weighted average first down interest quarter. income or $XX.X average primarily interest during last $X.X and Net up primarily lower basic was partially This in you, $XX.X borrowings the September offset million by due to investment and smaller million million the income. a $XX.X the share. prior or the down sequentially for debt quarter, $XX.X from a of to quarter per from first was lower decrease on sequentially share million, due for $X.XX $XX.X was investment expense from quarter in investment $XX.X This in was lower to quarter, expense yield million, the reflecting expenses

sequentially related an net professional primarily professional $X.X lower the in G&A million $X.X expenses management partially million, to expense, primarily to expenses, service declined for offset fees. Net and first expenses quarter fees interest included also by million $XX one-time by items, Excluding in fees. due increase to

X.X% total asset write-downs share quarter, deterioration outstanding XX. million. losses the XX per were eight The quarter LIBOR investments is further rate million expands loan Now our with provides XX, closed the interest status, first $XXX the a $XXX,XXX value. a to December of X.XX% of a a Since These taken share represented exits enhanced portfolio new vast capital. times. have price. at financial our up In were $X.XX per and at write-downs during we were our of $XX liabilities with to managing cost the we number was facility's the that ratio portfolio ranges interest million, occurred non-accrual steps us December Net experienced we debt X.XX%, concentrated quarter. our On OCSL, that $XXX were approximately credit average quality. XX at of At our as our terms. facility facility very majority payoffs capacity Total of debt-to-equity turning on to credit the optimize and in weighted declined value and the $X.XX plus from companies facility XX, the which par to Realized X.XX rate began and September November total the was attractive X.XX%. previous capacity and at fair December net capacity flexibility from of of borrowing three were debt million, from at at in pricing redemption or of on credit $XXX that

expanded the new five by lending adding also banks. We syndicate

credit to platform Our to support the our facility and establish confidence and believe Oaktree flexibility investing. capital the with approach and the our We liquidity in to terminated paid the the quarter. to new ability us partner more credit off venture credit facilities business. Kemper access our and efficiently the two To joint demonstrates positions and At order credit structure, new vehicle. facility in this markets facility venture, credit fund ample simplify our the capital we Bank we further merged during Sumitomo joint our

draw $XX commitments no due cash utilization with We primarily capacity portfolio million end, this delayed million, pay $XXX end had of new $XX companies facility. credit the quarter or Unfunded quarter on on and were facility. credit million, were outstanding loans. and cash at will revolving term our At of facilities we undrawn to longer fees equivalents the

we functions. mentioned, during Oaktree's transition integrating information platform the technology As quarter. accounting, OCSL's operational This compliance the into including valuation, all the completed and of infrastructure, process Edgar OCSL of included the

control platform. we Going integration, related importantly, a part in occurred from benefit services forward, this the of being internal the large economies part expect scale to that remediate reporting, which material able with shared financial XXXX. and we come of were to Very weakness to as of initially over

portfolio. the Pendo, to Now of enhance call to our like turn return I'd Officer, to plans our to Operating the over dividend and our equity Matt on our discuss Chief

Matt Pendo

Mel. you, Thank

begin me Let with first dividend. the

As We you XX. based payout saw in generated net the by the dividend March represents declared the shareholders of per of approximately quarter. income first pay investment in generated to to share, our This plan press an $X.XXX XX% a by dividend release, portfolio earnings on we the on the portfolio. dividends payable

designed we by These to the portfolio, originated Oaktree. continue opportunities we lower-yielding our out include, first, higher-yielding into to reposition rotating equity. several loans increase As focused return on on loans of are broadly-syndicated

of As of December $XX portfolio of approximately lower-yielding consisted the million XX, such loans.

generating comprised redeploying partnership investments non-accrual Second, equity, non-income loans. interests of limited and

As of XX, there partnership of million limited interests. December and of and million were bearing non-accruals $XX equities $XXX non-interest

SBIC primarily cash audit that costs the Fourth, With savings proceeds Third, would is We XX% Oaktree's deployment settlement, sixth, leveraging cost from realizing previously subsidiaries. among approximately million take rising portfolio held floating related delighted trade that And that, benefit at a rate. information expect we're floating portfolio other facilities platform. optimizing of $XX will realizing our to interest questions. un-invested savings rates. of areas. internal lower operating operational investment debt future Currently were to from maintaining previously Fifth, credit and rate of technology, from your

So the up open operator, please lines.

Operator

first of Shane come our JPMorgan. Rick question from And Instructions] [Operator will

Rick Shane

$XX you two But on with to sell remarks And would enough, reality the clearly million during down significant underperforming? been is were harder And quarter. thought One portfolio, things. the losses for that that. the what I'm have not. you of have I unrealized are going was this about it about quarter? investments is, Really, interestingly off sold telling the would there given that's curious have marked to be what been investments sold is there that the worth us

Edgar Lee

and thank for Edgar Hi, you question. Rick. here, the It's

million answer like incorrectly I'd quarter. your to it's I that and XXXX. your $XXX stated prepared the in With The experienced we monetizations of number losses higher, million not having of monetized respect of we question Before monetized that remarks. actually and $XXX investments between prepared clarify my remarks, my correct September question, investments to is January through were XX In there. around

As presentation, defined non-core The and have significant were down mix can of conditions we we From a see, in performing perspective, ones of we and investments. as the that we marks the ones of good were and investments investments. marks broken into investments the And you the on we portfolio entire accurately investments, the our and that feel outlined non-core core a we had sold as the portfolio high-performing, that on those portion reflect are the think current about, low-performing were these companies. medium-performing companies, generally. what

So I the terms monetizations. pretty would in say it's of broad-based been

wouldn't to portion has into monetize that And only time. the too the over remaining I difficult that investments so portfolio much of are more read

Rick Shane

adverse am so was took what in when the curious A you conservative there that last follow-up quarter? I market marking write-downs there that conventional is to very to for be out The that the positioning sense changed what forward. NAV and being the in that. down, an and investments in were based the wouldn't those came the quarter, market Or idea those wisdom going those been development specifically be you're markets additional seeing very, to is? of a to sale has The on is getting businesses? ensuing investments has where written there

Edgar Lee

were about write-down. would I was value say emphasize modest total write-downs at I of the accounted the asset confident investments. valuations. which the Well, X.X% the four reduction feel relatively borrowers, concentrated of the at that XX/XX the XX% total total we're the highly value. we for about by disappointed And in certainly write-downs The of

experienced all we based, not investments or The Health, specific. well Adventure subset the it that of very a were form quarter Maverick last borrowers write-downs some situations, four Edmentum. that Diagnostics, these experiencing these it operational So and Interactive was of Dominion In financial be might was a broad aware of were stress.

determined to investments, in these certain of circumstances, as say wouldn't of combination as I due us. a for and, that multiples capital. surprise valuation to were of factors, With compression to industry write-downs included it additional respect appropriate a well which further this we need some So was potential quarter a

of negligible we This these a to subset quarter, down amounts. loans wrote

say future value are a experienced of have I'd believe, additional So limited for there. lien we there's these as losses first reflected amount significant that that loans that, of write-downs potential still investments in remarks. the two

these that of don't impairment we in In capital that actually One investments discount those because support and to written was investment. in experiencing experiencing company financial investment investment rate And adjust based capital some to an that anticipate contrast therefore, additional that is today. to considering the in on come our that written we is senior down were investment strain. significant was had have could down the the used But growth. growth information situation, the potentially on we to structurally raising the

So potential portfolio although the lot we believe we experienced some to long-term capital write-downs this appreciation. generate has quarter, a of

hopefully, context have what remarks. to from the provides on some So that additional

Operator

York of next JMP. The from comes Chris question

Chris York

So expected for the the what on Matt, last of managed to pay the the the call. upon portfolio, topic future your maybe, that expectation the by generated ROE is portfolio the stabilization? given is earnings plan But in you dividend, you, based for dividends reduction on

Matt Pendo

outline XX the to million little Page a through XXX the loans, just the really yield of if and kind increase plus was L $XX overtime. what What And is see on the detail, in deck below. walk opportunities of levers try the we that more of to you ROE broadly-syndicated there's we or

you between million equities and the $XXX $XX million cash We of higher $X XXX just at and $X redeploy another basis is XXX XXX have Again, income. to that interests. that of $X income. redeploy you SBIC the in essence, that if million to L a million to XXX, LP earning can non-accruals could of can $X additional then you $XX million generate million $XXX to and given any sitting million, points of cash half you there that If There at was get the mentioned that assume you is, interest subsidiaries million. trapped of not

So if facilities into savings. reductions had cost. expense the $X.X portfolio the and we and quarter, million can we other then, the about synergies redeploy talked Mel In And from non-recurring cost credit that of assets. the

two of right got on that, top debt portfolio investments layer rates, in of rate. and debt floating fact fixed You XX% we've of that our now, our the are thirds

extended -- increases benefits those is obviously, this there. all there LIBOR So

So if together, you put a I all the when, math. or all can don't a happens if achieve on that I you if together, these we high you do can that again, gets constant. things can't single-digit you hold we and all ROE, put give It when know these, all but of assuming timeline to

from your That's answer ROE opportunities their to So us. the of kind ahead question, look we at dividends. of how

Chris York

of X I expectation kind takes? you Is curve? lastly, about Helpful. to how your high for long think the a stabilization? that what then there. X? you Or do know And sensitivity then expectation And that include single-digits that is forward talked the bit does little

Matt Pendo

Sure.

to timeline. we're single-digits, curve the prediction high forward premature the assuming of every And market we're updates I just just LIBOR, it's So you too I give cannot progress in give quarter LIBOR you but there. the on specific curve, We'll predict making. okay? mean, a

we'll you of make keep You've and seen progress progress. we quarter, this as the updated in some

Chris York

us Slide million, $XXX enough. average the question. core, in just at then Fair yield performing may and underperforming, across a $XX three it's X, and be the nonaccruals $XX provide Okay. million equity? non-core the which Could buckets million you weighted of looking then to non-core similar then And of clarifying

Edgar Lee

you. we together that to don't Sure. and come Why information pull back

Chris York

bit the then interesting, in Okay. for with little And about with question you were and the Edgar, last appreciation. potential Adventure on talked Rick declines, Maverick, long-term was Edmentum. It comments a which Dominion, then concentrated in your capital

two in is twofold. company And in specifically of adding capital? which then interested any follow-up secondly, additional my question companies? raising those So Are you either is growth considering capital

Edgar Lee

can say I What of amount is, we're to individual question. respect what the due arrangements, detail with companies. appreciate provide we to on limited nondisclosure I

to is would just company at approach So I in the comment capital you, put can't frame how And consideration we these because on we're to whether when But I real it this bad. are that situations not I there into to potential time. extent for fluid, specifically say, raising to comment situations, money capital. assessing after And we is additional good put on careful which situations particular take would in can't these into those going upside we'll companies. think point these

Chris York

exited well, put to the you exit Okay. you And investments did of you December relative Makes be investments, to in Where which sense. appear software. $XX in the million did those market? release press presentation in -- as then the concentrated

Edgar Lee

of All par these at exited situations were better. or

Chris York

then fees. last And Great. one, professional

the reductions potential would for I that you You elevated be of kind could quarter the kind be would how of laid subject as on in curious non-recurring there. was out consider stabilizes? this reductions much just portfolio or to

Matt Pendo

as my million the comments, non-recurring it quarter. So, at second to of the stated were fees, X.X in I taking we

quarter second costs. into the think, non-recurring taking I account relatively those be flat, should

Operator

question Lynch next KBW. of Ryan from The is

Ryan Lynch

If one. First look what identify, million as is is non-core nonaccrual XX guys you you investments, million about in underperforming investments. XXX classify at I there

accrual identified. for investments as are the big investments feels you status? are So but And the non-core outlook my accrual is, stressed a guys clearly still way in status, what on have what of of like that are million those still $XX on is chunk It underperforming just is question some remaining pretty investments?

Edgar Lee

Right.

that, or portfolio, the say, be fit But that sitting in with up company won't underperforming certain providing of in or of we So individual breakouts, what terms noncore characteristics. various would certain they to that where companies companies characteristics have the be disclosing tend buckets. made between investments I are

meaningful an of accruing undergoing suffering the there. third-party underperforming there investment an impairment borrower borrowers or where increased where that if ones restructuring some the risk form form operational are capital, oftentimes, some may accrue to of sitting are the stress. reflect in of more new And I'd we financial there or the as continuing experiencing are potential sheet example, are, of be noncore the bucket. what ultimately unusually think suffering an sale those on based high likelihood today are sale be the permanent current information has positions the These isn't on and the amounts speak, marks valuation generate of marked, balance For support asset that right or continue are that could just the characterize and the time. that say ultimate are some recovery investment and companies but company have sale those investments could the of its undergoing we the this environment. investments non-accrual, these now I'd at situations again depends than based processes. lead which are in cash interest unlevered these higher And we that processes to prices a those of In companies situations, -- to on situations, active as able these where we have to amount continue in to on companies free those flow significant situations

Ryan Lynch

sense. makes That Okay.

still, investment the the a current you you status, given the basically, feel with. have further No guys comfortable you ones guys So mark that information is, on write-downs are that accruals values have? guys to down

Edgar Lee

correct. That's

Ryan Lynch

And operating expect guys to cost Okay. from you savings but platform? guys have the quantify leveraging might this, that guys you can receive Oaktree's you mentioned

Mel Carlisle

basis. some you an give on the examples to I'll as manager annual compared former

from auditors changed to we in $X.X on change. For audit we basis services, recently EY, million an expect save and that to annual PWC

administration, a We manager functions to to, has into fees. cheaper that of the internal relation reduce taking reasonable control can cost. we internally. Oaktree many outsourced account that audit provide more that overtime, to environment, In services stronger expect the those a those at handle into former we Taken account

$X.X on be an basis, to that, expect We annual million.

Ryan Lynch

out break non-core guys your of what's core assets. then, And versus

excluded fund you loan analysis, that's that presentation, either not your from senior bucket. in in so guys, You the

know the just fund loan to I view senior that guys So going wanted how you forward? do --

Matt Pendo

Sure.

with JV, it active a partners. dialogue very an JV continue the we to relates as our So and to dialogue good have

continue We look to opportunities that sense. there assets put in makes to at

mentioned, on the there. we facilities As credit consolidated we

dialogue it's partner appropriate good put we in a financed, seamlessly can that we them there. have place, assets something it's our are good So and that in have we with

Ryan Lynch

Okay.

be just going That strategy to to continue intend you to So is utilize the clear. guys forward?

Matt Pendo

at think, Yes. something every just And And quarter. we I to that it. of opposed on it as optimizing the things we're it's look is utilizing focused one

Ryan Lynch

one just go on were last or of looks then guys your XX% new related like were And -- originations, and Okay. XX% one originations new actually, your gas related. over gas sorry, X, oil about of you Slide oil new about it originations when your and

So the can but -- lot a probably very talk that's on now, it's there. exposure just risk a commodity obviously certainly of about right you upswing has volatile industry,

talk So that about can was you this just why percentage high quarter?

Mel Carlisle

Sure.

liquidity. investment So was company it. longer-term really, think and good in particular oil where does company that almost pretty we was or to doesn't situation referring company on a generating commodity a take that it job risk. significant there ample were was was And the loan. had The to the in actively was where a hedging it a The the maturity. refining It shorter yielding loan of underlying gas oil, you're refinancing pursuing the related of that one And was category, I investing business. XX% marketing a at par

invest market was anomaly an low-commodity a that situation were was in there we in So the just able felt there. relatively where returns situation that risk we that in providing to had outsized a

Operator

question National comes Securities next of from Testa The Corporation. Christopher

Christopher Testa

non-core assets. of theme the with sticking Just

much next So debt, over roughly call is how the over time to Or in quarters? protection us that you an $XXX set much can frame? give million, of expiring the that mature of idea how of has several noncore performing

Edgar Lee

that. with data I the front you follow don't on but have can in of we now, me up right

Christopher Testa

be it, of to you're you if of your thinking on the what expecting of Okay. a head? to of I'm ballpark today's to have thing, kind kind off sell get estimate not is just refinanced estimate actively just mean, out trying actually I just a market have And much market? Edgar, of how repaid you bad that's much in that may versus at necessarily how or top course, you're the in ballpark

Edgar Lee

I don't have a ballpark estimate.

experience as strong. very our and on and that's space. the entered if back out I very there, what to so lending increased of into market our is capital, last would is that two in say far of it I a amount and the benefit take is portfolio. turnover robust private the we've say based quarters you all a significant And over know, It's step the the in portfolio, Although there velocity experienced

can't originally prices where very been. than it the its has velocity And have far. robust those attractive been current comment I thought situations I on have on that exit pace, quite will on would Now have whether been thus it continue but more would

robust, us that, interest chasing tell as would And As we to few of tremendous investments, can And we well. my I of marketplace XX% amount purchasing been January alone. turnover look market as amount remaining in debt in the I refinanced. be comment, amount investments earlier of bucket still of this the opportunity significant I the have with consistent there's remaining you, lot already there, look a there in very a received inbound loans we is the see of and for we noncore across Over at as earlier, significant opportunities. that turnover. of a noted is too say loans has the a capital balance from

the again, positions. a $XXX lot can't you to which interest at been I say tell will turn over than speed there's the these So of in that other million

Christopher Testa

those in, one a was of And guys new of you only Okay. co-investment XX companies That's with fair. the Oak. invested

a particular with if the high-level just point kind you discuss view, will opportunities utilized of co-investment public be with curious verticals Oak, more conjunction vehicle? just best in which could and that think you Just of

Edgar Lee

question. the appreciate I

a tend companies and priced, imagine past, would other that to is, as can much are can provide economic or that be more have provide who diversified, opportunities those And result, efficiently companies much weather we of loans. there's tend on reason cycles significant think less than heard managers that more to to here you a of amount be can. there's are going in fewer Part there larger comment businesses to better try stable to larger decent smaller bigger, opportunity capital managers with opportunity be large probably we you've here. finance opportunities, long-term as loan fewer the So great as the and

we Oaktree. the Oaktree. interesting able find Oaktree of of at is, some do attractive funds at capital or a we have and incredibly number we're about those to different leverage And pools verticals of other so opportunities, What's

funds any for vertical strategy say, be isn't opportunities be that, specific only for with. or may core be be mezzanine is there would companies in that example, on again, the funds a we so more working the credit with, to senior may tend depending funds, opportunities. partner middle-market But nature. would loan our direct strategic would vertical little type of Then non-sponsored our opportunistic our And I or that we lending we with for our one that working example, bit

report our with of be in of back able significant finish I can next able we we capital large on you range line work to are that are to And size. the loans a there say at a So very to hopefully, that pools you bring call. to and we quarterly working fund to to be loan one that will today,

Christopher Testa

Got diversified that's how million you number getting size it. that's to sub-$XX OCSL, with $XX I'm across Oak still you're the wondering guys million across kind looking of a about a I and $XXX what $XX a this a you'll and say, at have loan on but thinking even mean, million holistically and $XX a million you're of loan exit platform, or that larger million, not of itself. dink hold within made OCSL. platform, million in have It's to not But $XX Yes. just knock the a it's advantageous let's borrower. I Well, million you Oak because the that $XX are loans. I'm you loans -- if know making, and is,

trying figure looking I guess. So I'm out that you're like just how at to more holistically,

Edgar Lee

Absolutely. benefit, more The than OCSL achieve a of shareholders be at investors platform. might we portfolio able and company a much have been able to to because OCSL will stand-alone have as outside Oaktree the diversified we'll

concentrate having without to able exposure large over to we're OCSL. Here, very borrowers get to

Christopher Testa

it. I total is internal there speak up this come influenced hurdle just was Street mean, I by And finally Got lot guys question you a of surrounding fee that earn shareholders. potentially that removed? the NAV with. could a with been of discussions continue with there It you put reimplementing any a that return Fifth institutions have that's the is step out that just guys of the seems that's NAV if assets line down, despite incentive lot but an to to to concern continues declines that more work and

I'm So feature? any been discussions if internal wondering there's on that implementing of type

Edgar Lee

considering the don't appropriate managing right and now, that's returns And think I the for on generating and portfolio we're investors. we're I implementing something focused think

Operator

Bock comes question next Fargo. from Wells of The Jonathan

Jonathan Bock

million mentioning be -- point were the getting you done the resources. work, put to you XXX shared through of I to of conjunction with of an you What Edgar, those know that would XX investment. you able million were mentioned loans? as to CITGO kind in Oaktree, But walk were

Edgar Lee

of of through investments and some stores. quarter item materials, won't buying in include XX the So Navicure, and are loans, them, all other Cent and of line ones that strategic include but during I terms go some there gas, XX new the investments of would them oil

Jonathan Bock

make those -- were just to right. and sure So I'm

So again million didn't of given and done relief. in but work BDC-or-so, else that and somewhere the maybe you million concert, one right, $XXX $XX bought right, Oaktree to funds their put exemptive I in ask meaning

that those hold or saying a that right. make wasn't again? it were you're were So stores, to Cent got -- was we've loans, XX CITGO Just it sure what

Edgar Lee

I'm sorry. Maybe your I misunderstood question.

one Datto. that with coinvested Oaktree was was another So the fund a

Jonathan Bock

Datto was of million. $XX which

Great. Okay.

of partnering checks. write as, going model perhaps, to be kind your you're other the this So leave exemplary big with in funds new which to we'll

on were So walk size whether us tranche And Datto? the through transaction? of the you overall lead agent the to the

Edgar Lee

agent that Datto. overall the of Datto, one not Datto was companies The actually in tranche that lenders case into we Datto. merged largest the one We were sponsor was In the much were by lead We larger. of was on the equity incumbent on of the the were owned there.

Jonathan Bock

overall the size? was What tranche

Edgar Lee

want the can somewhere. number. don't you up misstate it I -- get to miss exact I

Jonathan Bock

can the No loan services well. as search problem, we

Okay.

can of why Oaktree NAV, of Matt, And by more wouldn't clearly, truly an it you $X.XX relationships originated to on investment. -- to your then, But the generating X.X% investors. given at a looking you about talked secured new question your a attractive moving if be So improved be buy believe loan you risk-adjusted returns dollar? for

Matt Pendo

in make statements me appreciate the of understand which getting a stock at terms of couple buybacks. let So and that. in We you're

getting think at, I what that's Jon. they're

So something we that's at. always review with our we're board, and looking

it. piece that's So of one

and in Oaktree The the purchased other window. thing last shares saw but of have open restrictions, windows in small quarter you other that last volume OCSL open itself and we in

discuss Oaktree, plans did we at. look happen that that's and regarding but any can't I So future something continue to quarter last

Jonathan Bock

a And as the So we as that is is appreciate a markets That that, the sheet to only or the being in create balance a are grow and that? Would you also this as more that folks it process a think big more extent be disagree of and of is used shareholder value. competitiveness Datto, middle market of as understand lower-end some a tool do powerful and be Having volatility in recently, then, And writing these kind for perhaps, there competitive and agree spreads going understand raising so said, high in to Again, but public near given few ticket that also continue of it's can well. I leverage relative capital. the with we the seem and manager we some debt with many might example, given I'm buyer the to, the that market. might few attractive, to would is that market in larger and to of checks that to absent about tighten less day-by-day moves larger of seen that that continues items. it.

Matt Pendo

at let's would which leverage the said, situations would But I think those that statement. concept, at important I think risk Empirically, the in it we look is of if data missing of that the of Well, yields. support profile an back, which look aspect be those some you and situations.

Jonathan Bock

that. brief just I appreciate follow And as on. a Okay. then,

add. was that CITGO, a So additional

company of security the in stack? to, you mean, you I oil So at $XX the was just Datto the the were first-lien where lender gas effectively the $XX million million additional a of when and new added only think I that

Matt Pendo

We not. No. were

Jonathan Bock

Okay.

this deal originated? So how was

Edgar Lee

In secondary the the oil gas market and it purchase from were we area, in sellers. to other able

Jonathan Bock

From at X, other sellers X.

Operator

The Chris question a next, we from York. have follow-up

Chris York

My is and follow-up reflective. big question picture

from So manager the for Edgar, now about acquisition X Oaktree. resulting get seat transformative months at you as in external driver

observation the to BDC reflecting the expectations come has contract? managing learning mirror experience the So learn rearview I've or your as that and relative you been to journey, acquiring look in the biggest before what the curious been across the you've

Edgar Lee

I'll line earlier, expectations, of in of been give turnover that's we that for except been couple think and But it's we portfolio long-term with it and ultimately would as going quick terms than thought. generally pace I in more would we the has been you the with in reasonably be our valuation the overall, actually, would overall, the with the is that say mentioned line been guess, is, would we of it's I where would in thought have beneficial would work work the a say, turnover line above be. the in for say, we portfolio, our has on investors where the One I we thought been velocity generally, I portfolio to expectations overall. comments. be of robust

Operator

Mosticchio our And like turn question-and-answer to session. closing this I conference back concludes would over remarks. any for Michael the to

Michael Mosticchio

And be you. beginning one hour conference broadcast. thank of by XXX-XXXX all, the a in (XXX) non-U.S. U.S. callers, you. fiscal again our on or XX quarter callers, first earnings Investors replay XXXXXXXX code access section days XXXX or call. approximately Thank replay this website joining for for will available you, with Thank for for after dialing for XXX-XXXX A us call OCSL's this (XXX)

Operator

concluded. conference today's attending presentation. for now The has Thank you

You may disconnect. now

Oaktree Specialty Lending (OCSL) 9 Feb 182018 Q1 Earnings call transcript