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News Release

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

LOS ANGELES, CA, Aug. 08, 2018 (GLOBE NEWSWIRE) -- 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 June 30, 2018.

Third Fiscal Quarter 2018 Highlights

  • Total investment income of $11.7 million, or $0.40 per share;

  • Net investment income of $5.1 million, or $0.17 per share;

  • Net asset value ("NAV") per share as of June 30, 2018 of $9.91; and

  • Originated $113.6 million of new investment commitments and received $83.8 million of proceeds from prepayments, exits, other paydowns and sales.

  • The Company's Board of Directors declared a quarterly distribution of $0.155 per share, payable on September 28, 2018 to stockholders of record on September 15, 2018.

Management Commentary

Edgar Lee, Chief Executive Officer and Chief Investment Officer said, “Oaktree Strategic Income delivered improved earnings for the third quarter by exiting virtually all of our underperforming investments and selectively growing our investment portfolio. Looking forward, with access to greater leverage, we are excited to grow and further diversify our portfolio to deliver enhanced shareholder returns.”

Portfolio and Investment Activity

As of June 30, 2018, the fair value of the Company's investment portfolio was $570.8 million and was comprised of investments in 72 companies, including our investments in OCSI Glick JV LLC ("Glick JV").

At fair value, 89.7% of the Company's portfolio as of June 30, 2018 consisted of senior secured floating-rate debt investments, including 85.7% of first lien loans and 4.0% of second lien loans; 10.1% consisted of a subordinated note investment in the Glick JV; and 0.2% consisted of equity investments in other portfolio companies.

As of June 30, 2018, the Glick JV had $181.9 million in assets, including senior secured loans to 32 portfolio companies.  The joint venture generated income of $1.6 million for Oaktree Strategic Income during the quarter ended June 30, 2018.

The weighted average yield on the Company's debt investments as of June 30, 2018, including the return on our subordinated note investment in Glick JV, was 7.9%.

During the quarter ended June 30, 2018, the Company originated $113.6 million of new investment commitments in 15 new portfolio companies and 1 existing portfolio company and funded $114.3 million of investments across new and existing portfolio companies.

During the quarter, the Company received $83.8 million of proceeds from various prepayments, exits, other paydowns and sales and exited 8 investments.

Results of Operations

Total investment income for the quarter ended June 30, 2018 was $11.7 million, including $10.8 million of cash interest income, $0.6 million of payment-in-kind ("PIK") interest income and $0.3 million of fee income from portfolio investments. PIK interest income, net of PIK collected in cash, represented 4.9% of total investment income for the quarter ended June 30, 2018.

Net expenses for the quarter were $6.6 million, a $0.6 million increase from $6.0 million in the prior quarter. The increase was primarily due to higher incentive fees, which was attributable to higher pre-incentive fee net investment income, and higher interest expense, which was attributable to increases to LIBOR, partially offset by lower professional fees.

Net realized and unrealized loss on our investment portfolio for the quarter ended June 30, 2018 was $3.3 million.

Liquidity and Capital Resources

As of June 30, 2018, the Company had $24.3 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $260.6 million, and $64.4 million of undrawn capacity on its credit facilities and debt securitization, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.3% as of June 30, 2018.

As of June 30, 2018, the Company’s total leverage ratio was 0.89x debt-to-equity.

Distribution Declaration

The Company's Board of Directors declared a quarterly distribution of $0.155 per share, payable on September 28, 2018 to stockholders of record on September 15, 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 June 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 June 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
 
  June 30, 2018
(unaudited)
  March 31, 2018
(unaudited)
  September 30,
 2017
ASSETS
         
Investments at fair value:          
Control investments (cost June 30, 2018: $72,973,228; cost March 31, 2018: $72,410,345; cost September 30, 2017: $71,340,632) $ 57,707,953     $ 57,895,281     $ 57,606,674  
Affiliate investments (cost June 30, 2018: $0; cost March 31, 2018: $16,333,131; cost September 30, 2017: $17,479,053)         935,913  
Non-control/Non-affiliate investments (cost June 30, 2018: $516,498,332; cost March 31, 2018: $493,721,398; cost September 30, 2017: $516,270,639) 513,086,230     484,777,863     501,894,073  
Total investments at fair value (cost June 30, 2018: $589,471,560; cost March 31, 2018: $582,464,874; cost September 30, 2017: $605,090,324) 570,794,183     542,673,144     560,436,660  
Cash and cash equivalents 13,296,085     23,633,508     35,604,127  
Restricted cash 10,982,637     7,973,136     7,408,260  
Interest, dividends and fees receivable 2,678,368     2,681,992     3,014,075  
Due from portfolio companies 8,951     37,546     286,260  
Receivables from unsettled transactions 4,620,469     2,020,000     505,000  
Deferred financing costs 2,101,795     2,220,700     1,222,933  
Other assets 968,876     1,045,792     185,336  
Total assets $ 605,451,364     $ 582,285,818     $ 608,662,651  
LIABILITIES AND NET ASSETS        
Liabilities:          
Accounts payable, accrued expenses and other liabilities $ 867,845     $ 1,154,430     $ 482,877  
Base management fee and incentive fee payable 1,711,290     1,515,934     2,236,187  
Due to affiliate 2,491,450     1,932,272     450,517  
Interest payable 2,510,079     2,098,920     1,996,171  
Payables from unsettled transactions 47,366,994     22,975,533     49,029,789  
Director fees payable     130,000     98,008  
Credit facilities payable 80,556,800     80,056,800     82,956,800  
Notes payable (net of $2,006,553, $2,079,079 and $2,224,132 of unamortized financing costs as of June 30, 2018, March 31, 2018 and September 30, 2017, respectively) 177,993,447     177,920,921     177,775,868  
Total liabilities 313,497,905     287,784,810     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 June 30, 2018, March 31, 2018 and September 30, 2017 294,668     294,668     294,668  
Additional paid-in-capital 373,995,934     373,995,934     373,995,934  
Net unrealized depreciation on investments, secured borrowings and foreign currency (18,578,126 )   (39,791,730 )   (44,653,664 )
Net realized loss on investments and secured borrowings (52,324,441 )   (27,764,071 )   (24,354,622 )
Accumulated overdistributed net investment income (11,434,576 )   (12,233,793 )   (11,645,882 )
Total net assets (equivalent to $9.91, $9.99 and $9.97 per common share as of June 30, 2018, March 31, 2018 and September 30, 2017, respectively) 291,953,459     294,501,008     293,636,434  
Total liabilities and net assets $ 605,451,364     $ 582,285,818     $ 608,662,651  


Oaktree Strategic Income Corporation
Consolidated Statements of Operations
(unaudited)
 
    Three months
ended
June 30, 2018
  Three months
ended
March 31, 2018
  Three months
ended
June 30, 2017
  Nine months
ended
June 30, 2018
  Nine months
ended
June 30, 2017
Interest income:
                   
Control investments   $ 1,074,611     $ 768,550     $ 1,452,148     $ 3,041,858     $ 4,250,910  
Affiliate investments           130,217         331,804  
Non-control/Non-affiliate investments   9,642,088     8,290,028     10,406,975     26,696,591     28,930,631  
Interest on cash and cash equivalents   74,887     62,879     36,094     208,861     98,590  
Total interest income   10,791,586     9,121,457     12,025,434     29,947,310     33,611,935  
PIK interest income:                    
Control investments   562,883     774,562         1,632,596      
Affiliate investments           63,551         164,331  
Non-control/Non-affiliate investments   7,669     7,493         18,425     20,965  
Total PIK interest income   570,552     782,055     63,551     1,651,021     185,296  
Fee income:                    
Affiliate investments   14,822         3,351     14,822     9,647  
Non-control/Non-affiliate investments   283,864     651,259     498,497     1,333,172     1,177,271  
Total fee income   298,686     651,259     501,848     1,347,994     1,186,918  
Dividend and other income:                    
Control investments                   187,420  
Allowance for control investments           (420,192 )       (420,192 )
Total dividend and other income           (420,192 )       (232,772 )
Total investment income   11,660,824     10,554,771     12,170,641     32,946,325     34,751,377  
Expenses:                    
Base management fee   1,414,815     1,393,458     1,419,603     4,220,445     4,234,003  
Part I incentive fee   1,002,145     480,384     1,143,101     1,742,251     2,420,829  
Professional fees   618,423     745,110     280,008     2,383,716     972,310  
Board of Directors fees   114,093     130,000     127,464     374,093     385,064  
Interest expense   3,235,080     2,898,165     2,661,975     8,897,722     8,124,752  
Administrator expense   326,998     281,931     127,533     888,613     456,018  
General and administrative expenses   225,132     276,568     480,490     936,910     1,513,902  
Total expenses   6,936,686     6,205,616     6,240,174     19,443,750     18,106,878  
Fees waived   (347,760 )   (240,192 )       (705,445 )   (6,232 )
Insurance recoveries                   (250,000 )
Net expenses   6,588,926     5,965,424     6,240,174     18,738,305     17,850,646  
Net investment income   5,071,898     4,589,347     5,930,467     14,208,020     16,900,731  
Unrealized appreciation (depreciation) on investments and foreign currency:                    
Control investments   (750,211 )   (59,931 )   103,555     (1,531,317 )   (1,702,261 )
Affiliate investments   16,333,131     134,093     (1,633,615 )   16,543,140     (3,281,200 )
  Non-control/Non-affiliate investments   5,630,684     3,045,873     (4,272,744 )   11,063,715     7,195,580  
Net unrealized appreciation (depreciation) on investments and foreign currency   21,213,604     3,120,035     (5,802,804 )   26,075,538     2,212,119  
Net unrealized appreciation on secured borrowings                   (14,575 )
Realized gain (loss) on investments and secured borrowings:                    
  Affiliate investments   (15,914,944 )           (15,914,916 )    
  Non-control/Non-affiliate investments   (8,645,426 )   973,257     11,535     (12,054,903 )   (13,401,975 )
Net realized gain (loss) on investments and secured borrowings   (24,560,370 )   973,257     11,535     (27,969,819 )   (13,401,975 )
Net increase in net assets resulting from operations   $ 1,725,132     $ 8,682,639     $ 139,198     $ 12,313,739     $ 5,696,300  
Net investment income per common share — basic and diluted   $ 0.17     $ 0.16     $ 0.20     $ 0.48     $ 0.57  
Earnings per common share — basic and diluted   $ 0.06     $ 0.29     $     $ 0.42     $ 0.19  
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   $ 0.145     $ 0.14     $ 0.19     $ 0.475     $ 0.605  

Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its third fiscal quarter results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on August 8, 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 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 10121987, 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 and our quarterly reports on Form 10-Q. 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 

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Oaktree Strategic Income Corporation