OCSL - Earnings call transcript Q1 2021 | Oaktree Specialty Lending Corporation

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Operator

Good morning and welcome. Thank you for joining the Oaktree Specialty Lending Corporation's First Fiscal Quarter and 2021 Conference Call. Today's conference call is being recorded. At this time, all participants are in a listen-only mode, but we will be prompted for question-and-answer session following the prepared remarks.

Now I would like to introduce Michael Mosticchio of Investor Relations, who will host today's conference call. Mr. begin. may you Mosticchio,

Michael Mosticchio

and conference Oaktree call. operator, first Lending fiscal quarter welcome you, Specialty to Corporation's Thank

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

Armen Chief Our and Treasurer. Officer and Pendo, Officer; Officer and and Mel Chief Chief speakers Panossian, Executive Officer; Investment today Matt Financial are Operating President Carlisle, Chief

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

include of and call statements Before among the that mergers the associated I comments merger, ability the saving current we with reflecting operating merger with and want you performance. views the the today's begin, and future to our remind other to financial on things, likelihood closing, forward-looking anticipated respect to, realizing of results the synergies the expected timing of benefits

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

Matt Pendo

our you, of and Thank appreciate listening and interest and your welcome, call. in We is OCSL we support well. to everyone first quarter hope conference everyone, earnings Mike,

credit both that quality sell-off prior excellent share was previously of the quarter. solid market quarter in NAV reported earnings, all delivered of liquid since and per to continued results price the from start March. year increase well strong. fiscal of off with from has the are recovery origination a reflected for the an our We realization activity We to $X.XX XXXX. OCSL which This in gains debt a as on-going investment, as non-accrual non-core investment X%

result quarter. compared the The then, ago. to decrease interest previous primarily as was investment income where OID repayment share of year our since investment and portfolio, December $X.XX fact, for than prior In NuStar our the of is higher acceleration Logistics. generated from compared quality lower was performance interest a for as income in of investment X.X% of income and net NAV strong per quarter, $X.XX, credit as the with our was XX it due form strong one the we Adjusted in medical to exceptionally quarter the

continued million by the which dividend four Based last performance for quarter strong yield and cents Board $X.XX approximately quarterly a NII earnings, earnings result the growth per as amount, this X% on would have consecutive increasing Excluding contributed our third year and commitments. were in XX% up our originated fully quarter, driven been on primarily continued new yield. previously increased to did consistent share, and of our end, $XXX Approximately first X.X the $XXX of ago. Leverage average increase. Of funding. we of new favorably portfolio's that our which with of of received was the level to investment where dividend new This new expectations settle funded which from X.X% settled weighted exited. adjusted transactions quarter a nearly been quarter, from $XX January. commitments, [Indiscernible], a market, position debt a $XX first primary pay dividend declined another not and lien by have $XXX they by loans to of investment million these represents increase in the of amount this the the X.X%, our these issue strong from We originations quarter new XX% in one and had private of XX, million included of was We at X.XX new December, September exits X.XX average $XXX million compares timing Most million from yield been the would of downs have non-core the had purchasers. exit million investments if that quarter times. times investments our cash in market originations leverage in in including quarter times approximately to we've on non-accrual. secondary in The million $XX investments

opportunities, identify directly remain originated actively opportunities. private sourcing on credit also we we As focused

that the the in We've have have has of portfolio are type that recent to exuberance And at market several priority efforts three had mind, other quarter. foundation. in key and component a we non-accrual status, sourcing total terms key With which no our represents pipeline and one from basis portfolio and of points economic pre only a We fair a fair credit with investors levels. quality new to top robust. continued these the noted, participants $XXX,XXX we approaching company investments our driven by private That value. OCSLs remains of uncertain hires value non-accruals in cautiously pandemic given of the backdrop, augment is pricing making new

We continued investments two the only now portfolio or monetizing holdings at progress million, fair good quarter X% positions. of during to make about Non-core the value. non-core exiting $XXX represent in

OCSL, planned update Income Corporation. Before you turn the merger I Strategic wanted we over to Tree to of and Oak Armen, on

with access will discussed shareholder call, our institutional this trading liquidity, broadening a potentially improve debt. last sources our lower larger, BDC create increased we and we expect more base, may in cost scaled of As to

both that will term. it and anticipate near NII also over drive We long accretion the

OCSI shareholders the review call vote XX. and encourage transaction proxy shareholders Overall, on we post-merger With quarterly are is declared our your that Armen. the our with materials been begun, transition turn quality we of confident We now statement And We process to forward that to will with out our nearly further benefits The shareholders on time been has that have to track assets Both accordingly. and XXXX this is complete. over and effective. very shares with now we've has the are the portfolios vote scheduled that, the quarter OCSL have the results. will March solicitation the confident for scale right The since all move and on our to is help will current to non-core the merger. merger strong proxy are end pleased on shareholders. drive by close registration of working I

Armen Panossian

new by Thanks, equity The vulnerable, continued we saw economic markets process good and of to crisis, in and accelerate commitments conditions sentiment rebounding monetary as everyone. believe the reasons by administration stimulus. public that Matt, and final to vaccines COVID-XX morning has health consumer XXXX investor we're credit this supported to XXXX fiscal nearing the into provide adding but confidence. improving rollout still and The well stages and of as that exceptional

calendar remains growth current that for for not year. noted end ultimate the the this necessarily to reflect economic an assume prevailing macro gradual second valuations projections or XXXX. of All GDP conditions The an in feel growth the inoculations and pace outlook elevated half might and of pandemic uncertainty, of

final in sense we're at outcome While also about investments much cautious caution new of investments in is With we with approach on our remain We important protecting to exuberance think continue taken. perilous downside too focused assuming hopeful, the stage. to market defensively. it view avoid this the compensation that mind, eye We about risks appropriate and and critical a for investment opportunities. seeking to

Oaktree on risk with businesses. largely notably and positively by stable invest COVID. and lower focus are Given sectors, including multiple This those across portfolio we diversified us or able enables to our scale unaffected resources, even to impacted markets

are that in continue and identify of We're delivering technical on and are methodologies. solutions ones the opportunities life the via also of capitalizing leveraged pandemic, face more level underwritten We traditional easily or buyouts companies the cash businesses the resilient lending compelling in to increased that proven commerce. based healthcare flow direct are digital and supportive that sciences opportunities seeing technology not of

landscape, we have rescue in we continue made that I Finally, first including discuss in investments two did that to lending we which the in carefully opportunities, quarter area last as appealing will year, more an shortly. we found study the detail

which Matt also in exiting upside, As limited of our we positions there's loan believe some we broadly yielding positions. syndicated noted, including further are lower

of with $X.X Now turning was first loans. senior the fair invested to the value companies. was XX% billion the At portfolio diversified, of quarter, well at across the performance. portfolio XXX portfolio secured overall end in the

as favor typical we approximately December Our company, million larger, was diversified businesses. more medium market EBITDA $XXX at middle portfolio to continue company, larger than the XX,

the close the And management in our equity generally, manage liquidity necessary remain through to contact companies portfolio we As always, environment. private and have teams sponsors. with current

reflects this. Our strong credit quality

investment Matt only continue one We on as modifications amendments and to very low. have be interest noted, non-accrual and

Turning to investment now activities.

year. a draw a be was in provider a company up loan. demand. at $XX rebounds delayed first raise $XX to opportunities diverse was term $XX XX% of what Airlines an term of amid maintenance revenue as significant amount and quarter, load bankruptcy its Latam to provider the airline numerous challenging The a of the Latin the discuss commitment the OCSL this The and to environment this Oaktree. sector, is is operational incremental expects with a to like middle opportunities from several OCSI of reward be made America. the term million OCSL for During to to its loan $XX largest restructure Oaktree this sought preserve with this loan, sectors, XX a terms. million needed term or loan a million the have million the deferred which aerospace in loan and take to Due priced in detail first X.XX% with U.S. pandemic. with liquidity to participated world's plus a the in of protection commercial for travel compelling of recurring the resurgence from the XX% sole wought was applications repairs of the Chapter adapted provider market lien planned in in debt and LIBOR Company flagship grounding X.X%. lankhorst alongside working the over attractively as drawn connection structured of total airlines have few one and ensure services as and the the global current base we to post three as structured on well loan. OCSL it companies airline able plus funds of the income. pandemic low million cost auto Oaktree in nanosized moment airline lien was pick. sole by second XXX X.X%. pandemic restructuring, IT business is its quarter. fourths for a LIBOR cloud When provider our $XX and cash companies aftermarket led was and investments basis, Company million through requiring a unique to lien capital opportunities the allocated pricing services is customers. financing LIBOR of of risk to of as $XX million total. to profiles pent fleet an allocated core $XXX priced largest was accounting loan with a our was defensive filed in airlines parts The I'd will part independent, of with September attractive specially Latam of plus continuity a over more acquisition, deal, bridge it with of allocated and

As private of Matt be currently as and continues noted, investment our opportunities a pipeline unique industries. broad we attractive are across robust to evaluating set

an Oaktree in environment strong liquidity and position opportunities these pursue as now, to excellent the resources is stable, in subsides. with what of a along Our the hope put growth we pandemic us

in to to results more Now, I call turn over our Mel financial discuss will detail. the

Mel Carlisle

OID increase down investment Armen. interest income in loan generated financial Total $X.X acceleration $XX.X was you, first million, from income, results mainly $X.X OCSL payoffs, noted two and to quarter. from partially totaled income. the million investment offset Net Good previous was one fees. incentive lower The $XX.X was driven expenses up morning, to the million the quarter This part was lower sequentially. for make-whole in Thank due decrease million, earlier. higher based everyone. as by The fees, strong on first part incentive decline by accrued $XX.X quarter. interest million lower Matt in due

of investment $XX.X net income investment and net per quarter, $X.XX or reported income respectively. $X.XX million $XX share OCSO adjusted For the million and

fees excluding we incentive part reminder, a NII incentive As define two gains fees. for adjusted capital

incentive OCSO the $XX while in quarter first gains note portfolio amount unrealized in quarter. us part it total fee fees. GAAP It requires end. million realized first of only in the $X.X to to the exceed important unrealized the is to two This losses approved net incentive take was a has two million due mostly During during realized expense each annually, incentive pay and part unrealized gains two at will accruing into extent that part quarter. and when to year OCSL fees that gains that account

strong. credit which quality to very Turning to continues be

successful our a of of noted, realize power had prior at investment portfolio and down in exit The million. fair investment, value was the total gain full one the where three XX non-accrual the reported on quarter. Matt quarter due debt basis we at $XX recovery we points points end, Edmentum, total As decrease a basis to from primarily representing of

all March, the And has interest its one companies their company quarter, payments portfolio payments. made cash converted During our interest of scheduled to only pick. since

and Moving the million $XXX investments quarter during in $XXX payoffs balance exits. to sheet, and of we funded received million the

September to ratio X.XX times in X.XX NAV. the leverage decreased increase net reflecting from XX Our times at

to also of the difference just timing XXX have XX, million end, quarter had approximately at leverage most this still below our targets net been X.XX unsettled of leverage a would however, purchases of Adjusting end times. January. of have in range funded We December low times X.XX for X.X times which

total million weighted interest a average end, and total and our of our XX, liquidity of in had and capacity our $XXX at represented Unsecured X.X%. next As in credit had quarter is comes million we XXXX $XXX of facility cash our XXX debt for rate of of At when of outstanding quarter was approximately total including $XX maturity debt debt scheduled up end million, XX% its approximately renewal. undrawn December by eligible portfolio revolving of immediately, credit subject Unfunded first facility. our met million, lender facility as commitments milestones lender $XXX quarter, amount a million, the must million having In new million, existing adding is we amount were increase the that commitment an and of remaining drawn credit $XXX capacity by with be for this million. certain revolving expanded $XXX $XX by $XX to be companies. to million

commitment $XXX million. is currently revolver Our total

and investment the maintained progress of successful Importantly, joint both quality on the and both lower Moody's exiting strength ratings Shifting our investments, to non-core OCSL leverage Fitch our Kemper Oaktree and with and grade citing peers. to date relative to now venture.

had in $XXX the December total invested of companies. of JV loans same invested number $XXX million last to secured As of assets the companies compared million of senior quarter. XX, XXX assets in This

sales growth the quarter-over-quarter, increased and in increase to exceeded its Assets market value mainly portfolio net due of investments as purchases and the repayments.

times of result was slightly million, from X.X quarter quarter. in at by were the a depreciation, JV quarter. portfolio Leverage investments $X down As September at the up written OCSL or underlying from the prior the X% the JV end

back the Matt you, Pendo to Now I Mel. Thank Matt. turn will call

to carried the continues The repositioning strong we first be strong operating nonetheless been that since quarter largely originations. XXXX defensive quarter. for out environment had of uncertain, and has the completed, generated While we've a we results

to our continue very current We feel about holdings. good

to overall throughout transactions opportunities potential and pipeline fiscal XXXX. identify we of remains expect continue to compelling investment Our robust,

remain focused rotating loans. on and by yielding portfolio of OCSL an positioned evidence to equity the higher generated paying have to this is that investments continue last that higher return two a compared we improved on improved we lower yielding are out for For in quarters, off. prior equity. area believe proprietary which quarters, to And is the return efforts into well deliver on positioning We our yields

as of of LIBOR remained During exited million the below these loans million senior types end, of priced secured investments. quarter, we $XX And quarter plus or that portfolio. in of $XXX X.X% at

quarter new during yield the Our at investments in of came average an X.X%.

time. realized there's upside So to over be continued

is deploying to us for portfolio leverage opportunity the at ROE Another increase more level.

we we of as investments term returns X.XX X low the continue would leverage. end mentioned, below incremental to times, enhance make of expect operating Mel deploy our higher so As and long target to were we to

grow However, our with that find offer we will an opportunities believe are that portfolio we we as only the approach attractive risk consistent investment reward.

present to the for to opportunity Kemper returns. continues JV us an Finally, improve

million forward the and very levered As $XX discipline we pleased investment capacity. JV to that of In year-end, was time. had will of conclusion, shareholders times over to also We pending OCSL X.X OCSI are believe and and be accretion. results. earnings portfolio the JV accretive growth ROE diversity combination with We're merger this OCSI with quarter looking also as our both expected benefits believe through first we of the that scale, strong

about improve remain excited for and attractive future continue optimistic Operator, OCSL. that deliver new call are opportunities us us adjusted interest and that, we our enabling the you to to today's company joining lines. shareholders. happy take your open questions. the to are for to in investment will returns Thank the identify We please With combined your continued risk we for on

Operator

And [Operator Please Instructions] the JMP question from Devin ahead. Securities. will Ryan come of go first

Devin Ryan

Hey Good morning, everyone. Great there.

Armen Panossian

Good morning

Devin Ryan

versus to pipeline, portfolios. you market at the just question kind overlap trying pull will of It that First would just your of expectation in And the here investment push of that. strong expectations it some additional and granularity all around about, give be and I'm obviously quarters comments relatively and exuberance comments what some is hear on OCSL OCSI, about the and two coming the get trying in think investment the to here activity the for investment very valuation given expectations the great merger the side cadence as seamless. could the for you if the repositioned on be between and of

Armen Panossian

Devin is Armen. Sure,

cadence of closed. after terms then the investing is overlap merger in the and with So of OCSI,

at investments non-overlapping OCSI, OCSL. It's portfolio in you of point, can OCSI XX% take rotate. million which of percentage that traded at are XX of XX a points about are little million know par be about, to, value longer that terms bit in of dollars that securities but to actually public a will or of private in so this positions, the So not of time

after that to that to, to pretty can effectuate our the continue we close that alluded on attractive you but that can loans. of predicated we So rotation, as we a be think merger, manageable it's will will originate obviously rotation effectuate, ability the

will structured, Just asking same maybe, you I'm in sponsor And their support non-sponsor typically maybe credit then, we're market paintbrush, market lien. there's, as take we there, the of that I of like credit in private and predict LBOs, finance could they're sure longer private are harder others to would some markets, are what like what middle days. timing to they're seeing say, the about second the not talk bit or more be of they they the little about are, doing to a the these know, And harder with it's of, you execute. we take within find can that loans mezzanine all more in

kind would these taken terms Pricing around of light what legal in whereby especially is pre-COVID variety that's a decks or a has What terms the taking covenant what flexibility coming levels, we would private they're much first as lenders. other agreements. of to other other your and bit side the not of hit think. the market credit of typical so side, sponsor that of are sponsors And market to blasting hit say middle in direct and we equity is out competitive covenants terms But there's, unitranche market, more are one pitch back loans, I do a on as lien, a that here. little to

finance, do of Oaktree advantage With more some particular a to very flow whole yet with of and, again, continue relationships think we we sectors. over few have that with So middle said, deal a very we rejecting and interesting for turning it those close market in finding stones a that especially we're sponsor committing just investments. less will sponsors so, are are to or that we of us, that that operational than finding it lot are we're lot

a in description. sponsors have We already meet pipeline now few that the with things that

cave there so, are legal is And we deals some to willing that to but we lender VDC typical, or going the originate not expect on we be terms. out unitranche lien flow still kind first that or there, otherwise, will of

willing financial focused terms In cave fact, given would Oaktree legal as than downside just to the terms, be a we more background on on of lender.

markets, But were The rescue engaged they the with it a We a of the issuer, place house and what non-sponsor On that liquidity several points declined. certainly quarters more experiencing lending or our bond, several declined. opportunistic, Matt several for to of willing couple reaction shown in has providing tighter been go side, And are sectors over last the We our other pace the market. quarters. active XXX quarters than were on in we fully has COVID. to public the with in side owned of positive funds. to some mentioned, that flow rescue, in of deal opportunities over the with over last them to as the provide I level the the of we've the very due exuberance and companies essentially market partnership the opportunity expect were dislocation away even basis with to last don't that has large able a sort

solutions life that highly our structured of area to we same sciences life We to last In that over So year, robust. active need be we the opportunities continues in are were in theme businesses said, engage for from very in going companies. activity that sciences. non-sponsor to lending, those are will us. capital many quarters. continue But taking the several the recognize markets with industries, public next many And

we'll few prior the very And with have attractive, considering structures expect are our we're in return with consistent our and that right deals that. We now we that a pipeline to continue expectations. do

contemplated, not pretty the OCSI able transition we of portfolio. portfolio type will feel be went quarters, over the world it's two to market that kind that, take so an during that little frankly, it bit color. around well one of OCSL know are good are just non-overlapping quite pipeline, a much So publicly there the and area. current to be I in market on especially few And will the that helps I our within, under we've the the strength going positions the the we trading given securities that one to non-sponsor over or it of quarter, current But a circumstances. the traded Well years

Devin Ryan

if that's color, difficult, then sure Okay, this maybe one great. consecutive And I be Armen. terrific the just think which help quarters just of a not I'm follow you increasing might had dividend, up three you've here, can is if but maybe the continuing to in about the of to higher order think about from of XXXX. of should investors dividend specifics, you looking And think can't for and here? for, rest outlook trend what us kind trajectory be kind give the the

Armen Panossian

generating, good or doing guidance really just for pipeline. not really portfolio, our the we're like things But We forward dividends make comfortable that I provide not income, thanks looking raising predictions, it's Yes, the think looking with something to now, forward feel were on earnings. right question. and about unfortunately. the We to

Matt Pendo

think I And Matt. it's it's,

income. again, large we The out, had pointed quarter, we we This flowed thoughtful. new have, the through time we We've, dividend through other past last as investment also of item quarters. income. investment three September We've also just, we're that the quarter, in one had stock that, a through payment, which had oven Devin, the you that, kind flows raised thing

of mindful one-time items. those be to want we So

was If look quarter, September and you going take take, quarter. at out performance, ago, this a back was, it $XX.X to just our investment if $X.XX ago, you a year in in $XX.XX those and year

kind and Board of that's about that one of as is if quarter what we So on focused we look looking underlying income very the kind thinks were to at as dividend. portfolio at end thing the kind recurring of to going we're

Devin Ryan

Okay, you Appreciate it. leave very it guys. helpful. I'll there. Thank

Operator

next Thank comes Kyle of go you. Joseph Please The ahead. Jefferies. question from

Kyle Joseph

on interest Thanks my if you strong margin, Congratulations mind. Start quarter. Hey, taking on good morning. don't questions. net another your for

give the have there's on on-going Just, opportunities. but sounds some things. portfolio side us sense for Obviously, yield of spreads a rotation like it tightened still

portfolio So can and of both direction. the are trending we any there and the at how you've in we opportunities give bottom Obviously, for give been to then reduce us at seen on the cost for side us of of a the out it's the a in sense figure that right kind yield those trending. margins? here. funds sense Are And

Matt Pendo

go first. I'll

the over side, on size that. from revolver, of we've then on obviously have we've we the capacity Group. liability strong really lot last the notes think got, I our unsecured we've decrease And support a the some Banking two and have there. of And, gotten the cost the increased, that quarters, obviously

dollar need from would kind plus borrow, of to So borrow that next the we is LIBOR, next the which LIBOR we XXX.

So solid. I think that's pretty

lower than on On off was, rolled obviously the that. asset side, yield the the the last quarter, the yield was saw was X.X%, assets you

the don't kind roll last the asset going what be predict So at did to other just assets, seller, the spread to the you to low of quarter and other and what's we But, on pick assets, the be each besides and you will yields the want get, place, would off. fund a if you we to I Armen's look assets. point, we what going yielding go up quarter, drawing revolver,

if more activities LIBOR of this the on, is it there's XXX, -- something been been the goes what end XXX, hard predict, LIBOR to It's off XXX, XXX just that spread. So, and plus, quarter, there's comes each it plus at kind far of last has robust. so to more quarter, and refinanced. refinancing the seen We've as market quarter, what's going in be

sense, that terms side in quarter seeing that think new and selling on assets. we lower it's But I to then that side on ago, asset gives terms because that just we're weren't and the trying to yielding predict side. will what flow. asset on of the So the kind of do a in And hard you the ebb origination liability a of

Kyle Joseph

Yes, that's very…

Armen Panossian

If originate. you consistent would the like of where continue look last I to mean, origination that's at we quarters, couple to in with our

And that. and we So it's certainly looking equity we like risk go than we're to not take originated. tighter are not anything like looking to

the That's of the just you're are So a well us. targeted forward. have or origination. have kept do positions into In our origination and going we where quarters that XXX ordinarily repayments that that our have from it's exit our predicated lower, just strength. of we is a of instruments yielding intention you higher OCSL portfolio. market with do liked positions yield like that's would certainly now. taken seeing a we and LIBOR have we are, at have Those to on rotated with significant us. our It'll the as look portfolio we from last we be is being, rotate market plus has kind pace can on really coupon And cup But by that few to consistent extent to that of would enough giving some

Kyle Joseph

I'd and ask growth one I know, compared sense give Got then than can it, initially amendment on Obviously, we it's been better give of credit. But to way us And very trends last kind you're us you portfolio for to like one activity spring. very a sense and helpful. the quarter have to the had that and solid a Thanks. would revenue how EBITDA seeing? the only just investment pick, moved in third performance you fourth or quarter, broadly? mentioned and for for that then expected

Armen Panossian

this Armen. Sure, is

amendment So the quiet. side, it's yes, very been on

a and name pick. amendment one We an is that or non-accrual subject to continue to on only one name have

have other been with issues the contacted any or performance. poor material around in or portfolio not We of kind engaged not

on really good to really that. defaults feel about we based have a at good information hand I in we about for will don't expect So meaningful the us uptick feel today. in

but hard performance say industries are and of we say that generalize, I to there. terms most some it's would would sensitive exposure to COVID I that have the those companies, of underlying In do

We have, on that some events. we related have businesses entertainment are, focused live

they think and of some. and some at We where leisure there, are are not most of businesses with line flow companies very large the strong those And oriented have top so in of was, do as cost impacted can over we the the have when Obviously last manage way liquidity, months, very go. events are very that them, of the need have some those have we'll and not have situations, the oriented you In these out if many are defense no the sponsors. mode, are mode. to little in airline to will, But think but cash And sponsor of and did we sponsors the reach cutting that there exposure letting incremental from lot are the in And several two we protection. are situations we the a no by cash. buyouts positions we're the on are we XX and in there's a most let by Those positions, response we cash preservation to revenue instances these don't way, well oriented live recent we as aerospace perspective. we areas, are we know, portfolio. the sitting exposure businesses this there course

on opportunity distressed you that hands. your have a think don't So,

upside. impacted, have is most XX%, deeply last revenues, up the those the revenues businesses So positive impacted some that as directly quarters, couple that We've the doing in down COVID, to The the been, be year-over-year. we've slightly technology in that or from provide, imagine. have might away there flat typical few they've services But for of provide related sectors. fast now been XX% really benefited it's the in cases, it's oriented remote doing around the businesses last or that invested tech And from involved sensitive to been, of that COVID year-over-year, in one XX%. with food are are down nice services a especially cloud life that including most these Year-over-year, LBOs, been more well. very names XX% as businesses, very quarters sciences businesses in been computing, as computing quite recent much couple have are could are including their a restaurants, well, cloud, surprises

just that we to all either not exposed all the And have thankfully, ability do it's exposure much and exposure, standing to So again, when it's needed. cut money, the very have a when if willing or to put if strong and the behind in them and essentially have the bone, sponsor, that to don't it's very costs, companies kind And over over where the we COVID. place. have is deeply of they

Kyle Joseph

Got Thanks answering Very helpful. questions. it. a my lot for

Armen Panossian

you. Thank No problem.

Operator

of The Please next Fargo Wells Finian Securities. comes go ahead. O'Shea from question

Finian O'Shea

morning. Good everyone. Hi,

Just a first question on OCSI.

who a us of those less For familiar. are little

non-accrual investment onto a Glick That's the big volatility. how us about put JV You yields. COVID obviously to on portfolio non-accrual update that? is. think to due a you bit that that On weighs you Are being able on

Armen Panossian

And that in the well. or related fairly last considerably related COVID few last on sensitivity, this have quarters. over worked as you it We volatility quarter JV is Glick value non-accrual as to know the assets Sure. appreciated

that, And that will consider every off non-accrual bringing so on quarter. we of back position

default price feel I re-evaluate terms quarter quarter. comfortable terms but underlying looking of We happy we're lack the consider want provide will about of appreciation. performance in don't guidance, and experience, but this will in we both also doing that forward assets, of next always to it of didn't we market the

Matt Pendo

although positive on that JV, And it income. grow we the and there. down net NAB are notes we're pay is using in interest generating investment add also the subordinated I'll that not accruing to

is that shareholders. a So benefit to

Finian O'Shea

very you. thank Yes, well,

Matt Pendo

On the marked actually that higher XXXX. note Glick as XXXX versus on we the the XX JV is top today that have

sense or of, give So around how perception feeling our, just a our to position. you that our

Finian O'Shea

behind little you And quarter. has in like on on any us to looks able Are names one legacy you. revolver. more this that thank Okay, your on color Diagnostics give Dominion pulling what's the then that? OCSL a It of been

Armen Panossian

Sure.

get but the as better It's in I suffering, what revolver pandemic. to the testing well that to business. need of but of needed expected. as you up details, Dominion, would I support that we'd we around with pretty business. by has They know on staff have actively COVID The better it's what than the is actually have It's of a Company certainly, result actually is doing So are a than certainly testing. its performing core still beneficiary involved working as COVID particular, thought to business capital the this I but back in drawer

Finian O'Shea

just Okay, line it quarter I guys income top and very thank Obviously being a there just NOI a NAV for question. that small exited. been that that And received Is that? top was correct your for may you for The on a this income And some realized was one? to you quarter. assume you. on Edmentum Was that good material non-accrual a final you on that's Edmentum have impacts while. line?

Armen Panossian

answer I’m I'll or question. ask Mel to not that sure. Matt

Mel Carlisle

And there realized the the Sure. of Sure. majority as Edmentum, terms of the line below was gain. income in generated

in million. my XX about mentioned remarks, it was I prepared As

income. a wasn't that an in investment lot Okay,

Matt Pendo

we immaterial. time can interest the income. not like recognize is back Yes, non-accrual. a go and It's But it was during

So we directly the recognize quarter, majority in a the but small current gains. amount realized was

Finian O'Shea

Okay, thank you.

Operator

Wedel ahead. of comes go Melissa Please The from JPMorgan. next question

Melissa Wedel

thinking of morning. deploys X.X% that Good this quickly sort touch deck make this deployments average to I on base about the right. quarter an to last levels your I at last yield of comparing quarter. million and slide from sure But yield quarter XXX new was some to of and wanted the versus, showing I'm this XXX quarter XX.X%. about a at want

that sort factoring there's that? around from in? if of can provide And context number we anything should So be missing some you that

Matt Pendo

Yes, thanks for the question.

around in obviously ended quarter quarter quarter seeing activity in And, market. rescue than particular during and loans what the X, was the higher it in September today we're XX, the those XXXX. for following began, summer So, the months, the frankly, was what July ended

as options September quarter, lenders third frozen towards opportunistic started the calendar the our the back other new are to with lending direct as are with mid potentially originations second middle subsided, lenders highly They that rescue dealing has part less and fairly coming -- correlated towards XX. issuers we the and new highly are yields market that calendar coral were or quarter. ended in opportunity. desperate far the the we have were that investments, So those were our When opportunity yields of that on late that quarter

So the as of has to driving, was the the part that so And, yields. digit rescue those it's type originations. declined, rescue yield double has business really lending, lending our that average

Melissa Wedel

Okay.

Armen Panossian

single one those types know, bit, Ag month a little not that frankly, deals. early skewed a was quarter of size, we we of August, originated, interesting position a one borrower, it might XX% have those that probably one. the It because transaction. it's decent is of Actually, that a is to just gotten just and And And look September, we pretty that rescue there funded was a loan. loan structured highly That that it's also was new transaction. and, for a to the in continue

star is but in might do We a deals the non-sponsor like transactions, quite that little that we have lumpy. quarter or We Ag new that, evidence be ended we might or will can very always area we massively of skew average. quarter like a XX, this might new or where part our really, will two always September have just look the for that these non-sponsor a one something a where quarter the business have

Melissa Wedel

really much into repayment are up a helpful. that's big a you see pipeline? on understood, Okay, Anything I sort as visibility follow of expecting? you that, guess, as do

Armen Panossian

market, loan the potentially basis. as the Yes, market best broadly what syndicated I that the But, well, on in a indication syndicated middle expect to In landscape XX% the we on numbers follow loan if a broadly can't that see put for market. lag of you it. is good pretty market,

or low reasons, And syndicated point. at XX%, trading broadly the wave a repaid of on up a in this repricing you loan first significant the it's second default to had syndicated trading the lien. lien of we broadly recently if is idiosyncratic took positions, risk, just bottom get that because and upsizing fact, couple we, clubbed January a XXXX best in close par through or XX% exclude market. of the So that in seen pretty even And resulted of month in par for above in we

the name, out would impact that broad as surprising, And give is me those month a the their hard I prices, for to the CLO upsides, It's as go-forward data today active. broadly entirety And And higher. quite so that last on cost of of inflows, first the of debt. that reduce you one color into not January, point inflows basis. so been of fact market volume has driven creation But in lien the the the that given many for take syndicated become the you. well and prices it's that retail second especially it's predict the loan to there's funds,

there in quarters, just On such I That's was by index syndicated and a the a the month call given about flow basis alone. month. be of that direct premium. oriented funds trafficked. And, technical activity been fundraising, part very the of is the increase technicals last in middle the a very points heavily the big and XXX material. it's suspect broadly market about in an there. just LBO protection That's given in It's a year of also XXXX, but few expect backed very and January market, not typically lending part call And I driven market. the that more the would that's repayment elevated would loan have up the actively some market, in only that fundraising strong then very, year,

quarters persist. the current middle market expect over repayment would some I if technicals couple market of So pick up the to in even these next activity

Melissa Wedel

Thanks Okay, much. great. so

Operator

[Operator We Instructions] questions, have further Mr. no Mosticchio.

Michael Mosticchio

beginning be Andrea. for XXX-XXX-XXXX today's OCSL’s days after approximately replay And thank The investor U.S. section, this for dialing broadcast. XX this on code earnings non-U.S. the with in conference call joining XXXXXXXX for call. or callers by replay X-XXX-XXX-XXXX website available or of on Thanks, for will one us the you hour Great. callers all access

Operator

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

Oaktree Specialty Lending (OCSL) 4 Feb 212021 Q1 Earnings call transcript