Attached files
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| EX-99.2 - EX-99.2 - Oaktree Strategic Income Corp | d485416dex992.htm |
| 8-K - 8-K - Oaktree Strategic Income Corp | d485416d8k.htm |
Exhibit 99.1
Oaktree Strategic Income Corporation Announces Fourth Fiscal Quarter 2017 Financial Results
LOS ANGELES, CA. December 1, 2017—Oaktree Strategic Income Corporation (formerly known as Fifth Street Senior Floating Rate Corp. through October 17, 2017) (NASDAQ: OCSI) (“Oaktree Strategic Income” or the “Company”), a specialty finance company, today announced its unaudited financial results for the fourth fiscal quarter ended September 30, 2017.
Fourth Fiscal Quarter 2017 Highlights
| • | Net investment income of $5.5 million, or $0.19 per share; |
| • | Net asset value per share as of September 30, 2017 of $9.97; |
| • | Originated $108.7 million of new investment commitments and received $71.3 million in connection with full repayments and exits of investments; and |
| • | On August 7, 2017, the Company’s Board of Directors declared a fourth quarter dividend of $0.19 per share, payable on December 29, 2017 to stockholders of record on December 15, 2017. |
Recent Developments
| • | On October 17, 2017, Oaktree Capital Management, L.P. was appointed as the investment adviser of the Company and Edgar Lee was appointed Chief Executive Officer. Other members of the executive leadership team include Matt Pendo, Chief Operating Officer, Mel Carlisle, Chief Financial Officer, and Kim Larin, Chief Compliance Officer. |
Management Commentary
“We are very excited to be managing Oaktree Strategic Income,” said Edgar Lee, Chief Executive Officer of Oaktree Strategic Income. “The vast majority of the portfolio is invested in senior secured loans to established middle-market companies that are performing well. We have begun making new investments and over time, we intend to increase our exposure to larger, more liquid first lien loans in both the broadly syndicated and private placement markets. We believe the Oaktree platform and our ability to co-invest alongside other Oaktree funds positions us well to deliver stable income and attractive returns to our stockholders over time.”
Portfolio and Investment Activity
As of September 30, 2017, the fair value of the investment portfolio was $560.4 million and total assets were $608.7 million. The investment portfolio consisted of investments in 67 companies and also included the Company’s investment in FSFR Glick JV LLC (“Glick JV”).
At fair value, 89.5% of the Company’s portfolio as of September 30, 2017 consisted of senior secured floating-rate debt investments, including 84.9% of first lien loans and 4.6% of second lien loans; 10.3% consisted of a subordinated note in Glick JV; and 0.2% in equity investments in other portfolio companies.
As of September 30, 2017, Glick JV had $126.7 million in assets, including senior secured loans to 23 portfolio companies. The joint venture generated income of $1.2 million for Oaktree Strategic Income during the fourth quarter.
The weighted average yield on the Company’s debt investments as of September 30, 2017, including the return on our subordinated note investment in Glick JV, was 7.5%, including 7.3% representing cash payments.
During the quarter ended September 30, 2017, the Company originated $108.7 million of investment commitments in 10 new and seven existing portfolio companies and funded $108.4 million across new and existing portfolio companies.
During the quarter, the Company received $71.3 million in connection with the full repayments and exits of eight of its investments, and an additional $23.2 million in connection with other paydowns and sales of investments.
Results of Operations
Total investment income for the quarter ended September 30, 2017 was $11.8 million, including $10.9 million of cash interest income from portfolio investments.
Net expenses for the quarter ended September 30, 2017 were $6.3 million. Net expenses increased slightly from $6.2 million in the quarter ended June 30, 2017.
Net unrealized depreciation on the investment portfolio for the quarter was $20.0 million, which was primarily due to significant write-downs on a number of the Company’s portfolio companies, including $10.3 million on one of the Company’s investments.
Liquidity and Capital Resources
As of September 30, 2017, the Company had $43.0 million of cash and cash equivalents, total principal value of debt outstanding of $263.0 million, and $67.0 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 3.26% as of September 30, 2017.
As of September 30, 2017, the Company’s total leverage ratio was 0.90x debt-to-equity.
Dividend Declaration
On August 7, 2017, the Company’s Board of Directors declared a fourth quarter dividend of $0.19 per share, payable on December 29, 2017 to stockholders of record on December 15, 2017.
Dividends are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company’s stockholders.
Portfolio Asset Quality
As of September 30, 2017, there were three investments on which the Company had stopped accruing cash and/or PIK interest or original issue discount (“OID”) income that, in the aggregate, represented 5.6% of the debt portfolio at cost and 1.1% at fair value.
| ($ in thousands) | ||||||||
| Non-Accrual - Debt Investments |
As of September 30, 2017 | As of June 30, 2017 | ||||||
| Non-Accrual Investments at Fair Value |
$ | 6,293 | $ | 7,922 | ||||
| Non-Accrual Investments/Total Investments at Fair Value |
1.1 | % | 1.4 | % | ||||
Oaktree Strategic Income Corporation
Consolidated Statements of Assets and Liabilities
| September 30, 2017 |
June 30, 2017 |
September 30, 2016 |
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| ASSETS |
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| Investments at fair value: |
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| Control investments (cost September 30, 2017: $71,340,632; cost June 30, 2017: $71,117,506; cost September 30, 2016: $71,117,506) |
$ | 57,606,674 | $ | 61,614,406 | $ | 63,316,667 | ||||||
| Affiliate investments (cost September 30, 2017: $17,479,053; cost June 30, 2017: $18,006,812; cost September 30, 2016: $15,953,798) |
935,913 | 11,778,272 | 13,006,458 | |||||||||
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Non-control/Non-affiliate investments (cost September 30, 2017: $516,270,639; cost June 30, 2017: $500,706,398; cost September 30, 2016: $513,397,659) |
501,894,073 | 491,785,575 | 497,281,256 | |||||||||
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| Total investments at fair value (cost September 30, 2017: $605,090,324; cost June 30, 2017: $589,830,716; cost September 30, 2016: $600,468,963) |
560,436,660 | 565,178,253 | 573,604,381 | |||||||||
| Cash and cash equivalents |
35,604,127 | 19,258,982 | 19,778,841 | |||||||||
| Restricted cash |
7,408,260 | 7,651,878 | 9,036,838 | |||||||||
| Interest, dividends and fees receivable |
3,014,075 | 2,883,409 | 4,579,935 | |||||||||
| Due from portfolio companies |
286,260 | 305,501 | 336,429 | |||||||||
| Receivables from unsettled transactions |
505,000 | 846,065 | 12,869,092 | |||||||||
| Deferred financing costs |
1,222,933 | 1,348,806 | 2,063,133 | |||||||||
| Other assets |
185,336 | 344,196 | 148,492 | |||||||||
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| Total assets |
$ | 608,662,651 | $ | 597,817,090 | $ | 622,417,141 | ||||||
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| LIABILITIES AND NET ASSETS |
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| Liabilities: |
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| Accounts payable, accrued expenses and other liabilities |
$ | 482,877 | $ | 466,921 | $ | 1,246,286 | ||||||
| Base management fee and incentive fee payable |
2,236,187 | 2,163,704 | 2,987,721 | |||||||||
| Due to FSC CT |
450,517 | 427,646 | 402,073 | |||||||||
| Interest payable |
1,996,171 | 1,946,228 | 1,798,653 | |||||||||
| Payables from unsettled transactions |
49,029,789 | 12,831,700 | — | |||||||||
| Amounts payable to syndication partners |
— | — | 18,750 | |||||||||
| Director fees payable |
98,008 | 122,450 | 236,275 | |||||||||
| Credit facilities payable |
82,956,800 | 86,656,800 | 107,426,800 | |||||||||
| Notes payable (net of $2,224,132, $2,296,658 and $2,514,236 of unamortized financing costs as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively) |
177,775,868 | 179,503,342 | 177,485,764 | |||||||||
| Secured borrowings at fair value (proceeds September 30, 2016: $5,000,000) |
— | — | 4,985,425 | |||||||||
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| Total liabilities |
315,026,217 | 284,118,791 | 296,587,747 | |||||||||
| Commitments and contingencies |
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| Net assets: |
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| Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding at September 30, 2017, June 30, 2017 and September 30, 2016 |
294,668 | 294,668 | 294,668 | |||||||||
| Additional paid-in-capital |
373,995,934 | 373,995,934 | 373,995,934 | |||||||||
| Net unrealized depreciation on investments and secured borrowings |
(44,653,664 | ) | (24,652,463 | ) | (26,850,007 | ) | ||||||
| Net realized loss on investments |
(24,354,622 | ) | (24,371,682 | ) | (10,969,707 | ) | ||||||
| Accumulated overdistributed net investment income |
(11,645,882 | ) | (11,568,158 | ) | (10,641,494 | ) | ||||||
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| Total net assets (equivalent to $9.97, $10.65 and $11.06 per common share at September 30, 2017, June 30, 2017 and September 30, 2016, respectively) |
293,636,434 | 313,698,299 | 325,829,394 | |||||||||
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| Total liabilities and net assets |
$ | 608,662,651 | $ | 597,817,090 | $ | 622,417,141 | ||||||
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Oaktree Strategic Income Corporation
Consolidated Statements of Operations
| Three months ended September 30, 2017 |
Three months ended June 30, 2017 |
Three months ended September 30, 2016 |
Year ended September 30, 2017 |
Year ended September 30, 2016 |
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| Interest income: |
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| Control investments |
$ | 1,290,389 | $ | 1,452,148 | $ | 1,383,409 | $ | 5,541,299 | $ | 5,065,350 | ||||||||||
| Affiliate investments |
— | 130,217 | 97,191 | 331,804 | 182,194 | |||||||||||||||
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Non-control/Non-affiliate investments |
9,559,293 | 10,406,975 | 10,736,098 | 38,489,924 | 42,152,565 | |||||||||||||||
| Interest on cash and cash equivalents |
68,306 | 36,094 | 15,319 | 166,896 | 68,630 | |||||||||||||||
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| Total interest income |
10,917,988 | 12,025,434 | 12,232,017 | 44,529,923 | 47,468,739 | |||||||||||||||
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| PIK interest income: |
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| Control investments |
223,125 | — | — | 223,125 | — | |||||||||||||||
| Affiliate investments |
— | 63,551 | 48,595 | 164,331 | 91,097 | |||||||||||||||
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Non-control/Non-affiliate investments |
— | — | 13,182 | 20,965 | 75,968 | |||||||||||||||
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| Total PIK interest income |
223,125 | 63,551 | 61,777 | 408,421 | 167,065 | |||||||||||||||
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| Fee income: |
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| Affiliate investments |
— | 3,351 | 3,148 | 9,647 | 6,296 | |||||||||||||||
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Non-control/Non-affiliate investments |
1,022,638 | 498,497 | 206,405 | 2,199,909 | 3,071,634 | |||||||||||||||
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| Total fee income |
1,022,638 | 501,848 | 209,553 | 2,209,556 | 3,077,930 | |||||||||||||||
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| Dividend and other income: |
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| Control investments |
— | — | 700,000 | 187,420 | 2,712,500 | |||||||||||||||
| Allowance for control investments |
(343,272 | ) | (420,192 | ) | — | (763,464 | ) | — | ||||||||||||
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| Total dividend and other income |
(343,272 | ) | (420,192 | ) | 700,000 | (576,044 | ) | 2,712,500 | ||||||||||||
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| Total investment income |
11,820,479 | 12,170,641 | 13,203,347 | 46,571,856 | 53,426,234 | |||||||||||||||
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| Expenses: |
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| Base management fee |
1,420,696 | 1,419,603 | 1,516,133 | 5,654,699 | 6,134,304 | |||||||||||||||
| Part I incentive fee |
815,491 | 1,143,101 | 1,477,820 | 3,236,320 | 5,211,729 | |||||||||||||||
| Professional fees |
543,226 | 280,008 | 664,247 | 1,515,536 | 4,193,532 | |||||||||||||||
| Board of Directors fees |
153,008 | 127,464 | 81,275 | 538,072 | 546,300 | |||||||||||||||
| Interest expense |
2,645,090 | 2,661,975 | 2,546,007 | 10,769,842 | 9,594,441 | |||||||||||||||
| Administrator expense |
205,152 | 127,533 | 98,269 | 661,170 | 504,299 | |||||||||||||||
| General and administrative expenses |
516,854 | 480,490 | 483,778 | 2,030,756 | 1,955,177 | |||||||||||||||
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| Total expenses |
6,299,517 | 6,240,174 | 6,867,529 | 24,406,395 | 28,139,782 | |||||||||||||||
| Base management fee waived |
— | — | (6,232 | ) | (6,232 | ) | (6,232 | ) | ||||||||||||
| Insurance recoveries |
— | — | — | (250,000 | ) | — | ||||||||||||||
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| Net expenses |
6,299,517 | 6,240,174 | 6,861,297 | 24,150,163 | 28,133,550 | |||||||||||||||
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| Net investment income |
5,520,962 | 5,930,467 | 6,342,050 | 22,421,693 | 25,292,684 | |||||||||||||||
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| Unrealized appreciation (depreciation) on investments: |
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| Control investments |
(4,230,858 | ) | 103,555 | (214,065 | ) | (5,933,119 | ) | (5,979,787 | ) | |||||||||||
| Affiliate investments |
(10,314,600 | ) | (1,633,615 | ) | (566,607 | ) | (13,595,800 | ) | (2,947,340 | ) | ||||||||||
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Non-control/Non-affiliate investments |
(5,455,743 | ) | (4,272,744 | ) | 2,426,107 | 1,739,837 | (8,067,972 | ) | ||||||||||||
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| Net unrealized appreciation (depreciation) on investments |
(20,001,201 | ) | (5,802,804 | ) | 1,645,435 | (17,789,082 | ) | (16,995,099 | ) | |||||||||||
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| Net unrealized (appreciation) depreciation on secured borrowings |
— | — | 14,575 | (14,575 | ) | 14,575 | ||||||||||||||
| Realized gain (loss) on investments and secured borrowings: |
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Non-control/Non-affiliate investments |
17,060 | 11,535 | 590,889 | (13,384,915 | ) | (12,769,777 | ) | |||||||||||||
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| Net realized gain (loss) on investments and secured borrowings |
17,060 | 11,535 | 590,889 | (13,384,915 | ) | (12,769,777 | ) | |||||||||||||
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| Net increase (decrease) in net assets resulting from operations |
$ | (14,463,179 | ) | $ | 139,198 | $ | 8,592,949 | $ | (8,766,879 | ) | $ | (4,457,617 | ) | |||||||
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| Net investment income per common share — basic and diluted |
$ | 0.19 | $ | 0.20 | $ | 0.22 | $ | 0.76 | $ | 0.86 | ||||||||||
| Earnings (loss) per common share — basic and diluted |
$ | (0.49 | ) | $ | — | $ | 0.29 | $ | (0.30 | ) | $ | (0.15 | ) | |||||||
| Weighted average common shares outstanding — basic and diluted |
29,466,768 | 29,466,768 | 29,466,768 | 29,466,768 | 29,466,768 | |||||||||||||||
| Distributions per common share |
$ | 0.19 | $ | 0.19 | $ | 0.225 | $ | 0.80 | $ | 0.90 | ||||||||||
Note: All interim financial results presented in this release are unaudited. Financial results for the year ended September 30, 2017 are subject to the completion of the Company’s annual audit.
Conference Call Information
Oaktree Strategic Income will host a conference call to discuss results for its fiscal quarter and year ended September 30, 2017 on December 1, 2017 at 1:00 p.m. Eastern Time / 10:00 a.m. Pacific Time. 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 through the Investors section of Oaktree Strategic Income website, www.oaktreestrategicincome.com.
For those individuals unable to listen to the live broadcast of the conference call, a replay will be available for 30 days 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 10114279, 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 Company 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 middle-market companies with primarily first lien secured debt financings that pay the Company interest at rates which are determined periodically on the basis of a floating interest rate. 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