Oaktree Specialty Lending Corporation

and welcome. Thank you for joining Oak Tree Specialty Lending Corporation's first fiscal quarter conference call. Today's conference call 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 Mustichio, Head of Investor Relations, who will host today's conference call. Mr. Mustichio, 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. Joining us on the call today are Armin Pinozian, Chief Executive Officer and Chief Investment Officer, Matt Pendo, President, Chris McCown, Chief Financial Officer and Treasurer, and Matt Stewart, our Chief Operating Officer. 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, the expected synergies and savings associated with the merger with Oak Tree Strategic Income II, Inc. the ability to realize the anticipated benefits of the merger, and 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 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.

Thanks, Mike, and welcome, everyone. Thank you for joining us today and for your interest in and support of OCSL. We identified a diverse set of attractive investment opportunities in our first quarter, driving strong origination activity and solid earnings. Adjusted NII was 57 cents per share, down from 62 cents for the prior quarter. These results reflect higher interest income from our predominantly floating rate portfolio and benefits of the scale we built with the OSI 2 merger. However, our results were impacted by idiosyncratic performance challenges at four portfolio companies. Armand will provide more specifics, but we experienced an uptick in non-accruals during the quarter as a result. We are engaged in working with each company to address their specific situations. We are drawing upon our long history and proven expertise in turning around challenge investments, as well as the deep resources of Oaktree to maximize outcomes for our shareholders. Investments on non-accrual status at quarter end represented 4.2% and 5.9% of the debt portfolio at fair value and cost, respectively. That was up from 1.8% of the debt portfolio at fair value and 2.4% of the portfolio at cost last quarter. We reported an average share of $19.14, down from $19.63 per share for the prior quarter. The decline reflected realized and unrealized losses on certain debt and equity investments, including the markdowns on the aforementioned four portfolio investments, as well as the $0.07 per share special distribution that was paid in December. This was partially offset by broader credit spread tightening across the portfolio. Our investment activity for the first quarter was strong, with $370 million of new investment commitments up substantially from $87 million the prior quarter. We continue to find attractive opportunities across sponsor, non-sponsor, and discounted publicly traded credit investments, generating net portfolio growth for the quarter, even as we maintain our highly selective approach to investing amid the uncertain current economic environment. Importantly, Our new originations were made during an attractive environment for private credit, highlighted by higher interest rates and lender-friendly deal structure and terms, including lower leverage and loan-to-values. The weighted average yield on new debt investments was 11.6%. On the repayment front, we received $214 million from paydowns and exits in the first quarter. While market activity has eased overall, given higher interest rates and fewer M&A transactions, We continue to receive steady levels of repayments. We have also been opportunistically selling out of certain liquid securities, including several junior capital positions. As we noted previously, about 30% of our portfolio turned over in fiscal year 2023, and that trend continued into the first quarter. We believe this amplifies the strength of the overall portfolio and our underwriting and selection process. As we see portfolio exits, it is largely because of these companies' achievements of their respective financial goals, enabling them to pay down debt, refinance at lower rates, or sell at attractive prices to larger competitors. In short, these outcomes effectively validate our initial investment decisions. Importantly, our portfolio turnover continues to drive a positive shift in our investment composition. Our first lien investments increased from 71% as of September 30, 2022 to to 78% as of December 31, 2023. At the same time, second lien investments decreased from 16% to 8%. This shift underscores our emphasis on improving the risk profile of our portfolio. Turning to the right-hand side of our balance sheet, as always, we maintained ample liquidity to meet funding needs. At quarter end, our net leverage ratio was one times, consistent with the prior quarter. We had $908 million available on our credit facilities and $112 million of cash. Our board approved a quarterly dividend of $0.55 per share, consistent with the prior quarterly distribution. Importantly, our dividend continues to be covered by our earnings despite the headwinds caused by the increase in non-accruals. With that, I would like to turn the call over to Arvind to provide more color on our portfolio activity and the market environment.