EX-99.1 2 d664259dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Oaktree Strategic Income Corporation Announces Fourth Fiscal Quarter 2018 Financial Results and Declares Distribution of $0.155 Per Share

LOS ANGELES, CA, November 29, 2018 — Oaktree Strategic Income Corporation (NASDAQ: OCSI) (“Oaktree Strategic Income” or the “Company”), a specialty finance company, today announced its unaudited financial results for the fiscal quarter ended September 30, 2018.

Fourth Fiscal Quarter 2018 Highlights

 

  •  

Total investment income of $14.7 million ($0.50 per share), up from $11.7 million ($0.40 per share) for the third fiscal quarter of 2018;

 

  •  

Net investment income of $5.6 million ($0.19 per share), up from $5.1 million ($0.17 per share) for the third fiscal quarter of 2018;

 

  •  

Net asset value (“NAV”) per share of $10.04, up from $9.91 for the third fiscal quarter of 2018;

 

  •  

Originated $91.8 million of new investment commitments and received $101.7 million of proceeds from prepayments, exits, other paydowns and sales; and

 

  •  

A quarterly dividend was declared of $0.155 per share, payable on December 28, 2018 to stockholders of record on December 17, 2018.

Management Commentary

Edgar Lee, Chief Executive Officer and Chief Investment Officer of Oaktree Strategic Income Corporation said, “OCSI finished the year strong, highlighted by solid earnings growth and excellent credit quality. Since we began managing OCSI a year ago, we have made significant progress towards optimizing the portfolio as core investments now represent over 88 percent of our portfolio, up from 41 percent as of September 30, 2017. Given our meaningful progress to date, we believe we are well positioned to further enhance our return on equity to our shareholders in 2019.”

Portfolio and Investment Activity

As of September 30, 2018, the fair value of the Company’s investment portfolio was $556.8 million and was comprised of investments in 75 companies, including the Company’s investments in OCSI Glick JV LLC (“OCSI Glick JV”).

At fair value, 89.1% of the Company’s portfolio as of September 30, 2018 consisted of senior secured floating-rate debt investments, including 85.0% of first lien loans and 4.1% of second lien loans; 10.5% consisted of a subordinated note investment in the OCSI Glick JV; and 0.4% consisted of equity investments in other portfolio companies.

As of September 30, 2018, the OCSI Glick JV had $166.2 million in assets, including senior secured loans to 31 portfolio companies. The joint venture generated income of $1.5 million for Oaktree Strategic Income during the quarter ended September 30, 2018.

The weighted average yield on the Company’s debt investments as of September 30, 2018, including the return on the Company’s subordinated note investment in OCSI Glick JV, was 7.7%.

During the quarter ended September 30, 2018, the Company originated $91.8 million of new investment commitments in 13 new portfolio companies and two existing portfolio company and funded $91.0 million of investments across new and existing portfolio companies.

During the quarter, the Company received $101.7 million of proceeds from various prepayments, exits, other paydowns and sales and exited nine investments.

Results of Operations

Total investment income for the quarter ended September 30, 2018 was $14.7 million, including $13.4 million of cash interest income, $0.5 million of payment-in-kind (“PIK”) interest income and $0.8 million of fee income from portfolio investments. PIK interest income, net of PIK collected in cash, represented 3.6% of total investment income for the quarter ended September 30, 2018. Total investment income increased $3.1 million from the quarter ended June 30, 2018, which was primarily attributable to the acceleration of interest income and prepayments fees earned in connection with the exit of a certain investment.

Net expenses for the quarter were $9.2 million, a $2.6 million increase from $6.6 million in the prior quarter. The increase was primarily due to a $2.2 million increase in interest expense, which was mainly attributable to a $2.0 million write-off of previously unamortized financing costs in connection with the redemption of the $309.0 million debt securitization.

Net realized and unrealized gain on the Company’s investment portfolio for the quarter ended September 30, 2018 was $2.8 million.

Liquidity and Capital Resources

As of September 30, 2018, the Company had $16.4 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $275.1 million, and $179.9 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.3% as of September 30, 2018.

As of September 30, 2018, the Company’s total leverage ratio was 0.93x debt-to-equity.

Distribution Declaration

The Company’s Board of Directors declared a quarterly distribution of $0.155 per share, payable on December 28, 2018 to stockholders of record on December 17, 2018.

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 Company’s stockholders.

Portfolio Asset Quality

As of September 30, 2018, there was one investment on which the Company had stopped accruing cash and/or PIK interest or original issue discount (“OID”) income that, in the aggregate, represented 0.14% of the debt portfolio at cost and 0.01% at fair value.

 

($ in thousands)             

Non-Accrual - Debt Investments

    As of September 30, 2018     As of September 30, 2017  

Non-Accrual Investments at Fair Value

    $ 50     $ 6,293  

Non-Accrual Investments/Total Debt Investments at Fair Value

      0.01 %      1.1 % 

Oaktree Strategic Income Corporation

Consolidated Statements of Assets and Liabilities

 

     September 30,
2018		     June 30, 2018
(unaudited)		     September 30,
2017		  
ASSETS       

Investments at fair value:

       

Control investments (cost September 30, 2018: $73,501,970; cost June 30, 2018: $72,973,228; cost September 30, 2017: $71,340,632)

    $ 58,512,170     $ 57,707,953     $ 57,606,674  

Affiliate investments (cost September 30, 2018: $0; cost June 30, 2018: $0; cost September 30, 2017: $17,479,053)

      —         —         935,913  

Non-control/Non-affiliate investments (cost September 30, 2018: $499,423,794; cost June 30, 2018: $516,498,332; cost September 30, 2017: $516,270,639)

      498,329,658       513,086,230       501,894,073  
  

 

 

    

 

 

    

 

 

  

Total investments at fair value (cost September 30, 2018: $572,925,764; cost June 30, 2018: $589,471,560; cost September 30, 2017: $605,090,324)

      556,841,828       570,794,183       560,436,660  

Cash and cash equivalents

      10,439,023       13,296,085       35,604,127  

Restricted cash

      5,992,764       10,982,637       7,408,260  

Interest, dividends and fees receivable

      3,139,334       2,678,368       3,014,075  

Due from portfolio companies

      167,946       8,951       286,260  

Receivables from unsettled transactions

      5,143,533       4,620,469       505,000  

Deferred financing costs

      2,469,675       2,101,795       1,222,933  

Derivative asset at fair value

      45,807       —         —    

Other assets

      891,960       968,876       185,336  
  

 

 

    

 

 

    

 

 

  

Total assets

    $ 585,131,870     $ 605,451,364     $ 608,662,651  
  

 

 

    

 

 

    

 

 

  
LIABILITIES AND NET ASSETS       

Liabilities:

       

Accounts payable, accrued expenses and other liabilities

    $ 649,781     $ 867,845     $ 482,877  

Base management fee and incentive fee payable

      1,915,682       1,711,290       2,236,187  

Due to affiliate

      1,700,952       2,491,450       450,517  

Interest payable

      1,130,735       2,510,079       1,996,171  

Payables from unsettled transactions

      8,932,500       47,366,994       49,029,789  

Director fees payable

      —         —         98,008  

Credit facilities payable

      275,056,800       80,556,800       82,956,800  

Notes payable (net of $0, $2,006,553 and $2,224,132 of unamortized financing costs as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively)

      —         177,993,447       177,775,868  
  

 

 

    

 

 

    

 

 

  

Total liabilities

      289,386,450       313,497,905       315,026,217  

Commitments and contingencies

       

Net assets:

       

Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding as of September 30, 2018, June 30, 2018 and September 30, 2017

      294,668       294,668       294,668  

Additional paid-in-capital

      370,751,389       373,995,934       373,995,934  

Accumulated overdistributed earnings

      (75,300,637 )      (82,337,143 )      (80,654,168 ) 
  

 

 

    

 

 

    

 

 

  

Total net assets (equivalent to $10.04, $9.91 and $9.97 per common share as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively)

      295,745,420       291,953,459       293,636,434  
  

 

 

    

 

 

    

 

 

  

Total liabilities and net assets

    $ 585,131,870     $ 605,451,364     $ 608,662,651  
  

 

 

    

 

 

    

 

 

  

Oaktree Strategic Income Corporation

Consolidated Statements of Operations

 

     Three months
ended
September 30,
2018
(unaudited)		     Three months
ended
June 30, 2018
(unaudited)		     Three months
ended
September 30,
2017
(unaudited)		     Year ended
September 30,
2018		     Year ended
September 30,
2017		  

Interest income:

           

Control investments

    $ 928,198     $ 1,074,611     $ 1,290,389     $ 3,970,056     $ 5,541,299  

Affiliate investments

      —         —         —         —         331,804  

Non-control/Non-affiliate investments

      12,443,148       9,642,088       9,559,293       39,139,739       38,489,924  

Interest on cash and cash equivalents

      64,691       74,887       68,306       273,552       166,896  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest income

      13,436,037       10,791,586       10,917,988       43,383,347       44,529,923  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

PIK interest income:

           

Control investments

      528,743       562,883       223,125       2,161,339       223,125  

Affiliate investments

      —         —         —         —         164,331  

Non-control/Non-affiliate investments

      7,634       7,669       —         26,059       20,965  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total PIK interest income

      536,377       570,552       223,125       2,187,398       408,421  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Fee income:

           

Affiliate investments

      —         14,822       —         14,822       9,647  

Non-control/Non-affiliate investments

      751,808       283,864       1,022,638       2,084,980       2,199,909  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total fee income

      751,808       298,686       1,022,638       2,099,802       2,209,556  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Dividend and other income:

           

Control investments

      —         —         (343,272 )      —         (576,044 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total dividend and other income

      —         —         (343,272 )      —         (576,044 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total investment income

      14,724,222       11,660,824       11,820,479       47,670,547       46,571,856  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

           

Base management fee

      1,437,341       1,414,815       1,420,696       5,657,786       5,654,699  

Part I incentive fee

      1,180,825       1,002,145       815,491       2,923,076       3,236,320  

Professional fees

      308,234       618,423       543,226       2,691,950       1,515,536  

Directors fees

      105,000       114,093       153,008       479,093       538,072  

Interest expense

      5,482,159       3,235,080       2,645,090       14,379,881       10,769,842  

Administrator expense

      197,206       326,998       205,152       1,085,819       661,170  

General and administrative expenses

      446,961       225,132       516,854       1,383,871       2,030,756  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

      9,157,726       6,936,686       6,299,517       28,601,476       24,406,395  

Fees waived

      3,184       (347,760 )      —         (702,261 )      (6,232 ) 

Insurance recoveries

      —         —         —         —         (250,000 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net expenses

      9,160,910       6,588,926       6,299,517       27,899,215       24,150,163  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income

      5,563,312       5,071,898       5,520,962       19,771,332       22,421,693  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation) on investments and foreign currency:

           

Control investments

      275,475       (750,211 )      (4,230,858 )      (1,255,842 )      (5,933,119 ) 

Affiliate investments

      —         16,333,131       (10,314,600 )      16,543,140       (13,595,800 ) 

Non-control/Non-affiliate investments

      2,218,715       5,630,684       (5,455,743 )      13,282,430       1,739,837  

Foreign currency forward contract

      45,807       —         —         45,807       —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net unrealized appreciation (depreciation) on investments and foreign currency

      2,539,997       21,213,604       (20,001,201 )      28,615,535       (17,789,082 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net unrealized (appreciation) depreciation on secured borrowings

      —         —         —         —         (14,575 ) 

Realized gain (loss) on investments, secured borrowings and foreign currency:

           

Affiliate investments

      —         (15,914,944 )      —         (15,914,916 )      —    

Non-control/Non-affiliate investments

      379,381       (8,645,426 )      17,060       (11,675,522 )      (13,384,915 ) 

Foreign currency forward contract

      (123,380 )      —         —         (123,380 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net realized gain (loss) on investments, secured borrowings and foreign currency

      256,001       (24,560,370 )      17,060       (27,713,818 )      (13,384,915 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ 8,359,310     $ 1,725,132     $ (14,463,179 )    $ 20,673,049     $ (8,766,879 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income per common share — basic and diluted

    $ 0.19     $ 0.17     $ 0.19     $ 0.67     $ 0.76  

Earnings (loss) per common share — basic and diluted

    $ 0.28     $ 0.06     $ (0.49 )    $ 0.70     $ (0.30 ) 

Weighted average common shares outstanding — basic and diluted

      29,466,768       29,466,768       29,466,768       29,466,768       29,466,768  

Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its fourth fiscal quarter results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on November 29, 2018. The conference call may be accessed by dialing (877) 507-4376 (U.S. callers) or +1 (412) 317-5239 (non-U.S. callers), participant password “Oaktree Strategic Income.” During the earnings conference call, Oaktree Strategic Income intends to refer to an investor presentation that will be available on the Investors section of the Oaktree Strategic Income website, www.oaktreestrategicincome.com. Alternatively, a live webcast of the conference call can be accessed on Oaktree Strategic Income’s website.

For those individuals unable to listen to the live broadcast of the conference call, a replay will be available on Oaktree Strategic Income’s website, or by dialing (877) 344-7529 (U.S. callers) or +1 (412) 317-0088 (non-U.S. callers), access code 10125431, beginning approximately one hour after the broadcast.

About Oaktree Strategic Income Corporation

Oaktree Strategic Income Corporation (NASDAQ:OCSI) is a specialty finance company dedicated to providing customized capital solutions for middle-market companies in both the syndicated and private placement markets. The firm seeks to generate a stable source of current income while minimizing the risk of principal loss and, to a lesser extent, capital appreciation by providing innovative first-lien financing solutions to companies across a wide variety of industries. The company is regulated as a business development company under the Investment Company Act of 1940, as amended. Oaktree Strategic Income is managed by Oaktree Capital Management, L.P. For additional information, please visit Oaktree Strategic Income’s website at www.oaktreestrategicincome.com.

Forward-Looking Statements

Some of the statements in this press release constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements may include statements as to: our future operating results and distribution projections; our business prospects and the prospects of our portfolio companies; and the impact of the investments that we expect to make. In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in our annual report on Form 10-K. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or regulated investment companies; and other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.

We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Contacts

Investor Relations:

Oaktree Strategic Income Corporation

Michael Mosticchio

(212) 284-1900

ocsi-ir@oaktreecapital.com

Media Relations:

Financial Profiles, Inc.

Moira Conlon

(310) 478-2700

mediainquiries@oaktreecapital.com