Oaktree Specialty Lending Corporation

Welcome and thank you for joining Oaktree Specialty Lending Corporation's fourth fiscal quarter conference call. Today's conference call is being recorded. If you require operator assistance, please press star then zero. 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. Before I pass the call over to the Oaktree team, I want to remind you that comments on today's call may include forward-looking statements reflecting Oak Tree's current views with respect to future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to OCSL's SEC filings for a discussion of these factors in further detail. Oak Tree undertakes 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. Now, I would like to introduce Dane Clevin, Head of Investor Relations, who will host today's conference call. Mr. Clevin, you may begin.

Thank you, Operator, and thank you all for listening in. We very much appreciate your support of Oak Tree Specialty Lending Corporation. I'd like to welcome you to our earnings call for the fourth fiscal quarter of 2024. 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. We encourage investors, the media, and others to review the information that is shared on our website. Joining us on the call today are Armin Panossian, Chief Executive Officer and Co-Chief Investment Officer, Matt Pendo, President, and Chris McCown, Chief Financial Officer and Treasurer. With that, I would now like to turn the call over to Matt to discuss our results.

Thanks, Dane, and welcome, everyone. Our adjusted NAI for the fiscal fourth quarter into September 30, 2024, was $45 million, or 55 cents per share. which was consistent with our third quarter results. NII for the quarter reflected our healthy origination and repayment activity combined with the decrease in net expenses driven by our lower management fees that went into effect on July 1st and interest expense. This was partially upset by a modest decline in adjusted total investment income as certain investments were moved to non-accrual status. Full year fiscal 2024 adjusted NII was $179 million, or $2.23 per share, compared to $178 million, or $2.47 per share, for fiscal year 2023. The dollar increase was driven by higher investment income generated from a larger average investment portfolio following last year's completion of our merger with Oak Tree Strategic Income II, Inc., or OSI II, impact of higher base rate, and an increase in prepayment fee and OID acceleration from successful investment exits. These drivers were offset by an increase in investments placed on non-accrual status and higher interest expense, primarily due to our floating rate liabilities. The year-over-year per share decrease in adjusted NAI reflects a higher share count from the issuance of common shares. During fiscal 2024, we continue to rotate into primarily first lien loans. Our first lien investments increased to 82% from 76% at fiscal year end 2023. Concurrently, second lien investments decreased from 10% to 4%. Investments on non-accrual status at quarter end were 4% at fair value and 4.9% at cost, compared to 3.7% and 5.7% last quarter. During the quarter, we successfully restructured two investments and removed them from non-accrual. However, we placed three additional investments on non-accrual status and took some further write-downs on certain investments. Our net asset value per share decreased slightly to $18.09 from $18.19 last quarter. We are working closely with each company and using our resources and expertise to achieve successful outcomes for our shareholders. Given that these non-accruals and additional write-downs had an impact on our earnings and net asset value, we waived $1.2 million of Part 1 incentive fees for the quarter. This is in addition to the $3.2 million of Part 1 incentive fees that we waived last quarter and $1.3 million of additional discretionary fees waived since the OSI 2 merger in January of last year. As a reminder, we implemented a permanent reduction in the base management fee from 1.5% to 1.0% of gross assets affected July 1, 2024. We hope these actions reflect their ongoing commitment to our shareholders. Turning to investment activity, we originated 259 million new investment commitments during the fourth quarter and a weighted average yield of 9.9% compared to 11.1% in the prior quarter. We were pleased with this level of activity albeit at lower yields, reflective of the current market environment. We continue to identify compelling investment opportunities across sponsored and non-sponsored companies, as well as in undervalued publicly traded credits, while maintaining our disciplined and selective investment approach in a competitive environment. Paydowns and exits in the quarter generated $338 million in proceeds, up from $186 million in the third quarter. With refinancing activity increasing across the broader market, we have experienced higher levels of paydowns. We believe this speaks to the strength of our overall portfolio as well as our due diligence and investment process. These paydowns demonstrate the ability of our portfolio companies to successfully execute their business plans, positioning them to refinance debt at more attractive prices, reduce leverage, or sell their businesses. Turning to the liability side of our balance sheet, At fiscal year end, we had substantial liquidity to fund our investment commitments and future investment opportunities. This included $908 million of undirected capacity under our credit facilities and unrestricted cash and cash equivalents of $64 million. Total debt to equity was 1.12 times and net debt to equity was 1.07 times after adjusting for cash and cash equivalents. With respect to the dividend, our board approved a quarterly dividend of $0.55 per share and consistent with prior quarterly distributions. This dividend is payable in cash on December 31, 2024. The stock will lose a record on December 16, 2024. With that, I will turn the call over to Armin to provide more details on our portfolio and the market environment.