Oaktree Specialty Lending Corporation

Welcome, and thank you for joining Oak Tree Specialty Lending Corporation's first fiscal quarter 2022 conference call. Today's conference is being recorded. At this time, all participants are in a listen-only mode, but will be prompted for a question and answer session following the prepared remarks. Now, I would like to introduce Michael Masticchio of Investor Relations, who will host today's conference call. Mr. Masticchio, you may begin.

Thank you, Operator, and welcome to Oak Tree Specialty Lending Corporation's first fiscal quarter conference call. Our earnings release, which we issued this morning, and the accompanying slide presentation can be accessed on the investor section of our website at oaktreespecialtylending.com. Our speakers today are Armin Knossian, Chief Executive Officer and Chief Investment Officer, Matt Pendo, President, and Chris McCown, Chief Financial Officer and Treasurer. Also joining us on the call today for the question and answer session is Matt Stewart, the company's newly appointed Chief Operating Officer, a role he took over from Matt Pendo last week. Before we begin, I want to remind you that comments on today's call include forward-looking statements reflecting our current views with respect to, among other things, our future operating results and financial performance. Our actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to our SEC filings for discussion of these factors in further detail. We undertake no duty to update or revise any forward-looking statements. I'd also like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in any Oak Tree Fund. Investors and others should note that Oak Tree Specialty Lending uses the investor section of its corporate website to announce material information. The company encourages investors, the media, and others to review the information that it shares on its website. With that, I would now like to turn the call over to Matt.

Thank you, Mike, and welcome, everyone. We appreciate your interest in and support of OCSL. We produced strong results in the first quarter and started our fiscal year with steady origination activity and solid credit quality. We again grew NAV and adjusted net investment income, supporting our seventh consecutive quarterly dividend increase. We reported NAV per share of $7.34, up 1% from the prior quarter. The increase was primarily driven by unrealized gains in our portfolio, as well as undistributed net investment income and successful realizations of non-core positions. Adjusted net investment income per share was 17 cents for the quarter, compared with 16 cents for the prior quarter. This was driven by higher interest income and fee income partially offset by increases in incentive fees and interest expense. This builds on the earnings power we established in 2021 when we achieved record annual adjusted net investment income under Oaktree's four years of management. Given the strength and consistency of our earnings, our board once again increased our quarterly dividend, lifting it by 3% to 16 cents per share. Our dividend is now up 68% from its pre-COVID level. Now turning to the portfolio. we originated $300 million of new investment commitments in the first quarter. Of these, 73% were first lien loans and included $227 million in private transactions and $73 million in the new issue primary market. The weighted average yield on new debt investments in the quarter was 8.1%. Capitalizing on the full breadth of the Oaktree platform, as well as our team's experience investing across multiple cycles, we expect continued strong origination activity. Even in a highly competitive environment, we are confident we can continue to leverage the platform and investment resources to find deals that are structured and priced favorably. We received $235 million from prepayments, paydown, and exits in the December quarter. This included exits and payoffs of $44 million of lower-yielding investments. The average yield of investments that we exited was 7.5%. Notably, our non-corporate portfolio declined by nearly $40 million and now stands at $95 million. are just under 4% of the portfolio at fair value at the close of the quarter. We continue to selectively reinvest these proceeds into higher-yielding attractive opportunities. Credit quality remains excellent, reflecting our sourcing capabilities and disciplined approach to underwriting. We invest selectively across a wide range of opportunities, enabling us to identify attractive opportunities while minimizing risk. As with the prior quarter, we had no investments on non-accrual at the close of the first quarter. With respect to the right side of our balance sheet, we have also identified additional opportunities to further enhance our borrowing flexibility and ensure we maintain ample liquidity to meet funding needs. During the quarter, we increased capacity on our credit facilities, increasing the size of our revolver to $1 billion from $950 million with the addition of a new bank. We also increased our low-cost Citibank facility to $200 million from $150 million. The weighted average interest rate on debt outstanding was 2.3% in the December quarter, down slightly from 2.4% the prior quarter. I would also like to share an important addition to our leadership team. Last week, our board appointed Matthew Stewart as chief operating officer of OCSL. I will continue in my role as president. Matt joined Oak Tree in 2017, and prior to this promotion, served as a senior vice president investment professional on our strategic credit team. Matt brings a wealth of experience and expertise to the role, and we are confident he is well-suited for the job. Now I would like to turn the call over to Armen.