LOS ANGELES, CA, Nov. 29, 2018 (GLOBE NEWSWIRE) -- Oaktree Strategic Income Corporation (NASDAQ: OCSI) (“Oaktree Strategic Income” or the “Company”), a specialty finance company, today announced its unaudited financial results for the fiscal quarter ended September 30, 2018.

Fourth Fiscal Quarter 2018 Highlights

  • Total investment income of $14.7 million ($0.50 per share), up from $11.7 million ($0.40 per share) for the third fiscal quarter of 2018;

  • Net investment income of $5.6 million ($0.19 per share), up from $5.1 million ($0.17 per share) for the third fiscal quarter of 2018;

  • Net asset value ("NAV") per share of $10.04, up from $9.91 for the third fiscal quarter of 2018;

  • Originated $91.8 million of new investment commitments and received $101.7 million of proceeds from prepayments, exits, other paydowns and sales; and

  • A quarterly dividend was declared of $0.155 per share, payable on December 28, 2018 to stockholders of record on December 17, 2018.

Management Commentary

Edgar Lee, Chief Executive Officer and Chief Investment Officer of Oaktree Strategic Income Corporation said, “OCSI finished the year strong, highlighted by solid earnings growth and excellent credit quality. Since we began managing OCSI a year ago, we have made significant progress towards optimizing the portfolio as core investments now represent over 88 percent of our portfolio, up from 41 percent as of September 30, 2017. Given our meaningful progress to date, we believe we are well positioned to further enhance our return on equity to our shareholders in 2019.”

Portfolio and Investment Activity

As of September 30, 2018, the fair value of the Company's investment portfolio was $556.8 million and was comprised of investments in 75 companies, including the Company's investments in OCSI Glick JV LLC ("OCSI Glick JV").

At fair value, 89.1% of the Company's portfolio as of September 30, 2018 consisted of senior secured floating-rate debt investments, including 85.0% of first lien loans and 4.1% of second lien loans; 10.5% consisted of a subordinated note investment in the OCSI Glick JV; and 0.4% consisted of equity investments in other portfolio companies.

As of September 30, 2018, the OCSI Glick JV had $166.2 million in assets, including senior secured loans to 31 portfolio companies.  The joint venture generated income of $1.5 million for Oaktree Strategic Income during the quarter ended September 30, 2018.

The weighted average yield on the Company's debt investments as of September 30, 2018, including the return on the Company's subordinated note investment in OCSI Glick JV, was 7.7%.

During the quarter ended September 30, 2018, the Company originated $91.8 million of new investment commitments in 13 new portfolio companies and two existing portfolio company and funded $91.0 million of investments across new and existing portfolio companies.

During the quarter, the Company received $101.7 million of proceeds from various prepayments, exits, other paydowns and sales and exited nine investments.

Results of Operations

Total investment income for the quarter ended September 30, 2018 was $14.7 million, including $13.4 million of cash interest income, $0.5 million of payment-in-kind ("PIK") interest income and $0.8 million of fee income from portfolio investments. PIK interest income, net of PIK collected in cash, represented 3.6% of total investment income for the quarter ended September 30, 2018. Total investment income increased $3.1 million from the quarter ended June 30, 2018, which was primarily attributable to the acceleration of interest income and prepayments fees earned in connection with the exit of a certain investment.

Net expenses for the quarter were $9.2 million, a $2.6 million increase from $6.6 million in the prior quarter. The increase was primarily due to a $2.2 million increase in interest expense, which was mainly attributable to a $2.0 million write-off of previously unamortized financing costs in connection with the redemption of the $309.0 million debt securitization.

Net realized and unrealized gain on the Company's investment portfolio for the quarter ended September 30, 2018 was $2.8 million.

Liquidity and Capital Resources

As of September 30, 2018, the Company had $16.4 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $275.1 million, and $179.9 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.3% as of September 30, 2018.

As of September 30, 2018, the Company’s total leverage ratio was 0.93x debt-to-equity.

Distribution Declaration

The Company's Board of Directors declared a quarterly distribution of $0.155 per share, payable on December 28, 2018 to stockholders of record on December 17, 2018.

Distributions are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company’s stockholders.

Portfolio Asset Quality

As of September 30, 2018, there was one investment on which the Company had stopped accruing cash and/or PIK interest or original issue discount ("OID") income that, in the aggregate, represented 0.14% of the debt portfolio at cost and 0.01% at fair value.


($ in thousands)  
Non-Accrual - Debt InvestmentsAs of September 30, 2018
 As of September 30, 2017
 
Non-Accrual Investments at Fair Value$50 $6,293 
Non-Accrual Investments/Total Debt Investments at Fair Value0.01%1.1%


Oaktree Strategic Income Corporation
Consolidated Statements of Assets and Liabilities

 September 30,
2018
 June 30, 2018
(unaudited)
 September 30,
 2017
ASSETS     
Investments at fair value:     
Control investments (cost September 30, 2018: $73,501,970; cost June 30, 2018: $72,973,228; cost September 30, 2017: $71,340,632)$58,512,170  $57,707,953  $57,606,674 
Affiliate investments (cost September 30, 2018: $0; cost June 30, 2018: $0; cost September 30, 2017: $17,479,053)    935,913 
Non-control/Non-affiliate investments (cost September 30, 2018: $499,423,794; cost June 30, 2018: $516,498,332; cost September 30, 2017: $516,270,639)498,329,658  513,086,230  501,894,073 
Total investments at fair value (cost September 30, 2018: $572,925,764; cost June 30, 2018: $589,471,560; cost September 30, 2017: $605,090,324)556,841,828  570,794,183  560,436,660 
Cash and cash equivalents10,439,023  13,296,085  35,604,127 
Restricted cash5,992,764  10,982,637  7,408,260 
Interest, dividends and fees receivable3,139,334  2,678,368  3,014,075 
Due from portfolio companies167,946  8,951  286,260 
Receivables from unsettled transactions5,143,533  4,620,469  505,000 
Deferred financing costs2,469,675  2,101,795  1,222,933 
Derivative asset at fair value45,807     
Other assets891,960  968,876  185,336 
Total assets$585,131,870  $605,451,364  $608,662,651 
LIABILITIES AND NET ASSETS    
Liabilities:     
Accounts payable, accrued expenses and other liabilities$649,781  $867,845  $482,877 
Base management fee and incentive fee payable1,915,682  1,711,290  2,236,187 
Due to affiliate1,700,952  2,491,450  450,517 
Interest payable1,130,735  2,510,079  1,996,171 
Payables from unsettled transactions8,932,500  47,366,994  49,029,789 
Director fees payable    98,008 
Credit facilities payable275,056,800  80,556,800  82,956,800 
Notes payable (net of $0, $2,006,553 and $2,224,132 of unamortized financing costs as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively)  177,993,447  177,775,868 
Total liabilities289,386,450  313,497,905  315,026,217 
Commitments and contingencies     
Net assets:     
Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding as of September 30, 2018, June 30, 2018 and September 30, 2017294,668  294,668  294,668 
Additional paid-in-capital370,751,389  373,995,934  373,995,934 
Accumulated overdistributed earnings(75,300,637) (82,337,143) (80,654,168)
Total net assets (equivalent to $10.04, $9.91 and $9.97 per common share as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively)295,745,420  291,953,459  293,636,434 
Total liabilities and net assets$585,131,870  $605,451,364  $608,662,651 


Oaktree Strategic Income Corporation
Consolidated Statements of Operations

  Three months ended
September 30, 2018  (unaudited)
 Three months ended
June 30, 2018 (unaudited)
 Three months ended
September 30, 2017 (unaudited)
 Year ended
September 30, 2018
 Year ended
September 30, 2017
Interest income:          
Control investments $928,198  $1,074,611  $1,290,389  $3,970,056  $5,541,299 
Affiliate investments         331,804 
Non-control/Non-affiliate investments 12,443,148  9,642,088  9,559,293  39,139,739  38,489,924 
Interest on cash and cash equivalents 64,691  74,887  68,306  273,552  166,896 
Total interest income 13,436,037  10,791,586  10,917,988  43,383,347  44,529,923 
PIK interest income:          
Control investments 528,743  562,883  223,125  2,161,339  223,125 
Affiliate investments         164,331 
Non-control/Non-affiliate investments 7,634  7,669    26,059  20,965 
Total PIK interest income 536,377  570,552  223,125  2,187,398  408,421 
Fee income:          
Affiliate investments   14,822    14,822  9,647 
Non-control/Non-affiliate investments 751,808  283,864  1,022,638  2,084,980  2,199,909 
Total fee income 751,808  298,686  1,022,638  2,099,802  2,209,556 
Dividend and other income:          
Control investments     (343,272)   (576,044)
Total dividend and other income     (343,272)   (576,044)
Total investment income 14,724,222  11,660,824  11,820,479  47,670,547  46,571,856 
Expenses:          
Base management fee 1,437,341  1,414,815  1,420,696  5,657,786  5,654,699 
Part I incentive fee 1,180,825  1,002,145  815,491  2,923,076  3,236,320 
Professional fees 308,234  618,423  543,226  2,691,950  1,515,536 
Directors fees 105,000  114,093  153,008  479,093  538,072 
Interest expense 5,482,159  3,235,080  2,645,090  14,379,881  10,769,842 
Administrator expense 197,206  326,998  205,152  1,085,819  661,170 
General and administrative expenses 446,961  225,132  516,854  1,383,871  2,030,756 
Total expenses 9,157,726  6,936,686  6,299,517  28,601,476  24,406,395 
Fees waived 3,184  (347,760)   (702,261) (6,232)
Insurance recoveries         (250,000)
Net expenses 9,160,910  6,588,926  6,299,517  27,899,215  24,150,163 
Net investment income 5,563,312  5,071,898  5,520,962  19,771,332  22,421,693 
Unrealized appreciation (depreciation) on investments and foreign currency:          
Control investments 275,475  (750,211) (4,230,858) (1,255,842) (5,933,119)
Affiliate investments   16,333,131  (10,314,600) 16,543,140  (13,595,800)
Non-control/Non-affiliate investments 2,218,715  5,630,684  (5,455,743) 13,282,430  1,739,837 
  Foreign currency forward contract 45,807      45,807   
Net unrealized appreciation (depreciation) on investments and foreign currency 2,539,997  21,213,604  (20,001,201) 28,615,535  (17,789,082)
Net unrealized (appreciation) depreciation on secured borrowings         (14,575)
Realized gain (loss) on investments, secured borrowings and foreign currency:          
Affiliate investments   (15,914,944)   (15,914,916)  
Non-control/Non-affiliate investments 379,381  (8,645,426) 17,060  (11,675,522) (13,384,915)
  Foreign currency forward contract (123,380)     (123,380)  
Net realized gain (loss) on investments, secured borrowings and foreign currency 256,001  (24,560,370) 17,060  (27,713,818) (13,384,915)
Net increase (decrease) in net assets resulting from operations $8,359,310  $1,725,132  $(14,463,179) $20,673,049  $(8,766,879)
Net investment income per common share — basic and diluted $0.19  $0.17  $0.19  $0.67  $0.76 
Earnings (loss) per common share — basic and diluted $0.28  $0.06  $(0.49) $0.70  $(0.30)
Weighted average common shares outstanding — basic and diluted 29,466,768  29,466,768  29,466,768  29,466,768  29,466,768 


Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its fourth fiscal quarter results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on November 29, 2018. The conference call may be accessed by dialing (877) 507-4376 (U.S. callers) or +1 (412) 317-5239 (non-U.S. callers), participant password “Oaktree Strategic Income.” During the earnings conference call, Oaktree Strategic Income intends to refer to an investor presentation that will be available on the Investors section of the Oaktree Strategic Income website, www.oaktreestrategicincome.com. Alternatively, a live webcast of the conference call can be accessed on Oaktree Strategic Income’s website.

For those individuals unable to listen to the live broadcast of the conference call, a replay will be available on Oaktree Strategic Income’s website, or by dialing (877) 344-7529 (U.S. callers) or +1 (412) 317-0088 (non-U.S. callers), access code 10125431, beginning approximately one hour after the broadcast.

About Oaktree Strategic Income Corporation

Oaktree Strategic Income Corporation (NASDAQ:OCSI) is a specialty finance company dedicated to providing customized capital solutions for middle-market companies in both the syndicated and private placement markets. The firm seeks 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. The company is regulated as a business development company under the Investment Company Act of 1940, as amended. Oaktree Strategic Income is managed by Oaktree Capital Management, L.P. For additional information, please visit Oaktree Strategic Income's website at www.oaktreestrategicincome.com.

Forward-Looking Statements

Some of the statements in this press release constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements may include statements as to: our future operating results and distribution projections; our business prospects and the prospects of our portfolio companies; and the impact of the investments that we expect to make. In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in our annual report on Form 10-K. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or regulated investment companies; and other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.

We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Contacts

Investor Relations:
Oaktree Strategic Income Corporation
Michael Mosticchio
(212) 284-1900
ocsi-ir@oaktreecapital.com

Media Relations:
Financial Profiles, Inc.
Moira Conlon
(310) 478-2700
mediainquiries@oaktreecapital.com