10-K/A

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

Form 10-K/A

Amendment No. 1

 

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-35999

 

 

Oaktree Strategic Income Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

 

DELAWARE   61-1713295
(State or jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

333 South Grand Avenue, 28th Floor

Los Angeles, CA

  90071
(Address of principal executive office)   (Zip Code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE:

(213) 830-6300

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchangeon Which Registered

Common Stock, par value $0.01 per share   OCSI   The Nasdaq Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    YES  ☐    NO  ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of March 31, 2020 was $122,830,348. For the purposes of calculating the aggregate market value of common stock held by non-affiliates, the registrant has excluded (1) shares held by its current directors and officers and (2) those reported to be held by Fifth Street Holdings L.P. and Leonard M. Tannenbaum and his other affiliates. The registrant had 29,466,768 shares of common stock outstanding as of December 18, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

 


EXPLANATORY NOTE

Oaktree Strategic Income Corporation, a Delaware corporation, or together with its subsidiaries, where applicable, the Company, which may also be referred to as “we”, “us” or “our”, is filing this Amendment No. 1 (the “Amendment”) to our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, which was filed with the SEC on November 19, 2020 (the “Form 10-K”), to (1) provide the information required by Items 10 through 14 of Part III because, in light of the proposed merger with Oaktree Specialty Lending Corporation, we no longer expect to file a definitive proxy statement within 120 days after September 30, 2020, the end of the fiscal year covered by the Form 10-K (and reference to our proxy statement on the cover page has been deleted accordingly) and (2) provide audited financial statements for our investment in an unconsolidated controlled portfolio company, OCSI Glick JV LLC (“OCSI Glick JV”), for the year ended September 30, 2020. The OCSI Glick JV consolidated financial statements for the fiscal years ended September 30, 2020, 2019 and 2018 (Exhibit 99.1) are included in Part IV, Item 15 of this filing.

We have determined that the OCSI Glick JV has met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X for which we are required, pursuant to Rule 3-09 of Regulation S-X, to provide audited financial statements as an exhibit to the Form 10-K. In accordance with Rule 3-09(b), the separate financial statements of the OCSI Glick JV are being filed as an amendment to the Form 10-K within 90 days after the end of the OCSI Glick JV’s September 30 fiscal year.

This Amendment also updates, amends and supplements Part II, Item 8 of the Form 10-K to (1) include the phrase “Public Company Accounting Oversight Board (United States)” inadvertently omitted by Ernst & Young LLP (“EY”) from the second paragraph of its “Report of Independent Registered Public Accounting Firm” and (2) add the following sentences inadvertently omitted by EY from the end of the third paragraph of its “Report of Independent Registered Public Accounting Firm”: “The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.” The changes to the report of EY do not affect EY’s unqualified opinion on the Company’s financial statements included in the Form 10-K. This Amendment also updates, amends and supplements Part IV, Item 15 of the Form 10-K to include the filing of new Exhibits 31.1, 31.2, 32.1 and 32.2, certifications of our Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and (b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

No other changes have been made to the Form 10-K. This Amendment does not reflect subsequent events that may have occurred after the original filing date of the Form 10-K or modify or update in any way disclosures made in the Form 10-K. Among other things, forward-looking statements made in the Form 10-K have not been revised to reflect events that occurred or facts that became known to us after filing of the Form 10-K, and such forward-looking statements should be read in their historical context. Furthermore, this Amendment should be read in conjunction with the Form 10-K and any subsequent filings with the SEC.


Item 8.

Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

 

Report of Independent Registered Public Accounting Firm

     2  

Consolidated Statements of Assets and Liabilities as of September  30, 2020 and 2019

     3  

Consolidated Statements of Operations for the Years Ended September  30, 2020, 2019 and 2018

     4  

Consolidated Statements of Changes in Net Assets for the Years Ended September 30, 2020, 2019 and 2018

     5  

Consolidated Statements of Cash Flows for the Years Ended September  30, 2020, 2019 and 2018

     6  

Consolidated Schedule of Investments as of September 30, 2020

     7  

Consolidated Schedule of Investments as of September 30, 2019

     14  

Notes to Consolidated Financial Statements

     21  

 

1


Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Oaktree Strategic Income Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of Oaktree Strategic Income Corporation (the Company), including the consolidated schedules of investments, as of September 30, 2020 and 2019, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2020 and 2019, and the results of its operations, changes in its net assets, and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of September 30, 2020 and 2019 by correspondence with the custodians, syndication agents and underlying investee companies, and by other appropriate auditing procedures where confirmation was not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2018.
Los Angeles, CA
November 18, 2020

 

2


Oaktree Strategic Income Corporation

Consolidated Statements of Assets and Liabilities

 

     September 30,
2020
    September 30,
2019
 
ASSETS  

Investments at fair value:

    

Control investments (cost September 30, 2020: $72,157,302; cost September 30, 2019: $73,189,664)

   $ 49,409,901   $ 54,326,418

Non-control/Non-affiliate investments (cost September 30, 2020: $466,907,805; cost September 30, 2019: $553,679,070)

     452,883,464     542,778,029
  

 

 

   

 

 

 

Total investments at fair value (cost September 30, 2020: $539,065,107; cost September 30, 2019: $626,868,734)

     502,293,365     597,104,447

Cash and cash equivalents

     25,072,749     5,646,899

Restricted cash

     4,427,678     8,404,733

Interest, dividends and fees receivable

     1,273,014     3,813,730

Due from portfolio companies

     527,064     350,597

Receivables from unsettled transactions

     7,966,668     5,091,671

Deferred financing costs

     2,130,020     2,139,299

Deferred offering costs

     121,310     —  

Derivative asset at fair value

     —       20,876

Other assets

     557,776     761,462
  

 

 

   

 

 

 

Total assets

   $ 544,369,644   $ 623,333,714
  

 

 

   

 

 

 
LIABILITIES AND NET ASSETS  

Liabilities:

    

Accounts payable, accrued expenses and other liabilities

   $ 1,401,709   $ 901,410

Base management fee and incentive fee payable

     1,663,660     1,368,431

Due to affiliate

     1,165,838     1,457,007

Interest payable

     1,486,077     2,750,587

Payables from unsettled transactions

     4,254,635     37,724,473

Derivative liability at fair value

     129,936     —  

Director fees payable

     —       25,000

Credit facilities payable

     256,656,800     294,656,800

Secured borrowings

     10,929,578     —  
  

 

 

   

 

 

 

Total liabilities

     277,688,233     338,883,708

Commitments and contingencies (Note 14)

    

Net assets:

    

Common stock, $0.01 par value per share, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding as of September 30, 2020 and September 30, 2019

     294,668     294,668

Additional paid-in-capital

     369,199,332     369,199,332

Accumulated overdistributed earnings

     (102,812,589     (85,043,994
  

 

 

   

 

 

 

Total net assets (equivalent to $9.05 and $9.65 per common share as of September 30, 2020 and September 30, 2019, respectively) (Note 12)

     266,681,411     284,450,006
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 544,369,644   $ 623,333,714
  

 

 

   

 

 

 

See notes to Consolidated Financial Statements.

 

3


Oaktree Strategic Income Corporation

Consolidated Statements of Operations

 

     Year ended
September 30,
2020
    Year ended
September 30,
2019
    Year ended
September 30,
2018
 

Interest income:

      

Control investments

   $ 1,436,726   $ 5,945,194   $ 3,970,056

Non-control/Non-affiliate investments

     34,892,600     42,847,646     39,139,739

Interest on cash and cash equivalents

     61,971     202,213     273,552
  

 

 

   

 

 

   

 

 

 

Total interest income

     36,391,297     48,995,053     43,383,347
  

 

 

   

 

 

   

 

 

 

PIK interest income:

      

Control investments

     —       —       2,161,339

Non-control/Non-affiliate investments

     1,983,129     26,220     26,059
  

 

 

   

 

 

   

 

 

 

Total PIK interest income

     1,983,129     26,220     2,187,398

Fee income:

      

Affiliate investments

     —       —       14,822

Non-control/Non-affiliate investments

     1,153,610     606,197     2,084,980
  

 

 

   

 

 

   

 

 

 

Total fee income

     1,153,610     606,197     2,099,802
  

 

 

   

 

 

   

 

 

 

Dividend income:

      

Non-control/Non-affiliate investments

     6,008     —       —  
  

 

 

   

 

 

   

 

 

 

Total dividend income

     6,008     —       —  
  

 

 

   

 

 

   

 

 

 

Total investment income

     39,534,044     49,627,470     47,670,547
  

 

 

   

 

 

   

 

 

 

Expenses:

      

Base management fee

     5,642,982     5,875,236     5,657,786

Part I incentive fee

     1,873,858     4,293,999     2,923,076

Professional fees

     1,316,387     1,534,958     2,691,950

Directors fees

     420,000     420,278     479,093

Interest expense

     12,431,910     14,528,318     14,379,881

Administrator expense

     911,612     1,121,984     1,085,819

General and administrative expenses

     1,055,916     1,201,721     1,383,871
  

 

 

   

 

 

   

 

 

 

Total expenses

     23,652,665     28,976,494     28,601,476

Fees waived

     (322,121     (489,275     (702,261
  

 

 

   

 

 

   

 

 

 

Net expenses

     23,330,544     28,487,219     27,899,215
  

 

 

   

 

 

   

 

 

 

Net investment income

     16,203,500     21,140,251     19,771,332
  

 

 

   

 

 

   

 

 

 

Unrealized appreciation (depreciation):

      

Control investments

     (3,884,155     (3,873,446     (1,255,842

Affiliate investments

     —       —       16,543,140

Non-control/Non-affiliate investments

     (3,123,300     (9,806,905     13,282,430

Foreign currency forward contract

     (150,812     (24,931     45,807
  

 

 

   

 

 

   

 

 

 

Net unrealized appreciation (depreciation)

     (7,158,267     (13,705,282     28,615,535
  

 

 

   

 

 

   

 

 

 

Realized gains (losses):

      

Affiliate investments

     —       —       (15,914,916

Non-control/Non-affiliate investments

     (10,326,109     (943,588     (11,675,522

Foreign currency forward contract

     13,673     482,601     (123,380
  

 

 

   

 

 

   

 

 

 

Net realized gains (losses)

     (10,312,436     (460,987     (27,713,818
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gains (losses)

     (17,470,703     (14,166,269     901,717
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ (1,267,203   $ 6,973,982   $ 20,673,049
  

 

 

   

 

 

   

 

 

 

Net investment income per common share — basic and diluted

   $ 0.55   $ 0.72   $ 0.67

Earnings (loss) per common share — basic and diluted (Note 5)

   $ (0.04   $ 0.24   $ 0.70

Weighted average common shares outstanding — basic and diluted

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

See notes to Consolidated Financial Statements.

 

4


Oaktree Strategic Income Corporation

Consolidated Statements of Changes in Net Assets

 

     Year ended
September 30,
2020
    Year ended
September 30,
2019
    Year ended
September 30,
2018
 

Operations:

      

Net investment income

   $ 16,203,500   $ 21,140,251   $ 19,771,332

Net unrealized appreciation (depreciation)

     (7,158,267     (13,705,282     28,615,535

Net realized gains (losses)

     (10,312,436     (460,987     (27,713,818
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (1,267,203     6,973,982     20,673,049
  

 

 

   

 

 

   

 

 

 

Stockholder transactions:

      

Distributions to stockholders

     (16,501,392     (18,269,396     (16,452,988

Tax return of capital

     —       —       (2,111,075
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets from stockholder transactions

     (16,501,392     (18,269,396     (18,564,063
  

 

 

   

 

 

   

 

 

 

Capital share transactions:

      

Issuance of common stock under dividend reinvestment plan

     291,848     215,067     281,737

Repurchases of common stock under dividend reinvestment plan

     (291,848     (215,067     (281,737
  

 

 

   

 

 

   

 

 

 

Net change in net assets from capital share transactions

     —       —       —  
  

 

 

   

 

 

   

 

 

 

Total increase (decrease) in net assets

     (17,768,595     (11,295,414     2,108,986

Net assets at beginning of period

     284,450,006     295,745,420     293,636,434
  

 

 

   

 

 

   

 

 

 

Net assets at end of period

   $ 266,681,411   $ 284,450,006   $ 295,745,420
  

 

 

   

 

 

   

 

 

 

Net asset value per common share

   $ 9.05   $ 9.65   $ 10.04
  

 

 

   

 

 

   

 

 

 

Common shares outstanding at end of period

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

See notes to Consolidated Financial Statements.

 

5


Oaktree Strategic Income Corporation

Consolidated Statements of Cash Flows

 

     Year ended
September 30,
2020
    Year ended
September 30,
2019
    Year ended
September 30,
2018
 

Operating activities:

      

Net increase (decrease) in net assets resulting from operations

   $ (1,267,203   $ 6,973,982   $ 20,673,049

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

      

Net unrealized (appreciation) depreciation

     7,158,267     13,705,282     (28,615,535

Net realized (gains) losses

     10,312,436     460,987     27,713,818

PIK interest income

     (1,983,129     (26,220     (2,187,398

Deferred fee income

     —       —       182,004

Accretion of original issue discount on investments

     (1,488,128     (2,226,783     (2,846,469

Amortization of deferred financing costs

     1,283,258     618,376     2,745,365

Purchases of investments

     (223,983,589     (249,144,958     (455,031,026

Proceeds from the sales and repayments of investments

     304,685,202     196,995,385     464,333,631

Changes in operating assets and liabilities:

      

(Increase) decrease in interest, dividends and fees receivable

     2,658,062     (674,396     (125,259

(Increase) decrease in due from portfolio companies

     (176,467     (182,651     118,314

(Increase) decrease in receivables from unsettled transactions

     (2,874,997     51,862     (4,638,533

(Increase) decrease in other assets

     203,686     130,498     (706,624

Increase (decrease) in accounts payable, accrued expenses and other liabilities

     (127,501     (26,371     166,904

Increase (decrease) in base management fee and incentive fee payable

     295,229     (547,251     (320,505

Increase (decrease) in due to affiliate

     (291,169     (243,945     1,250,435

Increase (decrease) in interest payable

     (1,264,510     1,619,852     (865,436

Increase (decrease) in payables from unsettled transactions

     (33,469,838     28,791,973     (40,097,289

Increase (decrease) in director fees payable

     (25,000     25,000     (98,008
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     59,644,609     (3,699,378     (18,348,562
  

 

 

   

 

 

   

 

 

 

Financing activities:

      

Distributions paid in cash

     (16,209,544     (18,054,329     (18,282,326

Borrowings under credit facilities

     79,500,000     122,100,000     311,000,000

Repayments of borrowings under credit facilities

     (117,500,000     (102,500,000     (118,900,000

Proceeds from secured borrowings

     10,929,578     —       —  

Proceeds from issuance of notes payable

     —       —       3,000,000

Repayments of notes payable

     —       —       (183,000,000

Repurchases of common stock under dividend reinvestment plan

     (291,848     (215,067     (281,737

Deferred financing costs paid

     (646,179     (10,000     (1,767,975

Offering costs paid

     (121,310     —       —  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (44,339,303     1,320,604     (8,232,038
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on foreign currency

     143,489     (1,381     —  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents and restricted cash

     15,448,795     (2,380,155     (26,580,600
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents and restricted cash, beginning of period

     14,051,632     16,431,787     43,012,387
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents and restricted cash, end of period

   $ 29,500,427   $ 14,051,632   $ 16,431,787
  

 

 

   

 

 

   

 

 

 

Supplemental information:

      

Cash paid for interest

   $ 12,413,162   $ 12,290,090   $ 12,499,952

Non-cash financing activities:

      

Issuance of shares of common stock under dividend reinvestment plan

   $ 291,848   $ 215,067   $ 281,737

Deferred financing costs incurred

     (627,800     (278,000     —  

Reconciliation to the Consolidated Statements of Assets and Liabilities

   September 30,
2020
    September 30,
2019
    September 30,
2018
 

Cash and cash equivalents

   $ 25,072,749   $ 5,646,899   $ 10,439,023

Restricted cash

     4,427,678     8,404,733     5,992,764
  

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents and restricted cash

   $ 29,500,427   $ 14,051,632   $ 16,431,787
  

 

 

   

 

 

   

 

 

 
See notes to Consolidated Financial Statements.

 

 

6


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

  Cash
Interest Rate
(6)
   

Industry

  Principal (7)     Cost     Fair Value     Notes  

Control Investments

              (8)  

OCSI Glick JV LLC

    Multi-Sector Holdings           (10)(11)  

Subordinated Note, LIBOR+4.50% cash due 10/20/2028

      $ 65,045,551   $ 65,045,551   $ 49,409,901     (6)(9)(14)(15)(16)  

87.5% equity interest

          7,111,751     —       (9)(12)(14)  
       

 

 

   

 

 

   
          72,157,302     49,409,901  
       

 

 

   

 

 

   

Total Control Investments (18.5% of net assets)

        $ 72,157,302   $ 49,409,901  
       

 

 

   

 

 

   

Non-Control/Non-Affiliate Investments

              (13)  

4 Over International, LLC

    Commercial Printing        

First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022

    7.00     $ 5,492,885   $ 5,432,331   $ 5,094,651     (6)(15)  

First Lien Revolver, LIBOR+6.00% cash due 6/7/2021

    7.00       68,452     67,950     63,489     (6)(15)  
       

 

 

   

 

 

   
          5,500,281     5,158,140  

99 Cents Only Stores LLC

    General Merchandise Stores        

First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022

    6.00       1,635,810     1,593,419     1,504,945     (6)  
       

 

 

   

 

 

   
          1,593,419     1,504,945  

Access CIG, LLC

    Diversified Support Services        

First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025

    3.91       5,406,946     5,370,428     5,303,052     (6)  
       

 

 

   

 

 

   
          5,370,428     5,303,052  

Accupac, Inc.

    Personal Products        

First Lien Term Loan, LIBOR+6.00% cash due 1/17/2026

    7.00       3,816,685     3,757,755     3,816,685     (6)(15)  

First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 1/17/2026

        —       (11,070)       —       (6)(14)(15)  

First Lien Revolver, LIBOR+6.00% cash due 1/17/2026

    7.00       477,989     470,609     477,989     (6)(15)  
       

 

 

   

 

 

   
          4,217,294     4,294,674  

AI Ladder (Luxembourg) Subco S.a.r.l.

    Electrical Components & Equipment        

First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025

    4.65       6,412,119     6,280,139     6,139,604     (6)(9)  
       

 

 

   

 

 

   
          6,280,139     6,139,604  

Airbnb, Inc.

    Hotels, Resorts & Cruise Lines        

First Lien Term Loan, LIBOR+7.50% cash due 4/17/2025

    8.50       4,755,083     4,645,028     5,159,265     (6)  
       

 

 

   

 

 

   
          4,645,028     5,159,265  

Aldevron, L.L.C.

    Biotechnology        

First Lien Term Loan, LIBOR+4.25% cash due 10/12/2026

    5.25       5,493,198     5,449,615     5,504,624     (6)  
       

 

 

   

 

 

   
          5,449,615     5,504,624  

All Web Leads, Inc.

    Advertising        

First Lien Term Loan, LIBOR+5.50% cash 2.0% PIK due 12/29/2023

    6.50       24,174,889     24,174,863     22,317,000     (6)(15)(18)  
       

 

 

   

 

 

   
          24,174,863     22,317,000  

Amplify Finco Pty Ltd.

    Movies & Entertainment        

First Lien Term Loan, LIBOR+4.00% cash due 11/26/2026

    4.75       5,970,000     5,910,300     5,134,200     (6)(9)(15)  
       

 

 

   

 

 

   
          5,910,300     5,134,200  

Ancile Solutions, Inc.

    Application Software        

First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021

    8.00       7,825,529     7,747,218     7,770,750     (6)(15)  
       

 

 

   

 

 

   
          7,747,218     7,770,750  

Apptio, Inc.

    Application Software        

First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025

    8.25       10,693,944     10,539,199     10,483,861     (6)(15)  

First Lien Revolver, LIBOR+7.25% cash due 1/10/2025

        —       (9,867)       (13,600)       (6)(14)(15)  
       

 

 

   

 

 

   
          10,529,332       10,470,261  

Ardonagh Midco 3 PLC

    Insurance Brokers        

First Lien Term Loan, EURIBOR+7.50% cash due 7/14/2026

    8.50     480,000     531,300     546,549     (6)(9)(15)  

First Lien Term Loan, UK LIBOR+7.50% cash due 7/14/2026

    8.25     £ 3,767,573     4,584,049     4,729,468     (6)(9)(15)(18)  

First Lien Delayed Draw Term Loan, UK LIBOR+7.50% cash due 7/14/2026

      £ —       —       —       (6)(9)(14)(15)  
       

 

 

   

 

 

   
          5,115,349     5,276,017  

 

7


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

  Cash
Interest Rate
(6)
   

Industry

  Principal (7)     Cost     Fair Value     Notes  

Athenex, Inc.

    Pharmaceuticals        

First Lien Term Loan, 11.00% cash due 6/19/2026

      $ 5,316,814   $ 5,094,543   $ 5,276,938     (9)(15)  

First Lien Delayed Draw Term Loan, 11.00% cash due 6/19/2026

        1,329,204     1,198,792     1,279,359     (9)(14)(15)  

62,097 Common Stock Warrants (exercise price $12.63) expiration date 6/19/2027

          213,614     183,186     (9)(15)  
       

 

 

   

 

 

   
          6,506,949     6,739,483  

Ball Metalpack Finco, LLC

    Metal & Glass Containers        

First Lien Term Loan, LIBOR+4.50% cash due 7/31/2025

    4.76       3,424,981     3,413,060     3,308,532     (6)(15)  
       

 

 

   

 

 

   
          3,413,060     3,308,532  

Blackhawk Network Holdings, Inc.

    Data Processing & Outsourced Services        

Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026

    7.19       4,375,000     4,341,470     4,025,000     (6)  
       

 

 

   

 

 

   
          4,341,470     4,025,000  

Boxer Parent Company Inc.

    Systems Software        

First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025

    4.40       6,057,113     5,992,780     5,895,357     (6)  
       

 

 

   

 

 

   
          5,992,780     5,895,357  

Cadence Aerospace, LLC

    Aerospace & Defense        

First Lien Term Loan, LIBOR+3.25% cash 5.25% PIK due 11/14/2023

    4.25       13,590,961     13,499,354     12,481,939     (6)(15)  
       

 

 

   

 

 

   
          13,499,354     12,481,939  

Carrols Restaurant Group, Inc.

    Restaurants        

First Lien Term Loan, LIBOR+6.25% cash due 4/30/2026

    7.25       3,577,035     3,398,183     3,550,207     (6)  
       

 

 

   

 

 

   
          3,398,183     3,550,207  

Chief Power Finance II, LLC

    Independent Power Producers & Energy Traders        

First Lien Term Loan, LIBOR+6.50% cash due 12/31/2022

    7.50       3,325,000     3,265,964     3,167,063     (6)(15)  
       

 

 

   

 

 

   
          3,265,964     3,167,063  

CircusTrix Holdings LLC

    Leisure Facilities        

First Lien Term Loan, LIBOR+6.75% PIK due 12/16/2021

        9,434,200     9,402,902     7,260,560     (6)(15)  
       

 

 

   

 

 

   
          9,402,902     7,260,560  

CITGO Petroleum Corp.

    Oil & Gas Refining & Marketing        

First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024

    6.00       5,387,652     5,333,776     5,131,738     (6)  
       

 

 

   

 

 

   
          5,333,776     5,131,738  

Connect U.S. Finco LLC

    Alternative Carriers        

First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026

    5.50       1,340,037     1,278,156     1,302,355     (6)(9)  
       

 

 

   

 

 

   
          1,278,156     1,302,355  

Continental Intermodal Group LP

    Oil & Gas Storage & Transportation        

First Lien Term Loan, LIBOR+9.50% PIK due 1/28/2025

        10,224,899     10,224,899     8,989,731     (6)(15)  

Common Stock Warrants expiration date 7/28/2025

          —       690,993  
       

 

 

   

 

 

   
          10,224,899     9,680,724  

Coyote Buyer, LLC

    Specialty Chemicals        

First Lien Term Loan, LIBOR+6.00% cash due 2/6/2026

    7.00       5,450,344     5,395,841     5,395,841     (6)(15)  

First Lien Revolver, LIBOR+6.00% cash due 2/6/2025

        —       (3,913)       (3,913)       (6)(14)(15)  
       

 

 

   

 

 

   
          5,391,928     5,391,928  

CPI Holdco, LLC

    Health Care Supplies        

First Lien Term Loan, LIBOR+4.25% cash due 11/4/2026

    4.40       5,894,380     5,869,505     5,875,960     (6)  
       

 

 

   

 

 

   
          5,869,505     5,875,960  

 

8


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

  Cash
Interest Rate
(6)
   

Industry

  Principal (7)     Cost     Fair Value     Notes  

CTOS, LLC

    Trading Companies & Distributors        

First Lien Term Loan, LIBOR+4.25% cash due 4/18/2025

    4.40     $ 8,731,138   $ 8,827,767   $ 8,671,111     (6)  
       

 

 

   

 

 

   
          8,827,767     8,671,111  

Curium Bidco S.à.r.l.

    Biotechnology        

First Lien Term Loan, LIBOR+3.75% cash due 7/9/2026

    3.97       3,960,000     3,930,300     3,930,300     (6)(9)  
       

 

 

   

 

 

   
          3,930,300     3,930,300  

Dealer Tire, LLC

    Distributors        

First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025

    4.40       8,851,404     8,760,175     8,674,375     (6)  
       

 

 

   

 

 

   
          8,760,175     8,674,375  

EnergySolutions LLC

    Environmental & Facilities Services        

First Lien Term Loan, LIBOR+3.75% cash due 5/9/2025

    4.75       3,910,000     3,897,041     3,753,600     (6)  
       

 

 

   

 

 

   
          3,897,041     3,753,600  

eResearch Technology, Inc.

    Application Software        

First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027

    5.50       3,990,000     3,950,100     3,979,187     (6)  
       

 

 

   

 

 

   
          3,950,100     3,979,187  

Firstlight Holdco, Inc.

    Alternative Carriers        

First Lien Term Loan, LIBOR+3.50% cash due 7/23/2025

    3.65       7,084,337     7,059,645     6,827,530     (6)  
       

 

 

   

 

 

   
          7,059,645     6,827,530  

Fortress Biotech, Inc.

    Biotechnology        

First Lien Term Loan, 11.00% cash due 8/27/2025

        3,013,000     2,831,219     2,854,818     (9)(15)(18)  

87,852 Common Stock Warrants (exercise price $3.20) expiration date 8/27/2030

          93,123     151,105     (9)(15)  
       

 

 

   

 

 

   
          2,924,342     3,005,923  

GI Chill Acquisition LLC

    Managed Health Care        

First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025

    4.22       2,969,697     2,947,424     2,917,727     (6)(15)  
       

 

 

   

 

 

   
          2,947,424     2,917,727  

GKD Index Partners, LLC

    Specialized Finance        

First Lien Term Loan, LIBOR+7.00% cash due 6/29/2023

    8.00       8,051,177     8,007,041     7,914,307     (6)(15)  

First Lien Revolver, LIBOR+7.00% cash due 6/29/2023

    8.00       355,556     352,069     347,556     (6)(14)(15)  
       

 

 

   

 

 

   
          8,359,110     8,261,863  

Global Medical Response

    Health Care Services        

First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025

    5.25       2,463,340     2,422,270     2,395,598     (6)  
       

 

 

   

 

 

   
          2,422,270     2,395,598  

Guidehouse LLP

    Research & Consulting Services        

First Lien Term Loan, LIBOR+4.50% cash due 5/1/2025

    4.65       2,474,683     2,453,364     2,456,135     (6)  

Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026

    8.15       5,000,000     4,982,443     4,825,000     (6)(15)  
       

 

 

   

 

 

   
          7,435,807     7,281,135  

Gulf Operating, LLC

    Oil & Gas Storage & Transportation        

First Lien Term Loan, LIBOR+5.25% cash due 8/25/2023

    6.25       1,316,869     751,248     934,430     (6)  
       

 

 

   

 

 

   
          751,248     934,430  

Helios Software Holdings, Inc.

    Systems Software        

First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025

    4.52       3,969,690     3,929,993     3,922,570     (6)  
       

 

 

   

 

 

   
          3,929,993     3,922,570  

iCIMs, Inc.

    Application Software        

First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024

    7.50       5,572,549     5,497,575     5,527,968     (6)(15)  

First Lien Revolver, LIBOR+6.50% cash due 9/12/2024

        —       (4,940)       (2,353)       (6)(14)(15)  
       

 

 

   

 

 

   
          5,492,635     5,525,615  

Immucor, Inc.

    Health Care Supplies        

First Lien Term Loan, LIBOR+5.75% cash due 7/2/2025

    6.75       2,267,567     2,224,475     2,222,215     (6)(15)  

First Lien Revolver, LIBOR+5.75% cash due 7/2/2025

        —       (3,600)       (3,789)       (6)(14)(15)  

Second Lien Term Loan, LIBOR+8.00% cash 3.50% PIK due 10/2/2025

    9.00       5,465,318     5,362,101     5,356,011     (6)(15)  
       

 

 

   

 

 

   
          7,582,976     7,574,437  

 

9


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

  Cash
Interest Rate
(6)
   

Industry

  Principal (7)     Cost     Fair Value     Notes  

KIK Custom Products Inc.

    Household Products        

First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023

    5.00     $ 3,326,063   $ 3,338,452   $ 3,313,557     (6)(9)  
       

 

 

   

 

 

   
          3,338,452     3,313,557  

Lannett Company, Inc.

    Pharmaceuticals        

First Lien Term Loan, LIBOR+5.38% cash due 11/25/2022

    6.38       6,794,491     6,802,553     6,692,574     (6)(9)  
       

 

 

   

 

 

   
          6,802,553     6,692,574  

Lightbox Intermediate, L.P.

    Real Estate Services        

First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026

    5.15       9,875,000     9,755,743     9,430,625     (6)(15)  
       

 

 

   

 

 

   
          9,755,743     9,430,625  

LogMeIn, Inc.

    Application Software        

First Lien Term Loan, LIBOR+4.75% cash due 8/31/2027

    4.91       4,000,000     3,900,591     3,873,760     (6)  
       

 

 

   

 

 

   
          3,900,591     3,873,760  

MHE Intermediate Holdings, LLC

    Diversified Support Services        

First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024

    6.00       11,419,753     11,305,654     11,114,846     (6)(15)  

First Lien Revolver, LIBOR+5.00% cash due 3/10/2023

        —       (228,947)       (140,296)       (6)(14)(15)  

First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 3/8/2024

    6.00       2,325,487     2,351,985     2,263,397     (6)(15)  
       

 

 

   

 

 

   
          13,428,692     13,237,947  

Mindbody, Inc.

    Internet Services & Infrastructure        

First Lien Term Loan, LIBOR+7.00% cash 1.5% PIK due 2/14/2025

    8.00       9,092,898     8,961,003     8,383,652     (6)(15)  

First Lien Revolver, LIBOR+8.00% cash due 2/14/2025

        —       (13,884)       (75,238)       (6)(14)(15)  
       

 

 

   

 

 

   
          8,947,119     8,308,414  

Ministry Brands, LLC

    Application Software        

First Lien Revolver, LIBOR+5.00% cash due 12/2/2022

    6.00       57,500     56,639     56,650     (6)(14)(15)  

Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023

    10.25       2,000,000     1,985,308     1,982,994     (6)(15)  
       

 

 

   

 

 

   
          2,041,947     2,039,644  

MRI Software LLC

    Application Software        

First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026

    6.50       5,968,744     5,918,189     5,824,509     (6)(15)  

First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026

        —       (22,352)       (52,991)       (6)(14)(15)  

First Lien Revolver, LIBOR+5.50% cash due 2/10/2026

        —       (5,283)       (12,765)       (6)(14)(15)  
       

 

 

   

 

 

   
          5,890,554     5,758,753  

NeuAG, LLC

    Fertilizers & Agricultural Chemicals        

First Lien Term Loan, LIBOR+5.50% cash 7.0% PIK due 9/11/2024

    7.00       8,529,688     8,194,410     8,188,501     (6)(15)  

First Lien Delayed Draw Term Loan, LIBOR+5.50% cash 7.0% PIK due 9/11/2024

          (42,360)       (42,360)       (6)(14)(15)  
       

 

 

   

 

 

   
          8,152,050     8,146,141  

Northwest Fiber, LLC

    Integrated Telecommunication Services        

First Lien Term Loan, LIBOR+5.50% cash due 4/30/2027

    5.66       4,200,473     4,049,552     4,205,723     (6)  
       

 

 

   

 

 

   
          4,049,552     4,205,723  

OEConnection LLC

    Application Software        

First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026

    4.15       7,920,420     7,881,988     7,831,315     (6)  

First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026

        —       (2,227)       (5,640)       (6)(14)  
       

 

 

   

 

 

   
          7,879,761     7,825,675  

Olaplex, Inc.

    Personal Products        

First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026

    7.50       8,887,500     8,731,401     8,887,500     (6)(15)  

First Lien Revolver, LIBOR+6.50% cash due 1/8/2025

    7.50       486,000     469,401     486,000     (6)(14)(15)  
       

 

 

   

 

 

   
          9,200,802     9,373,500  

 

10


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

  Cash
Interest Rate
(6)
   

Industry

  Principal (7)     Cost     Fair Value     Notes  

Onvoy, LLC

    Integrated Telecommunication Services        

First Lien Term Loan, LIBOR+4.50% cash due 2/10/2024

    5.50     $ 3,821,010   $ 3,811,810   $ 3,668,571     (6)  
       

 

 

   

 

 

   
          3,811,810     3,668,571  

PaySimple, Inc.

    Data Processing & Outsourced Services        

First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025

    5.65       9,906,964     9,742,150     9,560,221     (6)(15)  
       

 

 

   

 

 

   
          9,742,150     9,560,221  

Peraton Corp.

    Aerospace & Defense        

First Lien Term Loan, LIBOR+5.25% cash due 4/29/2024

    6.25       6,288,750     6,272,774     6,241,584     (6)(15)  
       

 

 

   

 

 

   
          6,272,774     6,241,584  

PG&E Corporation

    Electric Utilities        

First Lien Term Loan, LIBOR+4.50% cash due 6/23/2025

    5.50       1,995,000     1,966,495     1,958,422     (6)  
       

 

 

   

 

 

   
          1,966,495     1,958,422  

ProFrac Services, LLC

    Industrial Machinery        

First Lien Term Loan, LIBOR+7.50% cash due 9/15/2023

    8.75       8,289,847     8,240,727     6,362,458     (6)(15)  
       

 

 

   

 

 

   
          8,240,727     6,362,458  

Project Boost Purchaser, LLC

    Application Software        

Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027

    8.15       1,500,000     1,500,000     1,350,000     (6)(15)  
       

 

 

   

 

 

   
          1,500,000     1,350,000  

Pug LLC

    Internet & Direct Marketing Retail        

First Lien Term Loan, LIBOR+8.00% cash due 2/12/2027

    8.75       5,704,000     5,363,954     5,547,140     (6)  
       

 

 

   

 

 

   
          5,363,954     5,547,140  

Recorded Books Inc.

    Publishing        

First Lien Term Loan, LIBOR+4.00% cash due 8/29/2025

    4.16       9,757,714     9,660,137     9,708,926     (6)  
       

 

 

   

 

 

   
          9,660,137     9,708,926  

RevSpring, Inc.

    Commercial Printing        

First Lien Term Loan, LIBOR+4.25% cash due 10/11/2025

    4.47       9,825,000     9,807,175     9,628,500     (6)(15)  
       

 

 

   

 

 

   
          9,807,175     9,628,500  

Sabert Corporation

    Metal & Glass Containers        

First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026

    5.50       1,885,500     1,866,645     1,860,366     (6)  
       

 

 

   

 

 

   
          1,866,645     1,860,366  

Salient CRGT, Inc.

    Aerospace & Defense        

First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022

    7.50       5,488,244     5,457,684     5,104,067     (6)(15)  
       

 

 

   

 

 

   
          5,457,684     5,104,067  

Signify Health, LLC

    Health Care Services        

First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024

    5.50       10,725,000     10,658,741     10,349,625     (6)  
       

 

 

   

 

 

   
          10,658,741     10,349,625  

Sirva Worldwide, Inc.

    Diversified Support Services        

First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025

    5.65       7,650,000     7,535,250     6,387,750     (6)  
       

 

 

   

 

 

   
          7,535,250     6,387,750  

Star US Bidco LLC

    Industrial Machinery        

First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027

    5.25       5,826,911     5,529,350     5,564,700     (6)  
       

 

 

   

 

 

   
          5,529,350     5,564,700  

Supermoose Borrower, LLC

    Application Software        

First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025

    3.90       1,483,087     1,401,939     1,337,099     (6)  
       

 

 

   

 

 

   
          1,401,939     1,337,099  

Trident Topco LLC

    Health Care Services        

58.99 Class A Warrants (exercise price $156.164) expiration date 3/20/2021

          —       —       (15)  
       

 

 

   

 

 

   
          —       —    

Truck Hero, Inc.

    Auto Parts & Equipment        

First Lien Term Loan, LIBOR+3.75% cash due 4/22/2024

    3.90       5,681,160     5,688,828     5,520,667     (6)  
       

 

 

   

 

 

   
          5,688,828     5,520,667  

 

11


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

  Cash
Interest Rate
(6)
   

Industry

  Principal (7)     Cost     Fair Value     Notes  

UFC Holdings, LLC

    Movies & Entertainment        

First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026

    4.25     $ 2,887,362   $ 2,819,945   $ 2,844,961     (6)  
       

 

 

   

 

 

   
          2,819,945     2,844,961  

Uniti Group Inc.

    Specialized REITs        

40,052 Shares of Common Stock

          253,529     421,948     (9)(17)  
       

 

 

   

 

 

   
          253,529     421,948  

Veritas US Inc.

    Application Software        

First Lien Term Loan, LIBOR+5.50% cash due 9/1/2025

    6.50       6,000,000     5,880,994     5,885,010     (6)  
       

 

 

   

 

 

   
          5,880,994     5,885,010  

Verscend Holding Corp.

    Health Care Technology        

First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025

    4.65       11,830,827     11,732,318     11,752,447     (6)  
       

 

 

   

 

 

   
          11,732,318     11,752,447  

William Morris Endeavor Entertainment, LLC

    Movies & Entertainment        

First Lien Term Loan, LIBOR+8.50% cash due 5/18/2025

    9.50       8,371,098     7,942,825     8,371,098     (6)(15)  
       

 

 

   

 

 

   
          7,942,825     8,371,098  

Windstream Services II, LLC

    Integrated Telecommunication Services        

First Lien Term Loan, LIBOR+6.25% cash due 9/21/2027

    7.25       5,985,000     5,746,163     5,807,964     (6)  

11,903 Shares of Common Stock in Windstream Holdings II, LLC

          102,837     134,504     (15)  

72,205 Warrants in Windstream Holdings II, LLC

          1,785,324     793,624     (15)  
       

 

 

   

 

 

   
          7,634,324     6,736,092  

WP CPP Holdings, LLC

    Aerospace & Defense        

First Lien Term Loan, LIBOR+3.50% cash due 4/30/2025

    4.50       4,411,964     4,404,415     3,886,941     (6)  

Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026

    8.75       1,000,000     992,746     780,000     (6)(15)  
       

 

 

   

 

 

   
          5,397,161     4,666,941  

Zep Inc.

    Specialty Chemicals        

First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024

    5.00       4,607,500     4,632,209     4,349,779     (6)  
       

 

 

   

 

 

   
          4,632,209     4,349,779  
       

 

 

   

 

 

   

Total Non-Control/Non-Affiliate Investments (169.8% of net assets)

        $ 466,907,805   $ 452,883,464  
       

 

 

   

 

 

   

Total Portfolio Investments (188.3% of net assets)

        $ 539,065,107   $ 502,293,365  
       

 

 

   

 

 

   

Cash and Cash Equivalents and Restricted Cash

     

JP Morgan Prime Money Market Fund, Institutional Shares

        $ 7,052,674   $ 7,052,674  

Other cash accounts

          22,447,753     22,447,753  
       

 

 

   

 

 

   

Cash and Cash Equivalents and Restricted Cash (11.1% of net assets)

        $ 29,500,427   $ 29,500,427  
       

 

 

   

 

 

   

Total Portfolio Investments, Cash and Cash Equivalents and Restricted Cash (199.4% of net assets)

        $ 568,565,534   $ 531,793,792  
       

 

 

   

 

 

   

 

Derivatives Instrument

   Notional
Amount
Purchased /
(Sold) in U.S.
Dollars
     Notional
Amount
Purchased /
(Sold) in Local
Currency
    Maturity
Date
    

Counterparty

   Cumulative
Unrealized
Appreciation
(Depreciation)
 

Foreign currency forward contract

   $ 529,015    (465,600     11/12/2020      JPMorgan Chase Bank, N.A.    $ (17,450

Foreign currency forward contract

   $ 4,613,133    £ (3,654,546     11/12/2020      JPMorgan Chase Bank, N.A.    $ (112,486
             

 

 

 
         $ (129,936
             

 

 

 

 

(1)

All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.

(2)

See Note 3 to the Consolidated Financial Statements for portfolio composition by geographic region.

(3)

Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.

 

12


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

(4)

Each of the Company’s investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

 

(5)

Equity ownership may be held in shares or units of companies related to the portfolio companies.

 

(6)

The interest rate on the principal balance outstanding for all floating rate loans is indexed to the London Interbank Offered Rate (“LIBOR”) and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2020, the reference rates for the Company’s variable rate loans were the 30-day LIBOR at 0.15%, the 60-day LIBOR at 0.19%, the 90-day LIBOR at 0.22%, the 180-day LIBOR at 0.27%, the 360-day LIBOR at 0.37%, the PRIME at 3.25%, the 180-day UK LIBOR at 0.22% and the 180-day EURIBOR at (0.36)%. Most loans include an interest floor, which generally ranges from 0% to 1%.

 

(7)

Principal includes accumulated payment in kind (“PIK”) interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. “€” signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.

 

(8)

Control Investments generally are defined by the Investment Company Act of 1940, as amended (the “Investment Company Act”), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

 

(9)

Investment is not a “qualifying asset” as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of September 30, 2020, qualifying assets represented 83.1% of the Company’s total assets and non-qualifying assets represented 16.9% of the Company’s total assets.

 

(10)

As defined in the Investment Company Act, the Company is deemed to be both an “Affiliated Person” of and to “Control” this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the year ended September 30, 2020 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.

 

(11)

See Note 3 to the Consolidated Financial Statements for portfolio composition.

 

(12)

This investment was valued using net asset value as a practical expedient for fair value. Consistent with Financial Accounting Standards Board (“FASB”) guidance under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosure (“ASC 820”), these investments are excluded from the hierarchical levels.

 

(13)

Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.

 

(14)

Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.

 

(15)

As of September 30, 2020, these investments are categorized as Level 3 within the fair value hierarchy established by ASC 820.

 

(16)

This investment was on cash non-accrual status as of September 30, 2020. Cash non-accrual is inclusive of PIK and other non-cash income, where applicable.

 

(17)

Income producing through payment of dividends or distributions.

 

(18)

The sale of all or a portion of this investment did not qualify for sale accounting under FASB ASC Topic 860, Transfers and Servicing (“ASC 860”), and therefore the investment remains on the Company’s Consolidated Schedule of Investments as of September 30, 2020. See Note 6 in the Consolidated Financial Statements for further details.

See notes to Consolidated Financial Statements.

 

13


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2019

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

   Cash
Interest Rate
(6)
    Industry      Principal (7)      Cost     Fair Value     Notes

Control Investments

               (8)

OCSI Glick JV LLC

       Multi-sector holdings             (10)(11)

Subordinated Note, LIBOR+6.50% cash due 10/20/2021

     8.89      $ 66,077,912    $ 66,077,913   $ 54,326,418   (6)(9)(14)(15)

87.5% equity interest

             7,111,751       (9)(12)(14)
          

 

 

   

 

 

   
             73,189,664     54,326,418  
          

 

 

   

 

 

   

Total Control Investments (19.1% of net assets)

           $ 73,189,664   $ 54,326,418  
          

 

 

   

 

 

   
              

Non-Control/Non-Affiliate Investments

               (13)

4 Over International, LLC

       Commercial printing            

First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022

     8.04      $ 5,612,060    $ 5,547,000   $ 5,504,869   (6)(15)

First Lien Revolver, PRIME+5.00% cash due 6/7/2021

     10.00        7,823      7,321     6,516   (6)(14)(15)
          

 

 

   

 

 

   
             5,554,321     5,511,385  

99 Cents Only Stores LLC

      
General merchandise
stores
 
 
         

First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022

     7.10        1,626,953      1,549,641     1,425,618   (6)
          

 

 

   

 

 

   
             1,549,641     1,425,618  

Access CIG, LLC

      
Diversified support
services
 
 
         

First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025

     6.07        5,462,360      5,417,080     5,404,350   (6)
          

 

 

   

 

 

   
             5,417,080     5,404,350  

AI Ladder (Luxembourg) Subco S.a.r.l.

      
Electrical components &
equipment
 
 
         

First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025

     6.60        6,525,584      6,363,049     6,009,639   (6)(9)
          

 

 

   

 

 

   
             6,363,049     6,009,639  

Air Medical Group Holdings, Inc.

       Healthcare services            

First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025

     6.29        2,488,670      2,437,830     2,337,272   (6)
          

 

 

   

 

 

   
             2,437,830     2,337,272  

Airxcel, Inc.

       Household appliances            

First Lien Term Loan, LIBOR+4.50% cash due 4/28/2025

     6.54        6,912,500      6,857,242     6,661,922   (6)
          

 

 

   

 

 

   
             6,857,242     6,661,922  

AL Midcoast Holdings LLC

      
Oil & gas storage &
transportation
 
 
         

First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025

     7.60        564,300      558,657     556,541   (6)
          

 

 

   

 

 

   
             558,657     556,541  

Aldevron, L.L.C.

       Biotechnology            

First Lien Term Loan, LIBOR+4.25% cash due 9/20/2026

     6.36        4,000,000      3,960,000     4,020,000   (6)
          

 

 

   

 

 

   
             3,960,000     4,020,000  

All Web Leads, Inc.

       Advertising            

First Lien Term Loan, LIBOR+7.50% cash due 12/29/2020

     9.62        24,102,647      24,102,621     20,960,795   (6)(15)
          

 

 

   

 

 

   
             24,102,621     20,960,795  

Allen Media, LLC

       Movies & entertainment            

First Lien Term Loan, LIBOR+6.50% cash due 8/30/2023

     8.60        4,809,488      4,714,403     4,653,180   (6)(15)
          

 

 

   

 

 

   
             4,714,403     4,653,180  

Ancile Solutions, Inc.

       Application software            

First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021

     9.10        8,299,803      8,184,777     8,133,807   (6)(15)
          

 

 

   

 

 

   
             8,184,777     8,133,807  

Apptio, Inc.

       Application software            

First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025

     9.56        10,693,944      10,502,939     10,496,106   (6)(15)

First Lien Revolver, LIBOR+7.25% cash due 1/10/2025

               (12,179     (12,808   (6)(14)(15)
          

 

 

   

 

 

   
             10,490,760     10,483,298  

Aptos, Inc.

      
Computer & electronics
retail
 
 
         

First Lien Term Loan, LIBOR+5.50% cash due 7/23/2025

     7.70        10,917,500      10,808,325     10,781,031   (6)(15)
          

 

 

   

 

 

   
             10,808,325     10,781,031  

Avaya, Inc.

      
Communications
equipment
 
 
         

First Lien Term Loan, LIBOR+4.25% cash due 12/15/2024

     6.28        9,825,000      9,740,555     9,361,407   (6)
          

 

 

   

 

 

   
             9,740,555     9,361,407  

 

14


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

   Cash
Interest Rate
(6)
    Industry      Principal (7)      Cost      Fair Value      Notes  

Ball Metalpack Finco, LLC

       Metal & glass containers              

First Lien Term Loan, LIBOR+4.50% cash due 7/31/2025

     6.62      $ 8,887,500    $ 8,850,147    $ 8,387,578      (6)(15)  
          

 

 

    

 

 

    
             8,850,147      8,387,578   

Blackhawk Network Holdings, Inc.

      
Data processing &
outsourced services
 
 
           

Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026

     9.06        4,375,000      4,335,578      4,380,491      (6)  
          

 

 

    

 

 

    
             4,335,578      4,380,491   

Boxer Parent Company Inc.

       Systems software              

First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025

     6.29        6,118,763      6,051,218      5,899,007      (6)  
          

 

 

    

 

 

    
             6,051,218      5,899,007   

Cadence Aerospace LLC

       Aerospace & defense              

First Lien Term Loan, LIBOR+6.50% cash due 11/14/2023

     8.54        13,514,012      13,406,773      13,277,761      (6)(15)  
          

 

 

    

 

 

    
             13,406,773      13,277,761   

Canyon Buyer, Inc.

       Application software              

First Lien Term Loan, LIBOR+4.25% cash due 2/15/2025

     6.36        8,931,990      8,834,396      8,887,330      (6)  
          

 

 

    

 

 

    
             8,834,396      8,887,330   

Cast & Crew Payroll, LLC

       Application software              

First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026

     6.05        4,975,000      4,925,250      5,018,531      (6)  
          

 

 

    

 

 

    
             4,925,250      5,018,531   

Cincinnati Bell Inc.

      

Integrated
telecommunication
services
 
 
 
           

First Lien Term Loan, LIBOR+3.25% cash due 10/2/2024

     5.29        4,893,420      4,879,432      4,888,649      (6)(9)  
          

 

 

    

 

 

    
             4,879,432      4,888,649   

CircusTrix Holdings LLC

       Leisure facilities              

First Lien Term Loan, LIBOR+5.50% cash due 12/16/2021

     7.54        8,072,229      8,025,765      8,014,503      (6)(15)  

First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 12/16/2021

     7.54        971,967      966,372      965,016      (6)(15)  
          

 

 

    

 

 

    
             8,992,137      8,979,519   

CITGO Petroleum Corp.

      
Oil & gas refining &
marketing
 
 
           

First Lien Term Loan, LIBOR+4.50% cash due 7/29/2021

     6.60        5,937,500      5,921,943      5,963,505      (6)  

First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024

     7.10        5,970,000      5,910,301      6,007,313      (6)  
          

 

 

    

 

 

    
             11,832,244      11,970,818   

Connect U.S. Finco LLC

       Alternative carriers              

First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026

     7.10        10,000,000      9,800,000      9,860,150      (6)(9)  
          

 

 

    

 

 

    
             9,800,000      9,860,150   

Curium Bidco S.à r.l.

       Biotechnology              

First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026

     6.10        4,000,000      3,970,000      4,020,000      (6)(9)  
          

 

 

    

 

 

    
             3,970,000      4,020,000   

Curvature, Inc.

      
IT consulting & other
services
 
 
           

First Lien Term Loan, LIBOR+5.00% cash due 10/30/2023

     7.04        9,725,000      9,683,496      7,974,500      (6)  
             9,683,496      7,974,500   

Dcert Buyer, Inc.

      
Internet services &
infrastructure
 
 
           

First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026

     6.26        9,000,000      8,977,500      8,983,125      (6)  
          

 

 

    

 

 

    
             8,977,500      8,983,125   

DigiCert, Inc.

      
Internet services &
infrastructure
 
 
           

First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024

     6.04        10,631,986      10,611,348      10,629,753      (6)  
          

 

 

    

 

 

    
             10,611,348      10,629,753   

Ellie Mae, Inc.

       Application software              

First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026

     6.04        6,500,000      6,467,500      6,518,980      (6)  
          

 

 

    

 

 

    
             6,467,500      6,518,980   

EnergySolutions LLC

      
Environmental &
facilities services
 
 
           

First Lien Term Loan, LIBOR+3.75% cash due 5/9/2025

     5.85        3,950,000      3,934,058      3,703,125      (6)  
          

 

 

    

 

 

    
             3,934,058      3,703,125   

 

15


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2019

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

   Cash
Interest Rate
(6)
    Industry    Principal (7)      Cost     Fair Value     Notes  

Femur Buyer, Inc.

     Healthcare equipment          

First Lien Term Loan, LIBOR+4.25% cash due 3/5/2026

     6.38      $ 8,977,500    $ 8,887,725   $ 8,994,333     (6)  
          

 

 

   

 

 

   
             8,887,725     8,994,333  

Firstlight Holdco, Inc.

     Alternative carriers          

First Lien Term Loan, LIBOR+3.50% cash due 7/23/2025

     5.54        7,156,627      7,126,483     7,098,479     (6)  
          

 

 

   

 

 

   
             7,126,483     7,098,479  

Frontier Communications Corporation

     Integrated
telecommunication
services
         

First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024

     5.80        1,488,579      1,450,620     1,488,050     (6)(9)  
          

 

 

   

 

 

   
             1,450,620     1,488,050  

Gentiva Health Services, Inc.

     Healthcare services          

First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025

     5.81        3,989,924      3,985,062     4,017,355     (6)  
          

 

 

   

 

 

   
             3,985,062     4,017,355  

GKD Index Partners, LLC

     Specialized finance          

First Lien Term Loan, LIBOR+7.25% cash due 6/29/2023

     9.35        8,616,315      8,551,811     8,503,011     (6)(15)  

First Lien Revolver, LIBOR+7.25% cash due 6/29/2023

               (3,327     (5,844     (6)(14)(15)  
          

 

 

   

 

 

   
             8,548,484     8,497,167  

GoodRx, Inc.

     Interactive media &
services
         

First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025

     4.81        3,925,963      3,917,442     3,930,871     (6)  
          

 

 

   

 

 

   
             3,917,442     3,930,871  

Guidehouse LLP

     Research & consulting
services
         

Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026

     9.54        5,000,000      4,979,290     4,937,500     (6)  
          

 

 

   

 

 

   
             4,979,290     4,937,500  

iCIMs, Inc.

     Application software          

First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024

     8.56        5,572,549      5,478,546     5,479,203     (6)(15)  

First Lien Revolver, LIBOR+6.50% cash due 9/12/2024

               (4,852     (4,927     (6)(14)(15)  
          

 

 

   

 

 

   
             5,473,694     5,474,276  

Indivior Finance S.a.r.l.

     Pharmaceuticals          

First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022

     6.76        5,368,935      5,344,971     4,943,903     (6)(9)  
          

 

 

   

 

 

   
             5,344,971     4,943,903  

Kellermeyer Bergensons Services, LLC

     Environmental &
facilities services
         

Second Lien Term Loan, LIBOR+8.50% cash due 4/29/2022

     10.77        280,000      280,000     272,300     (6)(15)  
          

 

 

   

 

 

   
             280,000     272,300  

KIK Custom Products Inc.

     Household products          

First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023

     6.26        5,000,000      5,025,753     4,756,250     (6)(9)  
          

 

 

   

 

 

   
             5,025,753     4,756,250  

Lannett Company, Inc.

     Pharmaceuticals          

First Lien Term Loan, LIBOR+5.38% cash due 11/25/2022

     7.42        7,269,303      7,281,949     7,138,455     (6)(9)  
          

 

 

   

 

 

   
             7,281,949     7,138,455  

Lightbox Intermediate, L.P.

     Real estate services          

First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026

     7.05        9,975,000      9,832,986     9,875,250     (6)(15)  
          

 

 

   

 

 

   
             9,832,986     9,875,250  

Lytx Holdings, LLC

     Research & consulting
services
         

500 Class B Units

                 293,339     (15)  
          

 

 

   

 

 

   
                 293,339  

McAfee, LLC

     Systems software          

First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024

     5.79        8,138,690      8,082,911     8,166,891     (6)  
          

 

 

   

 

 

   
             8,082,911     8,166,891  

McDermott Technology (Americas), Inc.

     Oil & gas equipment &
services
         

First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025

     7.10        642,238      631,923     410,497     (6)(9)  
          

 

 

   

 

 

   
             631,923     410,497  

 

16


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2019

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

   Cash
Interest Rate
(6)
    Industry    Principal (7)      Cost     Fair Value     Notes  

MHE Intermediate Holdings, LLC

     Diversified support
services
         

First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024

     7.10      $ 11,538,092    $ 11,389,771   $ 11,307,331     (6)(15)  

First Lien Revolver, LIBOR+5.00% cash due 3/10/2023

     7.09        788,177      559,231     683,087     (6)(14)(15)  

First Lien Delayed Draw Term Loan, LIBOR+5.00% cash due 3/8/2024

     7.10        2,349,480      2,376,251     2,302,490     (6)(15)  
          

 

 

   

 

 

   
             14,325,253     14,292,908  

Mindbody, Inc.

     Internet services &
infrastructure
         

First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025

     9.06        9,047,619      8,885,497     8,875,714     (6)(15)  

First Lien Revolver, LIBOR+7.00% cash due 2/14/2025

               (17,065     (18,095     (6)(14)(15)  
          

 

 

   

 

 

   
             8,868,432     8,857,619  

Ministry Brands, LLC

     Application software          

Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023

     11.34        1,568,067      1,554,797     1,568,067     (6)(15)  

Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023

     11.34        431,933      428,278     431,933     (6)(15)  

First Lien Revolver, LIBOR+5.00% cash due 12/2/2022

     7.04        20,000      19,139     20,000     (6)(14)(15)  
          

 

 

   

 

 

   
             2,002,214     2,020,000  

New Trident Holdcorp, Inc.

     Healthcare services          

58.99 Class A Warrants (exercise price $156.164) expiration date 3/20/2021

                     (15)  
          

 

 

   

 

 

   
                  

OCI Beaumont LLC

     Commodity chemicals          

First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025

     6.10        4,925,000      4,920,165     4,931,156     (6)(9)  
          

 

 

   

 

 

   
             4,920,165     4,931,156  

OEConnection LLC

     Application software          

First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026

     6.13        7,768,817      7,729,973     7,754,251     (6)  

First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026

               (3,656     (1,371     (6)(14)  
          

 

 

   

 

 

   
             7,726,317     7,752,880  

Onvoy, LLC

     Integrated
telecommunication
services
         

First Lien Term Loan, LIBOR+4.50% cash due 2/10/2024

     6.54        3,860,606      3,848,514     3,238,083     (6)  
          

 

 

   

 

 

   
             3,848,514     3,238,083  

PaySimple, Inc.

     Data processing &
outsourced services
         

First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025

     7.55        7,550,000      7,400,733     7,436,750     (6)(15)  

First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025

               (48,438     (36,750     (6)(14)(15)  
          

 

 

   

 

 

   
             7,352,295     7,400,000  

Peraton Corp.

     Aerospace & defense          

First Lien Term Loan, LIBOR+5.25% cash due 4/29/2024

     7.30        6,353,750      6,333,030     6,306,097     (6)  
          

 

 

   

 

 

   
             6,333,030     6,306,097  

ProFrac Services, LLC

     Industrial machinery          

First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023

     8.66        9,394,444      9,319,898     9,206,556     (6)(15)  
          

 

 

   

 

 

   
             9,319,898     9,206,556  

Project Boost Purchaser, LLC

     Application software          

First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026

     5.54        2,800,000      2,772,000     2,785,650     (6)  

Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027

     10.14        1,500,000      1,500,000     1,500,000     (6)(15)  
          

 

 

   

 

 

   
             4,272,000     4,285,650  

PSI Services LLC

     Human resource &
employment services
         

First Lien Term Loan, LIBOR+5.00% cash due 1/20/2023

     7.04        6,601,580      6,545,627     6,555,342     (6)(15)  
          

 

 

   

 

 

   
             6,545,627     6,555,342  

Recorded Books Inc.

     Publishing          

First Lien Term Loan, LIBOR+4.50% cash due 8/29/2025

     6.54        10,395,000      10,291,050     10,421,039     (6)  
          

 

 

   

 

 

   
             10,291,050     10,421,039  

RevSpring, Inc.

     Commercial printing          

First Lien Term Loan, LIBOR+4.00% cash due 10/11/2025

     6.04        9,925,000      9,903,404     9,866,095     (6)(15)  
          

 

 

   

 

 

   
             9,903,404     9,866,095  

 

17


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2020

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

   Cash
Interest Rate
(6)
    Industry    Principal (7)      Cost      Fair Value      Notes  

Salient CRGT, Inc.

     Aerospace & defense            

First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022

     8.05      $ 5,731,994    $ 5,676,942    $ 5,445,395      (6)(15)  
          

 

 

    

 

 

    
             5,676,942      5,445,395   

Signify Health, LLC

     Healthcare services            

First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024

     6.60        10,835,000      10,752,193      10,821,456      (6)  
          

 

 

    

 

 

    
             10,752,193      10,821,456   

Sirva Worldwide, Inc.

     Diversified support
services
           

First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025

     7.54        7,850,000      7,732,250      7,614,500      (6)  
          

 

 

    

 

 

    
             7,732,250      7,614,500   

Sophia, L.P.

     Systems software            

First Lien Term Loan, LIBOR+3.25% cash due 9/30/2022

     5.35        1,398,788      1,396,201      1,400,830      (6)  
          

 

 

    

 

 

    
             1,396,201      1,400,830   

StandardAero Aviation Holdings Inc.

     Aerospace & defense            

First Lien Term Loan, LIBOR+4.00% cash due 4/6/2026

     6.10        2,000,000      1,997,545      2,011,870      (6)  
          

 

 

    

 

 

    
             1,997,545      2,011,870   

Sunshine Luxembourg VII SARL

     Personal products            

First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026

     6.59        3,000,000      2,985,000      3,017,820      (6)(9)  
          

 

 

    

 

 

    
             2,985,000      3,017,820   

The Dun & Bradstreet Corporation

     Research & consulting
services
           

First Lien Term Loan, LIBOR+5.00% cash due 2/6/2026

     7.05        5,000,000      4,908,337      5,037,050      (6)  
          

 

 

    

 

 

    
             4,908,337      5,037,050   

TIBCO Software Inc.

     Application software            

First Lien Term Loan, LIBOR+4.00% cash due 6/30/2026

     6.07        7,989,795      7,979,663      8,011,448      (6)  
          

 

 

    

 

 

    
             7,979,663      8,011,448   

Tribe Buyer LLC

     Human resources &
employment services
           

First Lien Term Loan, LIBOR+4.50% cash due 2/16/2024

     6.54        1,556,998      1,554,180      1,453,201      (6)(15)  
          

 

 

    

 

 

    
             1,554,180      1,453,201   

Truck Hero, Inc.

     Auto parts & equipment            

First Lien Term Loan, LIBOR+3.75% cash due 4/22/2024

     5.79        5,739,880      5,749,771      5,385,930      (6)  
          

 

 

    

 

 

    
             5,749,771      5,385,930   

Uber Technologies, Inc.

     Application software            

First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025

     6.03        2,239,323      2,224,436      2,230,467      (6)  
          

 

 

    

 

 

    
             2,224,436      2,230,467   

UFC Holdings, LLC

     Movies & entertainment            

First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026

     5.30        4,944,058      4,941,992      4,962,945      (6)  
          

 

 

    

 

 

    
             4,941,992      4,962,945   

Uniti Group LP

     Specialized REITs            

First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022

     7.04        8,848,483      8,642,094      8,648,021      (6)(9)  
          

 

 

    

 

 

    
             8,642,094      8,648,021   

UOS, LLC

     Trading companies &
distributors
           

First Lien Term Loan, LIBOR+5.50% cash due 4/18/2023

     7.54        8,819,673      8,943,835      8,929,919      (6
          

 

 

    

 

 

    
             8,943,835      8,929,919   

Veritas US Inc.

     Application software            

First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023

     6.60        12,811,879      12,902,946      12,142,266      (6
          

 

 

    

 

 

    
             12,902,946      12,142,266   

Verra Mobility, Corp.

     Data processing &
outsourced services
           

First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025

     5.79        4,949,749      4,960,502      4,976,552      (6 )(9) 
          

 

 

    

 

 

    
             4,960,502      4,976,552   

Verscend Holding Corp.

     Healthcare technology            

First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025

     6.54        10,975,140      10,897,989      11,032,320      (6
          

 

 

    

 

 

    
             10,897,989      11,032,320   

 

18


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2019

 

Portfolio Company/Type of Investment (1)(2)(3)(4)(5)

   Cash
Interest Rate
(6)
    Industry    Principal (7)      Cost      Fair Value      Notes  

WeddingWire, Inc.

     Interactive media &
services
           

First Lien Term Loan, LIBOR+4.50% cash due 12/19/2025

     6.54      $ 7,940,000    $ 7,904,378    $ 7,949,925      (6
          

 

 

    

 

 

    
             7,904,378      7,949,925   

Windstream Services, LLC

     Integrated
telecommunication
services
           

First Lien Term Loan, PRIME+5.00% cash due 3/29/2021

     10.00        7,384,828      7,227,936      7,524,069      (6 )(9) 
          

 

 

    

 

 

    
             7,227,936      7,524,069   

Woodford Express LLC

     Oil & gas exploration &
production
           

First Lien Term Loan, LIBOR+5.00% cash due 1/27/2025

     7.04        14,775,000      14,662,039      13,947,600      (6
          

 

 

    

 

 

    
             14,662,039      13,947,600   

WP CPP Holdings, LLC

     Aerospace & defense            

First Lien Term Loan, LIBOR+3.75% cash due 4/30/2025

     6.01        4,455,000      4,445,709      4,467,541      (6

Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026

     10.01        1,000,000      991,442      995,830      (6
          

 

 

    

 

 

    
             5,437,151      5,463,371   

Zep Inc.

     Specialty chemicals            

First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024

     6.04        4,655,000      4,686,365      3,687,132      (6
          

 

 

    

 

 

    
             4,686,365      3,687,132   

Zephyr Bidco Limited

     Specialized finance            

First Lien Term Loan, UK LIBOR+4.50% cash due 7/23/2025

     5.21      £ 5,000,000        6,667,495      5,976,039      (6 )(9) 
          

 

 

    

 

 

    
             6,667,495      5,976,039   
          

 

 

    

 

 

    

Total Non-Control/Non-Affiliate Investments (190.8% of net assets)

           $ 553,679,070    $ 542,778,029   
          

 

 

    

 

 

    

Total Portfolio Investments (209.9% of net assets)

           $ 626,868,734    $ 597,104,447   
          

 

 

    

 

 

    

Cash and Cash Equivalents and Restricted Cash

                

JP Morgan Prime Money Market Fund, Institutional Shares

           $ 228,653    $ 228,653   

Other cash accounts

             13,822,979      13,822,979   
          

 

 

    

 

 

    

Total Cash and Cash Equivalents and Restricted Cash (4.9% of net assets)

           $ 14,051,632    $ 14,051,632   
          

 

 

    

 

 

    

Total Portfolio Investments, Cash and Cash Equivalents and Restricted Cash (214.9% of net assets)

           $ 640,920,366    $ 611,156,079   
          

 

 

    

 

 

    

 

Derivatives Instrument

   Notional
Amount
Purchased /
(Sold) in U.S.
Dollars
     Notional
Amount
Purchased /
(Sold) in Local
Currency
    Maturity
Date
     Counterparty      Cumulative
Unrealized
Appreciation
(Depreciation)
 

Foreign currency forward contract

   $ 6,106,199    £ (4,934,900     10/15/2019        JPMorgan Chase Bank, N.A.      $ 20,876

 

19


Oaktree Strategic Income Corporation

Consolidated Schedule of Investments

September 30, 2019

 

(1)

All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.

(2)

See Note 3 to the Consolidated Financial Statements for portfolio composition by geographic region.

(3)

Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.

(4)

Each of the Company’s investments is pledged as collateral under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

(5)

Equity ownership may be held in shares or units of companies related to the portfolio companies.

(6)

The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2019, the reference rates for the Company’s variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, the PRIME at 5.00% and the 30-day UK LIBOR at 0.71%. Most loans include an interest floor, which generally ranges from 0% to 1%.

(7)

Principal includes accumulated PIK interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. All other investments are denominated in U.S. dollars.

(8)

Control Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

(9)

Investment is not a “qualifying asset” as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of September 30, 2019, qualifying assets represented 78.6% of the Company’s total assets and non-qualifying assets represented 21.4% of the Company’s total assets.

(10)

As defined in the Investment Company Act, the Company is deemed to be both an “Affiliated Person” of and to “Control” this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.

(11)

See Note 3 to the Consolidated Financial Statements for portfolio composition.

(12)

This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.

(13)

Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.

(14)

Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.

(15)

As of September 30, 2019, these investments are categorized as Level 3 within the fair value hierarchy established by ASC 820.

See notes to Consolidated Financial Statements.

 

20


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization

Oaktree Strategic Income Corporation (together with its consolidated subsidiaries, the “Company”) is a specialty finance company that looks to provide customized capital solutions for middle-market companies in both the syndicated and private placement markets. The Company was formed in May 2013 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company (“BDC”) under the Investment Company Act. The Company has qualified and elected to be treated as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”), for tax purposes.

The Company’s investment objective is 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. To a lesser extent, the Company may also invest in unsecured loans, including subordinated loans and bonds, issued by private middle-market companies, senior and subordinated loans and bonds issued by public companies and equity investments.

The Company is externally managed by Oaktree Fund Advisors, LLC (“Oaktree”), a subsidiary of Oaktree Capital Group, LLC (“OCG”), pursuant to an investment advisory agreement between the Company and Oaktree (the “Investment Advisory Agreement”). Oaktree is an affiliate of Oaktree Capital Management, L.P. (“OCM”), the Company’s external investment adviser from October 17, 2017 through May 3, 2020 and also a subsidiary of OCG. Oaktree Fund Administration, LLC (“Oaktree Administrator”), a subsidiary of OCM, provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement between the Company and Oaktree Administrator (the “Administration Agreement”). See Note 11. In 2019, Brookfield Asset Management Inc. (“Brookfield”) acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams.

Note 2. Significant Accounting Policies

Basis of Presentation:

The Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the requirements for reporting on Form 10-K and Regulation S-X. All intercompany balances and transactions have been eliminated. The Company is an investment company following the accounting and reporting guidance in FASB ASC Topic 946, Financial Services - Investment Companies (“ASC 946”).

Use of Estimates:

The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.

Consolidation:

The accompanying Consolidated Financial Statements include the accounts of Oaktree Strategic Income Corporation and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain subsidiaries that hold investments are treated as pass through entities for tax purposes. The assets of certain of the consolidated subsidiaries are not directly available to satisfy the claims of the creditors of Oaktree Strategic Income Corporation or any of its other subsidiaries.

As an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements but rather are included on the Statements of Assets and Liabilities as investments at fair value.

 

21


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Fair Value Measurements:

The Company values its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.

Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

 

   

Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.

 

   

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.

 

   

Level 3 — Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment’s level is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using “bid” and “ask” prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.

Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of the Company’s investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.

The Company seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If the Company is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within the Company’s set threshold, the Company seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, the Company does not adjust any of the prices received from these sources.

 

22


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, the Company values such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value (“EV”) of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that the Company is deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company’s assets and (vii) offers from third parties to buy the portfolio company. The Company may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.

The Company estimates the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.

The Company’s Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company’s investments:

 

   

The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree’s valuation team in conjunction with Oaktree’s portfolio management team and investment professionals responsible for each portfolio investment;

 

   

Preliminary valuations are then reviewed and discussed with management of Oaktree;

 

   

Separately, independent valuation firms engaged by the Board of Directors prepare valuations of the Company’s investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to Oaktree and the Audit Committee of the Board of Directors;

 

   

Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;

 

   

The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee;

 

   

The Audit Committee makes a recommendation to the full Board of Directors regarding the fair value of the investments in the Company’s portfolio; and

 

   

The Board of Directors discusses valuations and determines the fair value of each investment in the Company’s portfolio.

The fair value of the Company’s investments as of September 30, 2020 and September 30, 2019 was determined in good faith by the Board of Directors. The Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of the Company’s portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. However, the Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy and a consistently applied valuation process.

 

23


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

With the exception of the line items entitled “deferred financing costs,” “deferred offering costs,” “other assets,” “credit facilities payable” and “secured borrowings” which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statements of Assets and Liabilities. The carrying value of the line items titled “interest, dividends and fees receivable,” “due from portfolio companies,” “receivables from unsettled transactions,” “accounts payable, accrued expenses and other liabilities,” “base management fee and incentive fee payable,” “due to affiliate,” “interest payable,” “payables from unsettled transactions” and “director fees payable” approximate fair value due to their short maturities.

 

24


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Foreign Currency Translation:

The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the prevailing foreign exchange rate on the reporting date. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.

Derivative Instruments:

The Company does not utilize hedge accounting and as such values its derivative instruments at fair value with the unrealized gains or losses recorded in “net unrealized appreciation (depreciation)” in the Company’s Consolidated Statements of Operations.

Secured Borrowings:

Securities sold and simultaneously repurchased at a premium are reported as financing transactions in accordance with ASC 860. Amounts payable to the counterparty are due on the repurchase settlement date and, excluding accrued interest, such amounts are presented in the accompanying Statements of Assets and Liabilities as secured borrowings. Premiums payable are separately reported as accrued interest.

Investment Income:

Interest Income

Interest income, adjusted for accretion of original issue discount (“OID”), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations.

In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.

For the Company’s secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the counterparty is recorded within interest expense in the Consolidated Statements of Operations.

PIK Interest Income

The Company’s investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company’s decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company’s assessment of the portfolio company’s business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company’s management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. The Company’s determination to cease accruing PIK interest is generally made well before the Company’s full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by the Company to Oaktree. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s stockholders, even though the Company has not yet collected the cash and may never do so.

 

25


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Fee Income

Oaktree or its affiliates may provide financial advisory services to portfolio companies, and in return, the Company may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by the Company upon the investment closing date. The Company may also receive additional fees in the ordinary course of business, including servicing, amendment, and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.

The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are typically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.

Dividend Income

The Company generally recognizes dividend income on the ex-dividend date for public securities and the record date for private equity investments. Distributions received from private equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from private equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

Cash and Cash Equivalents and Restricted Cash:

Cash and cash equivalents and restricted cash consist of demand deposits and highly liquid investments with maturities of three months or less when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. Cash and cash equivalents and restricted cash are included on the Company’s Consolidated Schedule of Investments and cash equivalents are classified as Level 1 assets.

As of September 30, 2020, included in restricted cash was $4.1 million that was held at Wells Fargo Bank, N.A. in connection with the Company’s Citibank Facility and Deutsche Bank Facility (each as defined in Note 6 – Borrowings), and $0.3 million that was held at U.S. Bank National Association as collateral in connection with the ISDA Master Agreement (as defined in Note 13 - Derivative Instruments) with JPMorgan Chase Bank N.A. Of the $4.1 million of restricted cash held at Wells Fargo Bank, N.A., pursuant to the terms of the Citibank Facility, the Company was restricted in terms of access to $2.0 million of that amount until the occurrence of the periodic distribution dates and, in connection therewith, the Company’s submission of its required periodic reporting schedules and verifications of the Company’s compliance with the terms of the credit agreement. As of September 30, 2020, the remaining $2.1 million of cash held at Wells Fargo Bank, N.A. was restricted due to the obligation to pay interest under the terms of the Deutsche Bank Facility.

 

26


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

As of September 30, 2019, included in restricted cash was $7.6 million that was held at Wells Fargo Bank, N.A. in connection with the Company’s Citibank Facility and Deutsche Bank Facility and $0.8 million held at East West Bank in connection with the Company’s East West Bank Facility (as defined in Note 6 – Borrowings). Of the $7.6 million of restricted cash held at Wells Fargo Bank, N.A., pursuant to the terms of the Citibank Facility, the Company was restricted in terms of access to $3.4 million of that amount until the occurrence of the periodic distribution dates and, in connection therewith, the Company’s submission of its required periodic reporting schedules and verifications of the Company’s compliance with the terms of the credit agreement. As of September 30, 2019, the remaining $4.3 million of cash held at Wells Fargo Bank, N.A. was restricted due to the obligation to pay interest under the terms of the Deutsche Bank Facility. As of September 30, 2019, $0.8 million held at East West Bank was restricted due to minimum balance requirements under the East West Bank Facility.

Due from Portfolio Companies:

Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, including proceeds from the sale of portfolio companies not yet received or being held in escrow, and excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).

 

27


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Receivables/Payables from Unsettled Transactions:

Receivables/payables from unsettled transactions consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.

Deferred Financing Costs:

Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset when incurred. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability when incurred. Deferred financing costs are amortized using the effective interest method over the term of the respective debt arrangement. This amortization expense is included in interest expense in the Company’s Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense.

Deferred Offering Costs:

Legal fees and other costs incurred in connection with the Company’s shelf registration statement are capitalized as deferred offering costs in the Consolidated Statements of Assets and Liabilities. To the extent any such costs relate to equity offerings, these costs are charged as a reduction of capital upon utilization. To the extent any such costs relate to debt offerings, these costs are treated as deferred financing costs and are amortized over the term of the respective debt arrangement. Any deferred offering costs that remain at the expiration of the shelf registration statement or when it becomes probable that an offering will not be completed are expensed.

Income Taxes:

The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income within the tax rules under Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar years 2018 and 2019, and does not expect to incur a U.S. federal excise tax for calendar year 2020.

The Company may hold certain portfolio investments through taxable subsidiaries. The purpose of a taxable subsidiary is to permit the Company to hold equity investments in portfolio companies which are “pass through” entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s Consolidated Financial Statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company’s Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiaries’ income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.

 

28


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Company’s Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2017, 2018 or 2019. The Company identifies its major tax jurisdictions as U.S. Federal and California, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

Recent Accounting Pronouncements:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31, 2022. As of September 30, 2020, the guidance did not have a material impact on the Consolidated Financial Statements.

The SEC issued final rules that, among other things, amended the financial disclosure requirements of Regulation S-X for acquired and disposed businesses and the significance tests for a “significant subsidiary” as applicable to BDCs and amended certain forms used by BDCs. The amendments are intended to assist BDCs in making more meaningful determinations as to whether a subsidiary or an acquired or disposed entity is significant and improve the financial disclosure requirements applicable to acquisitions and dispositions of investment companies and BDCs. The Company early adopted the updated rules for the year ended September 30, 2020 which did not result in any new significant subsidiaries being identified.

Note 3. Portfolio Investments

As of September 30, 2020, 188.3% of net assets at fair value, or $502.3 million, was invested in 78 portfolio companies, including 18.5% of net assets, or $49.4 million at fair value, in subordinated notes and limited liability company (“LLC”) equity interests of OCSI Glick JV LLC (together with its consolidated subsidiaries, the “OCSI Glick JV”), a joint venture through which the Company and GF Equity Funding 2014 LLC (“GF Equity Funding”) co-invest primarily in senior secured loans of middle-market companies, and 11.1% of net assets, or $29.5 million, was invested in cash and cash equivalents (including $4.4 million of restricted cash). In comparison, as of September 30, 2019, 209.9% of net assets at fair value, or $597.1 million, was invested in 84 portfolio companies, including 19.1% of net assets, or $54.3 million at fair value, in subordinated notes and LLC equity interests of the OCSI Glick JV, and 4.9% of net assets, or $14.1 million, was invested in cash and cash equivalents (including $8.4 million of restricted cash). As of September 30, 2020, 89.7% of the Company’s portfolio at fair value consisted of senior secured debt investments, 9.8% consisted of investments in the subordinated notes of the OCSI Glick JV and 0.5% consisted of equity investments. As of September 30, 2019, 90.9% of the Company’s portfolio at fair value consisted of senior secured debt investments and 9.1% consisted of investments in the subordinated notes of the OCSI Glick JV.

As of September 30, 2020 and September 30, 2019, the Company’s equity investments consisted of LLC equity interests, common stock and warrants in portfolio companies. These instruments generally do not produce a current return but are held for potential investment appreciation and capital gain.

During the years ended September 30, 2020, 2019 and 2018, the Company recorded net realized losses of $10.3 million, $0.5 million, and $27.7 million, respectively. During the years ended September 30, 2020, 2019 and 2018, the Company recorded net unrealized appreciation (depreciation) of $(7.2) million, $(13.7) million, and $28.6 million, respectively.

 

29


OAKTREE STRATEGIC INCOME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The composition of the Company’s investments as of September 30, 2020 and September 30, 2019 at cost and fair value was as follows:

 

     September 30, 2020      September 30, 2019  
     Cost      Fair Value      Cost      Fair Value  

Senior secured loans

   $ 464,459,378    $ 450,508,104    $ 553,679,070    $ 542,484,690

OCSI Glick JV subordinated notes

     65,045,551      49,409,901      66,077,913      54,326,418

OCSI Glick JV equity interests

     7,111,751      —        7,111,751      —