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Oaktree Strategic Income Corporation Announces Second Fiscal Quarter 2019 Financial Results and Declares Distribution of $0.155 Per Share

LOS ANGELES, CA, May 08, 2019 (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 March 31, 2019.

Financial Highlights for the Quarter Ended March 31, 2019

  • Total investment income of $12.5 million ($0.42 per share), up from $11.3 million ($0.38 per share) for the first fiscal quarter of 2019, primarily reflecting a larger average portfolio.

  • Net investment income of $5.2 million ($0.18 per share), up from $4.9 million ($0.17 per share) for the first fiscal quarter of 2019, primarily due to higher interest income.

  • Net asset value per share of $9.74, up from $9.43 for the first fiscal quarter of 2019, driven by unrealized appreciation in certain debt instruments.

  • Originated $64.4 million of new investment commitments and received $38.9 million of proceeds from prepayments, exits, other paydowns and sales.

  • A quarterly distribution was declared of $0.155 per share, payable on June 28, 2019 to stockholders of record on June 14, 2019.

Edgar Lee, Chief Executive Officer and Chief Investment Officer, said, “The second quarter was highlighted by NAV appreciation and strong sequential earnings growth. OCSI delivered $0.18 of net investment income per share, an increase of $0.02 over the same quarter a year ago, reflecting our efforts to prudently grow the portfolio. The rebound in the liquid credit markets led to a NAV increase of over 3 percent during the quarter, as credit quality remains excellent, and we continue to defensively position OCSI’s portfolio by taking a highly selective, late-cycle approach to investing.”

Distribution Declaration

The Board of Directors declared a quarterly distribution of $0.155 per share, payable on June 28, 2019 to stockholders of record on June 14, 2019.

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.

Results of Operations

    For the three months ended
    March 31, 2019   December 31, 2018   March 31, 2018
Operating results:            
Interest income   $ 12,294,014     $ 11,203,567     $ 9,121,457  
PIK interest income   6,004     7,745     782,055  
Fee income   181,806     47,635     651,259  
Total investment income   12,481,824     11,258,947     10,554,771  
Net expenses   7,265,064     6,395,410     5,965,424  
Net investment income   5,216,760     4,863,537     4,589,347  
Net realized and unrealized gains (losses)   8,478,667     (18,064,228 )   4,093,292  
Net increase (decrease) in net assets resulting from operations   $ 13,695,427     $ (13,200,691 )   $ 8,682,639  
Net investment income per common share   $ 0.18     $ 0.17     $ 0.16  
Net realized and unrealized gains (losses) per common share   $ 0.28     $ (0.62 )   $ 0.13  
Earnings (loss) per common share — basic and diluted   $ 0.46     $ (0.45 )   $ 0.29  


    As of
    March 31, 2019   December 31,
2018
  September 30,
2018
Select balance sheet and other data:            
Investment portfolio at fair value   $ 592,147,418     $ 553,351,420     $ 556,841,828  
Total debt outstanding   307,656,800     262,156,800     275,056,800  
Net assets   287,105,458     277,977,380     295,745,420  
Net asset value per share   9.74     9.43     10.04  
Total leverage   1.07x     0.94x     0.93x  

Total investment income for the quarter ended March 31, 2019 was $12.5 million, and included $12.3 million of cash interest income from portfolio investments and $0.2 million of fee income. Total investment income was higher as compared to the quarter ended December 31, 2018, primarily due to a larger average portfolio.

Net expenses for the quarter were $7.3 million, a $0.9 million increase from $6.4 million in the prior quarter. The increase was primarily due to a $0.6 million increase in Part I incentive fees (net of waivers) as a result of higher pre-incentive fee net investment income during the quarter and a $0.5 million increase in interest expense as a result of additional borrowings during the quarter, partially offset by a $0.2 million decrease in professional fees and administrator expense.

Net realized and unrealized gains on the investment portfolio for the quarter were $8.5 million, reflecting unrealized appreciation in certain debt investments.

Portfolio and Investment Activity

    As of
($ in thousands)   March 31, 2019   December 31,
2018
  March 31, 2018
Investments at fair value   $ 592,147     $ 553,351     $ 542,673  
Number of portfolio companies   81     79     65  
Average portfolio company debt size   $ 7,400     $ 7,100     $ 8,500  
             
Asset class:            
Senior secured debt   90.5 %   90.1 %   89.0 %
Unsecured debt   9.5 %   9.9 %   10.7 %
Equity   %   %   0.3 %
             
Non-accrual debt investments:            
Non-accrual investments at fair value   $     $ 50     $ 5,434  
Non-accrual investments as a percentage of debt investments   %   %   1.0 %
Number of investments on non-accrual   1     1     3  
             
Interest rate type:            
Percentage floating-rate   100.0 %   100.0 %   100.0 %
             
Yields:            
Weighted average yield on debt investments (1)   8.0 %   7.8 %   7.9 %
Cash component of weighted average yield on debt investments   7.8 %   7.7 %   7.7 %
Weighted average yield on total portfolio investments (2)   8.0 %   7.8 %   7.7 %
             
Investment activity:            
New investment commitments   $ 64,400     $ 93,100     $ 94,300  
New funded investment activity (3)   $ 67,900     $ 87,000     $ 94,700  
Proceeds from prepayments, exits, other paydowns and sales   $ 38,900     $ 73,100     $ 98,400  
Net new investments (4)   $ 29,000     $ 13,900     $ (3,700 )
Number of new investment commitments in new portfolio companies   9     12     11  
Number of new investment commitments in existing portfolio companies   5     7      
Number of portfolio company exits   7     9     13  

 __________

(1)   Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments, including the Company's share of the return on debt investments in the OCSI Glick JV.
(2)   Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments and dividend income, including the Company's share of the return on debt investments in the OCSI Glick JV. 
(3)   New funded investment activity is reflected net of drawdowns on existing revolver commitments. 
(4)   Net new investments consists of new funded investment activity less proceeds from prepayments, exits, other paydowns and sales. 

As of March 31, 2019, the fair value of the Company's investment portfolio was $592.1 million and was comprised of investments in 81 companies, including the Company's investments in OCSI Glick JV LLC ("OCSI Glick JV").

At fair value, 90.5% of the Company's portfolio as of March 31, 2019 consisted of senior secured floating-rate debt investments, including 85.4% of first liens and 5.1% of second liens, and 9.5% consisted of a subordinated note investment in the OCSI Glick JV.

As of March 31, 2019, 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 0.13% of the debt portfolio at cost and 0.00% at fair value.

As of March 31, 2019, the OCSI Glick JV had $167.5 million in assets, including senior secured loans to 34 portfolio companies. The joint venture generated income of $1.5 million for Oaktree Strategic Income during the quarter ended March 31, 2019.

Liquidity and Capital Resources

As of March 31, 2019, the Company had $11.8 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $307.7 million, and $147.3 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.6% as of March 31, 2019.

As of March 31, 2019, the Company’s total leverage ratio was 1.07x debt-to-equity.

Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its second fiscal quarter results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on May 8, 2019. 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 10130351, 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 Securities and Exchange Commission, 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


Oaktree Strategic Income Corporation
Consolidated Statements of Assets and Liabilities

  March 31, 2019
(unaudited)
  December 31, 2018
(unaudited)
  September 30,
2018
ASSETS          
Investments at fair value:          
Control investments (cost March 31, 2019: $73,237,461; cost December 31, 2018:
$73,440,352; cost September 30, 2018: $73,501,970)
$ 56,017,403     $ 54,535,309     $ 58,512,170  
Non-control/Non-affiliate investments (cost March 31, 2019: $546,005,001; cost December 31,
2018: $515,681,060; cost September 30, 2018: $499,423,794)
536,130,015     498,816,111     498,329,658  
Total investments at fair value (cost March 31, 2019: $619,242,462; cost December 31,
2018: $589,121,412; cost September 30, 2018: $572,925,764)
592,147,418     553,351,420     556,841,828  
Cash and cash equivalents 2,854,506     6,892,598     10,439,023  
Restricted cash 8,972,775     8,081,210     5,992,764  
Interest, dividends and fees receivable 2,935,766     3,074,356     3,139,334  
Due from portfolio companies 52,091     50,826     167,946  
Receivables from unsettled transactions     2,939,282     5,143,533  
Deferred financing costs 2,199,665     2,329,897     2,469,675  
Derivative asset at fair value 93,702         45,807  
Other assets 930,541     1,009,609     891,960  
Total assets $ 610,186,464     $ 577,729,198     $ 585,131,870  
LIABILITIES AND NET ASSETS        
Liabilities:          
Accounts payable, accrued expenses and other liabilities $ 650,869     $ 552,712     $ 649,781  
Base management fee and incentive fee payable 1,368,446     1,139,267     1,915,682  
Due to affiliate 1,047,888     2,855,707     1,700,952  
Interest payable 2,961,560     2,549,429     1,130,735  
Payables from unsettled transactions 9,395,443     30,419,142     8,932,500  
Derivative liability at fair value     28,761      
Director fees payable     50,000      
Credit facilities payable 307,656,800     262,156,800     275,056,800  
Total liabilities 323,081,006     299,751,818     289,386,450  
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 March 31, 2019, December 31, 2018 and September 30, 2018
294,668     294,668     294,668  
Additional paid-in-capital 370,751,389     370,751,389     370,751,389  
Accumulated overdistributed earnings (83,940,599 )   (93,068,677 )   (75,300,637 )
Total net assets (equivalent to $9.74, $9.43 and 10.04 per common share as of March 31,
2019, December 31, 2018 and September 30, 2018, respectively)
287,105,458     277,977,380     295,745,420  
Total liabilities and net assets $ 610,186,464     $ 577,729,198     $ 585,131,870  


Oaktree Strategic Income Corporation

Consolidated Statements of Operations
(unaudited)

    Three months ended
March 31, 2019
  Three months ended
December 31, 2018
  Three months ended
March 31, 2018
  Six months ended
March 31, 2019
  Six months ended
March 31, 2018
Interest income:                    
Control investments   $ 1,472,785     $ 1,485,423     $ 768,550     $ 2,958,208     $ 1,967,247  
Non-control/Non-affiliate investments   10,769,097     9,651,149     8,290,028     20,420,246     17,054,503  
Interest on cash and cash equivalents   52,132     66,995     62,879     119,127     133,974  
Total interest income   12,294,014     11,203,567     9,121,457     23,497,581     19,155,724  
PIK interest income:                    
Control investments           774,562         1,069,713  
Non-control/Non-affiliate investments   6,004     7,745     7,493     13,749     10,756  
Total PIK interest income   6,004     7,745     782,055     13,749     1,080,469  
Fee income:                    
Non-control/Non-affiliate investments   181,806     47,635     651,259     229,441     1,049,308  
Total fee income   181,806     47,635     651,259     229,441     1,049,308  
Total investment income   12,481,824     11,258,947     10,554,771     23,740,771     21,285,501  
Expenses:                    
Base management fee   1,451,393     1,414,767     1,393,458     2,866,160     2,805,630  
Part I incentive fee   1,096,144     854,378     480,384     1,950,522     740,106  
Professional fees   375,601     458,612     745,110     834,213     1,765,293  
Directors fees   105,278     105,000     130,000     210,278     260,000  
Interest expense   3,771,530     3,222,954     2,898,165     6,994,484     5,662,642  
Administrator expense   231,033     434,867     281,931     665,900     561,615  
General and administrative expenses   283,338     332,226     276,568     615,564     711,778  
Total expenses   7,314,317     6,822,804     6,205,616     14,137,121     12,507,064  
Fees waived   (49,253 )   (427,394 )   (240,192 )   (476,647 )   (357,685 )
Net expenses   7,265,064     6,395,410     5,965,424     13,660,474     12,149,379  
Net investment income   5,216,760     4,863,537     4,589,347     10,080,297     9,136,122  
Unrealized appreciation (depreciation):                    
Control investments   1,684,985     (3,915,243 )   (59,931 )   (2,230,258 )   (781,106 )
Affiliate investments           134,093         210,009  
Non-control/Non-affiliate investments   6,989,963     (15,770,813 )   3,045,873     (8,780,850 )   5,433,031  
Foreign currency forward contract   122,463     (74,568 )       47,895      
Net unrealized appreciation (depreciation)   8,797,411     (19,760,624 )   3,120,035     (10,963,213 )   4,861,934  
Realized gains (losses):                    
Affiliate investments                   28  
Non-control/Non-affiliate investments   (77,774 )   1,447,306     973,257     1,369,532     (3,409,477 )
Foreign currency forward contract   (240,970 )   249,090         8,120      
Net realized gains (losses)   (318,744 )   1,696,396     973,257     1,377,652     (3,409,449 )
Net realized and unrealized gains (losses)   8,478,667     (18,064,228 )   4,093,292     (9,585,561 )   1,452,485  
Net increase (decrease) in net assets resulting from operations   $ 13,695,427     $ (13,200,691 )   $ 8,682,639     $ 494,736     $ 10,588,607  
Net investment income per common share — basic and diluted   $ 0.18     $ 0.17     $ 0.16     $ 0.34     $ 0.31  
Earnings (loss) per common share — basic and diluted   $ 0.46     $ (0.45 )   $ 0.29     $ 0.02     $ 0.36  
Weighted average common shares outstanding — basic and diluted   29,466,768     29,466,768     29,466,768     29,466,768     29,466,768  

 

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Oaktree Strategic Income Corporation