Oaktree Specialty Lending Corporation

leverage a little bit higher there. You know, they invest mostly in BSL, so those are, you know, it's relatively more easy to deploy there than in some of the private assets that the sales cycle is a little bit longer. So that's just the other point I'd make.

Sure. And, I mean, to that point on leverage and then deploying within the joint ventures, you know, I mean, obviously, This quarter seems very, very different from even the March quarter. When we look at sort of the repayment levels that you've seen in the portfolio and exits, repayments and exits over the last three quarters, they've been pretty sizable. Should we be expecting any slowing of repayment activity during this period of volatility, or would you expect that to remain pretty elevated?

Melissa, this is Armand. I could take a crack at that. So, a couple things. In terms of liquid credit, in the back half of last year, especially the fourth quarter, as the markets were pretty tight, we actually were just generally a net seller of liquid credit, and so we actually delevered the JVs as a result of that. I think given the volatility in the last four to six weeks in the public markets and our anticipation of further volatility in those markets given what I would expect would be a challenging tariff backdrop for a while, I would expect that we will find some opportunities to deploy into the joint ventures and increase their leverage again. We're looking for good deals that are – or good companies that are trading discounted and we don't think it's there yet. They traded off two, three, maybe three and a half points in late March and into April, and they've recovered maybe half of that point move. And if you look at high-yield bonds, the spreads had widened to 435, 440-ish during that time frame. They're now back to sort of 375. They are pretty volatile, though, quite sort of up and down, but We think that as performance starts to show up in the second calendar quarter this year and into the third, there's probably going to be volatility in the public credit and equity markets that we think we could take advantage of for the JVs. In the case of private credit, we actually have had some exits since the end of the quarter, and so I think those are more idiosyncratic, not really reflective of necessarily a tightening credit story. It was just, you know, situations that resolved. So I think our repayments for the quarter are not going to be immaterial. I think they will be up for the quarter end of June. I think they'll still be, you know, significant enough. But again, but yes, I think your instinct is correct that if the markets are volatile, that generally speaking, repayments, refinancings should slow down, and I would expect to see that over the coming quarters as well.

Thanks very much. Thank you.

Again, if you have a question, please press star, then 1. The next question comes from Paul Johnson with KBW. Please go ahead.

Thank you. Thanks for taking my questions. just on the kind of run rate question of income, um, just looking at the portfolio yield this quarter, I think it was down 50 basis points or so. Um, but if I take a quick average of just kind of the debt portfolio yield, um, you know, quarter over quarter, it looks like it's down a little over a hundred basis points. So I'm just curious, like, is there any kind of, you know, one-time stuff that's flowing through there? Um, you know, that would – is this yield, I guess, that we have today reflective of kind of what you think the portfolio should generate going forward?

Hey, it's Chris. Appreciate the question. Yeah, I think a couple of factors. I think looking at sort of the quarter-on-quarter decline in interest income, you know, part of that is just due to reference rate declines. In the December quarter, you know, rate sets for about half the book were based on 930 base rates. So those, you know, reset at the end of December in light of the rate cuts that happened in the fourth calendar quarter. You know, that slayed through, you know, in the March quarter. So that's part of it. And as far as the quarter-on-quarter decline in yield from the 10.7% we reported last quarter to the 10.2% this quarter. The majority of that, about 30 bps worth, was due to the impact of the new non-accruals, which we've discussed, and a little bit of, I'll call it lingering timing with respect to reference rate resets. and also some spread compression quarter on quarter. So I do think that where we're at now is a decent run rate yield on the book.

Okay. Thank you for that. And then you partly answered my question here, but on the JV, the 10.6% ROE Is that a net ROE as opposed to like an operating ROE on the JV?

That's looking at the NII of the JV. I should say the NII plus the coupon interest on the subordinated note.

Okay. Because that's pretty close to what you're generating on the balance sheet. So it sounds like you may find some opportunities to increase leverage there and put some investments into the JV. So with leverage, I guess, what do you think you could potentially get the JV to in terms of an ROE over time?

I think it would depend on the opportunity set. You know, getting back up into the, you know, call it the 11, 12% context I think is achievable. But, you know, we'll ultimately depend on the opportunities that we're seeing there.

Appreciate it. That's all for me.

Thank you. This concludes the question and answer session. I would like to turn the conference back over to Clark Corey for any closing remarks.

Thank you, Operator, and thank you all for joining us on today's call. A replay of the earnings call will be available in approximately one hour, and you can access that on the investor section of OCSL's website. Please feel free to reach out to me and team with any questions you may have. Thanks again for your participation and support.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.