los angeles ca aug 03 2023 globe newswire  oaktree specialty lending corporation ocsl oaktree specialty lending or the company a specialty finance company today announced its financial results for the fiscal quarter ended june 30 2023  financial highlights for the quarter ended june 30 20231   total investment income was 1019 million 132 per share for the third fiscal quarter of 2023 as compared with 963 million 132 per share for the second fiscal quarter of 2023 adjusted total investment income was 1011 million 131 per share for the third fiscal quarter of 2023 as compared with 957 million 131 per share for the second fiscal quarter of 2023 the increase on a dollar basis was primarily driven by the first full quarter of interest income earned on the assets acquired in the merger with oaktree strategic income ii inc osi2 the osi2 merger as well as the impact of higher base rates on the companys floating rate debt portfolio   gaap net investment income was 484 million 063 per share for the third fiscal quarter of 2023 as compared with 460 million 063 per share for the second fiscal quarter of 2023 the increase on a dollar basis was primarily driven by higher total investment income and lower operating expenses which was partially offset by higher interest expense management fees and part i incentive fees   adjusted net investment income was 476 million 062 per share for the third fiscal quarter of 2023 as compared with 454 million 062 per share for the second fiscal quarter of 2023 the increase on a dollar basis was primarily the result of higher adjusted total investment income and lower operating expenses which was partially offset by higher interest expense management fees and part i incentive fees   net asset value nav per share was 1958 as of june 30 2023 down slightly as compared with 1966 as of march 31 2023 which was mainly the result of unrealized depreciation on debt investments partially offset by undistributed net investment income   originated 2510 million of new investment commitments and received 2610 million of proceeds from prepayments exits other paydowns and sales during the quarter ended june 30 2023 the weighted average yield on new debt investments was 126   total debt outstanding was 17850 million as of june 30 2023 the total debt to equity ratio was 118x and the net debt to equity ratio was 114x after adjusting for cash and cash equivalents   upsized and extended maturity of the syndicated credit facility during the quarter ended june 30 2023 total commitments were increased from 10 billion to 12 billion and the maturity was extended to june 2028 pricing advance rates and other general terms were unchanged on the amended facility   liquidity as of june 30 2023 was comprised of 597 million of unrestricted cash and cash equivalents and 4825 million of undrawn capacity under the companys credit facilities subject to borrowing base and other limitations unfunded investment commitments were 2744 million or 2473 million excluding unfunded commitments to the companys joint ventures of the 2473 million approximately 1852 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies   a quarterly cash distribution was declared of 055 per share the distribution is payable in cash on september 29 2023 to stockholders of record on september 15 2023   1 the company completed a 1for3 reverse stock split on january 20 2023 effective as of the commencement of trading on january 23 2023 all share amounts and per share information included in this press release reflect the reverse stock split on a retroactive basis armen panossian chief executive officer and chief investment officer said ocsl produced solid results in our fiscal third quarter supported by strong earnings and robust origination activity which drove our annualized return on adjusted net investment income to 126 we leveraged oaktrees platform to source compelling investments including several opportunistic transactions that resulted from the prevailing volatile market environment we believe these investments present an appealing riskreward and position ocsl to continue to deliver attractive returns to our shareholders matt pendo president said we made several enhancements to our capital structure during the quarter creating flexibility and extending maturities we increased the size of our syndicated credit facility to 12 billion and extended its maturity to 2028 in addition we consolidated a credit facility acquired from oaktree strategic income ii inc with our existing citibank facility and pushed out the maturity to 2027 we appreciate the support from our banking partners to complete these amendments amid a challenging market backdrop which we believe reflects the confidence they have in oaktree as a manager these improvements further strengthen our funding options and position us well to capitalize on new investment opportunities the board of directors declared a quarterly distribution of 055 per share the distribution is payable in cash on september 29 2023 to stockholders of record on september 15 2023 distributions are paid primarily from distributable taxable income to the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year a portion of those distributions may be deemed a return of capital to the companys stockholders   1 see nongaap financial measures below for a description of the nongaap measures and the reconciliations from the most comparable gaap financial measures to the companys nongaap measures including on a per share basis the companys management uses these nongaap financial measures internally to analyze and evaluate financial results and performance and believes that these nongaap financial measures are useful to investors as an additional tool to evaluate ongoing results and trends for the company and to review the companys performance without giving effect to noncash incomegainloss resulting from the merger of oaktree strategic income corporation with and into the company in march 2021 the ocsi merger and the osi2 merger and in the case of adjusted net investment income without giving effect to capital gains incentive fees the presentation of nongaap measures is not intended to be a substitute for financial results prepared in accordance with gaap and should not be considered in isolation adjusted total investment income for the quarter ended june 30 2023 was 1011 million and included 944 million of interest income from portfolio investments 40 million of paymentinkind pik interest income 16 million of fee income and 11 million of dividend income the 53 million increase was primarily driven by the first full quarter of interest income earned on the assets acquired in the osi2 merger as well as the impact of higher base rates on the companys floating rate debt portfolio net expenses for the quarter ended june 30 2023 totaled 535 million up 32 million from the quarter ended march 31 2023 the increase in net expenses was primarily driven by 30 million of higher interest expense due to the impact of rising interest rates on the companys floating rate liabilities and an increase in average borrowings outstanding further contributing to the increase were a 08 million increase in base management fees resulting from the first full quarter of the assets acquired in the osi2 merger and 06 million of higher part i incentive fees as a result of higher adjusted net investment income during the quarter these were partially offset by a 12 million reduction in professional fees and general and administrative expenses during the quarter adjusted net investment income was 476 million 062 per share for the quarter ended june 30 2023 up from 454 million 062 per share for the quarter ended march 31 2023 the increase of 22 million primarily reflected 53 million of higher adjusted total investment income and was partially offset by 32 million of higher net expenses adjusted net realized and unrealized losses net of taxes were 111 million for the quarter ended june 30 2023 primarily reflecting unrealized depreciation on certain debt investments  1 annual stated yield earned plus net annual amortization of oid or premium earned on accruing investments including the companys share of the return on debt investments in slf jv i and glick jv and excluding any amortization or accretion of interest income resulting solely from the cost basis established by asc 805 see nongaap financial measures below for the assets acquired in connection with the ocsi merger and osi2 merger 2 annual stated yield earned plus net annual amortization of oid or premium earned on accruing investments and dividend income including the companys share of the return on debt investments in slf jv i and glick jv and excluding any amortization or accretion of interest income resulting solely from the cost basis established by asc 805 for the assets acquired in connection with the ocsi merger and osi2 merger 3 new funded investment activity includes drawdowns on existing revolver and delayed draw term loan commitments and excludes the assets acquired in the osi2 merger during the three months ended march 31 2023 4 net new investments consists of new funded investment activity less proceeds from prepayments exits other paydowns and sales as of june 30 2023 the fair value of the investment portfolio was 31 billion and was composed of investments in 156 companies these included debt investments in 143 companies equity investments in 43 companies and the companys joint venture investments in slf jv i llc slf jv i and ocsi glick jv llc glick jv 32 of the equity investments were in companies in which the company also had a debt investment as of june 30 2023 953 of the companys portfolio at fair value consisted of debt investments including 765 of first lien loans 120 of second lien loans and 68 of unsecured debt investments including the debt investments in slf jv i and glick jv this compared to 750 of first lien loans 130 of second lien loans and 70 of unsecured debt investments including the debt investments in slf jv i and glick jv as of march 31 2023 as of june 30 2023 there were five investments on nonaccrual status which represented 36 and 31 of the debt portfolio at cost and fair value respectively three additional investments were placed on nonaccrual during the quarter which represented 10 and 08 of the debt portfolio at cost and fair value the companys investments in slf jv i totaled 1406 million at fair value as of june 30 2023 up 1 from 1395 million as of march 31 2023 the increase was primarily driven by slf jv is use of leverage and unrealized appreciation in the underlying investment portfolio and undistributed net investment income as of june 30 2023 slf jv i had 3702 million in assets including senior secured loans to 52 portfolio companies this compared to 3929 million in assets including senior secured loans to 56 portfolio companies as of march 31 2023 as of june 30 2023 there were no investments held by slf jv i on nonaccrual status slf jv i generated cash interest income of 34 million for the company during the quarter ended june 30 2023 up from 32 million in the prior quarter in addition slf jv i generated dividend income of 11 million for the company during the quarter ended june 30 2023 flat as compared to the prior quarter as of june 30 2023 slf jv i had 600 million of undrawn capacity subject to borrowing base and other limitations on its 260 million senior revolving credit facility and its debt to equity ratio was 12x the companys investments in glick jv totaled 496 million at fair value as of june 30 2023 down 1 from 500 million as of march 31 2023 the decrease was primarily driven by investment losses as of june 30 2023 glick jv had 1268 million in assets including senior secured loans to 37 portfolio companies this compared to 1310 million in assets including senior secured loans to 39 portfolio companies as of march 31 2023 as of june 30 2023 there were no investments held by glick jv on nonaccrual status glick jv generated cash interest income of 14 million during the quarter ended june 30 2023 up as compared to 12 million in the prior quarter as of june 30 2023 glick jv had 239 million of undrawn capacity subject to borrowing base and other limitations on its 90 million senior revolving credit facility and its debt to equity ratio was 12x as of june 30 2023 the company had total principal value of debt outstanding of 17850 million including 11350 million of outstanding borrowings under its revolving credit facilities 3000 million of the 3500 notes due 2025 and 3500 million of the 2700 notes due 2027 the funding mix was composed of 64 secured and 36 unsecured borrowings as of june 30 2023 the company was in compliance with all financial covenants under its credit facilities as of june 30 2023 as of june 30 2023 the company had 597 million of unrestricted cash and cash equivalents and 4825 million of undrawn capacity on its credit facilities subject to borrowing base and other limitations as of june 30 2023 unfunded investment commitments were 2744 million or 2473 million excluding unfunded commitments to the companys joint ventures of the 2473 million approximately 1852 million could be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies the company has analyzed cash and cash equivalents availability under its credit facilities the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believes its liquidity and capital resources are sufficient to take advantage of market opportunities in the current economic climate as of june 30 2023 the weighted average interest rate on debt outstanding including the effect of the interest rate swap agreement was 66 up from 62 as of march 31 2023 primarily driven by the impact of higher interest rates on the companys floating rate liabilities the companys total debt to equity ratio was 118x and 116x as of june 30 2023 and march 31 2023 respectively the companys net debt to equity ratio was 114x and 114x as of june 30 2023 and march 31 2023 respectively on june 23 2023 the company entered into an amendment to its amended and restated senior secured credit facility to among other things i increase the size of the syndicated facility from 10 billion to 1218 billion with no changes to the accordion feature the permits the company under certain circumstances to increase the size of the syndicated facility to up to the greater of 125 billion and its net worth ii extend the reinvestment period for 1035 billion of commitments from may 4 2025 to june 23 2027 and iii extend the final maturity date for 1035 billion of commitments from may 4 2026 to june 23 2028 on may 25 2023 the company entered into an amendment to the revolving credit facility which i increased the size of the osi2 citibank facility from 250 million to 400 million ii extended the reinvestment period from may 26 2023 to may 25 2025 iii extended the final maturity date from january 26 2025 to january 26 2027 iv modified the interest rate such that borrowings during the reinvestment period are subject to a rate equal to a in the case of a lender that is identified as a conduit lender the lesser of i the applicable commercial paper rate for such conduit lender and ii the secured overnight financing rate sofr plus 200 per annum on broadly syndicated loans and 275 per annum on all other eligible loans and b for all other lenders sofr plus 200 per annum on broadly syndicated loans and 275 per annum on all other eligible loans in all cases subject to a minimum overall rate of sofr plus 250 per annum and v modified the interest rate such that borrowings after the reinvestment period are subject to an applicable spread of 400 per annum on a supplemental basis the company is disclosing certain adjusted financial measures each of which is calculated and presented on a basis of methodology other than in accordance with gaap nongaap the companys management uses these nongaap financial measures internally to analyze and evaluate financial results and performance and believes that these nongaap financial measures are useful to investors as an additional tool to evaluate ongoing results and trends for the company and to review the companys performance without giving effect to noncash incomegainloss resulting from the ocsi merger and the osi2 merger and in the case of adjusted net investment income without giving effect to capital gains incentive fees the presentation of the below nongaap measures is not intended to be a substitute for financial results prepared in accordance with gaap and should not be considered in isolation   adjusted total investment income and adjusted total investment income per share – represents total investment income excluding any amortization or accretion of interest income resulting solely from the cost basis established by asc 805 see below for the assets acquired in connection with the ocsi merger and the osi2 merger   adjusted net investment income and adjusted net investment income per share – represents net investment income excluding i any amortization or accretion of interest income resulting solely from the cost basis established by asc 805 see below for the assets acquired in connection with the ocsi merger and the osi2 merger and ii capital gains incentive fees part ii incentive fees   adjusted net realized and unrealized gains losses net of taxes and adjusted net realized and unrealized gains losses net of taxes per share – represents net realized and unrealized gains losses net of taxes excluding any net realized and unrealized gains losses resulting solely from the cost basis established by asc 805 see below for the assets acquired in connection with the ocsi merger and the osi2 merger   adjusted earnings loss and adjusted earnings loss per share – represents the sum of i adjusted net investment income and ii adjusted net realized and unrealized gains losses net of taxes and includes the impact of part ii incentive fees1 if any  the ocsi merger and the osi2 merger the mergers were accounted for as asset acquisitions in accordance with the asset acquisition method of accounting as detailed in asc 80550 business combinations—related issues asc 805 the consideration paid to each of the stockholders of oaktree strategic income corporation ocsi and osi2 were allocated to the individual assets acquired and liabilities assumed based on the relative fair values of the net identifiable assets acquired other than nonqualifying assets which established a new cost basis for the acquired investments under asc 805 that in aggregate was different than the historical cost basis of the acquired investments prior to the ocsi merger or the osi2 merger as applicable additionally immediately following the completion of the mergers the acquired investments were marked to their respective fair values under asc 820 fair value measurements which resulted in unrealized appreciationdepreciation the new cost basis established by asc 805 on debt investments acquired will accreteamortize over the life of each respective debt investment through interest income with a corresponding adjustment recorded to unrealized appreciationdepreciation on such investment acquired through its ultimate disposition the new cost basis established by asc 805 on equity investments acquired will not accreteamortize over the life of such investments through interest income and assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value the company will recognize a realized gainloss with a corresponding reversal of the unrealized appreciationdepreciation on disposition of such equity investments acquired the companys management uses the nongaap financial measures described above internally to analyze and evaluate financial results and performance and to compare its financial results with those of other business development companies that have not adjusted the cost basis of certain investments pursuant to asc 805 the companys management believes adjusted total investment income adjusted total investment income per share adjusted net investment income and adjusted net investment income per share are useful to investors as an additional tool to evaluate ongoing results and trends for the company without giving effect to the income resulting from the new cost basis of the investments acquired in the mergers because these amounts do not impact the fees payable to oaktree fund advisors llc the adviser under its second amended and restated advisory agreement the ar advisory agreement and specifically as its relates to adjusted net investment income and adjusted net investment income per share without giving effect to part ii incentive fees in addition the companys management believes that adjusted net realized and unrealized gains losses net of taxes adjusted net realized and unrealized gains losses net of taxes per share adjusted earnings loss and adjusted earnings loss per share are useful to investors as they exclude the noncash income and gainloss resulting from the mergers and are used by management to evaluate the economic earnings of its investment portfolio moreover these metrics more closely align the companys key financial measures with the calculation of incentive fees payable to the adviser under with the ar advisory agreement ie excluding amounts resulting solely from the lower cost basis of the acquired investments established by asc 805 that would have been to the benefit of the adviser absent such exclusion  1 adjusted earnings loss includes accrued part ii incentive fees as of and for the three months ended june 30 2023 there was no accrued part ii incentive fee liability part ii incentive fees are contractually calculated and paid at the end of the fiscal year in accordance with the ar advisory agreement which differs from part ii incentive fees accrued under gaap for the three months ended june 30 2023 no amounts were payable under the ar advisory agreement  the following table provides a reconciliation of total investment income the most comparable us gaap measure to adjusted total investment income for the periods presented the following table provides a reconciliation of net investment income the most comparable us gaap measure to adjusted net investment income for the periods presented the following table provides a reconciliation of net realized and unrealized gains losses net of taxes the most comparable us gaap measure to adjusted net realized and unrealized gains losses net of taxes for the periods presented the following table provides a reconciliation of net increase decrease in net assets resulting from operations the most comparable us gaap measure to adjusted earnings loss for the periods presented oaktree specialty lending will host a conference call to discuss its third fiscal quarter 2023 results at 1100 am eastern time  800 am pacific time on august 3 2023 the conference call may be accessed by dialing 877 5073275 us callers or 1 412 3175238 nonus callers all callers will need to reference oaktree specialty lending once connected with the operator alternatively a live webcast of the conference call can be accessed through the investors section of oaktree specialty lendings website  during the conference call the company intends to refer to an investor presentation that will be available on the investors section of its website for those individuals unable to listen to the live broadcast of the conference call a replay will be available on oaktree specialty lendings website or by dialing 877 3447529 us callers or 1 412 3170088 nonus callers access code 1958224 beginning approximately one hour after the broadcast oaktree specialty lending corporation ocsl is a specialty finance company dedicated to providing customized onestop credit solutions to companies with limited access to public or syndicated capital markets the companys investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions including first and second lien loans unsecured and mezzanine loans and preferred equity the company is regulated as a business development company under the investment company act of 1940 as amended and is externally managed by oaktree fund advisors llc an affiliate of oaktree capital management lp for additional information please visit oaktree specialty lendings website at  some of the statements in this press release constitute forwardlooking statements because they relate to future events future performance or financial condition the forwardlooking statements may include statements as to future operating results of the company and distribution projections business prospects of the company and the prospects of its portfolio companies and the impact of the investments that the company expects to make in addition words such as anticipate believe expect seek plan should estimate project and intend indicate forwardlooking statements although not all forwardlooking statements include these words the forwardlooking statements contained in this press release involve risks and uncertainties certain factors could cause actual results and conditions to differ materially from those projected including the uncertainties associated with i changes in the economy financial markets and political environment including the impacts of inflation and rising interest rates ii risks associated with possible disruption in the operations of the company or the economy generally due to terrorism war or other geopolitical conflict including the current conflict between russia and ukraine natural disasters or pandemics iii future changes in laws or regulations including the interpretation of these laws and regulations by regulatory authorities iv conditions in the companys operating areas particularly with respect to business development companies or regulated investment companies and v other considerations that may be disclosed from time to time in the companys publicly disseminated documents and filings the company has based the forwardlooking statements included in this press release on information available to it on the date of this press release and the company assumes no obligation to update any such forwardlooking statements the company undertakes no obligation to revise or update any forwardlooking statements whether as a result of new information future events or otherwise you are advised to consult any additional disclosures that it may make directly to you or through reports that the company in the future may file with the securities and exchange commission including annual reports on form 10k quarterly reports on form 10q and current reports on form 8k