Oaktree Specialty Lending Corp - FORM 10-Q - May 6, 2020

Attached files

file filename
EX-31.2 - EXHIBIT 31.2 - Oaktree Specialty Lending Corpocsl-ex312_0331202010xq.htm
EX-32.2 - EXHIBIT 32.2 - Oaktree Specialty Lending Corpocsl-ex322_0331202010xq.htm
EX-32.1 - EXHIBIT 32.1 - Oaktree Specialty Lending Corpocsl-ex321_0331202010xq.htm
EX-31.1 - EXHIBIT 31.1 - Oaktree Specialty Lending Corpocsl-ex311_0331202010xq.htm
EX-10.2 - EXHIBIT 10.2 - Oaktree Specialty Lending Corpexhibit102_ingxoaktree-ame.htm
EX-10.1 - EXHIBIT 10.1 - Oaktree Specialty Lending Corpexhibit101ocsl_investmenta.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
 
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2020
OR
 
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
COMMISSION FILE NUMBER: 1-33901
Oaktree Specialty Lending Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
DELAWARE
(State or jurisdiction of
incorporation or organization)
 
26-1219283
(I.R.S. Employer
Identification No.)
 
 
 
333 South Grand Avenue, 28th Floor
Los Angeles, CA
(Address of principal executive office)
 
90071
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(213) 830-6300


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
 
 
 
 
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange
on Which Registered
Common Stock, par value $0.01 per share
 
OCSL
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   þ     NO   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES   ¨   NO   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ¨
 
Accelerated filer  þ
 
Non-accelerated filer  ¨
 
Smaller reporting company  ¨
 
 
 
 
 
 
 
Emerging growth company  ¨

 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    YES  ¨     NO  þ
The registrant had 140,960,651 shares of common stock outstanding as of May 5, 2020.



OAKTREE SPECIALTY LENDING CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020



TABLE OF CONTENTS


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 3.
Item 4.
Item 5.

 




 






 




 


PART I — FINANCIAL INFORMATION

Item 1.
Consolidated Financial Statements.

Oaktree Specialty Lending Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
 
 
March 31, 2020 (unaudited)
 
September 30, 2019
ASSETS
Investments at fair value:
 
 
 
 
Control investments (cost March 31, 2020: $255,739; cost September 30, 2019: $224,255)
 
$
187,267

 
$
209,178

Affiliate investments (cost March 31, 2020: $10,487; cost September 30, 2019: $8,449)
 
9,414

 
9,170

Non-control/Non-affiliate investments (cost March 31, 2020: $1,362,354; cost September 30, 2019: $1,280,310)
 
1,195,506

 
1,219,694

Total investments at fair value (cost March 31, 2020: $1,628,580; cost September 30, 2019: $1,513,014)
 
1,392,187

 
1,438,042

Cash and cash equivalents
 
89,509

 
15,406

Interest, dividends and fees receivable
 
6,217

 
11,167

Due from portfolio companies
 
1,774

 
2,616

Receivables from unsettled transactions
 
1,868

 
4,586

Deferred financing costs
 
5,671

 
6,396

Deferred offering costs
 
45

 
—

Deferred tax asset, net
 
821

 
—

Derivative assets at fair value
 
1,268

 
490

Other assets
 
2,267

 
2,335

Total assets
 
$
1,501,627

 
$
1,481,038

LIABILITIES AND NET ASSETS
Liabilities:
 

 
 
Accounts payable, accrued expenses and other liabilities
 
$
1,750

 
$
1,589

Base management fee and incentive fee payable
 
8,739

 
10,167

Due to affiliate
 
2,651

 
2,689

Interest payable
 
1,681

 
2,296

Payables from unsettled transactions
 
35,896

 
59,596

Deferred tax liability
 
—

 
704

Credit facility payable
 
404,825

 
314,825

Unsecured notes payable (net of $3,645 and $2,708 of unamortized financing costs as of March 31, 2020 and September 30, 2019, respectively)
 
293,861

 
158,542

Total liabilities
 
749,403

 
550,408

Commitments and contingencies (Note 14)
 

 
 
Net assets:
 
 
 
 
Common stock, $0.01 par value per share, 250,000 shares authorized; 140,961 shares issued and outstanding as of March 31, 2020 and September 30, 2019
 
1,409

 
1,409

Additional paid-in-capital
 
1,487,774

 
1,487,774

Accumulated overdistributed earnings
 
(736,959
)
 
(558,553
)
Total net assets (equivalent to $5.34 and $6.60 per common share as of March 31, 2020 and September 30, 2019, respectively) (Note 12)
 
752,224

 
930,630

Total liabilities and net assets
 
$
1,501,627

 
$
1,481,038


See notes to Consolidated Financial Statements.

1

Oaktree Specialty Lending Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
Six months ended March 31, 2020
 
Six months ended
March 31, 2019
Interest income:
 
 
 
 
 
 
 
 
Control investments
 
$
2,393

 
$
2,852

 
$
4,944

 
$
6,191

Affiliate investments
 
138

 
22

 
252

 
35

Non-control/Non-affiliate investments
 
27,149

 
31,231

 
52,808

 
63,398

Interest on cash and cash equivalents
 
218

 
204

 
299

 
474

Total interest income
 
29,898

 
34,309

 
58,303

 
70,098

PIK interest income:
 
 
 
 
 
 
 
 
Control investments
 
—

 
—

 
—

 
67

Non-control/Non-affiliate investments
 
1,946

 
2,280

 
3,107

 
3,045

Total PIK interest income
 
1,946

 
2,280

 
3,107

 
3,112

Fee income:
 
 
 
 
 
 
 
 
Control investments
 
8

 
7

 
14

 
13

Affiliate investments
 
5

 
5

 
10

 
9

Non-control/Non-affiliate investments
 
2,037

 
1,120

 
3,097

 
2,312

Total fee income
 
2,050

 
1,132

 
3,121

 
2,334

Dividend income:
 
 
 
 
 
 
 
 
Control investments
 
277

 
523

 
600

 
976

Total dividend income
 
277

 
523

 
600

 
976

Total investment income
 
34,171

 
38,244

 
65,131

 
76,520

Expenses:
 
 
 
 
 
 
 
 
Base management fee
 
5,295

 
5,731

 
10,902

 
11,299

Part I incentive fee
 
3,444

 
3,813

 
6,432

 
7,541

Part II incentive fee
 
(6,608
)
 
8,170

 
(5,557
)
 
9,990

Professional fees
 
669

 
499

 
1,309

 
1,465

Directors fees
 
142

 
142

 
285

 
285

Interest expense
 
7,215

 
8,970

 
13,750

 
17,874

Administrator expense
 
393

 
406

 
821

 
1,169

General and administrative expenses
 
780

 
705

 
1,312

 
1,336

Total expenses
 
11,330

 
28,436

 
29,254

 
50,959

Reversal of fees waived / (fees waived)
 
—

 
(7,901
)
 
5,200

 
(9,465
)
Net expenses
 
11,330

 
20,535

 
34,454

 
41,494

Net investment income
 
22,841

 
17,709

 
30,677

 
35,026

Unrealized appreciation (depreciation):
 
 
 
 
 
 
 
 
Control investments
 
(55,392
)
 
3,868

 
(53,395
)
 
(1,952
)
Affiliate investments
 
(1,730
)
 
(181
)
 
(1,794
)
 
(181
)
Non-control/Non-affiliate investments
 
(108,651
)
 
17,108

 
(106,243
)
 
16,324

Secured borrowings
 
—

 
(76
)
 
—

 
(95
)
Foreign currency forward contracts
 
2,240

 
753

 
778

 
401

Net unrealized appreciation (depreciation)
 
(163,533
)
 
21,472

 
(160,654
)
 
14,497

Realized gains (losses):
 
 
 
 
 
 
 
 
Control investments
 
777

 
—

 
777

 
—

Non-control/Non-affiliate investments
 
(24,777
)
 
25,899

 
(20,938
)
 
42,660

Extinguishment of unsecured notes payable
 
(2,541
)
 
—

 
(2,541
)
 
—

Foreign currency forward contracts
 
61

 
(686
)
 
(490
)
 
515

Net realized gains (losses)
 
(26,480
)
 
25,213

 
(23,192
)
 
43,175

Provision for income tax (expense) benefit
 
1,705

 
91

 
1,545

 
(495
)
Net realized and unrealized gains (losses), net of taxes
 
(188,308
)
 
46,776

 
(182,301
)
 
57,177

Net increase (decrease) in net assets resulting from operations
 
$
(165,467
)
 
$
64,485

 
$
(151,624
)
 
$
92,203

Net investment income per common share — basic and diluted
 
$
0.16

 
$
0.13

 
$
0.22

 
$
0.25

Earnings (loss) per common share — basic and diluted (Note 5)
 
$
(1.17
)
 
$
0.46

 
$
(1.08
)
 
$
0.65

Weighted average common shares outstanding — basic and diluted
 
140,961

 
140,961

 
140,961

 
140,961


See notes to Consolidated Financial Statements.

2


Oaktree Specialty Lending Corporation
Consolidated Statements of Changes in Net Assets
(in thousands, except per share amounts)
(unaudited)

 
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
Six months ended
March 31, 2020
 
Six months ended
March 31, 2019
Operations:
 
 
 
 
 
 
 
 
Net investment income
 
$
22,841

 
$
17,709

 
$
30,677

 
$
35,026

Net unrealized appreciation (depreciation)
 
(163,533
)
 
21,472

 
(160,654
)
 
14,497

Net realized gains (losses)
 
(26,480
)
 
25,213

 
(23,192
)
 
43,175

Provision for income tax (expense) benefit

 
1,705

 
91

 
1,545

 
(495
)
Net increase (decrease) in net assets resulting from operations
 
(165,467
)
 
64,485

 
(151,624
)
 
92,203

Stockholder transactions:
 
 
 
 
 
 
 
 
Distributions to stockholders
 
(13,391
)
 
(13,391
)
 
(26,782
)
 
(26,782
)
Net increase (decrease) in net assets from stockholder transactions
 
(13,391
)
 
(13,391
)
 
(26,782
)
 
(26,782
)
Capital share transactions:
 
 
 
 
 
 
 
 
Issuance of common stock under dividend reinvestment plan
 
506

 
312

 
987

 
696

Repurchases of common stock under dividend reinvestment plan
 
(506
)
 
(312
)
 
(987
)
 
(696
)
Net increase (decrease) in net assets from capital share transactions
 
—

 
—

 
—

 
—

Total increase (decrease) in net assets
 
(178,858
)
 
51,094

 
(178,406
)
 
65,421

Net assets at beginning of period
 
931,082

 
872,362

 
930,630

 
858,035

Net assets at end of period
 
$
752,224

 
$
923,456

 
$
752,224

 
$
923,456

Net asset value per common share
 
$
5.34

 
$
6.55

 
$
5.34

 
$
6.55

Common shares outstanding at end of period
 
140,961

 
140,961

 
140,961

 
140,961




See notes to Consolidated Financial Statements.

3
Oaktree Specialty Lending Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)





 
 
Six months ended
March 31, 2020
 
Six months ended
March 31, 2019
Operating activities:
 
 
 
 
Net increase (decrease) in net assets resulting from operations
 
$
(151,624
)
 
$
92,203

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
 
 
 
 
Net unrealized (appreciation) depreciation
 
160,654

 
(14,497
)
Net realized (gains) losses
 
23,192

 
(43,175
)
PIK interest income
 
(3,107
)
 
(3,112
)
Accretion of original issue discount on investments
 
(5,454
)
 
(13,224
)
Accretion of original issue discount on unsecured notes payable
 
48

 
107

Amortization of deferred financing costs
 
968

 
1,545

Deferred taxes
 
(1,525
)
 
291

Purchases of investments
 
(379,169
)
 
(270,266
)
Proceeds from the sales and repayments of investments
 
251,499

 
329,035

Changes in operating assets and liabilities:
 
 
 
 
(Increase) decrease in interest, dividends and fees receivable
 
4,950

 
1,575

(Increase) decrease in due from portfolio companies
 
842

 
(50
)
(Increase) decrease in receivables from unsettled transactions
 
2,718

 
24,942

(Increase) decrease in other assets
 
68

 
189

Increase (decrease) in accounts payable, accrued expenses and other liabilities
 
163

 
(2,076
)
Increase (decrease) in base management fee and incentive fee payable
 
(1,428
)
 
699

Increase (decrease) in due to affiliate
 
(38
)
 
(1,334
)
Increase (decrease) in interest payable
 
(615
)
 
(1,248
)
Increase (decrease) in payables from unsettled transactions
 
(23,700
)
 
(27,336
)
Increase (decrease) in amounts payable to syndication partners
 
—

 
477

Net cash provided by (used in) operating activities
 
(121,558
)
 
74,745

Financing activities:
 
 
 
 
Distributions paid in cash
 
(25,795
)
 
(26,086
)
Borrowings under credit facilities
 
224,000

 
228,825

Repayments of borrowings under credit facilities
 
(134,000
)
 
(45,000
)
Repayments of unsecured notes
 
(161,250
)
 
(228,825
)
Issuance of unsecured notes
 
297,459

 
—

Repayments of secured borrowings
 
—

 
(692
)
Repurchases of common stock under dividend reinvestment plan
 
(987
)
 
(696
)
Deferred financing costs paid
 
(3,715
)
 
(2,608
)
Deferred offering costs paid
 
(45
)
 
—

Net cash provided by (used in) financing activities
 
195,667

 
(75,082
)
Effect of exchange rate changes on foreign currency
 
(6
)
 
—

Net increase (decrease) in cash and cash equivalents and restricted cash
 
74,103

 
(337
)
Cash and cash equivalents and restricted cash, beginning of period
 
15,406

 
13,489

Cash and cash equivalents and restricted cash, end of period
 
$
89,509

 
$
13,152

Supplemental information:
 
 
 
 
Cash paid for interest
 
$
13,349

 
$
17,472

Non-cash financing activities:
 
 
 
 
Issuance of shares of common stock under dividend reinvestment plan
 
$
987

 
$
696


See notes to Consolidated Financial Statements.

4
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Control Investments
 
 
 
 
 
 
 
 
(8)(9)
C5 Technology Holdings, LLC
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
829 Common Units
 
 
 
 
$
—

 
$
—

 
(20)
34,984,460.37 Preferred Units
 
 
 
 
34,984

 
27,638

 
(20)
 
 
 
 
 
34,984

 
27,638

 
 
Dominion Diagnostics, LLC
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024
6.46
%
 
$
27,799

 
27,799

 
27,799

 
(6)(20)
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024
6.46
%
 
5,260

 
5,260

 
5,260

 
(6)(19)(20)
30,030.8 Common Units in DD Healthcare Services Holdings, LLC
 
 
 
 
18,626

 
10,115

 
(20)
 
 
 
 
 
51,685

 
43,174

 
 
First Star Speir Aviation Limited
 
Airlines
 
 
 
 
 
 
(10)
First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
11,510

 
2,097

 
11,510

 
(11)(20)
100% equity interest
 
 
 
 
8,500

 
3,165

 
(11)(12)(20)
 
 
 
 
 
10,597

 
14,675

 
 
New IPT, Inc.
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
6.45
%
 
2,605

 
2,605

 
2,605

 
 (6)(20)
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
6.45
%
 
1,009

 
1,009

 
1,009

 
 (6)(19)(20)
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
—

 
1,596

 
(20)
 
 
 
 
 
3,614

 
5,210

 
 
Senior Loan Fund JV I, LLC
 
Multi-Sector Holdings
 
 
 
 
 
 
(14)
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028
8.73
%
 
96,250

 
96,250

 
92,171

 
(6)(11)(20)
87.5% LLC equity interest
 
 
 
 
49,322

 
—

 
(11)(16)(19)
 
 
 
 
 
145,572

 
92,171

 
 
Thruline Marketing, Inc.
 
Advertising
 
 
 
 
 
 

9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
9,287

 
4,399

 
(20)
 
 
 
 
 
9,287

 
4,399

 
 
 Total Control Investments (24.9% of net assets)
 
 
 
 
$
255,739

 
$
187,267

 
 
 
 
 
 
 
 
 
 
 
 
 Affiliate Investments
 
 
 
 
 
 
 
 
(17)
Assembled Brands Capital LLC
 
Specialized Finance
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023
6.99
%
 
$
7,623

 
$
7,623

 
$
6,115

 
(6)(19)(20)
1,609,201 Class A Units
 
 
 
 
765

 
917

 
(20)
1,019,168.80 Preferred Units, 6%
 
 
 
 
1,019

 
1,050

 
(20)
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
9,407

 
8,082

 
 
Caregiver Services, Inc.
 
Health Care Services
 
 
 
 
 
 
 
1,080,399 shares of Series A Preferred Stock, 10%
 
 
 
 
1,080

 
1,332

 
(20)
 
 
 
 
 
1,080

 
1,332

 
 
 Total Affiliate Investments (1.3% of net assets)
 
 
 
 
$
10,487

 
$
9,414

 
 
 
 
 
 
 
 
 
 
 
 
 Non-Control/Non-Affiliate Investments
 
 
 
 
 
 
 
 
(18)
4 Over International, LLC
 
Commercial Printing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022
7.45
%
 
$
5,738

 
$
5,710

 
$
5,528

 
(6)(20)
First Lien Revolver, LIBOR+6.00% cash due 6/7/2021
7.45
%
 
2,232

 
2,214

 
2,150

 
(6)(20)
 
 
 
 
 
7,924

 
7,678

 
 
99 Cents Only Stores LLC
 
General Merchandise Stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022
6.07
%
 
19,380

 
19,085

 
13,889

 
(6)
 
 
 
 
 
19,085

 
13,889

 
 

5
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Access CIG, LLC
 
Diversified Support Services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026
9.53
%
 
$
15,000

 
$
14,900

 
$
12,863

 
(6)
 
 
 
 
 
14,900

 
12,863

 
 
Accupac, Inc.
 
Personal Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 1/17/2026
7.84
%
 
12,550

 
12,338

 
12,330

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 1/17/2026
 
 
—

 
(39
)
 
(41
)
 
(6)(19)(20)
First Lien Revolver, LIBOR+6.00% cash due 1/17/2026
7.05
%
 
1,564

 
1,537

 
1,536

 
(6)(20)
 
 
 
 
 
13,836

 
13,825

 
 
Acquia Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 10/31/2025
8.58
%
 
20,950

 
20,559

 
19,961

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 10/31/2025
 
 
—

 
(43
)
 
(106
)
 
(6)(19)(20)
 
 
 
 
 
20,516

 
19,855

 
 
Aden & Anais Merger Sub, Inc.
 
Apparel, Accessories & Luxury Goods
 
 
 
 
 
 
 
51,645 Common Units in Aden & Anais Holdings, Inc.
 
 
 
 
5,165

 
—

 
(20)
 
 
 
 
 
5,165

 
—

 
 
AdVenture Interactive, Corp.
 
Advertising
 
 
 
 
 
 
 
9,073 shares of common stock
 
 
 
 
13,611

 
12,845

 
(20)
 
 
 
 
 
13,611

 
12,845

 
 
AI Ladder (Luxembourg) Subco S.a.r.l.
 
Electrical Components & Equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
5.49
%
 
21,563

 
21,072

 
18,185

 
(6)(11)
 
 
 
 
 
21,072

 
18,185

 
 
AI Sirona (Luxembourg) Acquisition S.a.r.l.
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, EURIBOR+7.25% cash due 9/28/2026
7.25
%
 
€
17,500

 
20,035

 
14,977

 
(6)(11)(20)
 
 
 
 
 
20,035

 
14,977

 
 
AirStrip Technologies, Inc.
 
Application Software
 
 
 
 
 
 
 
5,715 Common Stock Warrants (exercise price $139.99) expiration date 5/11/2025
 
 
 
 
90

 
—

 
(20)
 
 
 
 
 
90

 
—

 
 
Aldevron, L.L.C.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/12/2026
5.70
%
 
$
8,000

 
7,920

 
7,560

 
(6)
 
 
 
 
 
7,920

 
7,560

 
 
Algeco Scotsman Global Finance Plc
 
Construction & Engineering
 
 
 
 
 
 
 
Fixed Rate Bond, 8.00% cash due 2/15/2023
 
 
13,524

 
13,232

 
10,447

 
(11)
 
 
 
 
 
13,232

 
10,447

 
 
Altice France S.A.
 
Integrated Telecommunication Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
4.70
%
 
1,378

 
1,202

 
1,319

 
(6)(11)
 
 
 
 
 
1,202

 
1,319

 
 
Alvotech Holdings S.A.
 
Biotechnology
 
 
 
 
 
 
(13)
Fixed Rate Bond 15% PIK Note A due 12/13/2023
 
 
14,800

 
17,538

 
18,425

 
(11)(20)
Fixed Rate Bond 15% PIK Note B due 12/13/2023
 
 
14,800

 
17,538

 
17,997

 
(11)(20)
 
 
 
 
 
35,076

 
36,422

 
 
Ancile Solutions, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021
8.45
%
 
8,429

 
8,371

 
8,218

 
 (6)(20)
 
 
 
 
 
8,371

 
8,218

 
 
Apptio, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
8.25
%
 
23,764

 
23,380

 
22,647

 
(6)(20)
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
 
—

 
(24
)
 
(72
)
 
(6)(19)(20)
 
 
 
 
 
23,356

 
22,575

 
 

6
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Associated Asphalt Partners, LLC
 
Construction Materials
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.25% cash due 4/5/2024
6.25
%
 
$
2,569

 
$
2,113

 
$
1,863

 
(6)
 
 
 
 
 
2,113

 
1,863

 
 
Asurion, LLC
 
Property & Casualty Insurance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.00% cash due 11/3/2024
3.99
%
 
2,098

 
1,769

 
2,024

 
(6)
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/2025
7.49
%
 
21,274

 
21,234

 
19,718

 
(6)
 
 
 
 
 
23,003

 
21,742

 
 
Atlas Senior Loan Fund XV, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+7.54% cash due 10/23/2032
9.46
%
 
741

 
474

 
468

 
(6)(11)
 
 
 
 
 
474

 
468

 
 
Aurora Lux Finco S.À.R.L.
 
Airport Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026
7.00
%
 
23,000

 
22,447

 
21,623

 
(6)(11)(20)
 
 
 
 
 
22,447

 
21,623

 
 
Avantor Inc.
 
Health Care Distributors
 
 
 
 
 
 
 
Fixed Rate Bond, 9.00% cash due 10/1/2025
 
 
3,000

 
2,976

 
3,177

 
 
 
 
 
 
 
2,976

 
3,177

 
 
Avoca Capital CLO X Designated Activity Company
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class ER Notes, EURIBOR+6.05% cash due 1/15/2030
6.05
%
 
€
741

 
552

 
627

 
(6)(11)
 
 
 
 
 
552

 
627

 
 
Blackhawk Network Holdings, Inc.
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026
7.81
%
 
$
26,250

 
26,031

 
21,613

 
(6)
 
 
 
 
 
26,031

 
21,613

 
 
Boxer Parent Company Inc.
 
Systems Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
5.24
%
 
13,845

 
13,732

 
11,642

 
(6)
 
 
 
 
 
13,732

 
11,642

 
 
California Pizza Kitchen, Inc.
 
Restaurants
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 8/23/2022
 
 
3,106

 
3,081

 
1,571

 
(6)(21)
 
 
 
 
 
3,081

 
1,571

 
 
Carlyle US CLO 2019-3, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 

Class D Notes, LIBOR+7.03% cash due 10/20/2032
9.11
%
 
504

 
315

 
343

 
(6)(11)
 
 
 
 
 
315

 
343

 
 
Chief Power Finance II, LLC
 
Independent Power Producers & Energy Traders
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 12/31/2022
7.95
%
 
22,425

 
21,938

 
21,151

 
(6)(20)
 
 
 
 
 
21,938

 
21,151

 
 
CITGO Holding, Inc.
 
Oil & Gas Refining & Marketing
 
 
 
 
 
 
 
Fixed Rate Bond, 9.25% cash due 8/1/2024
 
 
10,672

 
10,672

 
8,778

 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/1/2023
8.00
%
 
9,950

 
9,825

 
8,225

 
(6)
 
 
 
 
 
20,497

 
17,003

 
 
CITGO Petroleum Corp.
 
Oil & Gas Refining & Marketing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
6.00
%
 
9,900

 
9,801

 
8,762

 
(6)
 
 
 
 
 
9,801

 
8,762

 
 
Commscope, Inc.
 
Communications Equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 4/6/2026
4.24
%
 
1,532

 
1,325

 
1,456

 
(6)(11)
 
 
 
 
 
1,325

 
1,456

 
 

7
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Connect U.S. Finco LLC
 
Alternative Carriers
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026
5.49
%
 
$
31,378

 
$
30,608

 
$
25,299

 
(6)(11)
 
 
 
 
 
30,608

 
25,299

 
 
Continental Intermodal Group LP
 
Oil & Gas Storage & Transportation
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+8.50% PIK due 1/28/2025
 
 
31,599

 
31,599

 
29,545

 
(6)(15)(20)
 
 
 
 
 
31,599

 
29,545

 
 
Convergeone Holdings, Inc.
 
IT Consulting & Other Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026
5.99
%
 
14,696

 
14,197

 
11,573

 
(6)
 
 
 
 
 
14,197

 
11,573

 
 
Conviva Inc.
 
Application Software
 
 
 
 
 
 
 
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021
 
 
 
 
105

 
395

 
(20)
 
 
 
 
 
105

 
395

 
 
Corrona, LLC
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.75% cash due 12/13/2025
6.75
%
 
10,352

 
10,180

 
10,041

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.75% cash due 12/13/2025
 
 
—

 
(32
)
 
(110
)
 
(6)(19)(20)
First Lien Revolver, PRIME + 4.75% cash due 12/13/2025
8.00
%
 
1,221

 
1,190

 
1,166

 
(6)(19)(20)
1,099 Class A2 Common Units in Corrona Group Holdings, L.P.
 
 
 
 
1,099

 
1,099

 
(20)
 
 
 
 
 
12,437

 
12,196

 
 
Covia Holdings Corporation
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 6/1/2025
 
 
7,860

 
7,860

 
3,720

 
(6)(11)(21)
 
 
 
 
 
7,860

 
3,720

 
 
Coyote Buyer, LLC
 
Specialty Chemicals
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 2/6/2026
7.74
%
 
13,189

 
13,057

 
13,057

 
(6)(20)
First Lien Revolver, LIBOR+6.00% cash due 2/6/2025
7.74
%
 
39

 
35

 
35

 
(6)(19)(20)
 
 
 
 
 
13,092

 
13,092

 
 
Crown Point CLO 7 Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 

Class E Notes, LIBOR+6.30% cash due 10/20/2031
8.12
%
 
2,745

 
1,969

 
1,561

 
(6)(11)
 
 
 
 
 
1,969

 
1,561

 
 
CTOS, LLC
 
Trading Companies & Distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 4/18/2025
5.00
%
 
10,190

 
10,290

 
8,789

 
(6)
 
 
 
 
 
10,290

 
8,789

 
 
Dealer Tire, LLC
 
Distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025
5.24
%
 
4,010

 
3,498

 
3,335

 
(6)
 
 
 
 
 
3,498

 
3,335

 
 
The Dun & Bradstreet Corporation
 
Research & Consulting Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 2/6/2026
4.96
%
 
10,000

 
9,831

 
9,088

 
(6)
Fixed Rate Bond 6.875% cash due 8/15/2026
 
 
5,000

 
5,000

 
5,228

 
 
 
 
 
 
 
14,831

 
14,316

 
 
Eagleview Technology Corporation
 
Application Software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026
8.57
%
 
12,000

 
11,880

 
10,320

 
(6)(20)
 
 
 
 
 
11,880

 
10,320

 
 
EHR Canada, LLC
 
Food Retail
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+8.00% cash due 9/28/2020
9.45
%
 
6,861

 
6,829

 
6,909

 
(6)(20)
 
 
 
 
 
6,829

 
6,909

 
 

8
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Elevation CLO 2013-1, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class D1R2 Notes, LIBOR+7.65% cash due 8/15/2032
9.34
%
 
$
1,418

 
$
1,096

 
$
949

 
(6)(11)
 
 
 
 
 
1,096

 
949

 
 
Elevation CLO 2017-6, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.60% cash due 7/15/2029
8.43
%
 
500

 
392

 
310

 
(6)(11)
 
 
 
 
 
392

 
310

 
 
Elevation CLO 2018-10, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.29% cash due 10/20/2031
8.12
%
 
1,411

 
1,070

 
816

 
(6)(11)
 
 
 
 
 
1,070

 
816

 
 
Elevation CLO 2018-9, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.30% cash due 7/15/2031
8.13
%
 
1,275

 
792

 
751

 
(6)(11)
 
 
 
 
 
792

 
751

 
 
EOS Fitness Opco Holdings, LLC
 
Leisure Facilities
 
 
 
 
 
 
 
487.5 Class A Preferred Units, 12%
 
 
 
 
488

 
907

 
(20)
12,500 Class B Common Units
 
 
 
 
—

 
492

 
(20)
 
 
 
 
 
488

 
1,399

 
 
ExamSoft Worldwide, Inc.
 
Application Software
 
 
 
 
 
 
 
180,707 Class C Units in ExamSoft Investor LLC
 
 
 
 
181

 
—

 
(20)
 
 
 
 
 
181

 
—

 
 
GI Chill Acquisition LLC
 
Managed Health Care
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025
5.45
%
 
17,730

 
17,641

 
15,336

 
(6)(20)
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/2026
8.95
%
 
10,000

 
9,921

 
8,700

 
(6)(20)
 
 
 
 
 
27,562

 
24,036

 
 
Global Medical Response
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025
5.86
%
 
6,289

 
6,172

 
5,675

 
(6)
 
 
 
 
 
6,172

 
5,675

 
 
GKD Index Partners, LLC
 
Specialized Finance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 6/29/2023
8.45
%
 
21,781

 
21,640

 
21,389

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 6/29/2023
8.12
%
 
924

 
914

 
902

 
(6)(19)(20)
 
 
 
 
 
22,554

 
22,291

 
 
Guidehouse LLP
 
Research & Consulting Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 5/1/2025
5.49
%
 
4,975

 
4,927

 
4,079

 
(6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026
8.99
%
 
20,000

 
19,924

 
17,300

 
(6)(20)
 
 
 
 
 
24,851

 
21,379

 
 
HealthEdge Software, Inc.
 
Application Software
 
 
 
 
 
 
 
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023
 
 
 
 
213

 
1,891

 
(20)
 
 
 
 
 
213

 
1,891

 
 
HNC Holdings, Inc.
 
Building Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 10/5/2023
5.00
%
 
1,734

 
1,621

 
1,570

 
(6)
 
 
 
 
 
1,621

 
1,570

 
 
Houghton Mifflin Harcourt Publishers Inc.
 
Education Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.25% cash due 11/22/2024
7.24
%
 
6,913

 
6,649

 
6,187

 
(6)(11)
 
 
 
 
 
6,649

 
6,187

 
 
Hyland Software, Inc.
 
Systems Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 7/1/2024
4.24
%
 
836

 
749

 
785

 
(6)
 
 
 
 
 
749

 
785

 
 
I Drive Safely, LLC
 
Education Services
 
 
 
 
 
 
 
125,079 Class A Common Units of IDS Investments, LLC
 
 
 
 
1,000

 
200

 
(20)
 
 
 
 
 
1,000

 
200

 
 
IBG Borrower LLC
 
Apparel, Accessories & Luxury Goods
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/2/2022
8.50
%
 
13,284

 
12,374

 
11,424

 
(6)(20)
 
 
 
 
 
12,374

 
11,424

 
 

9
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
iCIMs, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024
7.50
%
 
$
16,718

 
$
16,464

 
$
16,024

 
(6)(20)
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024
 
 
—

 
(17
)
 
(37
)
 
(6)(19)(20)
 
 
 
 
 
16,447

 
15,987

 
 
Integral Development Corporation
 
Other Diversified Financial Services
 
 
 
 
 
 
 
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024
 
 
 
 
113

 
—

 
(20)
 
 
 
 
 
113

 
—

 
 
Intelsat Jackson Holdings S.A.
 
Alternative Carriers
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/2/2024
6.43
%
 
769

 
696

 
717

 
(6)(11)
 
 
 
 
 
696

 
717

 
 
L Squared Capital Partners LLC
 
Multi-Sector Holdings
 
 
 
 
 
 
 
2.00% limited partnership interest
 
 
 
 
864

 
2,462

 
(11)(16)
 
 
 
 
 
864

 
2,462

 
 
Lanai Holdings III, Inc.
 
Health Care Distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 8/29/2022
6.53
%
 
13,016

 
12,840

 
9,580

 
(6)
 
 
 
 
 
12,840

 
9,580

 
 
Lannett Company, Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 11/25/2020
6.00
%
 
611

 
611

 
544

 
(6)(11)
 
 
 
 
 
611

 
544

 
 
Lift Brands Holdings, Inc.
 
Leisure Facilities
 
 
 
 
 
 
 
2,000,000 Class A Common Units in Snap Investments, LLC
 
 
 
 
1,399

 
1,644

 
(20)
 
 
 
 
 
1,399

 
1,644

 
 
Lightbox Intermediate, L.P.
 
Real Estate Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026
5.80
%
 
39,700

 
39,178

 
34,738

 
(6)(20)
 
 
 
 
 
39,178

 
34,738

 
 
LTI Holdings, Inc.
 
Auto Parts & Equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 7/24/2026
5.74
%
 
1,317

 
1,139

 
997

 
(6)
First Lien Term Loan, LIBOR+3.50% cash due 9/6/2025
4.49
%
 
17,815

 
14,646

 
13,398

 
(6)
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026
7.74
%
 
9,000

 
9,000

 
4,878

 
(6)
 
 
 
 
 
24,785

 
19,273

 
 
Maravai Intermediate Holdings, LLC
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 8/1/2025
5.75
%
 
11,820

 
11,702

 
10,343

 
(6)(20)
 
 
 
 
 
11,702

 
10,343

 
 
Mayfield Agency Borrower Inc.
 
Property & Casualty Insurance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 2/28/2025
5.49
%
 
28,970

 
28,100

 
23,611

 
(6)
 
 
 
 
 
28,100

 
23,611

 
 
McAfee, LLC
 
Systems Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024
4.69
%
 
12,433

 
12,200

 
11,750

 
(6)
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2025
9.44
%
 
7,000

 
7,031

 
6,650

 
(6)
 
 
 
 
 
19,231

 
18,400

 
 
MHE Intermediate Holdings, LLC
 
Diversified Support Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024
6.07
%
 
2,917

 
2,900

 
2,839

 
(6)(20)
 
 
 
 
 
2,900

 
2,839

 
 
Mindbody, Inc.
 
Internet Services & Infrastructure
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
8.00
%
 
28,952

 
28,482

 
26,781

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025
8.07
%
 
3,048

 
2,998

 
2,819

 
(6)(20)
 
 
 
 
 
31,480

 
29,600

 
 

10
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Ministry Brands, LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022
6.00
%
 
$
575

 
$
566

 
$
568

 
(6)(19)(20)
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023
10.51
%
 
7,056

 
7,005

 
7,004

 
(6)(20)
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023
10.51
%
 
1,944

 
1,917

 
1,929

 
(6)(20)
 
 
 
 
 
9,488

 
9,501

 
 
Mountain View CLO XIV Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+6.71% cash due 4/15/2029
8.54
%
 
593

 
365

 
407

 
(6)(11)
 
 
 
 
 
365

 
407

 
 
MRI Software LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026
6.57
%
 
12,798

 
12,676

 
11,327

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026
 
 
—

 
(13
)
 
(255
)
 
(6)(19)(20)
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026
6.57
%
 
636

 
623

 
490

 
(6)(19)(20)
 
 
 
 
 
13,286

 
11,562

 
 
Olaplex, Inc.
 
Personal Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026
7.50
%
 
35,500

 
34,817

 
33,192

 
(6)(20)
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025
7.50
%
 
3,834

 
3,761

 
3,585

 
(6)(20)
 
 
 
 
 
38,578

 
36,777

 
 
OmniSYS Acquisition Corporation
 
Diversified Support Services
 
 
 
 
 
 
 
100,000 Common Units in OSYS Holdings, LLC
 
 
 
 
1,000

 
660

 
(20)
 
 
 
 
 
1,000

 
660

 
 
Onvoy, LLC
 
Integrated Telecommunication Services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/2025
11.50
%
 
16,750

 
16,750

 
12,228

 
(6)(20)
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC
 
 
 
 
1,967

 
—

 
(20)
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
18,717

 
12,228

 
 
OZLM Funding III, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class DR Notes, LIBOR+7.77% cash due 1/22/2029
9.58
%
 
4,517

 
3,360

 
2,597

 
(6)(11)

 
 
 
 
3,360

 
2,597

 
 
PaySimple, Inc.
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025
6.46
%
 
37,561

 
36,882

 
34,181

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025
6.48
%
 
8,256

 
8,022

 
7,154

 
(6)(19)(20)
 
 
 
 
 
44,904

 
41,335

 
 
Petsmart, Inc.
 
Specialty Stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 3/11/2022
5.00
%
 
1,629

 
1,466

 
1,566

 
(6)
 
 
 
 
 
1,466

 
1,566

 
 
Pingora MSR Opportunity Fund I-A, LP
 
Thrifts & Mortgage Finance
 
 
 
 
 
 
 
1.86% limited partnership interest
 
 
 
 
938

 
355

 
(11)(16)(19)
 
 
 
 
 
938

 
355

 
 
PLATO Learning Inc.
 
Education Services
 
 
 
 
 
 
 
Unsecured Senior PIK Note, 8.50% PIK due 12/9/2021
 
 
2,970

 
2,434

 
—

 
(20)(22)
Unsecured Junior PIK Note, 10.00% PIK due 12/9/2021
 
 
14,279

 
10,227

 
—

 
(20)(22)
Unsecured Revolver, 5.00% cash due 12/9/2021
 
 
2,865

 
2,631

 
573

 
(20)(21)
126,127.80 Class A Common Units of Edmentum
 
 
 
 
126

 
—

 
(20)
 
 
 
 
 
15,418

 
573

 
 

11
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
ProFrac Services, LLC
 
Industrial Machinery
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023
8.14
%
 
$
16,175

 
$
16,063

 
$
14,153

 
(6)(20)
 
 
 
 
 
16,063

 
14,153

 
 
Project Boost Purchaser, LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026
4.49
%
 
6,965

 
6,895

 
5,874

 
(6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027
8.99
%
 
3,750

 
3,750

 
2,906

 
(6)(20)
 
 
 
 
 
10,645

 
8,780

 
 
QuorumLabs, Inc.
 
Application Software
 
 
 
 
 
 
 
64,887,669 Junior-2 Preferred Stock
 
 
 
 
375

 
—

 
(20)
 
 
 
 
 
375

 
—

 
 
Refac Optical Group
 
Specialty Stores
 
 
 
 
 
 
 
1,550.9435 Shares of Common Stock in Refac Holdings, Inc.
 
 
 
 
1

 
—

 
(20)
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
305

 
—

 
(20)
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
999

 
—

 
(20)
 
 
 
 
 
1,305

 
—

 
 
Salient CRGT, Inc.
 
Aerospace & Defense
 
 


 


 

First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022
7.57
%
 
3,043

 
3,019

 
2,510

 
(6)(20)
 
 
 
 
 
3,019

 
2,510

 
 
Scilex Pharmaceuticals Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
Fixed Rate Zero Coupon Bond due 8/15/2026
 
 
15,716

 
11,602

 
11,394

 
(20)
 
 
 
 
 
11,602

 
11,394

 
 
Shackleton 2018-XII CLO, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class E Notes, LIBOR+5.90% cash due 7/20/2031
7.72
%
 
1,443

 
1,028

 
824

 
(6)(11)
 
 
 
 
 
1,028

 
824

 
 
Shackleton 2019-XIV CLO, Ltd.
 
Multi-Sector Holdings
 
 
 
 
 
 
 
Class D Notes, LIBOR+6.48% cash due 7/20/2030
8.30
%
 
1,097

 
666

 
579

 
(6)(11)
 
 
 
 
 
666

 
579

 
 
ShareThis, Inc.
 
Application Software
 
 
 
 
 
 
 
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024
 
 
 
 
367

 
—

 
(20)
 
 
 
 
 
367

 
—

 
 
Sorrento Therapeutics, Inc.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 11/7/2023
8.50
%
 
16,116

 
15,235

 
15,955

 
(6)(11)(20)
1,572,246 Common Stock Warrants (exercise price $3.28) expiration date 5/7/2029
 
 
 
 
1,750

 
1,384

 
(11)(20)
333,326 Common Stock Warrants (exercise price $3.94) expiration date 11/3/2029
 
 
 
 
—

 
280

 
(11)(20)
500,000 Common Stock Warrants (exercise price $3.26) expiration date 6/6/2030
 
 
 
 
—

 
415

 
(11)(20)

 
 
 
 
16,985

 
18,034

 
 
Sunshine Luxembourg VII SARL
 
Personal Products
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026
5.32
%
 
1,040

 
949

 
947

 
(6)(11)
 
 
 
 
 
949

 
947

 
 
Supermoose Borrower, LLC
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025
5.20
%
 
7,066

 
6,331

 
5,695

 
(6)
 
 
 
 
 
6,331

 
5,695

 
 
Surgery Center Holdings, Inc.
 
Health Care Facilities
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024
4.25
%
 
4,350

 
3,552

 
3,373

 
(6)(11)
 
 
 
 
 
3,552

 
3,373

 
 
Swordfish Merger Sub LLC
 
Auto Parts & Equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026
7.75
%
 
12,500

 
12,454

 
9,844

 
(6)(20)
 
 
 
 
 
12,454

 
9,844

 
 

12
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Tacala, LLC
 
Restaurants
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/2028
8.49
%
 
$
6,196

 
$
6,181

 
$
4,848

 
(6)
 
 
 
 
 
6,181

 
4,848

 
 
TerSera Therapeutics LLC
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+9.25% cash due 3/30/2024
10.70
%
 
29,663

 
29,175

 
29,241

 
(6)(20)
668,879 Common Units of TerSera Holdings LLC
 
 
 
 
1,961

 
2,859

 
(20)

 
 
 
 
31,136

 
32,100

 
 
Thunder Finco (US), LLC
 
Movies & Entertainment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.00% cash due 11/26/2027
8.99
%
 
12,500

 
12,188

 
9,250

 
(6)(11)(20)
 
 
 
 
 
12,188

 
9,250

 
 
TIBCO Software Inc.
 
Application Software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.25% cash due 3/3/2028
8.24
%
 
15,000

 
14,925

 
14,325

 
(6)
 
 
 
 
 
14,925

 
14,325

 
 
TigerConnect, Inc.
 
Application Software
 
 
 
 
 
 
 
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024
 
 
 
 
60

 
525

 
(20)
 
 
 
 
 
60

 
525

 
 
Transact Holdings Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 4/30/2026
5.74
%
 
6,965

 
6,861

 
5,398

 
(6)(20)
 
 
 
 
 
6,861

 
5,398

 
 
Truck Hero, Inc.
 
Auto Parts & Equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/2025
9.25
%
 
21,500

 
21,191

 
16,663

 
(6)(20)
 
 
 
 
 
21,191

 
16,663

 
 
Turbocombustor Technology, Inc.
 
Aerospace & Defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 12/2/2020
5.50
%
 
3,490

 
3,140

 
3,071

 
(6)
 
 
 
 
 
3,140

 
3,071

 
 
Uber Technologies, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
5.00
%
 
5,661

 
5,626

 
5,326

 
(6)(11)
 
 
 
 
 
5,626

 
5,326

 
 
UFC Holdings, LLC
 
Movies & Entertainment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
4.25
%
 
1,374

 
1,210

 
1,225

 
(6)
 
 
 
 
 
1,210

 
1,225

 
 
Uniti Fiber Holdings Inc.
 
Specialized REITs
 
 
 
 
 
 
 
Fixed Rate Bond, 8.25% cash due 10/15/2023
 
 
5,026

 
4,779

 
3,908

 
(11)
Fixed Rate Bond, 7.88% cash due 2/15/2025
 
 
19,685

 
19,685

 
18,454

 
(11)
 
 
 
 
 
24,464

 
22,362

 
 
U.S. Renal Care, Inc.
 
Health Care Services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 6/26/2026
6.00
%
 
1,127

 
924

 
997

 
(6)
 
 
 
 
 
924

 
997

 
 
Veritas US Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
5.95
%
 
31,805

 
32,017

 
27,551

 
(6)
 
 
 
 
 
32,017

 
27,551

 
 
Verscend Holding Corp.
 
Health Care Technology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
5.49
%
 
24,625

 
24,506

 
23,394

 
(6)
Fixed Rate Bond, 9.75% cash due 8/15/2026
 
 
12,000

 
12,021

 
12,068

 
 
 
 
 
 
 
36,527

 
35,462

 
 
Vertex Aerospace Services Corp.
 
Aerospace & Defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 6/29/2025
5.49
%
 
15,720

 
15,661

 
13,657

 
(6)
 
 
 
 
 
15,661

 
13,657

 
 
Vitalyst Holdings, Inc.
 
IT Consulting & Other Services
 
 
 
 
 
 
 
675 Series A Preferred Stock Units
 
 
 
 
675

 
440

 
(20)
7,500 Class A Common Stock Units
 
 
 
 
75

 
—

 
(20)
 
 
 
 
 
750

 
440

 
 

13
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Windstream Services, LLC
 
Integrated Telecommunication Services
 
 
 
 
 
 
 
Fixed Rate Bond, 8.63% cash due 10/31/2025
 
 
$
1,460

 
$
1,420

 
$
1,029

 
(11)(20)
 
 
 
 
 
1,420

 
1,029

 
 
WP CPP Holdings, LLC
 
Aerospace & Defense
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
9.53
%
 
15,000

 
14,884

 
10,300

 
(6)(20)
 
 
 
 
 
14,884

 
10,300

 
 
WPEngine, Inc.
 
Application Software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 3/27/2026
7.77
%
 
14,188

 
13,834

 
13,833

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+6.50% cash due 3/27/2026
 
 
—

 
(657
)
 
(659
)
 
(6)(19)(20)
 
 
 
 
 
13,177

 
13,174

 
 
xMatters, Inc.
 
Application Software
 
 
 
 
 
 
 
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025
 
 
 
 
709

 
269

 
(20)
 
 
 
 
 
709

 
269

 
 
Zep Inc.
 
Specialty Chemicals
 
 


 


 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024
5.07
%
 
1,965

 
1,897

 
1,326

 
(6)
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025
9.32
%
 
30,000

 
29,898

 
19,170

 
(6)(20)
 
 
 
 
 
31,795

 
20,496

 
 
Zephyr Bidco Limited
 
Specialized Finance
 
 
 
 
 
 
 
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/2026
7.74
%
 
£
18,000

 
23,666

 
19,194

 
(6)(11)
 
 
 
 
 
23,666

 
19,194

 
 
Total Non-Control/Non-Affiliate Investments (158.9% of net assets)
 
 
 
 
$
1,362,354

 
$
1,195,506

 
 
Total Portfolio Investments (185.1% of net assets)
 
 
 
 
$
1,628,580

 
$
1,392,187

 
 
Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
JP Morgan Prime Money Market Fund, Institutional Shares
 
 
 
 
$
82,928

 
$
82,928

 
 
Other cash accounts
 
 
 
 
6,581

 
6,581

 
 
Total Cash and Cash Equivalents (11.9% of net assets)
 
 
 
 
$
89,509

 
$
89,509

 
 
Total Portfolio Investments and Cash and Cash Equivalents (197.0% of net assets)
 
 
 
 
$
1,718,089

 
$
1,481,696

 
 



Derivative Instrument
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Counterparty
 
Cumulative Unrealized Appreciation /(Depreciation)
Foreign currency forward contract
 
$
19,756

 
£
14,850

 
8/18/2020
 
JPMorgan Chase Bank, N.A.
 
$
1,310

Foreign currency forward contract
 
$
14,532

 
€
13,213

 
8/31/2020
 
JPMorgan Chase Bank, N.A.
 
(42
)
 
 
 
 
 
 
 
 
 
 
$
1,268



14
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


(1)
All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)
Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)
Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)
Each of the Company's investments is pledged as collateral under the Credit Facility (as defined in Note 6 to the accompanying notes to the Consolidated Financial Statements).
(6)
The interest rate on the principal balance outstanding for all floating rate loans is indexed to the London Interbank Offered Rate ("LIBOR") and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of March 31, 2020, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45%, the 180-day LIBOR at 1.07%, the PRIME at 3.25%, the 30-day UK LIBOR at 0.24% and the 30-day EURIBOR at (0.40)%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(7)
Principal includes accumulated payment in kind ("PIK") interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)
Control Investments generally are defined by the Investment Company Act of 1940, as amended (the "Investment Company Act"), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)
As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" these portfolio companies as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the six months ended March 31, 2020 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)
First Star Speir Aviation 1 Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with Accounting Standards Update ("ASU") 2013-08, the Company has deemed the holding company to be an investment company under accounting principles generally accepted in the United States ("GAAP") and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(11)
Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of March 31, 2020, qualifying assets represented 77.2% of the Company's total assets and non-qualifying assets represented 22.8% of the Company's total assets.
(12)
Income producing through payment of dividends or distributions.
(13)
PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of March 31, 2020, the accumulated PIK interest balance for each of the A notes and the B notes was $3.0 million. The fair value of this investment is inclusive of PIK.
(14)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)
During the quarter ended March 31, 2020, this portfolio company modified its scheduled interest payment to PIK.
(16)
This investment was valued using net asset value as a practical expedient for fair value. Consistent with Financial Accounting Standards Board ("FASB") guidance under Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), these investments are excluded from the hierarchical levels.
(17)
Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)
Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)
As of March 31, 2020, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820.



15
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
March 31, 2020
(dollar amounts in thousands)
(unaudited)


(21)
This investment was on cash non-accrual status as of March 31, 2020. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.
(22)
This investment was on PIK non-accrual status as of March 31, 2020. PIK non-accrual status is inclusive of other non-cash income, where applicable.


See notes to Consolidated Financial Statements.

16
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Control Investments
 
 
 
 
 
 
 
 
(8)(9)
C5 Technology Holdings, LLC
 
Data processing & outsourced services
 
 
 
 
 
 
 
829 Common Units
 
 
 
 
$
—

 
$
—

 
(20)
34,984,460.37 Preferred Units
 
 
 
 
34,984

 
34,984

 
(20)
 
 
 
 
 
34,984

 
34,984

 
 
First Star Speir Aviation Limited
 
Airlines
 
 
 
 
 
 
(10)
First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
$
11,510

 
2,140

 
11,510

 
(11)(20)
100% equity interest
 
 
 
 
8,500

 
4,630

 
(11)(12)(20)
 
 
 
 
 
10,640

 
16,140

 
 
New IPT, Inc.
 
Oil & gas equipment services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
7.10
%
 
3,256

 
3,256

 
3,256

 
 (6)(20)
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
7.10
%
 
1,009

 
1,009

 
1,009

 
 (6)(19)(20)
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
—

 
2,903

 
(20)
 
 
 
 
 
4,265

 
7,168

 
 
Senior Loan Fund JV I, LLC
 
Multi-sector holdings
 
 
 
 
 
 
(14)(15)
Subordinated Debt, LIBOR+7.00% cash due 12/29/2028
9.39
%
 
96,250

 
96,250

 
96,250

 
(6)(11)(20)
87.5% LLC equity interest
 
 
 
 
49,322

 
30,052

 
(11)(16)(19)
 
 
 
 
 
145,572

 
126,302

 
 
Thruline Marketing, Inc.
 
Advertising
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
9.10
%
 
18,146

 
18,146

 
18,146

 
(6)(20)
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022
 
 
—

 
—

 
—

 
(6)(19)(20)
9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
10,648

 
6,438

 
(20)
 
 
 
 
 
28,794

 
24,584

 
 
 Total Control Investments (22.5% of net assets)
 
 
 
 
$
224,255

 
$
209,178

 
 
 
 
 
 
 
 
 
 
 
 
 Affiliate Investments
 
 
 
 
 
 
 
 
(17)
Assembled Brands Capital LLC
 
Specialized finance
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023
8.10
%
 
$
5,585

 
$
5,585

 
$
5,585

 
(6)(19)(20)
1,609,201 Class A Units
 
 
 
 
765

 
782

 
(20)
1,019,168.80 Preferred Units, 6%
 
 
 
 
1,019

 
1,019

 
(20)
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
7,369

 
7,386

 
 
Caregiver Services, Inc.
 
Healthcare services
 
 
 
 
 
 
 
1,080,399 shares of Series A Preferred Stock, 10%
 
 
 
 
1,080

 
1,784

 
(20)
 
 
 
 
 
1,080

 
1,784

 
 
 Total Affiliate Investments (1.0% of net assets)
 
 
 
 
$
8,449

 
$
9,170

 
 
 
 
 
 
 
 
 
 
 
 
 Non-Control/Non-Affiliate Investments
 
 
 
 
 
 
 
 
(18)
4 Over International, LLC
 
Commercial printing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 6/7/2022
8.04
%
 
$
5,799

 
$
5,764

 
$
5,688

 
(6)(20)
First Lien Revolver, PRIME+5.00% cash due 6/7/2021
10.00
%
 
255

 
238

 
212

 
(6)(19)(20)
 
 
 
 
 
6,002

 
5,900

 
 
99 Cents Only Stores LLC
 
General merchandise stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash 1.50% PIK due 1/13/2022
7.10
%
 
19,326

 
18,946

 
16,934

 
(6)
 
 
 
 
 
18,946

 
16,934

 
 
Access CIG, LLC
 
Diversified support services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/2026
10.07
%
 
15,000

 
14,892

 
15,000

 
(6)(20)
 
 
 
 
 
14,892

 
15,000

 
 

17
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Aden & Anais Merger Sub, Inc.
 
Apparel, accessories & luxury goods
 
 
 
 
 
 
 
51,645 Common Units in Aden & Anais Holdings, Inc.
 
 
 
 
$
5,165

 
$
—

 
(20)
 
 
 
 
 
5,165

 
—

 
 
AdVenture Interactive, Corp.
 
Advertising
 
 
 
 
 
 
 
9,073 shares of common stock
 
 
 
 
13,611

 
12,677

 
(20)
 
 
 
 
 
13,611

 
12,677

 
 
AI Ladder (Luxembourg) Subco S.a.r.l.
 
Electrical components & equipment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
6.60
%
 
$
21,752

 
21,210

 
20,032

 
(6)(11)
 
 
 
 
 
21,210

 
20,032

 
 
AI Sirona (Luxembourg) Acquisition S.a.r.l.
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, EURIBOR+7.25% cash due 7/10/2026
7.25
%
 
€
17,500

 
20,035

 
18,673

 
(6)(11)
 
 
 
 
 
20,035

 
18,673

 
 
Air Medical Group Holdings, Inc.
 
Healthcare services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 3/14/2025
6.29
%
 
$
6,321

 
6,192

 
5,936

 
(6)
 
 
 
 
 
6,192

 
5,936

 
 
AirStrip Technologies, Inc.
 
Application software
 
 
 
 
 
 
 
22,858.71 Series C-1 Preferred Stock Warrants (exercise price $34.99757) expiration date 5/11/2025
 
 
 
 
90

 
—

 
(20)
 
 
 
 
 
90

 
—

 
 
Airxcel, Inc.
 
Household appliances
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 4/28/2025
6.54
%
 
7,900

 
7,837

 
7,614

 
(6)
 
 
 
 
 
7,837

 
7,614

 
 
Aldevron, L.L.C.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 9/20/2026
6.36
%
 
8,000

 
7,920

 
8,040

 
(6)
 
 
 
 
 
7,920

 
8,040

 
 
Algeco Scotsman Global Finance Plc
 
Construction & engineering
 
 
 
 
 
 
 
Fixed Rate Bond, 8.00% cash due 2/15/2023
 
 
23,915

 
23,443

 
23,982

 
(11)
 
 
 
 
 
23,443

 
23,982

 
 
Allen Media, LLC
 
Movies & entertainment
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 8/30/2023
8.60
%
 
19,238

 
18,858

 
18,613

 
(6)(20)
 
 
 
 
 
18,858

 
18,613

 
 
Altice France S.A.
 
Integrated telecommunication services
 
 
 
 
 
 
 
Fixed Rate Bond, 8.13% cash due 1/15/2024
 
 
3,000

 
3,045

 
3,113

 
(11)
Fixed Rate Bond, 7.63% cash due 2/15/2025
 
 
2,000

 
2,012

 
2,083

 
(11)
 
 
 
 
 
5,057

 
5,196

 
 
Alvotech Holdings S.A.
 
Biotechnology
 
 
 
 
 
 
 
Fixed Rate Bond 15% PIK Note A due 12/13/2023
 
 
14,800

 
16,304

 
18,089

 
(11)(13)(20)
Fixed Rate Bond 15% PIK Note B due 12/13/2023
 
 
14,800

 
16,304

 
16,609

 
(11)(13)(20)
 
 
 
 
 
32,608

 
34,698

 
 
Ancile Solutions, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 6/30/2021
9.10
%
 
8,677

 
8,591

 
8,504

 
 (6)(20)
 
 
 
 
 
8,591

 
8,504

 
 
Apptio, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
9.56
%
 
23,764

 
23,340

 
23,325

 
(6)(20)
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
 
—

 
(27
)
 
(28
)
 
(6)(19)(20)
 
 
 
 
 
23,313

 
23,297

 
 
Asurion, LLC
 
Property & casualty insurance
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.50% cash due 8/4/2025
8.54
%
 
22,000

 
21,954

 
22,382

 
(6)
 
 
 
 
 
21,954

 
22,382

 
 

18
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Avantor Inc.
 
Healthcare distributors
 
 
 
 
 
 
 
Fixed Rate Bond, 9.00% cash due 10/1/2025
 
 
$
3,000

 
$
2,975

 
$
3,379

 
 
 
 
 
 
 
2,975

 
3,379

 
 
Belk Inc.
 
Department stores
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 12/12/2022
6.80
%
 
653

 
585

 
480

 
(6)
 
 
 
 
 
585

 
480

 
 
Blackhawk Network Holdings, Inc.
 
Data processing & outsourced services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.00% cash due 6/15/2026
9.06
%
 
26,250

 
26,013

 
26,283

 
(6)
 
 
 
 
 
26,013

 
26,283

 
 
Boxer Parent Company Inc.
 
Systems software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
6.29
%
 
13,915

 
13,798

 
13,416

 
(6)
 
 
 
 
 
13,798

 
13,416

 
 
California Pizza Kitchen, Inc.
 
Restaurants
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 8/23/2022
8.53
%
 
3,122

 
3,097

 
2,800

 
(6)
 
 
 
 
 
3,097

 
2,800

 
 
Cenegenics, LLC
 
Healthcare services
 
 
 
 
 
 
(23)
First Lien Term Loan, 9.75% cash 2.00% PIK due 9/30/2019
 
 
29,781

 
27,738

 
—

 
(20)(21)
First Lien Revolver, 15.00% cash due 9/30/2019
 
 
2,203

 
2,203

 
—

 
(20)(21)
452,914.87 Common Units in Cenegenics, LLC
 
 
 
 
598

 
—

 
(20)
345,380.141 Preferred Units in Cenegenics, LLC
 
 
 
 
300

 
—

 
(20)
 
 
 
 
 
30,839

 
—

 
 
CITGO Holding, Inc.
 
Oil & gas refining & marketing
 
 
 
 
 
 
 
Fixed Rate Bond, 9.25% cash due 8/1/2024
 
 
10,672

 
10,672

 
11,366

 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/1/2023
 
 
10,000

 
9,855

 
10,219

 
(6)
 
 
 
 
 
20,527

 
21,585

 
 
CITGO Petroleum Corp.
 
Oil & gas refining & marketing
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
7.10
%
 
9,950

 
9,851

 
10,012

 
(6)
 
 
 
 
 
9,851

 
10,012

 
 
Connect U.S. Finco LLC
 
Alternative carriers
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026
7.10
%
 
30,000

 
29,400

 
29,580

 
(6)(11)
 
 
 
 
 
29,400

 
29,580

 
 
Convergeone Holdings, Inc.
 
IT consulting & other services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 1/4/2026
7.04
%
 
14,770

 
14,225

 
13,352

 
(6)
 
 
 
 
 
14,225

 
13,352

 
 
Conviva Inc.
 
Application software
 
 
 
 
 
 
 
417,851 Series D Preferred Stock Warrants (exercise price $1.1966) expiration date 2/28/2021
 
 
 
 
105

 
411

 
(20)
 
 
 
 
 
105

 
411

 
 
Covia Holdings Corporation
 
Oil & gas equipment services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 6/1/2025
6.31
%
 
7,900

 
7,900

 
6,484

 
(6)(11)
 
 
 
 
 
7,900

 
6,484

 
 
DigiCert, Inc.
 
Internet services & infrastructure
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024
6.04
%
 
4,222

 
4,184

 
4,221

 
(6)
 
 
 
 
 
4,184

 
4,221

 
 
Dominion Diagnostics, LLC
 
Healthcare services
 
 
 
 
 
 
(23)
Subordinated Term Loan, 11.00% cash 1.00% PIK due 10/18/2019
 
 
20,273

 
14,281

 
2,890

 
(20)(21)
First Lien Term Loan, PRIME+4.00% cash due 4/8/2019
9.00
%
 
45,691

 
45,691

 
45,691

 
(6)(20)
First Lien Revolver, PRIME+4.00% cash due 4/8/2019
9.00
%
 
2,090

 
2,090

 
2,090

 
(6)(20)
 
 
 
 
 
62,062

 
50,671

 
 

19
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
The Dun & Bradstreet Corporation
 
Research & consulting services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 2/6/2026
7.05
%
 
$
10,000

 
$
9,817

 
$
10,074

 
(6)
Fixed Rate Bond 6.875% cash due 8/15/2026
 
 
5,000

 
5,000

 
5,459

 
 
 
 
 
 
 
14,817

 
15,533

 
 
Eagleview Technology Corporation
 
Application software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 8/14/2026
9.55
%
 
12,000

 
11,880

 
11,520

 
(6)(20)
 
 
 
 
 
11,880

 
11,520

 
 
EHR Canada, LLC
 
Food retail
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+8.00% cash due 9/28/2020
10.10
%
 
14,611

 
14,473

 
14,903

 
(6)(20)
 
 
 
 
 
14,473

 
14,903

 
 
EOS Fitness Opco Holdings, LLC
 
Leisure facilities
 
 
 
 
 
 
 
487.5 Class A Preferred Units, 12%
 
 
 
 
488

 
855

 
(20)
12,500 Class B Common Units
 
 
 
 
—

 
934

 
(20)
 
 
 
 
 
488

 
1,789

 
 
Equitrans Midstream Corp.
 
Oil & gas storage & transportation
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/31/2024
6.55
%
 
11,910

 
11,603

 
11,926

 
(6)(11)
 
 
 
 
 
11,603

 
11,926

 
 
ExamSoft Worldwide, Inc.
 
Application software
 
 
 
 
 
 
 
180,707 Class C Units in ExamSoft Investor LLC
 
 
 
 
181

 
—

 
(20)
 
 
 
 
 
181

 
—

 
 
GI Chill Acquisition LLC
 
Managed healthcare
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 8/6/2025
6.10
%
 
17,820

 
17,731

 
17,775

 
(6)(20)
Second Lien Term Loan, LIBOR+7.50% cash due 8/6/2026
9.60
%
 
10,000

 
9,914

 
10,000

 
(6)(20)
 
 
 
 
 
27,645

 
27,775

 
 
GKD Index Partners, LLC
 
Specialized finance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.25% cash due 6/29/2023
9.35
%
 
22,402

 
22,235

 
22,108

 
(6)(20)
First Lien Revolver, LIBOR+7.25% cash due 6/29/2023
 
 
—

 
(9
)
 
(15
)
 
(6)(19)(20)
 
 
 
 
 
22,226

 
22,093

 
 
GoodRx, Inc.
 
Interactive media & services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 10/12/2026
9.54
%
 
22,222

 
21,805

 
22,500

 
(6)(20)
 
 
 
 
 
21,805

 
22,500

 
 
Guidehouse LLP
 
Research & consulting services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026
9.54
%
 
20,000

 
19,917

 
19,750

 
(6)
 
 
 
 
 
19,917

 
19,750

 
 
HealthEdge Software, Inc.
 
Application software
 
 
 
 
 
 
 
482,453 Series A-3 Preferred Stock Warrants (exercise price $1.450918) expiration date 9/30/2023
 
 
 
 
213

 
757

 
(20)
 
 
 
 
 
213

 
757

 
 
I Drive Safely, LLC
 
Education services
 
 
 
 
 
 
 
125,079 Class A Common Units of IDS Investments, LLC
 
 
 
 
1,000

 
200

 
(20)
 
 
 
 
 
1,000

 
200

 
 
IBG Borrower LLC
 
Apparel, accessories & luxury goods
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 8/2/2022
9.13
%
 
14,209

 
13,027

 
13,286

 
(6)(20)
 
 
 
 
 
13,027

 
13,286

 
 
iCIMs, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.50% cash due 9/12/2024
8.56
%
 
16,718

 
16,436

 
16,438

 
(6)(20)
First Lien Revolver, LIBOR+6.50% cash due 9/12/2024
 
 
—

 
(15
)
 
(15
)
 
(6)(19)(20)
 
 
 
 
 
16,421

 
16,423

 
 

20
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Integral Development Corporation
 
Other diversified financial services
 
 
 
 
 
 
 
1,078,284 Common Stock Warrants (exercise price $0.9274) expiration date 7/10/2024
 
 
 
 
$
113

 
$
—

 
(20)
 
 
 
 
 
113

 
—

 
 
Kellermeyer Bergensons Services, LLC
 
Environmental & facilities services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.50% cash due 4/29/2022
10.77
%
 
$
6,105

 
5,940

 
5,937

 
(6)(20)
 
 
 
 
 
5,940

 
5,937

 
 
L Squared Capital Partners LLC
 
Multi-sector holdings
 
 
 
 
 
 
 
2.00% limited partnership interest
 
 
 
 
864

 
2,237

 
(11)(16)
 
 
 
 
 
864

 
2,237

 
 
Lanai Holdings III, Inc.
 
Healthcare distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 8/29/2022
7.01
%
 
19,892

 
19,586

 
18,583

 
(6)
 
 
 
 
 
19,586

 
18,583

 
 
Lannett Company, Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 11/25/2020
7.04
%
 
762

 
762

 
759

 
(6)(11)
 
 
 
 
 
762

 
759

 
 
Lift Brands Holdings, Inc.
 
Leisure facilities
 
 
 
 
 
 
 
2,000,000 Class A Common Units in Snap Investments, LLC
 
 
 
 
1,399

 
3,020

 
(20)
 
 
 
 
 
1,399

 
3,020

 
 
Lightbox Intermediate, L.P.
 
Real estate services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2026
7.05
%
 
39,900

 
39,332

 
39,501

 
(6)(20)
 
 
 
 
 
39,332

 
39,501

 
 
Long's Drugs Incorporated
 
Pharmaceuticals
 
 
 
 
 
 
 
50 Series A Preferred Shares in Long's Drugs Incorporated
 
 
 
 
385

 
924

 
(20)
25 Series B Preferred Shares in Long's Drugs Incorporated
 
 
 
 
210

 
572

 
(20)
 
 
 
 
 
595

 
1,496

 
 
LTI Holdings, Inc.
 
Auto parts & equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.75% cash due 9/6/2026
8.79
%
 
9,000

 
9,000

 
8,246

 
(6)
 
 
 
 
 
9,000

 
8,246

 
 
Lytx Holdings, LLC
 
Research & consulting services
 
 
 
 
 
 
 
3,500 Class B Units
 
 
 
 
—

 
2,053

 
(20)
 
 
 
 
 
—

 
2,053

 
 
Maravai Intermediate Holdings, LLC
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.25% cash due 8/2/2025
6.31
%
 
11,880

 
11,761

 
11,813

 
(6)(20)
 
 
 
 
 
11,761

 
11,813

 
 
Mayfield Agency Borrower Inc.
 
Property & casualty insurance
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 2/28/2025
6.54
%
 
15,892

 
15,630

 
15,481

 
(6)
Second Lien Term Loan, LIBOR+8.50% cash due 3/2/2026
10.54
%
 
35,925

 
35,492

 
36,285

 
(6)(20)
 
 
 
 
 
51,122

 
51,766

 
 
McAfee, LLC
 
Systems software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.75% cash due 9/30/2024
5.79
%
 
10,957

 
10,884

 
10,995

 
(6)
Second Lien Term Loan, LIBOR+8.50% cash due 9/29/2025
10.54
%
 
7,000

 
7,034

 
7,093

 
(6)
 
 
 
 
 
17,918

 
18,088

 
 

21
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
MHE Intermediate Holdings, LLC
 
Diversified support services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/8/2024
7.10
%
 
$
2,932

 
$
2,913

 
$
2,874

 
(6)(20)
 
 
 
 
 
2,913

 
2,874

 
 
Mindbody, Inc.
 
Internet services & infrastructure
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
9.06
%
 
28,952

 
28,434

 
28,402

 
(6)(20)
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025
 
 
—

 
(55
)
 
(58
)
 
(6)(19)(20)
 
 
 
 
 
28,379

 
28,344

 
 
Ministry Brands, LLC
 
Application software
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+9.25% cash due 6/2/2023
11.34
%
 
7,056

 
6,997

 
7,056

 
(6)(20)
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 6/2/2023
11.34
%
 
1,944

 
1,927

 
1,944

 
(6)(20)
First Lien Revolver, LIBOR+5.00% cash due 12/2/2022
7.04
%
 
200

 
191

 
200

 
(6)(19)(20)
 
 
 
 
 
9,115

 
9,200

 
 
Navicure, Inc.
 
Healthcare technology
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.50% cash due 10/31/2025
9.54
%
 
14,500

 
14,389

 
14,573

 
(6)(20)
 
 
 
 
 
14,389

 
14,573

 
 
Numericable SFR SA
 
Integrated telecommunication services
 
 
 
 
 
 
 
Fixed Rate Bond, 7.38% cash due 5/1/2026
 
 
5,000

 
5,104

 
5,380

 
(11)
 
 
 
 
 
5,104

 
5,380

 
 
OmniSYS Acquisition Corporation
 
Diversified support services
 
 
 
 
 
 
 
100,000 Common Units in OSYS Holdings, LLC
 
 
 
 
1,000

 
750

 
(20)
 
 
 
 
 
1,000

 
750

 
 
Onvoy, LLC
 
Integrated telecommunication services
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+10.50% cash due 2/10/2025
12.54
%
 
16,750

 
16,750

 
13,187

 
(6)(20)
19,666.67 Class A Units in GTCR Onvoy Holdings, LLC
 
 
 
 
1,967

 
—

 
(20)
13,664.73 Series 3 Class B Units in GTCR Onvoy Holdings, LLC
 
 
 
 
—

 
—

 
(20)
 
 
 
 
 
18,717

 
13,187

 
 
P2 Upstream Acquisition Co.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 10/30/2020
6.19
%
 
2,976

 
2,936

 
2,950

 
(6)
First Lien Revolver, LIBOR+4.00% cash due 2/1/2020
 
 
—

 
—

 
(79
)
 
(6)(19)
 
 
 
 
 
2,936

 
2,871

 
 
PaySimple, Inc.
 
Data processing & outsourced services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 8/23/2025
7.55
%
 
37,750

 
37,004

 
37,184

 
(6)(20)
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 8/23/2025
 
 
—

 
(242
)
 
(184
)
 
(6)(19)(20)
 
 
 
 
 
36,762

 
37,000

 
 
Pingora MSR Opportunity Fund I-A, LP
 
Thrift & mortgage finance
 
 
 
 
 
 
 
1.86% limited partnership interest
 
 
 
 
1,217

 
691

 
(11)(16)(19)
 
 
 
 
 
1,217

 
691

 
 
PLATO Learning Inc.
 
Education services
 
 
 
 
 
 
 
Unsecured Senior PIK Note, 8.5% PIK due 12/9/2021
 
 
2,845

 
2,434

 
—

 
(20)(22)
Unsecured Junior PIK Note, 10% PIK due 12/9/2021
 
 
13,577

 
10,227

 
—

 
(20)(22)
Unsecured Revolver, 5.00% cash due 12/9/2021
 
 
2,064

 
1,885

 
(184
)
 
(19)(20)(21)
126,127.80 Class A Common Units of Edmentum
 
 
 
 
126

 
—

 
(20)
 
 
 
 
 
14,672

 
(184
)
 
 

22
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
 
 
 
 
 
 
 
 
 
 
Project Boost Purchaser, LLC
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+3.50% cash due 6/1/2026
5.54
%
 
$
7,000

 
$
6,930

 
$
6,964

 
(6)
Second Lien Term Loan, LIBOR+8.00% cash due 5/9/2027
10.14
%
 
3,750

 
3,750

 
3,750

 
(6)(20)
 
 
 
 
 
10,680

 
10,714

 
 
ProFrac Services, LLC
 
Industrial machinery
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.25% cash due 9/15/2023
8.66
%
 
17,192

 
17,055

 
16,848

 
(6)(20)
 
 
 
 
 
17,055

 
16,848

 
 
QuorumLabs, Inc.
 
Application software
 
 
 
 
 
 
 
64,887,669 Junior-2 Preferred Stock
 
 
 
 
375

 
—

 
(20)
 
 
 
 
 
375

 
—

 
 
Refac Optical Group
 
Specialty stores
 
 
 
 
 
 
 
1,550.9435 Shares of Common Stock in Refac Holdings, Inc.
 
 
 
 
1

 
—

 
(20)
550.9435 Series A-2 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
305

 
—

 
(20)
1,000 Series A-1 Preferred Stock in Refac Holdings, Inc., 10%
 
 
 
 
999

 
—

 
(20)
 
 
 
 
 
1,305

 
—

 
 
Salient CRGT, Inc.
 
Aerospace & defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022
8.05
%
 
3,086

 
3,056

 
2,932

 
(6)(20)
 
 
 
 
 
3,056

 
2,932

 
 
Scilex Pharmaceuticals Inc.
 
Pharmaceuticals
 
 
 
 
 
 
 
Fixed Rate Zero Coupon Bond due 8/15/2026
 
 
15,879

 
11,146

 
11,353

 
(20)
 
 
 
 
 
11,146

 
11,353

 
 
ShareThis, Inc.
 
Application software
 
 
 
 
 
 
 
345,452 Series C Preferred Stock Warrants (exercise price $3.0395) expiration date 3/4/2024
 
 
 
 
367

 
2

 
(20)
 
 
 
 
 
367

 
2

 
 
Sorrento Therapeutics, Inc.
 
Biotechnology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 11/7/2023
9.13
%
 
30,000

 
28,132

 
29,250

 
(6)(11)(20)
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 11/7/2023
 
 
 
 
(62
)
 
(69
)
 
(6)(11)(19)(20)
Stock Warrants Strike (exercise price $3.28) expiration date 5/7/2029
 
 
 
 
1,750

 
1,667

 
(11)(20)
Stock Warrants Strike (exercise price $3.94) expiration date 11/3/2029
 
 
 
 
—

 
320

 
(11)(20)
 
 
 
 
 
29,820

 
31,168

 
 
Swordfish Merger Sub LLC
 
Auto parts & equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+6.75% cash due 2/2/2026
8.79
%
 
12,500

 
12,450

 
12,135

 
(6)(20)
 
 
 
 
 
12,450

 
12,135

 
 
TerSera Therapeutics, LLC
 
Pharmaceuticals
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+9.25% cash due 3/30/2024
11.35
%
 
25,463

 
25,025

 
25,192

 
(6)(20)
Second Lien Delayed Draw Term Loan, LIBOR+9.25% cash due 12/31/2020
 
 
 
 
—

 
(45
)
 
(6)(19)(20)
668,879 Common Units of TerSera Holdings LLC
 
 
 
 
1,731

 
2,629

 
(20)
 
 
 
 
 
26,756

 
27,776

 
 
TigerText, Inc.
 
Application software
 
 
 
 
 
 
 
299,110 Series B Preferred Stock Warrants (exercise price $1.3373) expiration date 12/8/2024
 
 
 
 
60

 
560

 
(20)
 
 
 
 
 
60

 
560

 
 
Transact Holdings Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.75% cash due 4/30/2026
7.01
%
 
7,000

 
6,895

 
6,965

 
(6)
 
 
 
 
 
6,895

 
6,965

 
 

23
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Tribe Buyer LLC
 
Human resource & employment services
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 2/16/2024
6.54
%
 
$
830

 
$
830

 
$
775

 
(6)(20)
 
 
 
 
 
830

 
775

 
 
Truck Hero, Inc.
 
Auto parts & equipment
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.25% cash due 4/21/2025
10.29
%
 
21,500

 
21,191

 
20,103

 
(6)(20)
 
 
 
 
 
21,191

 
20,103

 
 
Uber Technologies, Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
6.03
%
 
5,689

 
5,652

 
5,667

 
(6)
 
 
 
 
 
5,652

 
5,667

 
 
Uniti Group LP
 
Specialized REITs
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022
7.04
%
 
8,403

 
8,264

 
8,213

 
(6)(11)
 
 
 
 
 
8,264

 
8,213

 
 
UOS, LLC
 
Trading companies & distributors
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.50% cash due 4/18/2023
7.54
%
 
10,242

 
10,357

 
10,370

 
(6)
 
 
 
 
 
10,357

 
10,370

 
 
Veritas US Inc.
 
Application software
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
6.60
%
 
34,200

 
34,468

 
32,413

 
(6)
 
 
 
 
 
34,468

 
32,413

 
 
Verscend Holding Corp.
 
Healthcare technology
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
6.54
%
 
24,750

 
24,633

 
24,879

 
(6)
Fixed Rate Bond, 9.75% cash due 8/15/2026
 
 
12,000

 
12,022

 
12,823

 
 
 
 
 
 
 
36,655

 
37,702

 
 
Vertex Aerospace Services Corp.
 
Aerospace & defense
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+4.50% cash due 6/29/2025
6.54
%
 
15,800

 
15,735

 
15,869

 
(6)
 
 
 
 
 
15,735

 
15,869

 
 
Vitalyst Holdings, Inc.
 
IT consulting & other services
 
 
 
 
 
 
 
675 Series A Preferred Stock Units
 
 
 
 
675

 
440

 
(20)
7,500 Class A Common Stock Units
 
 
 
 
75

 
—

 
(20)
 
 
 
 
 
750

 
440

 
 
Windstream Services, LLC
 
Integrated telecommunication services
 
 
 
 
 
 
 
Fixed Rate Bond, 8.63% cash due 10/31/2025
 
 
5,000

 
4,863

 
5,113

 
(11)
 
 
 
 
 
4,863

 
5,113

 
 
WP CPP Holdings, LLC
 
Aerospace & defense
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
10.01
%
 
15,000

 
14,874

 
14,937

 
(6)
 
 
 
 
 
14,874

 
14,937

 
 
xMatters, Inc.
 
Application software
 
 
 
 
 
 
 
600,000 Common Stock Warrants (exercise price $0.593333) expiration date 2/26/2025
 
 
 
 
709

 
273

 
(20)
 
 
 
 
 
709

 
273

 
 
Yeti Holdings, Inc.
 
Leisure products
 
 
 
 
 
 
 
537,629 Shares Yeti Holdings, Inc. Common Stock
 
 
 
 
—

 
15,054

 
 
 
 
 
 
 
—

 
15,054

 
 
Zep Inc.
 
Specialty chemicals
 
 
 
 
 
 
 
Second Lien Term Loan, LIBOR+8.25% cash due 8/11/2025
10.35
%
 
30,000

 
29,889

 
21,950

 
(6)(20)
First Lien Term Loan, LIBOR+4.00% cash due 8/12/2024
6.04
%
 
1,975

 
1,899

 
1,564

 
(6)
 
 
 
 
 
31,788

 
23,514

 
 
Zephyr Bidco Limited
 
Specialized finance
 
 
 
 
 
 
 
Second Lien Term Loan, UK LIBOR+7.50% cash due 7/23/2026
8.21
%
 
£
18,000

 
23,632

 
22,006

 
(6)(11)
 
 
 
 
 
23,632

 
22,006

 
 

24
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


Portfolio Company/Type of Investment (1)(2)(3)(4)(5)
 Cash Interest Rate (6)
Industry
Principal (7)

 
Cost
 
Fair Value
 
Notes
Total Non-Control/Non-Affiliate Investments (131.1% of net assets)
 
 
 
 
$
1,280,310

 
$
1,219,694

 
 
Total Portfolio Investments (154.5% of net assets)
 
 
 
 
$
1,513,014

 
$
1,438,042

 
 
Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
JP Morgan Prime Money Market Fund, Institutional Shares
 
 
 
 
$
9,611

 
$
9,611

 
 
Other cash accounts
 
 
 
 
5,795

 
5,795

 
 
Total Cash and Cash Equivalents (1.7% of net assets)
 
 
 
 
$
15,406

 
$
15,406

 
 
Total Portfolio Investments and Cash and Cash Equivalents (156.2% of net assets)
 
 
 
 
$
1,528,420

 
$
1,453,448

 
 

Derivative Instrument
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Counterparty
 
Cumulative Unrealized Appreciation /(Depreciation)
Foreign currency forward contract
 
$
22,161

 
£
17,910

 
10/15/2019
 
JPMorgan Chase Bank, N.A.
 
$
76

Foreign currency forward contract
 
$
19,193

 
€
17,150

 
11/29/2019
 
JPMorgan Chase Bank, N.A.
 
414

 
 
 
 
 
 
 
 
 
 
$
490





25
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


(1)
All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)
Equity ownership may be held in shares or units of companies related to the portfolio companies.
(4)
Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)
With the exception of investments held by the Company’s wholly-owned subsidiaries that each formerly held a license from the SBA to operate as an SBIC, each of the Company's investments is pledged as collateral under the Credit Facility (as defined in Note 6 to the accompanying notes to the Consolidated Financial Statements).
(6)
The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of September 30, 2019, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, the PRIME at 5.00%, the 30-day UK LIBOR at 0.71% and the 30-day EURIBOR at (0.51)%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(7)
Principal includes accumulated PIK interest and is net of repayments, if any. “£” signifies the investment is denominated in British Pounds. "€" signifies the investment is denominated in Euros. All other investments are denominated in U.S. dollars.
(8)
Control Investments generally are defined by the Investment Company Act, as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(9)
As defined in the Investment Company Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the Company's annual report on Form 10-K for the year ended September 30, 2019 for transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.
(10)
First Star Speir Aviation 1 Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(11)
Investment is not a "qualifying asset" as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2019, qualifying assets represented 75.0% of the Company's total assets and non-qualifying assets represented 25.0% of the Company's total assets.
(12)
Income producing through payment of dividends or distributions.
(13)
PIK interest income for this investment accrues at an annualized rate of 15%, however, the PIK interest is not contractually capitalized on the investment. As a result, the principal amount of the investment does not increase over time for accumulated PIK interest. As of September 30, 2019, the accumulated PIK interest balance for each of the A notes and the B notes was $1.8 million. The fair value of this investment is inclusive of PIK.
(14)
See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition.
(15)
On December 28, 2018, the mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of Senior Loan Fund JV I, LLC ("SLF JV I"), were redeemed and the Company purchased subordinated notes and LLC equity interests issued by SLF JV I. Prior to December 28, 2018, the mezzanine notes issued by SLF Repack Issuer 2016, LLC consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes.
(16)
This investment was valued using net asset value as a practical expedient for fair value. Consistent with ASC 820, these investments are excluded from the hierarchical levels.
(17)
Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(18)
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.
(19)
Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(20)
As of September 30, 2019, these investments were categorized as Level 3 within the fair value hierarchy established by ASC 820.
(21)
This investment was on cash non-accrual status as of September 30, 2019. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

26
Oaktree Specialty Lending Corporation
Consolidated Schedule of Investments
September 30, 2019
(dollar amounts in thousands)


(22)
This investment was on PIK non-accrual status as of September 30, 2019. PIK non-accrual status is inclusive of other non-cash income, where applicable.
(23)
Payments on this investment were past due as of September 30, 2019.


 

See notes to Consolidated Financial Statements.





























27
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 1. Organization
Oaktree Specialty Lending Corporation (together with its consolidated subsidiaries, the "Company") is a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company was formed in late 2007 and operates as a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for tax purposes.
The Company seeks to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. The Company may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions.
As of March 31, 2020, the Company is externally managed by Oaktree Capital Management, L.P. (“Oaktree”), a subsidiary of Oaktree Capital Group, LLC (“OCG”), pursuant to an investment advisory agreement between the Company and Oaktree, as amended from time to time (the “Investment Advisory Agreement”). Oaktree Fund Administration, LLC (“Oaktree Administrator”), a subsidiary of Oaktree, provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement between the Company and Oaktree Administrator, as amended from time to time (the “Administration Agreement”). See Note 11. In 2019, Brookfield Asset Management Inc. ("Brookfield") acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams.

Note 2. Significant Accounting Policies
Basis of Presentation:
The Consolidated Financial Statements of the Company have been prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. Certain prior-period financial information has been reclassified to conform to current period presentation. The Company is an investment company following the accounting and reporting guidance in ASC Topic 946, Financial Services - Investment Companies ("ASC 946").
Use of Estimates:
The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
Consolidation:
The accompanying Consolidated Financial Statements include the accounts of Oaktree Specialty Lending Corporation and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain subsidiaries that hold investments are treated as pass through entities for tax purposes. The assets of certain of the consolidated subsidiaries are not directly available to satisfy the claims of the creditors of Oaktree Specialty Lending Corporation or any of its other subsidiaries. As of March 31, 2020, the consolidated subsidiaries were Fifth Street Fund of Funds LLC ("Fund of Funds"), Fifth Street Mezzanine Partners IV, L.P. ("FSMP IV"), Fifth Street Mezzanine Partners V, L.P. ("FSMP V" and together with FSMP IV, the "Excluded Subsidiaries"), FSMP IV GP, LLC, FSMP V GP, LLC, OCSL SRNE, LLC, OCSL AB Blocker, LLC and FSFC Holdings, Inc. ("Holdings"). In addition, the Company consolidates various holding companies held in connection with its equity investments in certain portfolio investments.
As an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements but rather are included on the Statements of Assets and Liabilities as investments at fair value.

Fair Value Measurements:
The Company values its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's

28
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
 
•
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of the Company's investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
The Company seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If the Company is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within the Company's set threshold, the Company seeks to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, the Company does not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, the Company values such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that the Company is deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. The Company may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key

29
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
The Company estimates the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
The Company's Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:
•
The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree's valuation team in conjunction with Oaktree's portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of Oaktree;
•
Separately, independent valuation firms engaged by the Board of Directors prepare valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company and provide such reports to Oaktree and the Audit Committee of the Board of Directors;
•
Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
•
The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee;
•
The Audit Committee makes a recommendation to the full Board of Directors regarding the fair value of the investments in the Company's portfolio; and
•
The Board of Directors discusses valuations and determines the fair value of each investment in the Company's portfolio.
The fair value of the Company's investments as of March 31, 2020 and September 30, 2019 was determined in good faith by the Board of Directors. The Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of the Company's portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. However, the Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company's valuation policy and a consistently applied valuation process.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
With the exception of the line items entitled "deferred financing costs," "deferred offering costs," "other assets," "deferred tax asset, net," "deferred tax liability," "credit facility payable" and "unsecured notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statements of Assets and Liabilities. The carrying value of the line items titled "interest, dividends and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "accounts payable, accrued expenses and other liabilities," "base management fee and incentive fee payable," "due to affiliate," "interest payable," "payable to syndication partners" and "payables from unsettled transactions" approximate fair value due to their short maturities.

30
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Foreign Currency Translation:
The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the prevailing foreign exchange rate on the reporting date. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.
Derivative Instruments:
The Company does not utilize hedge accounting and as such values its derivative instruments at fair value with the unrealized gains or losses recorded in “net unrealized appreciation (depreciation)” in the Company’s Consolidated Statements of Operations.
Investment Income:
Interest Income
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations.
In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For the Company's secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial sales is recorded within interest expense in the Consolidated Statements of Operations.
PIK Interest Income
The Company's investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company's assessment of the portfolio company's business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. The Company's determination to cease accruing PIK interest is generally made well before the Company's full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by the Company to Oaktree. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s stockholders, even though the Company has not yet collected the cash and may never do so.

31
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Fee Income
Oaktree may provide financial advisory services to portfolio companies and, in return, the Company may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by the Company upon the investment closing date. The Company may also receive additional fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are typically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
The Company generally recognizes dividend income on the record date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents and restricted cash consist of demand deposits and highly liquid investments with maturities of three months or less when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and cash equivalents and restricted cash are included on the Company's Consolidated Schedule of Investments and cash equivalents are classified as Level 1 assets.
Due from Portfolio Companies:
Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, including proceeds from the sale of portfolio companies not yet received or being held in escrow, and excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).
Receivables/Payables from Unsettled Transactions:
Receivables/payables from unsettled transactions consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset when incurred. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability when incurred. Deferred financing costs are amortized using the effective interest method over the term of the respective debt arrangement. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense. For extinguishments of the Company’s unsecured notes payable, any unamortized deferred financing costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.
Deferred Offering Costs:
Legal fees and other costs incurred in connection with the Company’s shelf registration statement are capitalized as deferred offering costs in the Consolidated Statements of Assets and Liabilities. To the extent any such costs relate to equity offerings, these costs are charged as a reduction of capital upon utilization. To the extent any such costs relate to debt offerings, these costs are treated as deferred financing costs and are amortized over the term of the respective debt arrangement. Any deferred offering costs that remain at the expiration of the shelf registration statement or when it becomes probable that an offering will not be completed are expensed.


32
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Income Taxes:
The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income within the tax rules under Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar years 2018 and 2019.
The Company holds certain portfolio investments through taxable subsidiaries, including Fund of Funds and Holdings. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s Consolidated Financial Statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes ("ASC 740"), provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more-likely-than-not" to be sustained assuming examination by tax authorities. Management has analyzed the Company's tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2017, 2018 or 2019. The Company identifies its major tax jurisdictions as U.S. Federal and California, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.    
Recent Accounting Pronouncements:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31, 2022. As of March 31, 2020, the guidance did not have a material impact on the Consolidated Financial Statements.


33
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 3. Portfolio Investments
As of March 31, 2020, 185.1% of net assets at fair value, or $1.4 billion, was invested in 128 portfolio companies, including $92.2 million in subordinated notes and limited liability company ("LLC") equity interests of SLF JV I. As of March 31, 2020, 11.9% of net assets at fair value, or $89.5 million, was invested in cash and cash equivalents. In comparison, as of September 30, 2019, 154.5% of net assets at fair value, or $1.4 billion, was invested in 104 portfolio investments, including $126.3 million in subordinated notes and LLC equity interests of SLF JV I, and 1.7% of net assets at fair value, or $15.4 million, was invested in cash and cash equivalents. As of March 31, 2020, 81.9% of the Company's portfolio at fair value consisted of senior secured debt investments and 12.4% consisted of subordinated notes, including debt investments in SLF JV I. As of September 30, 2019, 78.6% of the Company's portfolio at fair value consisted of senior secured debt investments and 12.3% consisted of subordinated notes, including debt investments in SLF JV I.
The Company also held equity investments in certain of its portfolio companies consisting of common stock, preferred stock, warrants, limited partnership interests or LLC equity interests. These instruments generally do not produce a current return but are held for potential investment appreciation and capital gain.
During the three and six months ended March 31, 2020, the Company recorded net realized gains (losses) of $(26.5) million and $(23.2) million, respectively. During the three and six months ended March 31, 2019, the Company recorded net realized gains (losses) of $25.2 million and $43.2 million, respectively. During the three and six months ended March 31, 2020, the Company recorded net unrealized appreciation (depreciation) of $(163.5) million and $(160.7) million, respectively. During the three and six months ended March 31, 2019, the Company recorded net unrealized appreciation (depreciation) of $21.5 million and $14.5 million, respectively.
The composition of the Company's investments as of March 31, 2020 and September 30, 2019 at cost and fair value was as follows:
 
 
March 31, 2020
 
September 30, 2019
 
 
Cost
 
Fair Value
 
Cost
 
Fair Value
Investments in debt securities
 
$
1,373,111

 
$
1,220,682

 
$
1,274,367

 
$
1,212,174

Investments in equity securities
 
109,897

 
79,334

 
93,075

 
99,566

Debt investments in SLF JV I
 
96,250

 
92,171

 
96,250

 
96,250

Equity investment in SLF JV I
 
49,322

 
—

 
49,322

 
30,052

Total
 
$
1,628,580

 
$
1,392,187

 
$
1,513,014

 
$
1,438,042

The following table presents the composition of the Company's debt investments as of March 31, 2020 and September 30, 2019 at fixed rates and floating rates:
 
 
 
March 31, 2020
 
September 30, 2019
 
 
Fair Value
 
% of Debt
Portfolio
 
Fair Value
 
% of Debt
Portfolio
Fixed rate debt securities
 
$
122,988

 
9.37
%
 
$
132,965

 
10.16
%
Floating rate debt securities, including debt investments in SLF JV I
 
1,189,865

 
90.63

 
1,175,459

 
89.84

Total
 
$
1,312,853

 
100.00
%
 
$
1,308,424

 
100.00
%

34
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table presents the financial instruments carried at fair value as of March 31, 2020 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
 
 
Level 1
 
Level 2
 
Level 3
 
Measured at Net Asset Value (a)
 
Total
Investments in debt securities (senior secured)
 
$
—

 
$
420,512

 
$
720,110

 
$
—

 
$
1,140,622

Investments in debt securities (subordinated, including debt investments in SLF JV I)
 
—

 
67,064

 
105,167

 
—

 
172,231

Investments in equity securities (preferred)
 
—

 
—

 
31,367

 
—

 
31,367

Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I)
 
—

 
—

 
45,150

 
2,817

 
47,967

Total investments at fair value
 
—

 
487,576

 
901,794

 
2,817

 
1,392,187

Cash equivalents
 
82,928

 
—

 
—

 
—

 
82,928

Derivative asset
 
—

 
1,268

 
—

 
—

 
1,268

Total assets at fair value

$
82,928

 
$
488,844

 
$
901,794

 
$
2,817

 
$
1,476,383

__________ 
(a)
In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
The following table presents the financial instruments carried at fair value as of September 30, 2019 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
 
 
Level 1
 
Level 2
 
Level 3
 
Measured at Net Asset Value (a)
 
Total
Investments in debt securities (senior secured)
 
$
—

 
$
477,542

 
$
653,334

 
$
—

 
$
1,130,876

Investments in debt securities (subordinated, including debt investments in SLF JV I)
 
—

 
67,239

 
110,309

 
—

 
177,548

Investments in equity securities (preferred)
 
—

 
—

 
40,578

 
—

 
40,578

Investments in equity securities (common and warrants, including LLC equity interests of SLF JV I)
 
15,054

 
—

 
41,006

 
32,980

 
89,040

Total investments at fair value
 
15,054

 
544,781

 
845,227

 
32,980

 
1,438,042

Cash equivalents
 
9,611

 
—

 
—

 
—

 
9,611

Derivative assets
 
—

 
490

 
—

 
—

 
490

Total assets at fair value
 
$
24,665

 
$
545,271

 
$
845,227

 
$
32,980

 
$
1,448,143

__________ 
(a)
In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.
When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically have both unobservable or Level 3 components and observable components (i.e. components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology. Transfers between levels are recognized at the beginning of the reporting period.

35
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table provides a roll-forward in the changes in fair value from December 31, 2019 to March 31, 2020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
Fair value as of December 31, 2019
 
$
697,632

 
$
108,348

 
$
38,909

 
$
44,645

 
$
889,534

Purchases 
 
142,790

 
106

 
—

 
—

 
142,896

Sales and repayments
 
(81,656
)
 
(117
)
 
—

 
(6,535
)
 
(88,308
)
Transfers in (a)(b)
 
34,522

 
1,405

 
—

 
18,625

 
54,552

Transfers out (a)(b)
 
(18,625
)
 
—

 
—

 
—

 
(18,625
)
PIK interest income
 
1,841

 
—

 
—

 
—

 
1,841

Accretion of OID
 
2,139

 
313

 
—

 
—

 
2,452

Net unrealized appreciation (depreciation)
 
(29,696
)
 
9,393

 
(7,242
)
 
(16,160
)
 
(43,705
)
Net realized gains (losses)
 
(28,837
)
 
(14,281
)
 
(300
)
 
4,575

 
(38,843
)
Fair value as of March 31, 2020
 
$
720,110

 
$
105,167

 
$
31,367

 
$
45,150

 
$
901,794

Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of March 31, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended March 31, 2020
 
$
(60,406
)
 
$
(4,888
)
 
$
(7,542
)
 
$
(14,708
)
 
$
(87,544
)
__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the three months ended March 31, 2020 as a result of a decreased number of market quotes available and/or decreased market liquidity.
(b) There was one transfer from senior secured debt to common equity and warrants during the three months ended March 31, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million.

The following table provides a roll-forward in the changes in fair value from December 31, 2018 to March 31, 2019 for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
Liabilities
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
 
Secured Borrowings
Fair value as of December 31, 2018
 
$
741,372

 
$
119,953

 
$
4,988

 
$
34,107

 
$
900,420

 
$
9,302

Purchases 
 
60,800

 
1,978

 
—

 
—

 
62,778

 
—

Sales and repayments
 
(95,212
)
 
(394
)
 
—

 
(9,995
)
 
(105,601
)
 
(367
)
Transfers in (a)
 
19,780

 
—

 
—

 
—

 
19,780

 
—

PIK interest income
 
420

 
26

 
—

 
—

 
446

 
—

Accretion of OID
 
5,486

 
292

 
—

 
—

 
5,778

 
—

Net unrealized appreciation (depreciation)
 
(13,190
)
 
(1,420
)
 
25

 
7,073

 
(7,512
)
 
76

Net realized gains (losses)
 
17,499

 
—

 
—

 
7,937

 
25,436

 
—

Fair value as of March 31, 2019
 
$
736,955

 
$
120,435

 
$
5,013

 
$
39,122

 
$
901,525

 
$
9,011

Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of March 31, 2019 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the three months ended March 31, 2019
 
$
(8,658
)
 
$
(1,420
)
 
$
25

 
$
7,876

 
$
(2,177
)
 
$
76

__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the three months ended March 31, 2019 as a result of a decreased number of market quotes available and/or decreased market liquidity.


36
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table provides a roll-forward in the changes in fair value from September 30, 2019 to March 31, 2020 for all investments for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
Fair value as of September 30, 2019
 
$
653,334

 
$
110,309

 
$
40,578

 
$
41,006

 
$
845,227

Purchases 
 
239,185

 
1,065

 
—

 
1,328

 
241,578

Sales and repayments
 
(154,948
)
 
(3,863
)
 
(1,388
)
 
(6,574
)
 
(166,773
)
Transfers in (a)(b)
 
67,939

 
5,113

 
—

 
18,625

 
91,677

Transfers out (a)(b)
 
(33,625
)
 
—

 
—

 
—

 
(33,625
)
PIK interest income
 
2,960

 
—

 
—

 
—

 
2,960

Accretion of OID
 
3,565

 
617

 
—

 
—

 
4,182

Net unrealized appreciation (depreciation)
 
(29,397
)
 
6,268

 
(8,318
)
 
(13,850
)
 
(45,297
)
Net realized gains (losses)
 
(28,903
)
 
(14,342
)
 
495

 
4,615

 
(38,135
)
Fair value as of March 31, 2020
 
$
720,110

 
$
105,167

 
$
31,367

 
$
45,150

 
$
901,794

Net unrealized appreciation (depreciation) relating to Level 3 investments still held as of March 31, 2020 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the six months ended March 31, 2020
 
$
(58,203
)
 
$
(5,123
)
 
$
(7,716
)
 
$
(12,397
)
 
$
(83,439
)
__________
(a) There were transfers into/out of Level 3 from/to Level 2 for certain investments during the six months ended March 31, 2020 as a result of a change in the number of market quotes available and/or a change in market liquidity.
(b) There was one transfer from senior secured debt to common equity and warrants during the six months ended March 31, 2020 as a result of an investment restructuring, in which $46.5 million of senior secured debt was exchanged for new senior secured debt of $27.9 million and common equity of $18.6 million.

The following table provides a roll-forward in the changes in fair value from September 30, 2018 to March 31, 2019 for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:
 
 
Investments
 
Liabilities
 
 
Senior Secured Debt
 
Subordinated
Debt (including debt investments in SLF JV I)
 
Preferred
Equity
 
Common
Equity and Warrants
 
Total
 
Secured Borrowings
Fair value as of September 30, 2018
 
$
638,971

 
$
158,859

 
$
4,918

 
$
61,134

 
$
863,882

 
$
9,728

Purchases 
 
150,799

 
2,511

 
—

 
2,514

 
155,824

 
—

Sales and repayments
 
(128,235
)
 
(16,143
)
 
—

 
(31,286
)
 
(175,664
)
 
(812
)
Transfers in (a)
 
23,446

 
—

 
—

 
—

 
23,446

 
—

Transfers out (b)
 
—

 
(33,150
)
 
—

 
(12,073
)
 
(45,223
)
 
—

PIK interest income
 
1,065

 
121

 
—

 
—

 
1,186

 
—

Accretion of OID
 
12,080

 
663

 
—

 
—

 
12,743

 
—

Net unrealized appreciation (depreciation)
 
21,908

 
7,574

 
590

 
(4,391
)
 
25,681

 
95

Net realized gains (losses)
 
16,921

 
—

 
(495
)
 
23,224

 
39,650

 
—

Fair value as of March 31, 2019
 
$
736,955

 
$
120,435

 
$
5,013

 
$
39,122

 
$
901,525

 
$
9,011

Net unrealized appreciation (depreciation) relating to Level 3 assets & liabilities still held as of March 31, 2019 and reported within net unrealized appreciation (depreciation) in the Consolidated Statement of Operations for the six months ended March 31, 2019
 
$
(16,071
)
 
$
7,577

 
$
95

 
$
8,733

 
$
334

 
$
95

__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the six months ended March 31, 2019 as a result of a decreased number of market quotes available and/or decreased market liquidity.
(b) There was one transfer from Level 3 to Level 1 during the six months ended March 31, 2019 as a result of an initial public offering of a portfolio company. There was also one transfer out of Level 3 during the six months ended March 31, 2019 as a result of an investment restructuring in which debt investments were exchanged for equity investments that are valued using net asset value as a practical expedient.

37
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)






Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of March 31, 2020:
Asset
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range
 
Weighted
Average (a)
Senior Secured Debt
 
$
419,433

 
Market Yield
 
Market Yield
 
(b)
6.6%
-
22.0%
 
11.4%
 
 
15,842

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
5.9x
 
5.0x
 
 
11,510

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
-
1.1x
 
1.0x
 
 
26,266

 
Transactions Precedent
 
Transaction Price
 
(d)
N/A
-
N/A
 
N/A
 
 
247,059

 
Broker Quotations
 
Broker Quoted Price
 
(e)
N/A
-
N/A
 
N/A
Subordinated Debt
 
11,394

 
Market Yield
 
Market Yield
 
(b)
15.0%
-
17.0%
 
16.0%
 
 
1,602

 
Enterprise Value
 
EBITDA Multiple
 
(c)
7.7x
-
7.9x
 
7.8x
SLF JV I Debt Investments
 
92,171

 
Enterprise Value
 
N/A
 
(f)
N/A
-
N/A
 
N/A
Preferred & Common Equity
 
16,201

 
Enterprise Value
 
Revenue Multiple
 
(c)
0.8x
-
8.0x
 
3.1x
 
 
50,861

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
19.0x
 
7.2x
 
 
3,165

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
-
1.1x
 
1.0x
 
 
6,290

 
Transactions Precedent
 
Transaction Price
 
(d)
N/A
-
N/A
 
N/A
Total
 
$
901,794

 
 
 
 
 
 
 
 
 
 
 
__________ 
(a)
Weighted averages are calculated based on fair value of investments.
(b)
Used when market participants would take into account market yield when pricing the investment.
(c)
Used when market participants would use such multiples when pricing the investment.
(d)
Used when there is an observable transaction or pending event for the investment.
(e)
The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by Oaktree.
(f)
The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the subordinated notes held at SLF JV I in an amount not exceeding par under the EV technique.
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value, as of September 30, 2019:
Asset
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range
 
Weighted
Average (a)
Senior Secured Debt
 
$
314,026

 
Market Yield
 
Market Yield
 
(b)
6.7%
-
18.0%
 
11.2%
 
 
17,452

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
6.0x
 
5.0x
 
 
11,510

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
 
1.1x
 
1.0x
 
 
3,750

 
Transactions Precedent
 
Transaction Price
 
(d)
N/A
-
N/A
 
N/A
 
 
306,596

 
Broker Quotations
 
Broker Quoted Price
 
(e)
N/A
-
N/A
 
N/A
Subordinated Debt
 
11,353

 
Market Yield
 
Market Yield
 
(b)
13.0%
-
15.0%
 
14.0%
 
 
2,706

 
Enterprise Value
 
EBITDA Multiple
 
(c)
6.5x
-
8.5x
 
7.5x
SLF JV I Debt Investments
 
96,250

 
Enterprise Value
 
N/A
 
(f)
N/A
-
N/A
 
N/A
Preferred & Common Equity
 
4,004

 
Enterprise Value
 
Revenue Multiple
 
(c)
0.8x
-
8.9x
 
3.3x
 
 
72,950

 
Enterprise Value
 
EBITDA Multiple
 
(c)
1.8x
-
17.0x
 
6.9x
 
 
4,630

 
Enterprise Value
 
Asset Multiple
 
(c)
0.9x
-
1.1x
 
1.0x
Total
 
$
845,227

 
 
 
 
 
 
 
 
 
 
 
__________ 
(a)
Weighted averages are calculated based on fair value of investments.
(b)
Used when market participants would take into account market yield when pricing the investment.
(c)
Used when market participants would use such multiples when pricing the investment.
(d)
Used when there is an observable transaction or pending event for the investment.
(e)
The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by Oaktree.

38
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





(f)
The Company determined the value of its subordinated notes of SLF JV I based on the total assets less the total liabilities senior to the subordinated notes held at SLF JV I in an amount not exceeding par under the EV technique.

Under the market yield technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt securities is the market yield. Increases or decreases in the market yield may result in a lower or higher fair value measurement, respectively.
Under the EV technique, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities is the earnings before interest, taxes, depreciation and amortization ("EBITDA"), revenue or asset multiple, as applicable. Increases or decreases in the valuation multiples in isolation may result in a higher or lower fair value measurement, respectively.
 
Financial Instruments Disclosed, But Not Carried, At Fair Value
The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of March 31, 2020 and the level of each financial liability within the fair value hierarchy:
 
 
 
Carrying
Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Credit facility payable
 
$
404,825

 
$
404,825

 
$
—

 
$
—

 
$
404,825

Unsecured notes payable (net of unamortized financing costs and unaccreted discount)
 
293,861

 
274,500

 
—

 
274,500

 
—

Total
 
$
698,686

 
$
679,325

 
$
—

 
$
274,500

 
$
404,825

The following table presents the carrying value and fair value of the Company's financial liabilities disclosed, but not carried, at fair value as of September 30, 2019 and the level of each financial liability within the fair value hierarchy:
 
 
 
Carrying
Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Credit facility payable
 
$
314,825

 
$
314,825

 
$
—

 
$
—

 
$
314,825

Unsecured notes payable (net of unamortized financing costs)
 
158,542

 
164,966

 
—

 
164,966

 
—

Total
 
$
473,367

 
$
479,791

 
$
—

 
$
164,966

 
$
314,825

The principal value of the credit facility payable approximates fair value due to its variable interest rate and is included in Level 3 of the hierarchy. As of March 31, 2020, unsecured notes payable included the 3.500% unsecured notes due 2025 ("2025 Notes"). The Company used market quotes as of the valuation date to estimate the fair value of the 2025 Notes, which are included in Level 2 of the hierarchy. As of September 30, 2019, unsecured notes payable included the 5.875% unsecured notes due 2024 ("2024 Notes") and the 6.125% unsecured notes due 2028 ("2028 Notes"). The Company used the unadjusted quoted price as of the valuation date to calculate the fair value of the 2024 Notes and the 2028 Notes. Although these securities were publicly traded, the market was relatively inactive, and accordingly, these securities were included in Level 2 of the hierarchy.

Portfolio Composition
Summaries of the composition of the Company's portfolio at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets are shown in the following tables:
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 % of Total Investments
 
 
 
 % of Total Investments
Senior secured debt
 
$
1,269,353

 
77.94
%
 
$
1,170,258

 
77.35
%
Subordinated debt
 
103,758

 
6.37
%
 
104,109

 
6.88
%
Debt investments in SLF JV I
 
96,250

 
5.91
%
 
96,250

 
6.36
%
Common equity and warrants
 
70,347

 
4.32
%
 
52,630

 
3.48
%
LLC equity interests of SLF JV I
 
49,322

 
3.03
%
 
49,322

 
3.26
%
Preferred equity
 
39,550

 
2.43
%
 
40,445

 
2.67
%
Total
 
$
1,628,580

 
100.00
%
 
$
1,513,014

 
100.00
%

39
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
March 31, 2020
 
September 30, 2019
Fair Value:
 
 
 
 % of Total Investments
 
% of Net Assets
 
 
 
 % of Total Investments
 
% of Net Assets
Senior secured debt
 
$
1,140,622

 
81.93
%
 
151.64
%
 
$
1,130,876

 
78.64
%
 
121.51
%
Debt investments in SLF JV I
 
92,171

 
6.62
%
 
12.25
%
 
96,250

 
6.69
%
 
10.34
%
Subordinated debt
 
80,060

 
5.75
%
 
10.64
%
 
81,298

 
5.65
%
 
8.74
%
Common equity and warrants
 
47,967

 
3.45
%
 
6.38
%
 
58,988

 
4.10
%
 
6.34
%
Preferred equity
 
31,367

 
2.25
%
 
4.17
%
 
40,578

 
2.82
%
 
4.36
%
LLC equity interests of SLF JV I
 
—

 
—

 
—

 
30,052

 
2.10
%
 
3.23
%
Total
 
$
1,392,187

 
100.00
%
 
185.08
%
 
$
1,438,042

 
100.00
%
 
154.52
%

The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business. The following tables show the composition of the Company's portfolio by geographic region at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets:
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 % of Total Investments
 
 
 
 % of Total Investments
Northeast
 
$
497,883

 
30.58
%
 
$
394,130

 
26.05
%
West
 
342,353

 
21.02
%
 
377,810

 
24.97
%
Midwest
 
286,867

 
17.61
%
 
322,651

 
21.33
%
International
 
191,624

 
11.77
%
 
171,129

 
11.31
%
Southeast
 
159,921

 
9.82
%
 
131,522

 
8.69
%
Southwest
 
69,365

 
4.26
%
 
66,781

 
4.41
%
South
 
45,331

 
2.78
%
 
13,798

 
0.91
%
Northwest
 
35,236

 
2.16
%
 
35,193

 
2.33
%
Total
 
$
1,628,580

 
100.00
%
 
$
1,513,014

 
100.00
%
 
 
March 31, 2020
 
September 30, 2019
Fair Value:
 
 
 
 % of Total Investments
 
% of Net Assets
 
 
 
 % of Total Investments
 
% of Net Assets
Northeast
 
$
409,356

 
29.41
%
 
54.43
%
 
$
358,328

 
24.93
%
 
38.50
%
West
 
308,880

 
22.19
%
 
41.06
%
 
350,660

 
24.38
%
 
37.68
%
Midwest
 
227,951

 
16.37
%
 
30.30
%
 
297,433

 
20.68
%
 
31.97
%
International
 
172,965

 
12.42
%
 
22.99
%
 
175,687

 
12.22
%
 
18.88
%
Southeast
 
136,601

 
9.81
%
 
18.16
%
 
125,306

 
8.71
%
 
13.46
%
Southwest
 
62,352

 
4.48
%
 
8.29
%
 
82,395

 
5.73
%
 
8.85
%
South
 
41,187

 
2.96
%
 
5.48
%
 
13,416

 
0.93
%
 
1.44
%
Northwest
 
32,895

 
2.36
%
 
4.37
%
 
34,817

 
2.42
%
 
3.74
%
Total
 
$
1,392,187

 
100.00
%
 
185.08
%
 
$
1,438,042

 
100.00
%
 
154.52
%
 
The following tables show the composition of the Company's portfolio by industry at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets as of March 31, 2020 and September 30, 2019:

40
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 % of Total Investments
 
 
 
 % of Total Investments
Application Software
 
$
195,026

 
11.97
%
 
$
132,051

 
8.73
%
Multi-Sector Holdings (1)
 
158,515

 
9.73

 
146,436

 
9.67

Data Processing & Outsourced Services
 
105,919

 
6.50

 
97,759

 
6.46

Health Care Services
 
72,298

 
4.44

 
100,173

 
6.62

Biotechnology
 
71,683

 
4.40

 
82,109

 
5.43

Pharmaceuticals
 
63,384

 
3.89

 
59,294

 
3.92

Auto Parts & Equipment
 
58,430

 
3.59

 
42,641

 
2.82

Specialized Finance
 
55,627

 
3.42

 
53,227

 
3.52

Personal Products
 
53,363

 
3.28

 
—

 
—

Property & Casualty Insurance
 
51,103

 
3.14

 
73,076

 
4.83

Specialty Chemicals
 
44,887

 
2.76

 
31,788

 
2.10

Research & Consulting Services
 
39,682

 
2.44

 
34,734

 
2.30

Real Estate Services
 
39,178

 
2.41

 
39,332

 
2.60

Aerospace & Defense
 
36,704

 
2.25

 
33,665

 
2.23

Health Care Technology
 
36,527

 
2.24

 
51,044

 
3.37

Systems Software
 
33,712

 
2.07

 
31,716

 
2.10

Oil & Gas Storage & Transportation
 
31,599

 
1.94

 
11,603

 
0.77

Internet Services & Infrastructure
 
31,480

 
1.93

 
32,563

 
2.15

Alternative Carriers
 
31,304

 
1.92

 
29,400

 
1.94

Oil & Gas Refining & Marketing
 
30,298

 
1.86

 
30,378

 
2.01

Managed Health Care
 
27,562

 
1.69

 
27,645

 
1.83

Specialized REITs
 
24,464

 
1.50

 
8,264

 
0.55

Education Services
 
23,067

 
1.42

 
15,672

 
1.04

Advertising
 
22,898

 
1.41

 
42,405

 
2.80

Airport Services
 
22,447

 
1.38

 
—

 
—

Independent Power Producers & Energy Traders
 
21,938

 
1.35

 
—

 
—

Integrated Telecommunication Services
 
21,339

 
1.31

 
33,741

 
2.23

Electrical Components & Equipment
 
21,072

 
1.29

 
21,210

 
1.40

General Merchandise Stores
 
19,085

 
1.17

 
18,946

 
1.25

Diversified Support Services
 
18,800

 
1.15

 
18,805

 
1.24

Apparel, Accessories & Luxury Goods
 
17,539

 
1.08

 
18,192

 
1.20

Industrial Machinery
 
16,063

 
0.99

 
17,055

 
1.13

Health Care Distributors
 
15,816

 
0.97

 
22,561

 
1.49

IT Consulting & Other Services
 
14,947

 
0.92

 
14,975

 
0.99

Movies & Entertainment
 
13,398

 
0.82

 
18,858

 
1.25

Construction & Engineering
 
13,232

 
0.81

 
23,443

 
1.55

Oil & Gas Equipment & Services
 
11,474

 
0.70

 
12,165

 
0.80

Airlines
 
10,597

 
0.65

 
10,640

 
0.70

Trading Companies & Distributors
 
10,290

 
0.63

 
10,357

 
0.68

Restaurants
 
9,262

 
0.57

 
3,097

 
0.20

Commercial Printing
 
7,924

 
0.49

 
6,002

 
0.40

Food Retail
 
6,829

 
0.42

 
14,473

 
0.96

Health Care Facilities
 
3,552

 
0.22

 
—

 
—

Distributors
 
3,498

 
0.21

 
—

 
—

Specialty Stores
 
2,771

 
0.17

 
1,305

 
0.09

Construction Materials
 
2,113

 
0.13

 
—

 
—

Leisure Facilities
 
1,887

 
0.12

 
1,887

 
0.12

Building Products
 
1,621

 
0.10

 
—

 
—

Communications Equipment
 
1,325

 
0.08

 
—

 
—

Thrifts & Mortgage Finance
 
938

 
0.06

 
1,217

 
0.08

Other Diversified Financial Services
 
113

 
0.01

 
113

 
0.01

Interactive Media & Services
 
—

 
—

 
21,805

 
1.44

Household Appliances
 
—

 
—

 
7,837

 
0.52

Environmental & Facilities Services
 
—

 
—

 
5,940

 
0.39

Human Resource & Employment Services
 
—

 
—

 
830

 
0.05

Department Stores
 
—

 
—

 
585

 
0.04

Total
 
$
1,628,580

 
100.00
%
 
$
1,513,014

 
100.00
%

41
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
March 31, 2020
 
September 30, 2019
Fair Value:
 
 
 
 % of Total Investments
 
% of Net Assets
 
 
 
 % of Total Investments
 
% of Net Assets
Application Software
 
$
181,347

 
13.02
%
 
24.08
%
 
$
129,577

 
9.00
%
 
13.94
%
Multi-Sector Holdings (1)
 
104,865

 
7.53

 
13.94

 
128,539

 
8.94

 
13.81

Data Processing & Outsourced Services
 
90,586

 
6.51

 
12.04

 
98,267

 
6.83

 
10.56

Biotechnology
 
72,359

 
5.20

 
9.62

 
85,719

 
5.96

 
9.21

Health Care Services
 
63,374

 
4.55

 
8.42

 
58,391

 
4.06

 
6.27

Pharmaceuticals
 
59,015

 
4.24

 
7.85

 
60,057

 
4.18

 
6.45

Personal Products
 
51,549

 
3.70

 
6.85

 
—

 
—

 
—

Specialized Finance
 
49,567

 
3.56

 
6.59

 
51,485

 
3.58

 
5.53

Auto Parts & Equipment
 
45,780

 
3.29

 
6.09

 
40,484

 
2.82

 
4.35

Property & Casualty Insurance
 
45,353

 
3.26

 
6.03

 
74,148

 
5.16

 
7.97

Research & Consulting Services
 
35,695

 
2.56

 
4.75

 
37,336

 
2.60

 
4.01

Health Care Technology
 
35,462

 
2.55

 
4.71

 
52,275

 
3.64

 
5.62

Real Estate Services
 
34,738

 
2.50

 
4.62

 
39,501

 
2.75

 
4.24

Specialty Chemicals
 
33,588

 
2.41

 
4.47

 
23,514

 
1.64

 
2.53

Systems Software
 
30,827

 
2.21

 
4.10

 
31,504

 
2.19

 
3.39

Internet Services & Infrastructure
 
29,600

 
2.13

 
3.93

 
32,565

 
2.26

 
3.50

Oil & Gas Storage & Transportation
 
29,545

 
2.12

 
3.93

 
11,926

 
0.83

 
1.28

Aerospace & Defense
 
29,538

 
2.12

 
3.93

 
33,738

 
2.35

 
3.63

Alternative Carriers
 
26,016

 
1.87

 
3.46

 
29,580

 
2.06

 
3.18

Oil & Gas Refining & Marketing
 
25,765

 
1.85

 
3.43

 
31,597

 
2.20

 
3.40

Managed Health Care
 
24,036

 
1.73

 
3.20

 
27,775

 
1.93

 
2.98

Specialized REITs
 
22,362

 
1.61

 
2.97

 
8,213

 
0.57

 
0.88

Airport Services
 
21,623

 
1.55

 
2.87

 
—

 
—

 
—

Independent Power Producers & Energy Traders
 
21,151

 
1.52

 
2.81

 
—

 
—

 
—

Electrical Components & Equipment
 
18,185

 
1.31

 
2.42

 
20,032

 
1.39

 
2.15

Advertising
 
17,244

 
1.24

 
2.29

 
37,261

 
2.59

 
4.00

Diversified Support Services
 
16,362

 
1.18

 
2.18

 
18,624

 
1.30

 
2.00

Airlines
 
14,675

 
1.05

 
1.95

 
16,140

 
1.12

 
1.73

Integrated Telecommunication Services
 
14,576

 
1.05

 
1.94

 
28,876

 
2.01

 
3.10

Industrial Machinery
 
14,153

 
1.02

 
1.88

 
16,848

 
1.17

 
1.81

General Merchandise Stores
 
13,889

 
1.00

 
1.85

 
16,934

 
1.18

 
1.82

Health Care Distributors
 
12,757

 
0.92

 
1.70

 
21,962

 
1.53

 
2.36

IT Consulting & Other Services
 
12,013

 
0.86

 
1.60

 
13,792

 
0.96

 
1.48

Apparel, Accessories & Luxury Goods
 
11,424

 
0.82

 
1.52

 
13,286

 
0.92

 
1.43

Movies & Entertainment
 
10,475

 
0.75

 
1.39

 
18,613

 
1.29

 
2.00

Construction & Engineering
 
10,447

 
0.75

 
1.39

 
23,982

 
1.67

 
2.58

Oil & Gas Equipment & Services
 
8,930

 
0.64

 
1.19

 
13,652

 
0.95

 
1.47

Trading Companies & Distributors
 
8,789

 
0.63

 
1.17

 
10,370

 
0.72

 
1.11

Commercial Printing
 
7,678

 
0.55

 
1.02

 
5,900

 
0.41

 
0.63

Education Services
 
6,960

 
0.50

 
0.93

 
16

 
—

 
—

Food Retail
 
6,909

 
0.50

 
0.92

 
14,903

 
1.04

 
1.60

Restaurants
 
6,419

 
0.46

 
0.85

 
2,800

 
0.19

 
0.30

Health Care Facilities
 
3,373

 
0.24

 
0.45

 
—

 
—

 
—

Distributors
 
3,335

 
0.24

 
0.44

 
—

 
—

 
—

Leisure Facilities
 
3,043

 
0.22

 
0.40

 
4,809

 
0.33

 
0.52

Construction Materials
 
1,863

 
0.13

 
0.25

 
—

 
—

 
—

Building Products
 
1,570

 
0.11

 
0.21

 
—

 
—

 
—

Specialty Stores
 
1,566

 
0.11

 
0.21

 
—

 
—

 
—

Communications Equipment
 
1,456

 
0.10

 
0.19

 
—

 
—

 
—

Thrifts & Mortgage Finance
 
355

 
0.03

 
0.05

 
691

 
0.05

 
0.07

Interactive Media & Services
 
—

 
—

 
—

 
22,500

 
1.56

 
2.42

Leisure Products
 
—

 
—

 
—

 
15,054

 
1.05

 
1.62

Household Appliances
 
—

 
—

 
—

 
7,614

 
0.53

 
0.82

Environmental & Facilities Services
 
—

 
—

 
—

 
5,937

 
0.41

 
0.64

Human Resource & Employment Services
 
—

 
—

 
—

 
775

 
0.05

 
0.08

Department Stores
 
—

 
—

 
—

 
480

 
0.03

 
0.05

Total
 
$
1,392,187

 
100.00
%
 
185.08
%
 
$
1,438,042

 
100.00
%
 
154.52
%
___________________

(1)
This industry includes the Company's investments in SLF JV I, collateral loan obligations and certain limited partnership interests.


42
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





As of March 31, 2020 and September 30, 2019, the Company had no single investment that represented greater than 10% of the total investment portfolio at fair value. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, may fluctuate and in any given period can be highly concentrated among several investments.

Senior Loan Fund JV I, LLC
In May 2014, the Company entered into an LLC agreement with Trinity Universal Insurance Company, a subsidiary of Kemper Corporation ("Kemper"), to form SLF JV I. The Company co-invests in senior secured loans of middle-market companies and other corporate debt securities with Kemper through its investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by the Company and one representative selected by Kemper (with approval from a representative of each required). Since the Company does not have a controlling financial interest in SLF JV I, the Company does not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to the Company and Kemper by SLF JV I. On December 28, 2018, the Company and Kemper directed the redemption of their holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which consisted of equity interests of SLF JV I Funding LLC (the "Equity Interests"), were distributed in-kind to each of the Company and Kemper, based upon their respective holdings of mezzanine notes. Upon such distribution, the Company and Kemper each then directed that a portion of their respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I.  SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I (the "SLF JV 1 Subordinated Notes") and the mezzanine notes issued by SLF Repack Issuer 2016, LLC (the "SLF Repack Notes") collectively are referred to as the SLF JV I Notes. Prior to the redemption on December 28, 2018, the SLF Repack Notes consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes. The SLF JV I Subordinated Notes are (and the SLF Repack Notes were, prior to their redemption) senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of March 31, 2020 and September 30, 2019, the Company and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Subordinated Notes.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch (as amended, the "Deutsche Bank I Facility"), which permitted up to $250.0 million of borrowings (subject to borrowing base and other limitations) as of March 31, 2020 and September 30, 2019. Borrowings under the Deutsche Bank I Facility are secured by all of the assets of SLF JV I Funding LLC, a special purpose financing subsidiary of SLF JV I. As of March 31, 2020, the reinvestment period of the Deutsche Bank I Facility was scheduled to expire June 28, 2021 and the maturity date for the Deutsche Bank I Facility was June 29, 2026. As of March 31, 2020, borrowings under the Deutsche Bank I Facility accrued interest at a rate equal to 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility, $193.9 million and $170.2 million of borrowings were outstanding as of March 31, 2020 and September 30, 2019, respectively.
As of March 31, 2020 and September 30, 2019, SLF JV I had total assets of $329.6 million and $360.9 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 53 and 51 portfolio companies, as of March 31, 2020 and September 30, 2019, respectively. The portfolio companies in SLF JV I are in industries similar to those in which the Company may invest directly. As of March 31, 2020, the Company's investment in SLF JV I consisted of LLC equity interests and Subordinated Notes of $92.2 million, at fair value. As of September 30, 2019, the Company's investment in SLF JV I consisted of LLC equity interests and Subordinated Notes of $126.3 million, at fair value.
As of each of March 31, 2020 and September 30, 2019, the Company and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from the Company. As of March 31, 2020 and September 30, 2019, the Company and Kemper had the option to fund additional SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each of March 31, 2020 and September 30, 2019, the Company had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.

43
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of March 31, 2020 and September 30, 2019:
 
 
March 31, 2020
 
September 30, 2019
Senior secured loans (1)
 
$337,016
 
$340,960
Weighted average interest rate on senior secured loans (2)
 
5.54%
 
6.57%
Number of borrowers in SLF JV I
 
53
 
51
Largest exposure to a single borrower (1)
 
$10,686
 
$10,835
Total of five largest loan exposures to borrowers (1)
 
$51,441
 
$50,510
__________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.


44
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





SLF JV I Portfolio as of March 31, 2020
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
5.53
%
Diversified Support Services
$
9,253

 
$
9,213

 
$
7,622

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,312

(4)
AI Convoy (Luxembourg) S.À.R.L.
First Lien Term Loan, LIBOR+3.50% cash due 1/18/2027
5.34
%
Aerospace & Defense
9,200

 
9,154

 
8,257

 
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
5.49
%
Electrical Components & Equipment
6,092

 
5,953

 
5,137

(4)
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
4.70
%
Integrated Telecommunication Services
9,709

 
9,398

 
9,296

(4)
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+5.25% cash due 12/31/2023
6.32
%
Pharmaceuticals
9,879

 
9,586

 
8,594

 
Anastasia Parent, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025
5.20
%
Personal Products
2,843

 
2,360

 
1,658

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
8.25
%
Application Software
4,615

 
4,542

 
4,398

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application Software
—

 
(6
)
 
(18
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,536

 
4,380

 
Aurora Lux Finco S.À.R.L.
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026
7.00
%
Airport Services
6,500

 
6,344

 
6,111

(4)
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
3.99
%
Data Processing & Outsourced Services
9,825

 
9,807

 
8,134

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
5.24
%
Systems Software
7,571

 
7,483

 
6,366

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
4.92
%
Oil & Gas Equipment & Services
7,369

 
7,342

 
3,887

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
Data Processing & Outsourced Services
 
 
7,194

 
5,683

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
5,683

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
6.00
%
Oil & Gas Refining & Marketing
7,920

 
7,841

 
7,009

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026
5.49
%
Alternative Carriers
8,367

 
8,162

 
6,746

(4)
Curium Bidco S.à.r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
5.07
%
Biotechnology
5,970

 
5,925

 
5,672

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/16/2026
4.99
%
Internet Services & Infrastructure
8,000

 
7,980

 
7,193

 
Dealer Tire, LLC
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025
5.24
%
Distributors
948

 
904

 
788

(4)
Delta 2 (Lux) S.à.r.l.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2024
3.50
%
Movies & Entertainment
5,167

 
4,649

 
4,665

 
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 4/17/2026
5.20
%
Application Software
4,974

 
4,950

 
4,372

 
eResearch Technology, Inc.
First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027
5.95
%
Application Software
7,500

 
7,425

 
6,653

 
Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.21
%
Integrated Telecommunication Services
7,162

 
7,068

 
6,846

 
GFL Environmental, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/30/2025
4.00
%
Environmental & Facilities Services
718

 
663

 
700

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
5.25
%
Systems Software
7,820

 
7,767

 
6,726

 

45
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
3.74
%
Interactive Media & Services
$
8,592

 
$
8,470

 
$
8,119

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026
8.99
%
Research & Consulting Services
6,000

 
5,977

 
5,190

(4)
Helios Software Holdings, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025
5.32
%
Systems Software
3,990

 
3,950

 
3,438

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.68
%
Alternative Carriers
10,686

 
10,563

 
9,905

 
KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
5.00
%
Household Products
8,000

 
7,976

 
7,237

 
Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
8.00
%
Internet Services & Infrastructure
4,524

 
4,450

 
4,185

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025
8.07
%
Internet Services & Infrastructure
476

 
468

 
440

(4)
Total Mindbody, Inc.
 
 
 
 
 
4,918

 
4,625

 
MRI Software LLC
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
3,411

 
3,379

 
3,019

(4)
 
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026
 
Application Software
—

 
(4
)
 
(68
)
(4)(5)
 
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
169

 
166

 
130

(4)(5)
Total MRI Software LLC
 
 
 
 
 
3,541

 
3,081

 
Navicure, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/22/2026
4.99
%
Health Care Technology
6,000

 
5,970

 
5,565

 
New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
6.45
%
Oil & Gas Equipment & Services
1,138

 
1,138

 
1,138

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & Gas Equipment & Services
 
 
—

 
697

(4)
Total New IPT, Inc.
 
 
 
 
 
1,138

 
1,835

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
5.57
%
Electrical Components & Equipment
6,860

 
6,835

 
5,831

 
Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
6.00
%
Application Software
5,962

 
5,935

 
5,315

 
OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026
5.45
%
Application Software
7,271

 
7,234

 
5,871

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026
 
Application software
—

 
(3
)
 
(133
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,231

 
5,738

 
Olaplex, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026
7.50
%
Personal Products
5,000

 
4,904

 
4,675

(4)
 
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025
7.50
%
Personal Products
540

 
530

 
505

(4)
Total Olaplex, Inc.
 
 
 
 
 
5,434

 
5,180

 
Quikrete Holdings, Inc.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2027
3.49
%
Construction Materials
2,280

 
2,106

 
2,109

 
Sabert Corporation
First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026
5.50
%
Metal & Glass Containers
4,350

 
4,307

 
4,046

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022
7.57
%
Aerospace & Defense
2,173

 
2,156

 
1,793

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
3.74
%
Casinos & Gaming
6,483

 
6,461

 
5,262

 
SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
6.78
%
Footwear
8,376

 
8,362

 
6,575

 
Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
5.95
%
Health Care Services
9,800

 
9,732

 
8,232

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
6.49
%
Diversified Support Services
4,844

 
4,771

 
3,633

 
Star US Bidco LLC
First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027
5.94
%
Industrial Machinery
2,973

 
2,943

 
2,587

 

46
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026
5.32
%
Personal Products
$
7,980

 
$
7,940

 
$
7,262

(4)
Supermoose Borrower, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025
5.20
%
Application Software
4,913

 
4,566

 
3,960

(4)
Surgery Center Holdings, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024
4.25
%
Health Care Facilities
4,987

 
4,966

 
3,868

(4)
Thruline Marketing, Inc.
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
949

 
449

(4)
Thunder Finco (US), LLC
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026
5.24
%
Movies & Entertainment
8,000

 
7,920

 
6,260

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
5.00
%
Application Software
10,509

 
10,440

 
9,887

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
4.25
%
Movies & Entertainment
4,831

 
4,787

 
4,306

(4)
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
5.95
%
Application Software
6,859

 
6,826

 
5,941

(4)
Verscend Holding Corp.
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
5.49
%
Health Care Technology
4,133

 
4,099

 
3,926


VM Consolidated, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 2/28/2025
4.24
%
Data Processing & Outsourced Services
10,542

 
10,554

 
9,593

(4)
WideOpenWest Finance, LLC
First Lien Term Loan, LIBOR+3.25% cash due 8/18/2023
4.25
%
Cable & Satellite
962

 
867

 
897

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
9.53
%
Aerospace & Defense
6,000

 
5,953

 
4,120

(4)
 
 
 
 
$
337,016

 
$
341,737

 
$
299,572

 
__________
(1) Represents the interest rate as of March 31, 2020. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of March 31, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45% and the 180-day LIBOR at 1.07%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of March 31, 2020 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of March 31, 2020.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
 



47
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





SLF JV I Portfolio as of September 30, 2019
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
6.07
%
Diversified support services
$
9,300

 
$
9,256

 
$
9,201

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,295

(4)
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
6.60
%
Electrical components & equipment
6,145

 
5,992

 
5,659

(4)
Air Newco LP
First Lien Term Loan, LIBOR+4.75% cash due 5/31/2024
6.79
%
IT consulting & other services
9,900

 
9,875

 
9,916

 
AL Midcoast Holdings LLC
First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025
7.60
%
Oil & gas storage & transportation
9,900

 
9,801

 
9,764

 
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
6.03
%
Integrated telecommunication services
7,444

 
7,282

 
7,439

 
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+4.75% cash due 4/1/2022
6.79
%
Pharmaceuticals
7,656

 
7,656

 
6,963

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
9.56
%
Application software
4,615

 
4,534

 
4,530

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application software
—

 
(7
)
 
(7
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,527

 
4,523

 
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
5.04
%
Data processing & outsourced services
9,875

 
9,855

 
9,858

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
6.29
%
Systems software
7,609

 
7,518

 
7,336

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
6.05
%
Oil & gas equipment & services
7,406

 
7,376

 
6,855

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
Data Processing & Outsourced Services
 
 
7,194

 
7,194

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
7,194

 
Cast & Crew Payroll, LLC
First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026
6.05
%
Application software
4,975

 
4,925

 
5,018

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
7.10
%
Oil & gas refining & marketing
7,960

 
7,880

 
8,010

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026
7.10
%
Alternative Carriers
8,000

 
7,840

 
7,888

(4)
Curium Bidco S.à r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
6.10
%
Biotechnology
6,000

 
5,955

 
6,030

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026
6.26
%
Internet services & infrastructure
8,000

 
7,980

 
7,985

 
DigiCert, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024
6.04
%
Internet services & infrastructure
8,250

 
8,148

 
8,249

(4)
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026
6.04
%
Application software
5,000

 
4,975

 
5,015

 
Everi Payments Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/9/2024
5.04
%
Casinos & gaming
4,764

 
4,742

 
4,776

 
Falmouth Group Holdings Corp.
First Lien Term Loan, LIBOR+6.75% cash due 12/14/2021
8.95
%
Specialty chemicals
4,938

 
4,909

 
4,910

 
Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.80
%
Integrated telecommunication services
6,473

 
6,400

 
6,471

 
Gentiva Health Services, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025
5.81
%
Healthcare services
7,920

 
7,801

 
7,974

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
6.29
%
Systems software
7,860

 
7,801

 
7,644

 
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
4.81
%
Interactive media & services
7,852

 
7,835

 
7,862

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026
9.54
%
Research & consulting services
6,000

 
5,975

 
5,925

(4)

48
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Indivior Finance S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022
6.76
%
Pharmaceuticals
$
7,898

 
$
7,797

 
$
7,272

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.80
%
Alternative Carriers
10,000

 
9,891

 
10,042

 
KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
6.26
%
Household products
8,000

 
7,972

 
7,610

 
McDermott Technology (Americas), Inc.
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025
7.10
%
Oil & gas equipment & services
4,187

 
4,119

 
2,676

 
Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
9.06
%
Internet services & infrastructure
4,524

 
4,443

 
4,438

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025
 
Internet services & infrastructure
—

 
(9
)
 
(9
)
(4)(5)
Total Mindbody, Inc.
 
 
 
 
 
4,434

 
4,429

 
Navicure, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 9/18/2026
6.13
%
Healthcare technology
6,000

 
5,970

 
6,008

 
New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
7.10
%
Oil & gas equipment & services
1,422

 
1,422

 
1,422

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & gas equipment & services
 
 
—

 
1,268

(4)
Total New IPT, Inc.
 
 
 
 
 
1,422

 
2,690

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
6.56
%
Electrical components & equipment
6,895

 
6,868

 
6,792

 
Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
7.05
%
Application software
5,993

 
5,961

 
5,882

 
OCI Beaumont LLC
First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025
6.10
%
Commodity chemicals
7,880

 
7,872

 
7,890

 
OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026
6.13
%
Application software
7,312

 
7,275

 
7,298

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026
 
Application software
—

 
(3
)
 
(1
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,272

 
7,297

 
Red Ventures, LLC
First Lien Term Loan, LIBOR+3.00% cash due 11/8/2024
5.04
%
Interactive media & services
3,990

 
3,971

 
4,011

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022
8.05
%
Aerospace & defense
2,205

 
2,183

 
2,094

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
4.79
%
Casinos & gaming
6,516

 
6,491

 
6,470

 
SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
7.26
%
Footwear
8,420

 
8,403

 
7,999

 
Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
6.60
%
Healthcare services
9,850

 
9,775

 
9,838

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
7.54
%
Diversified support services
4,906

 
4,833

 
4,759

 
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026
6.59
%
Personal products
8,000

 
7,960

 
8,048

 
Thruline Marketing, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
9.10
%
Advertising
1,854

 
1,851

 
1,854

(4)
 
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
1,088

 
658

(4)
Total Thruline Marketing, Inc.
 
 
 
 
 
2,939

 
2,512

 
Triple Royalty Sub LLC
Fixed Rate Bond 144A 9.0% Toggle PIK cash due 4/15/2033
 
Pharmaceuticals
5,000

 
5,000

 
5,175

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
6.03
%
Application software
9,875

 
9,836

 
9,836

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
5.30
%
Movies & entertainment
4,489

 
4,489

 
4,506

 
Uniti Group LP
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022
7.04
%
Specialized REITs
6,401

 
6,221

 
6,256

(4)
Valeant Pharmaceuticals International Inc.
First Lien Term Loan, LIBOR+2.75% cash due 11/27/2025
4.79
%
Pharmaceuticals
1,772

 
1,764

 
1,778

 

49
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
6.60
%
Application software
$
6,894

 
$
6,856

 
$
6,534

(4)
Verra Mobility, Corp.
First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025
5.79
%
Data processing & outsourced services
10,835

 
10,849

 
10,894

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
10.01
%
Aerospace & defense
6,000

 
5,949

 
5,974

(4)
 
 
 
 
$
340,960

 
$
347,985

 
$
345,032

 
__________
(1) Represents the interest rate as of September 30, 2019. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2019, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2019 utilizing a similar technique as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both the Company and SLF JV I as of September 30, 2019.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.

The cost and fair value of the Company's debt investment in SLF JV I were $96.3 million and $92.2 million, respectively, as of March 31, 2020. Both the cost and fair value of the Company's debt investment in SLF JV I were $96.3 million as of September 30, 2019. The Company earned interest income of $2.1 million and $4.3 million on its debt investment in the SLF JV I for the three and six months ended March 31, 2020, respectively. The Company earned interest income of $2.3 million and $5.1 million on its investments in the SLF JV I Notes for the three and six months ended March 31, 2019, respectively. The Company's debt investment in SLF JV I bears interest at a rate of one-month LIBOR plus 7.0% per annum and matures on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by the Company were $49.3 million and $0.0 million, respectively, as of March 31, 2020, and $49.3 million and $30.1 million, respectively, as of September 30, 2019. The Company did not earn dividend income for the three and six months ended March 31, 2020 and 2019, with respect to its investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are generally dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of March 31, 2020 and September 30, 2019 and for the three and six months ended March 31, 2020 and 2019:
 
 
March 31, 2020
 
September 30, 2019
Selected Balance Sheet Information:
 
 
 
 
Investments at fair value (cost March 31, 2020: $341,737; cost September 30, 2019: $347,985)
 
$
299,572

 
$
345,032

Cash and cash equivalents
 
14,039

 
3,674

Restricted cash
 
5,242

 
5,242

Other assets
 
10,783

 
6,912

Total assets
 
$
329,636

 
$
360,860

 
 
 
 
 
Senior credit facility payable
 
$
193,910

 
$
170,210

Debt securities payable at fair value (proceeds March 31, 2020: $110,000; proceeds September 30, 2019: $110,000)
 
105,339

 
110,000

Other liabilities
 
30,387

 
46,303

Total liabilities
 
$
329,636

 
$
326,513

Members' equity
 
—

 
34,347

Total liabilities and members' equity
 
$
329,636

 
$
360,860



50
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





 
 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
 
Six months ended March 31, 2020
 
Six months ended March 31, 2019
Selected Statements of Operations Information:
 
 
 
 
 
 
 
 
Interest income
 
$
5,546

 
$
5,551

 
$
10,939

 
$
10,989

Other income
 
291

 
80

 
297

 
89

Total investment income
 
5,837

 
5,631

 
11,236

 
11,078

Interest expense
 
4,493

 
4,709

 
9,134

 
9,863

Other expenses
 
64

 
276

 
131

 
326

Total expenses (1)
 
4,557

 
4,985

 
9,265

 
10,189

Net unrealized appreciation (depreciation)
 
(37,491
)
 
4,576

 
(34,550
)
 
1,120

Net realized gains (losses)
 
(615
)
 
19

 
(1,767
)
 
(4,986
)
Net income (loss)
 
$
(36,826
)
 
$
5,241

 
$
(34,346
)
 
$
(2,977
)
 __________
(1) There are no management fees or incentive fees charged at SLF JV I.
SLF JV I has elected to fair value the debt securities issued to the Company and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option. The debt securities are valued based on the total assets less the total liabilities senior to the subordinated notes of SLF JV I in an amount not exceeding par under the EV technique.
During the six months ended March 31, 2020 and 2019, the Company did not sell any debt investments to SLF JV I.

Note 4. Fee Income
For the three and six months ended March 31, 2020 the Company recorded total fee income of $2.1 million and $3.1 million, respectively, of which $0.2 million and $0.4 million, respectively, was recurring in nature. For the three and six months ended March 31, 2019, the Company recorded total fee income of $1.1 million and $2.3 million, respectively, of which $0.1 million and $0.3 million, respectively, was recurring in nature. Recurring fee income primarily consisted of servicing fees and exit fees.

Note 5. Share Data and Net Assets
Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share, pursuant to ASC Topic 260-10, Earnings per Share, for the three and six months ended March 31, 2020 and 2019:
(Share amounts in thousands)
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
Six months ended
March 31, 2020
 
Six months
ended
March 31, 2019
Earnings (loss) per common share — basic and diluted:
 
 
 
 
 
 
 
 
Net increase (decrease) in net assets resulting from operations
 
$
(165,467
)
 
$
64,485

 
$
(151,624
)
 
$
92,203

Weighted average common shares outstanding — basic and diluted
 
140,961

 
140,961

 
140,961

 
140,961

Earnings (loss) per common share — basic and diluted
 
$
(1.17
)
 
$
0.46

 
$
(1.08
)
 
$
0.65


51
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Changes in Net Assets

The following table presents the changes in net assets for the three and six months ended March 31, 2020:
 
 
Common Stock
 
 
 
 
 
 
 
 
Shares
 
Par Value
 
Additional paid-in-capital
 
Accumulated Overdistributed Earnings
 
Total Net Assets
Balance at September 30, 2019
 
140,961

 
$
1,409

 
$
1,487,774

 
$
(558,553
)
 
$
930,630

Net investment income
 
—

 
—

 
—

 
7,836

 
7,836

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
2,879

 
2,879

Net realized gains (losses)
 
—

 
—

 
—

 
3,288

 
3,288

Provision for income tax (expense) benefit
 
—

 
—

 
—

 
(160
)
 
(160
)
Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
88

 
1

 
480

 
—

 
481

Repurchases of common stock under dividend reinvestment plan
 
(88
)
 
(1
)
 
(480
)
 
—

 
(481
)
Balance at December 31, 2019
 
140,961

 
$
1,409

 
$
1,487,774

 
$
(558,101
)
 
$
931,082

Net investment income
 
—

 
$
—

 
$
—

 
$
22,841

 
$
22,841

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
(163,533
)
 
(163,533
)
Net realized gains (losses)
 
—

 
—

 
—

 
(26,480
)
 
(26,480
)
Provision for income tax (expense) benefit
 
—

 
—

 
—

 
1,705

 
1,705

Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
158

 
2

 
504

 
—

 
506

Repurchases of common stock under dividend reinvestment plan
 
(158
)
 
(2
)
 
(504
)
 
—

 
(506
)
Balance at March 31, 2020
 
140,961

 
$
1,409

 
$
1,487,774

 
$
(736,959
)
 
$
752,224


The following table presents the changes in net assets for the three and six months ended March 31, 2019:
 
 
Common Stock
 
 
 
 
 
 
 
 
Shares
 
Par Value
 
Additional paid-in-capital
 
Accumulated Overdistributed Earnings
 
Total Net Assets
Balance at September 30, 2018
 
140,961

 
$
1,409

 
$
1,492,739

 
$
(636,113
)
 
$
858,035

Net investment income
 
—

 
—

 
—

 
17,317

 
17,317

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
(6,975
)
 
(6,975
)
Net realized gains (losses)
 
—

 
—

 
—

 
17,962

 
17,962

Provision for income tax (expense) benefit
 
—

 
—

 
—

 
(586
)
 
(586
)
Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
87

 
1

 
383

 
—

 
384

Repurchases of common stock under dividend reinvestment plan
 
(87
)
 
(1
)
 
(383
)
 
—

 
(384
)
Balance at December 31, 2018
 
140,961

 
$
1,409

 
$
1,492,739

 
$
(621,786
)
 
$
872,362

Net investment income
 
—

 
$
—

 
$
—

 
$
17,709

 
$
17,709

Net unrealized appreciation (depreciation)
 
—

 
—

 
—

 
21,472

 
21,472

Net realized gains (losses)
 
—

 
—

 
—

 
25,213

 
25,213

Provision for income tax (expense) benefit
 
—

 
—

 
—

 
91

 
91

Distributions to stockholders
 
—

 
—

 
—

 
(13,391
)
 
(13,391
)
Issuance of common stock under dividend reinvestment plan
 
60

 
1

 
311

 
—

 
312

Repurchases of common stock under dividend reinvestment plan
 
(60
)
 
(1
)
 
(311
)
 
—

 
(312
)
Balance at March 31, 2019
 
140,961

 
$
1,409

 
$
1,492,739

 
$
(570,692
)
 
$
923,456



52
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Distributions
Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, may be distributed to stockholders or retained for reinvestment.
The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors declares a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP with such shares issued at the greater of the most recently computed net asset value per share of common stock or 95% of the current market price per share of common stock on the payment date for such distribution. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP.
For income tax purposes, the Company has reported its distributions for the 2019 calendar year as ordinary income. The character of such distributions was appropriately reported to the Internal Revenue Service and stockholders for the 2019 calendar year. To the extent the Company’s taxable earnings for a fiscal and taxable year fall below the amount of distributions paid for the fiscal and taxable year, a portion of the total amount of the Company’s distributions for the fiscal and taxable year is deemed a return of capital for tax purposes to the Company’s stockholders.
The following table reflects the distributions per share that the Company has paid, including shares issued under the DRIP, on its common stock during the six months ended March 31, 2020 and 2019:
Date Declared
 
Record Date
 
Payment Date
 
Amount
per Share
 
Cash
Distribution
 
DRIP Shares
Issued (1)
 
DRIP Shares
Value
November 12, 2019
 
December 13, 2019
 
December 31, 2019
 
$
0.095

 
$ 12.9 million
 
87,747

 
$ 0.5 million
January 31, 2020
 
March 13, 2020
 
March 31, 2020
 
0.095

 
12.9 million
 
157,523

 
0.5 million
Total for the six months ended March 31, 2020
 
$
0.190

 
$ 25.8 million
 
245,270

 
$ 1.0 million
Date Declared
 
Record Date
 
Payment Date
 
Amount
per Share
 
Cash
Distribution
 
DRIP Shares
Issued (1)
 
DRIP Shares
Value
November 19, 2018
 
December 17, 2018
 
December 28, 2018
 
$
0.095

 
$ 13.0 million
 
87,429

 
$ 0.4 million
February 1, 2019
 
March 15, 2019
 
March 29, 2019
 
0.095

 
13.1 million
 
59,603

 
 0.3 million
Total for the six months ended March 31, 2019
 
$
0.190

 
$ 26.1 million
 
147,032

 
$ 0.7 million
 __________
(1) Shares were purchased on the open market and distributed.

Common Stock Offering
There were no common stock offerings during the six months ended March 31, 2020 and 2019.

Note 6. Borrowings
Credit Facility

On November 30, 2017, the Company entered into a senior secured revolving credit facility (as amended and restated, the “Credit Facility”) pursuant to a Senior Secured Revolving Credit Agreement with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents. The Credit Facility provides that the Company may use the proceeds of the loans and issuances of letters of credit under the Credit Facility for general corporate purposes, including acquiring and funding leveraged loans, mezzanine loans, high-yield securities, convertible securities, preferred stock, common stock and other investments. The Credit Facility further allows the Company to request letters of credit from ING Capital LLC, as the issuing bank.


53
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





As of March 31, 2020 and September 30, 2019, (i) the size of the Credit Facility was $700 million (with an “accordion” feature that permits the Company, under certain circumstances, to increase the size of the facility up to $1.02 billion), (ii) the period during which the Company may make drawings will expire on February 25, 2023 and the maturity date is February 25, 2024 and (iii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at the Company’s option) was 2.00% (which can be increased up to 2.25%) and (b) alternate base rate loans was 1.00% (which can be increased up to 1.25%), each depending on the Company’s senior debt coverage ratio.

On December 13, 2019, the Company amended the Credit Facility to (1) reduce the required ratio of total assets (less total liabilities) to total indebtedness of the Company and its subsidiaries (subject to certain exceptions), from 1.65 to 1.00 to 1.50 to 1.00 and (2) modify the definition of Advance Rate to reference asset coverage of 1.50 to 1.00, rather than 1.65 to 1.00.

The Credit Facility is secured by substantially all of the Company’s assets (excluding, among other things, investments held in and by certain subsidiaries of the Company or investments in certain portfolio companies of the Company) and guaranteed by certain subsidiaries of the Company. As of March 31, 2020, except for assets that were held by the Excluded Subsidiaries and certain other immaterial subsidiaries, substantially all of the Company's assets are pledged as collateral under the Credit Facility.

The Credit Facility requires the Company to, among other things, (i) make representations and warranties regarding the collateral as well as each of the Company’s portfolio companies’ businesses, (ii) agree to certain indemnification obligations, and (iii) comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including covenants related to: (A) limitations on the incurrence of additional indebtedness and liens, (B) limitations on certain investments, (C) limitations on certain asset transfers and restricted payments, (D) maintaining a certain minimum stockholders’ equity, (E) maintaining a ratio of total assets (less total liabilities) to total indebtedness, of the Company and its subsidiaries (subject to certain exceptions), of not less than 1.50 to 1.00, (F) maintaining a ratio of consolidated EBITDA to consolidated interest expense, of the Company and its subsidiaries (subject to certain exceptions), of not less than 2.25 to 1.00, (G) maintaining a minimum liquidity and net worth, and (H) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. The Credit Facility also includes usual and customary default provisions such as the failure to make timely payments under the facility, the occurrence of a change in control, and the failure by the Company to materially perform under the agreements governing the facility, which, if not complied with, could accelerate repayment under the facility. As of March 31, 2020, the Company was in compliance with all financial covenants under the Credit Facility. In addition to the asset coverage ratio described above, borrowings under the Credit Facility (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that will apply different advance rates to different types of assets in the Company’s portfolio. Each loan or letter of credit originated or assumed under the Credit Facility is subject to the satisfaction of certain conditions.

As of March 31, 2020 and September 30, 2019, the Company had $404.8 million and $314.8 million of borrowings outstanding under the Credit Facility, respectively, which had a fair value of $404.8 million and $314.8 million, respectively. The Company's borrowings under the Credit Facility bore interest at a weighted average interest rate of 3.806% and 4.688% for the six months ended March 31, 2020 and 2019, respectively. For the three and six months ended March 31, 2020, the Company recorded interest expense (inclusive of fees) of $4.2 million and $8.2 million, respectively, related to the Credit Facility. For the three and six months ended March 31, 2019, the Company recorded interest expense (inclusive of fees) of $4.3 million and $7.5 million in the aggregate, related to the Credit Facility.

2025 Notes
On February 25, 2020, the Company issued $300.0 million in aggregate principal amount of the 2025 Notes for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the 2025 Notes.
The 2025 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the fifth supplemental indenture, dated February 25, 2020 (collectively, the "2025 Notes Indenture"), between the Company and Deutsche Bank Trust Company Americas (the "Trustee"). The 2025 Notes are the Company's general unsecured obligations that rank senior in right of payment to all of the Company's existing and future indebtedness that is expressly subordinated in right of payment to the 2025 Notes. The 2025 Notes rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated. The 2025 Notes effectively rank junior to any of the Company's secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness. The 2025 Notes rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities. 

54
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Interest on the 2025 Notes is paid semi-annually on February 25 and August 25 at a rate of 3.500% per annum. The 2025 Notes mature on February 25, 2025 and may be redeemed in whole or in part at any time or from time to time at the Company's option prior to maturity at par plus a “make-whole” premium, if applicable.
The 2025 Notes Indenture contains certain covenants, including covenants requiring the Company's compliance with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act or any successor provisions (but giving effect to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission ("SEC"), as well as covenants requiring the Company to provide financial information to the holders of the 2025 Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. These covenants are subject to limitations and exceptions that are described in the 2025 Notes Indenture. The Company may repurchase the 2025 Notes in accordance with the Investment Company Act and the rules promulgated thereunder. In addition, holders of the 2025 Notes can require the Company to repurchase the 2025 Notes at 100% of their principal amount upon the occurrence of certain change of control events as described in the 2025 Notes Indenture. The 2025 Notes were issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. During the three months ended March 31, 2020, the Company did not repurchase any of the 2025 Notes in the open market.
For each of the three and six months ended March 31, 2020, the Company recorded interest expense (inclusive of fees) of $1.1 million related to the 2025 Notes.
As of March 31, 2020, there were $300.0 million of 2025 Notes outstanding, which had a carrying value and fair value of $293.9 million and $274.5 million, respectively. The carrying value represents the aggregate principal amount outstanding less unamortized deferred financing costs and the unaccreted discount recorded upon the issuance of the 2025 Notes. As March 31, 2020, the total unamortized deferred financing costs and the net unaccreted discount were $3.6 million and $2.5 million, respectively.
2019 Notes
On February 26, 2014, the Company issued $250.0 million in aggregate principal amount of its 4.875% unsecured notes due 2019 (the "2019 Notes") for net proceeds of $244.4 million after deducting OID of $1.4 million, underwriting commissions and discounts of $3.7 million and offering costs of $0.5 million.  The OID on the 2019 Notes was amortized based on the effective interest method over the term of the notes. The 2019 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the third supplemental indenture, dated February 26, 2014, between the Company and the Trustee.
Interest on the 2019 Notes was paid semi-annually on March 1 and September 1 at a rate of 4.875% per annum. As of March 31, 2020 and September 30, 2019, there were no 2019 Notes outstanding. The 2019 Notes matured on March 1, 2019 and were fully repaid during the three months ended March 31, 2019. For the three and six months ended March 31, 2019, the Company recorded interest expense of $2.1 million and $5.1 million (inclusive of fees), respectively, related to the 2019 Notes.
2024 Notes
On October 18, 2012, the Company issued $75.0 million in aggregate principal amount of its 5.875% unsecured 2024 Notes for net proceeds of $72.5 million after deducting underwriting commissions of $2.2 million and offering costs of $0.3 million. The 2024 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the first supplemental indenture, dated October 18, 2012, between the Company and the Trustee.
Interest on the 2024 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 5.875% per annum. On March 2, 2020, the Company redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes, following which they were delisted from the New York Stock Exchange. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes during each of the three and six months ended March 31, 2020.
For the three and six months ended March 31, 2020, the Company recorded interest expense of $0.8 million and $1.9 million (inclusive of fees), respectively, related to the 2024 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.2 million and $2.3 million (inclusive of fees), respectively, related to the 2024 Notes.
As of March 31, 2020, there were no 2024 Notes outstanding. As of September 30, 2019, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.9 million and $77.4 million, respectively.

55
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





2028 Notes
In April and May 2013, the Company issued $86.3 million in aggregate principal amount of its 6.125% unsecured 2028 Notes for net proceeds of $83.4 million after deducting underwriting commissions of $2.6 million and offering costs of $0.3 million. The 2028 Notes were issued pursuant to an indenture, dated April 30, 2012, as supplemented by the second supplemental indenture, dated April 4, 2013, between the Company and the Trustee.
Interest on the 2028 Notes was paid quarterly in arrears on January 30, April 30, July 30 and October 30 at a rate of 6.125% per annum. On March 13, 2020, the Company redeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes, following which they were delisted from the Nasdaq Global Select Market. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. The Company recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes during each of the three and six months ended March 31, 2020.
For the three and six months ended March 31, 2020, the Company recorded interest expense of $1.1 million and $2.5 million (inclusive of fees), respectively, related to the 2028 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.4 million and $2.7 million (inclusive of fees), respectively, related to the 2028 Notes.
As of March 31, 2020, there were no 2028 Notes outstanding. As of September 30, 2019, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.6 million and $87.6 million, respectively.

Note 7. Interest and Dividend Income
 
As of each of March 31, 2020 and September 30, 2019, there were three investments on which the Company had stopped accruing cash and/or PIK interest or OID income. The percentages of the Company's debt investments at cost and fair value by accrual status as of March 31, 2020 and September 30, 2019 were as follows: 
 
 
March 31, 2020
 
September 30, 2019
 
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
Accrual
 
$
1,443,128

 
98.22
%
 
$
1,306,989

 
99.55
%
 
$
1,311,849

 
95.72
%
 
$
1,305,718

 
99.79
%
PIK non-accrual (1)
 
12,661

 
0.86

 
—

 
—

 
12,661

 
0.92

 
—

 
—

Cash non-accrual (2)
 
13,572

 
0.92

 
5,864

 
0.45

 
46,107

 
3.36

 
2,706

 
0.21

Total
 
$
1,469,361

 
100.00
%
 
$
1,312,853

 
100.00
%
 
$
1,370,617

 
100.00
%
 
$
1,308,424

 
100.00
%
 ___________________
(1)
PIK non-accrual status is inclusive of other non-cash income, where applicable.
(2)
Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

 Note 8. Taxable/Distributable Income and Dividend Distributions
Taxable income differs from net increase (decrease) in net assets resulting from operations primarily due to: (1) unrealized appreciation (depreciation) on investments, secured borrowings and foreign currency, as gains and losses are not included in taxable income until they are realized; (2) origination and exit fees received in connection with investments in portfolio companies; (3) organizational costs; (4) income or loss recognition on exited investments; (5) recognition of interest income on certain loans; and (6) investments in controlled foreign corporations.
As of September 30, 2019, the Company had net capital loss carryforwards of $515.8 million to offset net capital gains that will not expire, to the extent available and permitted by U.S. federal income tax law, of which $109.2 million are available to offset future short-term capital gains and $406.6 million are available to offset future long-term capital gains.

56
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Listed below is a reconciliation of "net increase (decrease) in net assets resulting from operations" to taxable income for the three and six months ended March 31, 2020 and 2019.
 
 
Three months ended
March 31, 2020
 
Three months
ended
March 31, 2019
 
Six months ended
March 31, 2020
 
Six months
ended
March 31, 2019
Net increase (decrease) in net assets resulting from operations
 
$
(165,467
)
 
$
64,485

 
$
(151,624
)
 
$
92,203

Net unrealized (appreciation) depreciation
 
163,533

 
(21,472
)
 
160,654

 
(14,497
)
Book/tax difference due to organizational costs
 
(21
)
 
(11
)
 
(43
)
 
(21
)
Book/tax difference due to interest income on certain loans
 
—

 
—

 
—

 
878

Book/tax difference due to capital losses not recognized / (recognized)
 
23,958

 
(26,738
)
 
19,981

 
(44,440
)
Other book/tax differences
 
(8,002
)
 
(296
)
 
(2,858
)
 
290

Taxable/Distributable Income (1)
 
$
14,001

 
$
15,968

 
$
26,110

 
$
34,413

 __________
(1) The Company's taxable income for the three and six months ended March 31, 2020 is an estimate and will not be finally determined until the Company files its tax return for the fiscal year ending September 30, 2020. Therefore, the final taxable income may be different than the estimate.
The Company uses the liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
When assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred tax assets are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. The deferred tax asset recognized by the Company, as it relates to the higher tax basis in the carrying value of certain assets compared to the book basis of those assets, will be recognized in future years by these taxable entities. Deferred tax assets are based on the amount of the tax benefit that the Company’s management has determined is more likely than not to be realized in future periods. In determining the realizability of this tax benefit, management considered numerous factors that will give rise to pre-tax income in future periods. Among these are the historical and expected future book and tax basis pre-tax income of the Company and unrealized gains in the Company’s assets at the determination date. Based on these and other factors, the Company determined that, as of March 31, 2020, $3.0 million of $3.8 million net deferred tax assets would not more likely than not be realized in future periods. As of March 31, 2020, the Company recorded a deferred tax asset of $0.8 million on the Consolidated Statements of Assets and Liabilities.
For the three months ended March 31, 2020, the Company recognized a total provision for income tax benefit of $1.7 million, which was comprised of (i) a current income tax expense of approximately $0.1 million primarily as a result of penalties and interest incurred, and (ii) a deferred income tax benefit of approximately $1.8 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
For the six months ended March 31, 2020, the Company recognized a total provision for income tax benefit of $1.5 million, which was comprised of (i) a current income tax benefit of approximately $0.1 million primarily as a result of a reversal of penalties and interest previously incurred, partially offset by current tax expense incurred from realized gains on investments held at the Company's wholly-owned taxable subsidiaries and (ii) a deferred income tax benefit of approximately $1.5 million, which resulted from unrealized depreciation on investments held by the Company’s wholly-owned taxable subsidiaries.
As of September 30, 2019, the Company's last tax year end, the components of accumulated overdistributed earnings on a tax basis were as follows:
Undistributed ordinary income, net
$
10,699

Net realized capital losses
(515,800
)
Unrealized losses, net
(53,451
)
The aggregate cost of investments for income tax purposes was $1.5 billion as of September 30, 2019. As of September 30, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over cost for income tax purposes was $202.2 million. As of September 30, 2019, the aggregate gross unrealized depreciation for all investments in which there was an

57
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





excess of cost for income tax purposes over value was $255.6 million. Net unrealized depreciation based on the aggregate cost of investments for income tax purposes was $53.4 million.
Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation
Realized Gains or Losses
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended March 31, 2020, the Company recorded net realized losses of $26.5 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Cenegenics, LLC
$
(29.2
)
 Dominion Diagnostics, LLC
(15.6
)
 YETI Holdings, Inc.
14.2

 Lytx Holdings, LLC
5.2

 Other, net
(1.1
)
Total, net
$
(26.5
)
During the three months ended March 31, 2019, the Company recorded net realized gains of $25.2 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Maverick Healthcare Group, LLC
$
17.5

 Comprehensive Pharmacy Services LLC
7.5

 Other, net
0.2

Total, net
$
25.2


During the six months ended March 31, 2020, the Company recorded net realized losses of $23.2 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Cenegenics, LLC
$
(29.2
)
 Dominion Diagnostics, LLC
(15.6
)
 YETI Holdings, Inc.
17.6

 Lytx Holdings, LLC
5.2

 Other, net
(1.2
)
Total, net
$
(23.2
)






58
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





During the six months ended March 31, 2019, the Company recorded net realized gains of $43.2 million, which consisted of the following:
($ in millions)
 
Portfolio Company
Net Realized Gain (Loss)
 Maverick Healthcare Group, LLC
$
17.5

 BeyondTrust Holdings LLC
12.4

 Comprehensive Pharmacy Services LLC
7.5

 InMotion Entertainment Group, LLC
2.7

 YETI Holdings, Inc.
2.7

 Other, net
0.4

Total, net
$
43.2


Net Unrealized Appreciation or Depreciation
Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.
During the three months ended March 31, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $(163.5) million and $21.5 million, respectively. For the three months ended March 31, 2020, this consisted of $(139.8) million of net unrealized depreciation on debt investments and $(54.4) million of net unrealized depreciation on equity investments, partially offset by $28.4 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $2.2 million of net unrealized appreciation of foreign currency forward contracts. For the three months ended March 31, 2019, this consisted of $22.3 million of net unrealized appreciation on equity investments, $3.6 million of net unrealized appreciation on debt investments and $0.8 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(5.2) million of net unrealized depreciation related to exited investments (a portion of which results in a reclassification to realized gains).
During the six months ended March 31, 2020 and 2019, the Company recorded net unrealized appreciation (depreciation) of $(160.7) million and $14.5 million, respectively. For the six months ended March 31, 2020, this consisted of $(134.0) million of net unrealized depreciation on debt investments and $(50.0) million of net unrealized depreciation on equity investments, partially offset by $22.5 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $0.8 million of net unrealized appreciation of foreign currency forward contracts. For the six months ended March 31, 2019, this consisted of $24.2 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $14.0 million of net unrealized appreciation on equity investments and $0.4 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(24.1) million of net unrealized depreciation on debt investments.
Note 10. Concentration of Credit Risks
The Company deposits its cash with financial institutions and at times such balances may be in excess of the FDIC insurance limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.
Note 11. Related Party Transactions

As of March 31, 2020 and September 30, 2019, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $8.7 million and $10.2 million, respectively, reflecting the unpaid portion of the base management fees and incentive fees payable to Oaktree. Oaktree has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.
Investment Advisory Agreement
The Company is party to the Investment Advisory Agreement. Under the Investment Advisory Agreement, the Company pays Oaktree a fee for its services under the Investment Advisory Agreement consisting of two components: a base management fee and an incentive fee. The cost of both the base management fee payable to Oaktree and any incentive fees earned by Oaktree is ultimately borne by common stockholders of the Company.

59
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Prior to October 17, 2017, the Company was externally managed by Fifth Street Management LLC (the "Former Adviser”), an indirect, partially-owned subsidiary of Fifth Street Asset Management Inc., pursuant to an investment advisory agreement between the Company and the Former Adviser (the "Former Investment Advisory Agreement"), which was terminated on October 17, 2017.
Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect until September 30, 2021 and thereafter from year-to-year if approved annually by the Board of Directors of the Company or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, including, in either case, approval by a majority of the directors of the Company who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Investment Advisory Agreement may also be terminated, without penalty, upon the vote of a majority of the outstanding voting securities of the Company.
Base Management Fee

Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of total gross assets, including any investment made with borrowings, but excluding cash and cash equivalents. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated. Effective May 3, 2019, the base management fee on the Company’s gross assets, including any investments made with borrowings, but excluding any cash and cash equivalents, that exceed the product of (A) 200% and (B) the Company’s net asset value will be 1.00%. For the avoidance of doubt, the 200% will be calculated in accordance with the Investment Company Act and will give effect to exemptive relief the Company received from the SEC with respect to debentures issued by a small business investment company subsidiary.
For the three and six months ended March 31, 2020, the base management fee incurred under the Investment Advisory Agreement was $5.3 million and $10.9 million, respectively. For the three and six months ended March 31, 2019, the base management fee (net of waivers) incurred under the Investment Advisory Agreement was $5.7 million and $11.2 million, respectively.
Incentive Fee

The incentive fee consists of two parts. Under the Investment Advisory Agreement, the first part of the incentive fee (the “incentive fee on income” or "Part I incentive fee") is calculated and payable quarterly in arrears based upon the “pre-incentive fee net investment income” of the Company for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter (i.e., a “hurdle rate”), expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature.
For this purpose, “pre-incentive fee net investment income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies, other than fees for providing managerial assistance) accrued during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as OID debt, instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Under the Investment Advisory Agreement, the calculation of the incentive fee on income for each quarter is as follows:

•
No incentive fee is payable to Oaktree in any quarter in which the Company’s pre-incentive fee net investment income does not exceed the preferred return rate of 1.50% (the “preferred return”) on net assets;
•
100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the preferred return but is less than or equal to 1.8182% in any fiscal quarter is payable to Oaktree. This portion of the incentive fee on income is referred to as the “catch-up” provision, and it is intended to provide Oaktree with an incentive fee of 17.5% on all of the Company’s pre-incentive fee net investment income when the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets in any fiscal quarter; and
•
For any quarter in which the Company’s pre-incentive fee net investment income exceeds 1.8182% on net assets, the incentive fee on income is equal to 17.5% of the amount of the Company’s pre-incentive fee net investment income, as the preferred return and catch-up will have been achieved.

60
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)






There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle.

For the three and six months ended March 31, 2020, the first part of the incentive fee (incentive fee on income) incurred under the Investment Advisory Agreement was $3.4 million and $6.4 million, respectively. For the three and six months ended March 31, 2019, the first part of the incentive fee (incentive fee on income) incurred under the Investment Advisory Agreement was $3.8 million and $7.5 million (prior to waivers), respectively. Oaktree has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.

Under the Investment Advisory Agreement, the second part of the incentive fee (the "capital gains incentive fee") is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date) commencing with the fiscal year ended September 30, 2019 and equals 17.5% of the Company’s realized capital gains, if any, on a cumulative basis from the beginning of the fiscal year ended September 30, 2019 through the end of each subsequent fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees under the Investment Advisory Agreement. Any realized capital gains, realized capital losses, unrealized capital appreciation and unrealized capital depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the calculations of the second part of the incentive fee. For the year ended September 30, 2019, the Company incurred $4.6 million of capital gains incentive fees under the Investment Advisory Agreement (prior to waivers).

GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized on a theoretical "liquidation basis." A fee so calculated and accrued would not be payable under applicable law and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. Amounts ultimately paid under the Investment Advisory Agreement will be consistent with the formula reflected in the Investment Advisory Agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains incentive fee plus the aggregate cumulative unrealized capital appreciation. Any realized capital gains and losses and cumulative unrealized capital appreciation and depreciation with respect to the Company’s portfolio as of the end of the fiscal year ended September 30, 2018 are excluded from the GAAP accrual. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 17.5% of such cumulative amount, less the aggregate amount of actual capital gains incentive fees payable or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future or any accrued capital gains incentive fee will become payable under the Investment Advisory Agreement. For the three and six months ended March 31, 2020, the Company reversed $6.6 million and $5.6 million of previously accrued capital gains incentive fees, respectively. For the three and six months ended March 31, 2019, the Company recorded a $8.2 million and $10.0 million capital gains incentive fee accrual (prior to waivers), respectively. The Company did not have any cumulative accrued capital gains incentive fees payable as of March 31, 2020.

To ensure compliance with Section 15(f) of the Investment Company Act, Oaktree entered into a two-year contractual fee waiver with the Company, which ended on October 17, 2019, pursuant to which Oaktree waived any management or incentive fees payable under the Investment Advisory Agreement that exceeded what would have been paid to the Former Adviser in the aggregate under the Former Investment Advisory Agreement. The contractual amount of fees permanently waived at the end of the two-year period was $3.9 million. Prior to the end of the two-year period, amounts potentially subject to waiver under the two-year contractual fee waiver were accrued quarterly based on a theoretical “liquidation basis.” As of September 30, 2019, the Company had accrued cumulative fee waivers of $9.1 million. During the three months ended December 31, 2019, the Company reversed $5.2 million of
previously accrued fee waivers since the two-year fee waiver period has ended.


61
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





The following table provides a roll-forward of the accrued waiver balance and illustrates the impact of the end of the two-year contractual fee waiver period:
($ in millions)
 
Accrued fee waivers as of September 30, 2019 (1)
$
9.1

Reversal of previously accrued fee waivers (2)
(5.2
)
Contractual fees waived under the Investment Advisory Agreement (3)
(3.9
)
Accrued fee waivers as of March 31, 2020
$
—

(1)
Calculated in accordance with GAAP as of September 30, 2019 and is based on a hypothetical liquidation basis.
(2)
Reflects the reversal of fee waivers that were previously accrued based on a hypothetical liquidation basis when the two-year contractual fee waiver was in effect. This reversal was recognized in connection with the expiration of the two-year contractual fee waiver, which ended on October 17, 2019, and is reflected in reversal of fees waived in the Consolidated Statement of Operations for the six months ended March 31, 2020.
(3)
Reflects the amount of fees permanently waived pursuant to the two-year contractual fee waiver.

As of September 30, 2019, the capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers) was $0.8 million as shown below:
($ in millions)
 September 30, 2019 (1)
Capital gains incentive fee payable under the Investment Advisory Agreement (prior to waivers)
$
4.6

Contractual fees waived
(3.9
)
Capital gains incentive fee payable under the Investment Advisory Agreement (net of waivers)
$
0.8

(1)
Amounts may not sum due to rounding.
Indemnification

The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oaktree and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of Oaktree's services under the Investment Advisory Agreement or otherwise as investment adviser.
Administrative Services
The Company is party to the Administration Agreement with Oaktree Administrator. Pursuant to the Administration Agreement, Oaktree Administrator provides administrative services to the Company necessary for the operations of the Company, which include providing office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as Oaktree Administrator, subject to review by the Company’s Board of Directors, shall from time to time deem to be necessary or useful to perform its obligations under the Administration Agreement. Oaktree Administrator may, on behalf of the Company, conduct relations and negotiate agreements with custodians, trustees, depositories, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. Oaktree Administrator makes reports to the Company’s Board of Directors of its performance of obligations under the Administration Agreement and furnishes advice and recommendations with respect to such other aspects of the Company’s business and affairs, in each case, as it shall determine to be desirable or as reasonably required by the Company’s Board of Directors; provided that Oaktree Administrator shall not provide any investment advice or recommendation.
Oaktree Administrator also provides portfolio collection functions for interest income, fees and warrants and is responsible for the financial and other records that the Company is required to maintain and prepares, prints and disseminates reports to the Company’s stockholders and all other materials filed with the SEC. In addition, Oaktree Administrator assists the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Oaktree Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies.

62
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





For providing these services, facilities and personnel, the Company reimburses Oaktree Administrator the allocable portion of overhead and other expenses incurred by Oaktree Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the rent of the Company’s principal executive offices (which are located in a building owned by a Brookfield affiliate) at market rates and the Company’s allocable portion of the costs of compensation and related expenses of its Chief Financial Officer, Chief Compliance Officer, their staffs and other non-investment professionals at Oaktree that perform duties for the Company. Such reimbursement is at cost, with no profit to, or markup by, Oaktree Administrator. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. The Administration Agreement may also be terminated, without penalty, upon the vote of a majority of the Company’s outstanding voting securities.
For the three months ended March 31, 2020, the Company accrued administrative expenses of $0.5 million, including $0.1 million of general and administrative expenses. For the six months ended March 31, 2020, the Company accrued administrative expenses of $1.0 million, including $0.1 million of general and administrative expenses. For the three months ended March 31, 2019, the Company accrued administrative expenses of $0.5 million, including $0.1 million of general and administrative expenses. For the six months ended March 31, 2019, the Company accrued administrative expenses of $1.3 million, including $0.2 million of general and administrative expenses.
As of each of March 31, 2020 and September 30, 2019, $2.7 million was included in “Due to affiliate” in the Consolidated Statements of Assets and Liabilities, reflecting the unpaid portion of administrative expenses and other reimbursable expenses payable to Oaktree Administrator.


63
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Note 12. Financial Highlights
(Share amounts in thousands)
 
Three months ended
March 31, 2020
 
Three months ended
March 31, 2019
 
 Six months ended
March 31, 2020
 
Six months ended
March 31, 2019
Net asset value per share at beginning of period
 
$6.61
 
$6.19
 
$6.60
 
$6.09
Net investment income (1)
 
0.16
 
0.13
 
0.22
 
0.25
Net unrealized appreciation (depreciation) (1)
 
(1.15)
 
0.15
 
(1.14)
 
0.10
Net realized gains (losses) (1)
 
(0.19)
 
0.18
 
(0.16)
 
0.30
Provision for income tax (expense) benefit (1)
 
0.01
 
—
 
0.01
 
—
Distributions to stockholders
 
(0.10)
 
(0.10)
 
(0.19)
 
(0.19)
Net asset value per share at end of period
 
$5.34
 
$6.55
 
$5.34
 
$6.55
Per share market value at beginning of period
 
$5.46
 
$4.23
 
$5.18
 
$4.96
Per share market value at end of period
 
$3.24
 
$5.18
 
$3.24
 
$5.18
Total return (2)
 
(38.91)%
 
24.68%
 
(34.49)%
 
8.63%
Common shares outstanding at beginning of period
 
140,961
 
140,961
 
140,961
 
140,961
Common shares outstanding at end of period
 
140,961
 
140,961
 
140,961
 
140,961
Net assets at beginning of period
 
$931,082
 
$872,362
 
$930,630
 
$858,035
Net assets at end of period
 
$752,224
 
$923,456
 
$752,224
 
$923,456
Average net assets (3)
 
$846,610
 
$901,507
 
$891,012
 
$885,507
Ratio of net investment income to average net assets (4)
 
10.82%
 
7.97%
 
6.87%
 
7.93%
Ratio of total expenses to average net assets (4)
 
5.37%
 
12.79%
 
6.55%
 
11.54%
Ratio of net expenses to average net assets (4)
 
5.37%
 
9.24%
 
7.71%
 
9.40%
Ratio of portfolio turnover to average investments at fair value
 
10.80%
 
7.26%
 
17.56%
 
18.18%
Weighted average outstanding debt (5)
 
$623,696
 
$610,891
 
$556,264
 
$612,649
Average debt per share (1)
 
$4.42
 
$4.33
 
$3.95
 
$4.35
Asset coverage ratio at end of period (6)
 
205.85%
 
254.12%
 
205.85%
 
254.12%
 __________
(1)
Calculated based upon weighted average shares outstanding for the period.
(2)
Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's DRIP.
(3)
Calculated based upon the weighted average net assets for the period.
(4)
Interim periods are annualized.
(5)
Calculated based upon the weighted average of debt outstanding for the period.
(6)
Based on outstanding senior securities of $704.8 million and $597.6 million as of March 31, 2020 and 2019, respectively.

Note 13. Derivative Instruments
The Company enters into forward currency contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies.
In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company entered into an International Swaps and Derivatives Association, Inc. Master Agreement ("ISDA Master Agreement") with its derivative counterparty, JPMorgan Chase Bank, N.A. The ISDA Master Agreement permits a single net payment in the event of a default or similar event. No cash collateral has been pledged to cover obligations and no cash collateral has been received from the counterparty with respect to the Company's forward currency contracts.
Net unrealized gains or losses on foreign currency contracts are included in “net unrealized appreciation (depreciation)” and net realized gains or losses on forward currency contracts are included in “net realized gains (losses)” in the accompanying Consolidated Statements of Operations. Forward currency contracts are considered undesignated derivative instruments.

64
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Certain information related to the Company’s foreign currency forward contracts is presented below as of March 31, 2020.
Description
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Gross Amount of Recognized Assets
 
Gross Amount of Recognized Liabilities
 
Balance Sheet Location of Net Amounts
Foreign currency forward contract
 
$
19,756

 
£
14,850

 
8/18/2020
 
$
1,310

 
$
—

 
Derivative asset
Foreign currency forward contract
 
$
14,532

 
€
13,213

 
8/31/2020
 
$
—

 
$
(42
)
 
Derivative asset
 
 
 
 
 
 
 
 
$
1,310

 
$
(42
)
 
 
Certain information related to the Company’s foreign currency forward contracts is presented below as of September 30, 2019.
Description
 
Notional Amount to be Purchased
 
Notional Amount to be Sold
 
Maturity Date
 
Gross Amount of Recognized Assets
 
Gross Amount of Recognized Liabilities
 
Balance Sheet Location of Net Amounts
Foreign currency forward contract
 
$
22,161

 
£
17,910

 
10/15/2019
 
$
76

 
$
—

 
Derivative asset
Foreign currency forward contract
 
$
19,193

 
€
17,150

 
11/29/2019
 
$
414

 
$
—

 
Derivative asset
 
 
 
 
 
 
 
 
$
490

 
$
—

 
 

Note 14. Commitments and Contingencies
Off-Balance Sheet Arrangements
The Company may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its companies. As of March 31, 2020, the Company's only off-balance sheet arrangements consisted of $91.6 million of unfunded commitments, which was comprised of $86.7 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. As of September 30, 2019, the Company's only off-balance sheet arrangements consisted of $88.3 million of unfunded commitments, which was comprised of $83.5 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company's Consolidated Statements of Assets and Liabilities.

65
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I LLC subordinated notes and LLC equity interests and limited partnership interests) as of March 31, 2020 and September 30, 2019 is shown in the table below:
 
 
March 31, 2020
 
September 30, 2019
Assembled Brands Capital LLC
 
$
33,143

 
$
35,182

WPEngine, Inc.
 
26,348

 
—

Dominion Diagnostics, LLC
 
5,887

 
—

Corrona, LLC
 
4,273

 
—

PaySimple, Inc.
 
3,985

 
12,250

Pingora MSR Opportunity Fund I-A, LP
 
3,500

 
3,500

MRI Software LLC
 
2,857

 
—

Accupac, Inc.
 
2,346

 
—

Acquia Inc.
 
2,240

 
—

New IPT, Inc.
 
2,229

 
2,229

Apptio, Inc.
 
1,538

 
1,538

Senior Loan Fund JV I, LLC
 
1,328

 
1,328

iCIMs, Inc.
 
882

 
882

Ministry Brands, LLC
 
425

 
800

Coyote Buyer, LLC
 
352

 
—

GKD Index Partners, LLC
 
231

 
1,156

P2 Upstream Acquisition Co.
 
—

 
9,000

Sorrento Therapeutics, Inc.
 
—

 
7,500

4 Over International, LLC
 
—

 
1,977

Mindbody, Inc.
 
—

 
3,048

Thruline Marketing, Inc.
 
—

 
3,000

TerSera Therapeutics, LLC
 
—

 
4,200

PLATO Learning Inc. (1)
 
—

 
746

Total
 
$
91,564

 
$
88,336

 ___________ 
(1) This investment was on cash or PIK non-accrual status as of March 31, 2020 and September 30, 2019.

Note 15. Subsequent Events
The Company’s management evaluated subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the Consolidated Financial Statements as of and for the three and six months ended March 31, 2020, except as discussed below:
Distribution Declaration
On April 30, 2020, the Company’s Board of Directors declared a quarterly distribution of $0.095 per share, payable in cash on June 30, 2020 to stockholders of record on June 15, 2020.
Investment Advisory Agreement
On May 4, 2020, Oaktree effected the novation of the Investment Advisory Agreement to Oaktree Fund Advisors, LLC, a registered investment adviser under common control with Oaktree. Immediately following such novation, the Company and Oaktree Fund Advisors, LLC entered into a new investment advisory agreement with the same terms, including fee structure, as the Investment Advisory Agreement.





66
OAKTREE SPECIALTY LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)





Credit Facility Amendment
On May 6, 2020, the Company amended its revolving credit facility (i) to reduce the minimum shareholders' equity covenant from $700 million to $550 million, (ii) to increase the interest rate margin up to 2.75% on LIBOR loans or 1.75% on alternative base rate loans if the Company's minimum shareholders' equity is below $700 million depending on its senior coverage ratio and (iii) to reduce the maximum size of the facility under the "accordion" feature to the greater of $800 million or the Company's net worth on the date of such increase.


67

Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Six months ended March 31, 2020
(unaudited)
Portfolio Company/Type of Investment (1)
 
 Cash Interest Rate
 
Industry
 
Principal
 
Net Realized Gain (Loss)
 
Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)
 
Fair Value
at October 1,
2019
 
Gross
Additions (3)
 
Gross
Reductions (4)
 
Fair Value
at March 31, 2020
 
% of Total Net Assets
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C5 Technology Holdings, LLC
 
 
 
Data Processing & Outsourced Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
829 Common Units
 
 
 
 
 
 
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
—
%
34,984,460.37 Preferred Units
 
 
 
 
 
 
 
—

 
—

 
34,984

 
—

 
(7,346
)
 
27,638

 
3.7
%
Dominion Diagnostics, LLC
 
 
 
Health Care Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 2/28/2024
 
6.46
%
 
 
 
$
27,799

 
—

 
172

 
—

 
27,869

 
(70
)
 
27,799

 
3.7
%
First Lien Revolver, LIBOR+5.00% cash due 2/28/2024
 
6.46
%
 
 
 
5,260

 
—

 
35

 
—

 
5,260

 
—

 
5,260

 
0.7
%
30,030.8 Common Units in DD Healthcare Services Holdings, LLC
 
 
 
 
 
—

 
—

 
—

 
—

 
18,626

 
(8,511
)
 
10,115

 
1.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First Star Speir Aviation Limited (5)
 
 
 
Airlines
 
 
 
 
 
 
 
 
 
 
 
 
 


 


First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
 
 
 
11,510

 
—

 
600

 
11,510

 
42

 
(42
)
 
11,510

 
1.5
%
100% equity interest
 
 
 
 
 
—

 
—

 
—

 
4,630

 
—

 
(1,465
)
 
3,165

 
0.4
%
New IPT, Inc.
 
 
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
 
 
 
 
 
 
 


 


First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
 
6.45
%
 
 
 
2,605

 
—

 
112

 
3,256

 
—

 
(651
)
 
2,605

 
0.3
%
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
 
6.45
%
 
 
 
1,009

 
—

 
40

 
1,009

 
—

 
—

 
1,009

 
0.1
%
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
 
 
 
—

 
—

 
2,903

 
—

 
(1,307
)
 
1,596

 
0.2
%
 Senior Loan Fund JV I, LLC (6)
 
 
 
Multi-Sector Holdings
 
 
 
 
 
 
 
 
 
 
 
 
 


 


Subordinated Debt, LIBOR+7.00% cash due 12/29/2028
 
8.73
%
 
 
 
96,250

 
—

 
4,341

 
96,250

 
—

 
(4,079
)
 
92,171

 
12.3
%
87.5% LLC equity interest
 
 
 
 
 
 
 
—

 
—

 
30,052

 
—

 
(30,052
)
 
—

 
—
%
 Thruline Marketing, Inc.
 
 
 
Advertising
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
—
%
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
 
 
 
 
 
—

 
—

 
257

 
18,146

 
—

 
(18,146
)
 
—

 
—
%
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022
 
 
 
 
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—
%
 9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
 
 
 
—

 
—

 
6,438

 
—

 
(2,039
)
 
4,399

 
0.6
%
Total Control Investments
 
 
 
 
 
$
144,433

 
$
—

 
$
5,558

 
$
209,178

 
$
51,797

 
$
(73,708
)
 
$
187,267

 
24.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Assembled Brands Capital LLC
 
 
 
Specialized Finance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan, LIBOR+6.00% cash due 10/17/2023
 
6.99
%
 
 
 
$
7,623

 
$
—

 
$
262

 
$
5,585

 
$
2,038

 
$
(1,508
)
 
$
6,115

 
0.8
%
1,609,201 Class A Units
 
 
 
 
 
 
 
—

 
—

 
782

 
135

 
—

 
917

 
0.1
%
1,019,168.80 Preferred Units, 6%
 
 
 
 
 
 
 
—

 
—

 
1,019

 
31

 
—

 
1,050

 
0.1
%
70,424.5641 Class A Warrants (exercise price $3.3778) expiration date 9/9/2029
 
 
 
 
 
 
 
—

 
—

 
—

 
—

 
—

 
—

 
—
%
Caregiver Services, Inc.
 
 
 
Health Care Services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1,080,399 shares of Series A Preferred Stock, 10%
 
 
 
 
 
—

 
—

 
—

 
1,784

 
—

 
(452
)
 
1,332

 
0.2
%
Total Affiliate Investments
 
 
 
 
 
$
7,623

 
$
—

 
$
262

 
$
9,170

 
$
2,204

 
$
(1,960
)
 
$
9,414

 
1.3
%
Total Control & Affiliate Investments
 
 
 
 
 
$
152,056

 
$
—

 
$
5,820

 
$
218,348

 
$
54,001

 
$
(75,668
)
 
$
196,681

 
26.1
%

This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.

68

______________________
(1)
The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments.
(2)
Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.
(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)
Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)
First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be an investment company under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding company are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entities.
(6)
Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).




69

Schedule 12-14
Oaktree Specialty Lending Corporation
Schedule of Investments in and Advances to Affiliates
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
Six months ended March 31, 2019
(unaudited)
Portfolio Company/Type of Investment (1)
 
 Cash Interest Rate
 
Industry
 
Principal
 
Net Realized Gain (Loss)
 
Amount of
Interest,
Fees or
Dividends
Credited in
Income (2)
 
Fair Value
at October 1,
2018
 
Gross
Additions (3)
 
Gross
Reductions (4)
 
Fair Value
at March 31, 2019
 
% of Total Net Assets
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First Star Speir Aviation Limited (5)
 
 
 
Airlines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 First Lien Term Loan, 9.00% cash due 12/15/2020
 
 
 
 
 
$
32,510

 
$
—

 
$
976

 
$
32,510

 
$
722

 
$
(722
)
 
$
32,510

 
3.5
%
 100% equity interest
 
 
 
 
 
—

 
—

 
—

 
—

 
967

 
(100
)
 
867

 
0.1
%
 New IPT, Inc.
 
 
 
 Oil & gas equipment services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
 
7.60
%
 
 
 
4,107

 
—

 
170

 
4,107

 
—

 
—

 
4,107

 
0.4
%
Second Lien Term Loan, LIBOR+5.10% cash due 9/17/2021
 
7.70
%
 
 
 
601

 
—

 
39

 
1,453

 
—

 
(851
)
 
602

 
0.1
%
First Lien Revolver, LIBOR+5.00% cash due 3/17/2021
 
7.60
%
 
 
 
1,009

 
—

 
43

 
1,009

 
—

 
—

 
1,009

 
0.1
%
50.087 Class A Common Units in New IPT Holdings, LLC
 
 
 
 
 
—

 
—

 
—

 
2,291

 
612

 
—

 
2,903

 
0.3
%
 Senior Loan Fund JV I, LLC (6)
 
 
 
Multi-sector holdings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A Mezzanine Secured Deferrable Floating Rate Notes due 2036 in SLF Repack Issuer 2016 LLC
 
 
 
 
 
—

 
—

 
2,036

 
99,813

 
—

 
(99,813
)
 
—

 
—
%
Class B Mezzanine Secured Deferrable Fixed Rate Notes, 10.00% cash due 2036 in SLF Repack Issuer 2016 LLC
 
 
 
 
 
—

 
—

 
707

 
29,520

 
67

 
(29,587
)
 
—

 
—
%
 Subordinated Note, LIBOR+7.00% cash due 12/29/2028
 
9.51
%
 
 
 
96,250

 
—

 
2,388

 
—

 
96,250

 
—

 
96,250

 
10.4
%
 87.5% LLC equity interest
 
 
 
 
 
—

 
—

 
—

 
41

 
37,734

 
(7,191
)
 
30,584

 
3.3
%
 Thruline Marketing, Inc.
 
 
 
Advertising
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
 
9.60
%
 
 
 
18,146

 
—

 
880

 
18,146

 
—

 
—

 
18,146

 
2.0
%
First Lien Revolver, LIBOR+7.75% cash due 4/3/2022
 
 
 
 
 
—

 
—

 
8

 
—

 
—

 
—

 
—

 
—
%
9,073 Class A Units in FS AVI Holdco, LLC
 
 
 
 
 
—

 
—

 
—

 
7,984

 
—

 
(1,546
)
 
6,438

 
0.7
%
Total Control Investments
 
 
 
 
 
$
152,623

 
$
—

 
$
7,247

 
$
196,874

 
$
136,352

 
$
(139,810
)
 
$
193,416

 
20.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Assembled Brands Capital LLC
 
 
 
Specialized finance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Lien Delayed Draw Term Loan LIBOR+6.00% cash due 10/17/2023
 
8.60
%
 
 
 
$
1,835

 
$
—

 
$
44

 
$
—

 
$
1,835

 
$
—

 
$
1,835

 
0.2
%
764,376.60 Class A Units
 
 
 
 
 
—

 
—

 
—

 
—

 
764

 
—

 
764

 
0.1
%
583,190.81 Class B Units
 
 
 
 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—
%
 Caregiver Services, Inc.
 
 
 
Healthcare services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,080,399 shares of Series A Preferred Stock, 10.00%
 
 
 
 
 
—

 
—

 
—

 
2,161

 
—

 
(182
)
 
1,979

 
0.2
%
Total Affiliate Investments
 
 
 
 
 
$
1,835

 
$
—

 
$
44

 
$
2,161

 
$
2,599

 
$
(182
)
 
$
4,578

 
0.5
%
Total Control & Affiliate Investments
 
 
 
 
 
$
154,458

 
$
—

 
$
7,291

 
$
199,035

 
$
138,951

 
$
(139,992
)
 
$
197,994

 
21.4
%


This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements as of March 31, 2019 included in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019.
______________________
(1)
The principal amount and ownership detail are shown in the Company's Consolidated Schedules of Investments as of March 31, 2019 included in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019.
(2)
Represents the total amount of interest (net of non-accrual amounts), fees and dividends credited to income for the portion of the period an investment was included in the Control or Affiliate categories.

70

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest (net of non-accrual amounts) and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.
(4)
Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)
First Star Speir Aviation Limited is a wholly-owned holding company formed by the Company in order to facilitate its investment strategy. In accordance with ASU 2013-08, the Company has deemed the holding company to be investment companies under GAAP and therefore deemed it appropriate to consolidate the financial results and financial position of the holding company and to recognize dividend income versus a combination of interest income and dividend income. Accordingly, the debt and equity investments in the wholly-owned holding companies are disregarded for accounting purposes since the economic substance of these instruments are equity investments in the operating entity.
(6)
Together with Kemper, the Company co-invests through SLF JV I. SLF JV I is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF JV I must be approved by the SLF JV I investment committee consisting of representatives of the Company and Kemper (with approval from a representative of each required).






71


Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q.
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•
our future operating results and distribution projections;
•
the ability of Oaktree Capital Management, L.P., or Oaktree, to reposition our portfolio and to implement Oaktree's future plans with respect to our business;
•
the ability of Oaktree to attract and retain highly talented professionals;
•
our business prospects and the prospects of our portfolio companies;
•
the impact of the investments that we expect to make;
•
the ability of our portfolio companies to achieve their objectives;
•
our expected financings and investments and additional leverage we may seek to incur in the future;
•
the adequacy of our cash resources and working capital;
•
the timing of cash flows, if any, from the operations of our portfolio companies; and
•
the cost or potential outcome of any litigation to which we may be a party.
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 quarterly report on Form 10-Q 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 “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2019 and elsewhere in this quarterly report on Form 10-Q.
Other factors that could cause actual results to differ materially include:
 
•
changes or potential disruptions in our operations, the economy, financial markets or political environment;
•
risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic;
•
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, or RICs;
•
general considerations associated with the COVID-19 pandemic; 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 quarterly report on Form 10-Q on information available to us on the date of this quarterly report, 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 Securities and Exchange Commission, or the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
All dollar amounts in tables are in thousands, except share and per share amounts and as otherwise indicated.
Business Overview
We are a specialty finance company that looks to provide customized, one-stop credit solutions to companies with limited access to public or syndicated capital markets. We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a Business Development Company under the Investment Company Act of 1940, as amended, or the Investment Company Act. In addition, we have qualified and elected to be treated as a RIC under the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes.
As of March 31, 2020, we are externally managed by Oaktree pursuant to an investment advisory agreement, as amended from time to time, or the Investment Advisory Agreement, between the Company and Oaktree. Oaktree Fund Administration, LLC, or the Oaktree Administrator, a subsidiary of Oaktree, provides certain administrative and other services necessary for us to operate pursuant to an administration agreement, as amended from time to time, or the Administration Agreement.

72


We seek to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, bonds, preferred equity and certain equity co-investments. We may also seek to generate capital appreciation and income through secondary investments at discounts to par in either private or syndicated transactions. Our portfolio may also include certain structured finance and other non-traditional structures. We invest in companies that typically possess business models we expect to be resilient in the future with underlying fundamentals that will provide strength in economic downturns. We intend to deploy capital across credit and economic cycles with a focus on long-term results, which we believe will enable us to build lasting partnerships with financial sponsors and management teams, and we may seek to opportunistically take advantage of dislocations in the financial markets and other situations that may benefit from Oaktree’s credit and structuring expertise, including during the COVID-19 pandemic. Sponsors may include financial sponsors, such as an institutional investor or a private equity firm, or a strategic entity seeking to invest in a portfolio company. Oaktree is generally focused on middle-market companies, which we define as companies with enterprise values of between $100 million and $750 million. We generally invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
Oaktree intends to continue to reposition our portfolio into investments that are better aligned with Oaktree's overall approach to credit investing and that it believes have the potential to generate attractive returns across market cycles. Since becoming our investment adviser, Oaktree has performed a comprehensive review of our portfolio and categorized our portfolio into core investments, non-core performing investments and underperforming investments. Certain additional information on such categorization and our portfolio composition is included in investor presentations that we file with the SEC. Since becoming our investment adviser, Oaktree has reduced the investments it has identified as non-core by over $700 million at fair value. Over time, Oaktree intends to rotate us out of the remaining non-core investments, which were approximately $142 million at fair value as of March 31, 2020. Oaktree periodically reviews designations of investments as core and non-core and may change such designations over time.
Business Environment and Developments
We believe that the economic impact of the COVID-19 pandemic has contributed to significant market volatility and disruption, which may have lasting effects on the U.S. and global financial markets and have caused (and may cause further) economic uncertainties or deterioration in the performance of the middle market in the United States and worldwide.
In particular, the disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market. This widening of spreads makes it more difficult for middle market businesses to access capital as lenders could become more selective in evaluating investment opportunities, equity sponsors delay transactions given earnings uncertainty and sellers are hesitant to accept lower purchase price multiples.
In this type of environment, we believe attractive risk-adjusted returns can be achieved by making loans to companies in the middle market. Given the breadth of Oaktree’s investment platform, we believe that we have the resources and experience to source, diligence and structure investments in these companies and are well placed to generate attractive returns for investors.
We have proactively taken a number of actions to evaluate and support our portfolio companies in light of the COVID-19 pandemic, including outreach to a variety of management teams and sponsors.  We have established a dialogue with many of our portfolio companies and are especially focused on those that might have moderate to higher risk of material impacts from COVID-19. We believe that these efforts to identify vulnerable credits will allow us to address potential problems early and provide constructive solutions to our portfolio companies.
As of March 31, 2020, 90.6% of our debt investment portfolio (at fair value) and 90.9% of our debt investment portfolio (at cost) bore interest at floating rates indexed to the London Interbank Offered Rate, or LIBOR, and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly or monthly at the borrower’s option. As a result of the COVID-19 pandemic and the related decision of the U.S. Federal Reserve to reduce certain interest rates, LIBOR decreased in March 2020. A prolonged reduction in interest rates will result in a decrease in our total investment income and could result in a decrease in our net investment income to the extent the decreases are not offset by an increase in the spread on our floating rate investments, a decrease in our interest expense or a reduction of our incentive fee on income. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it remains unknown whether these alternative reference rates will attain market acceptance as replacements for LIBOR.  If LIBOR ceases to exist, we may need to renegotiate any credit agreements extending beyond 2021 with our prospective portfolio

73


companies that utilize LIBOR as a factor in determining the interest rate and may also need to renegotiate the terms of the Credit Facility (as defined below), which matures in 2024. Certain of the loan agreements with our portfolio companies have included fallback language in the event that LIBOR becomes unavailable. This language generally provides that the administrative agent may identify a replacement reference rate, typically with the consent of (or prior consultation with) the borrower.  In certain cases, the administrative agent will be required to obtain the consent of either a majority of the lenders under the facility, or the consent of each lender, prior to identifying a replacement reference rate.  Certain of the loan agreements with our portfolio companies do not include any fallback language providing a mechanism for the parties to negotiate a new reference interest rate and will instead revert to the base rate in the event LIBOR ceases to exist. It remains unclear whether the cessation of LIBOR will be delayed due to COVID-19 or what form any delay may take, and there are no assurances that there will be a delay. It is also unclear what the duration and severity of COVID-19 will be, and whether this will impact LIBOR transition planning. COVID-19 may also slow regulators’ and others’ efforts to develop and implement alternative reference rates, which could make LIBOR transition planning more difficult, particularly if the cessation of LIBOR is not delayed but alternatives do not develop.
Critical Accounting Policies

Basis of Presentation
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. All intercompany balances and transactions have been eliminated. We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services-Investment Companies, or ASC 946.
Investment Valuation
We value our investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. ASC 820 prioritizes the use of observable market prices over entity-specific inputs. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.
Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
 
•
Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
•
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
If inputs used to measure fair value fall into different levels of the fair value hierarchy, an investment's level is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. These investments may be classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustments for investment-specific factors or restrictions.
Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, Oaktree obtains and analyzes readily available market quotations provided by pricing vendors and brokers for all of our investments for which quotations are available. In determining the fair value of a particular investment, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.
We seek to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If we are unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within our set threshold, we seek to obtain a quote directly from a broker making a market for the asset. Oaktree evaluates the quotations provided by pricing vendors and brokers

74


based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Oaktree also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, Oaktree performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process. Generally, we do not adjust any of the prices received from these sources.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, we value such investments using any of three different valuation techniques. The first valuation technique is the transaction precedent technique, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine (i) the value of equity investments, (ii) whether there is credit impairment for debt investments and (iii) the value for debt investments that we are deemed to control under the Investment Company Act. To estimate the EV of a portfolio company, Oaktree analyzes various factors, including the portfolio company’s historical and projected financial results, macroeconomic impacts on the company and competitive dynamics in the company’s industry. Oaktree also utilizes some or all of the following information based on the individual circumstances of the portfolio company: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase prices as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis, (vi) estimated liquidation or collateral value of the portfolio company’s assets and (vii) offers from third parties to buy the portfolio company. We may probability weight potential sale outcomes with respect to a portfolio company when uncertainty exists as of the valuation date. The third valuation technique is a market yield technique, which is typically performed for non-credit impaired debt investments. In the market yield technique, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk, and we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded transactions and industry-specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels. These investments are generally not redeemable.
We estimate the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an EV analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
Our Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of our investments:
•
The quarterly valuation process begins with each portfolio company or investment being initially valued by Oaktree’s valuation team in conjunction with Oaktree’s portfolio management team and investment professionals responsible for each portfolio investment;
•Preliminary valuations are then reviewed and discussed with management of Oaktree;
•
Separately, independent valuation firms engaged by our Board of Directors prepare valuations of our investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to us and provide such reports to Oaktree and the Audit Committee of our Board of Directors;
•
Oaktree compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee;
•
The Audit Committee reviews the preliminary valuations with Oaktree, and Oaktree responds and supplements the preliminary valuations to reflect any discussions between Oaktree and the Audit Committee;
•
The Audit Committee makes a recommendation to our full Board of Directors regarding the fair value of the investments in our portfolio; and
•
Our Board of Directors discusses valuations and determines the fair value of each investment in our portfolio.

75


The fair value of our investments as of March 31, 2020 and September 30, 2019 was determined in good faith by our Board of Directors. Our Board of Directors has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board of Directors may reasonably rely on that assistance. As of March 31, 2020, 92.4% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms. However, our Board of Directors is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been reported had a ready market for the investments existed, and it is reasonably possible that the difference could be material.
As of March 31, 2020 and September 30, 2019, approximately 92.7% and 97.1%, respectively, of our total assets represented investments at fair value.
Revenue Recognition
Interest Income
Interest income, adjusted for accretion of original issue discount, or OID, is recorded on an accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations. As of March 31, 2020, there were three investments on which we had stopped accruing cash and/or payment in kind, or PIK, interest or OID income.
In connection with our investment in a portfolio company, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For our secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial loan sales is recorded within interest expense in the Consolidated Statements of Operations.
PIK Interest Income
Our investments in debt securities may contain PIK interest provisions. PIK interest, which typically represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Our determination to cease accruing PIK interest is generally made well before our full write-down of a loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our Consolidated Financial Statements including for purposes of computing the capital gains incentive fee payable by us to Oaktree. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our stockholders, even though we have not yet collected the cash and may never do so.
Fee Income
Oaktree may provide financial advisory services to portfolio companies and, in return, we may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by us upon the investment closing date. We may also receive additional

76


fees in the ordinary course of business, including servicing, amendment and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
We have also structured exit fees across certain of our portfolio investments to be received upon the future exit of those investments. These fees are typically paid to us upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.
Dividend Income
We generally recognize dividend income on the record date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from such equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Portfolio Composition
Our investments principally consist of loans, common and preferred equity and warrants in privately-held companies and Senior Loan Fund JV I, LLC, or SLF JV I. Our loans are typically secured by a first, second or subordinated lien on the assets of the portfolio company and generally have terms of up to ten years (but an expected average life of between three and four years).
During the six months ended March 31, 2020, we originated $407.1 million of investment commitments in 41 new and 12 existing portfolio companies and funded $387.9 million of investments.
During the six months ended March 31, 2020, we received $251.5 million of proceeds from prepayments, exits, other paydowns and sales and exited 17 portfolio companies.
A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables:
 
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 
Senior secured debt
 
77.94
%
 
77.35
%
Subordinated debt
 
6.37

 
6.88

Debt investments in SLF JV I
 
5.91

 
6.36

Common equity and warrants
 
4.32

 
3.48

LLC equity interests of SLF JV I
 
3.03

 
3.26

Preferred equity
 
2.43

 
2.67

Total
 
100.00
%
 
100.00
%
 
 
 
March 31, 2020
 
September 30, 2019
Fair value:
 
 
 
 
Senior secured debt
 
81.93
%
 
78.64
%
Debt investments in SLF JV I
 
6.62

 
6.69

Subordinated debt
 
5.75

 
5.65

Common equity and warrants
 
3.45

 
4.10

Preferred equity
 
2.25

 
2.82

LLC equity interests of SLF JV I
 
—

 
2.10

Total
 
100.00
%
 
100.00
%


77


The industry composition of our portfolio at cost and fair value as a percentage of total investments was as follows:
 
 
March 31, 2020
 
September 30, 2019
Cost:
 
 
 
 
Application Software
 
11.97
%
 
8.73
%
Multi-Sector Holdings (1)
 
9.73

 
9.67

Data Processing & Outsourced Services
 
6.50

 
6.46

Health Care Services
 
4.44

 
6.62

Biotechnology
 
4.40

 
5.43

Pharmaceuticals
 
3.89

 
3.92

Auto Parts & Equipment
 
3.59

 
2.82

Specialized Finance
 
3.42

 
3.52

Personal Products
 
3.28

 
0.00

Property & Casualty Insurance
 
3.14

 
4.83

Specialty Chemicals
 
2.76

 
2.10

Research & Consulting Services
 
2.44

 
2.30

Real Estate Services
 
2.41

 
2.60

Aerospace & Defense
 
2.25

 
2.23

Health Care Technology
 
2.24

 
3.37

Systems Software
 
2.07

 
2.10

Oil & Gas Storage & Transportation
 
1.94

 
0.77

Internet Services & Infrastructure
 
1.93

 
2.15

Alternative Carriers
 
1.92

 
1.94

Oil & Gas Refining & Marketing
 
1.86

 
2.01

Managed Health Care
 
1.69

 
1.83

Specialized REITs
 
1.50

 
0.55

Education Services
 
1.42

 
1.04

Advertising
 
1.41

 
2.80

Airport Services
 
1.38

 
—

Independent Power Producers & Energy Traders
 
1.35

 
—

Integrated Telecommunication Services
 
1.31

 
2.23

Electrical Components & Equipment
 
1.29

 
1.40

General Merchandise Stores
 
1.17

 
1.25

Diversified Support Services
 
1.15

 
1.24

Apparel, Accessories & Luxury Goods
 
1.08

 
1.20

Industrial Machinery
 
0.99

 
1.13

Health Care Distributors
 
0.97

 
1.49

IT Consulting & Other Services
 
0.92

 
0.99

Movies & Entertainment
 
0.82

 
1.25

Construction & Engineering
 
0.81

 
1.55

Oil & Gas Equipment & Services
 
0.70

 
0.80

Airlines
 
0.65

 
0.70

Trading Companies & Distributors
 
0.63

 
0.68

Restaurants
 
0.57

 
0.20

Commercial Printing
 
0.49

 
0.40

Food Retail
 
0.42

 
0.96

Health Care Facilities
 
0.22

 
—

Distributors
 
0.21

 
—

Specialty Stores
 
0.17

 
0.09

Construction Materials
 
0.13

 
—

Leisure Facilities
 
0.12

 
0.12

Building Products
 
0.10

 
—

Communications Equipment
 
0.08

 
—

Thrifts & Mortgage Finance
 
0.06

 
0.08

Other Diversified Financial Services
 
0.01

 
0.01

Interactive Media & Services
 
—

 
1.44

Household Appliances
 
—

 
0.52

Environmental & Facilities Services
 
—

 
0.39

Human Resource & Employment Services
 
—

 
0.05

Department Stores
 
—

 
0.04

Total
 
100.00
%
 
100.00
%

78


 
 
March 31, 2020
 
September 30, 2019
Fair value:
 
 
 
 
Application Software
 
13.02
%
 
9.00
%
Multi-Sector Holdings (1)
 
7.53

 
8.94

Data Processing & Outsourced Services
 
6.51

 
6.83

Biotechnology
 
5.20

 
5.96

Health Care Services
 
4.55

 
4.06

Pharmaceuticals
 
4.24

 
4.18

Personal Products
 
3.70

 
—

Specialized Finance
 
3.56

 
3.58

Auto Parts & Equipment
 
3.29

 
2.82

Property & Casualty Insurance
 
3.26

 
5.16

Research & Consulting Services
 
2.56

 
2.60

Health Care Technology
 
2.55

 
3.64

Real Estate Services
 
2.50

 
2.75

Specialty Chemicals
 
2.41

 
1.64

Systems Software
 
2.21

 
2.19

Internet Services & Infrastructure
 
2.13

 
2.26

Oil & Gas Storage & Transportation
 
2.12

 
0.83

Aerospace & Defense
 
2.12

 
2.35

Alternative Carriers
 
1.87

 
2.06

Oil & Gas Refining & Marketing
 
1.85

 
2.20

Managed Health Care
 
1.73

 
1.93

Specialized REITs
 
1.61

 
0.57

Airport Services
 
1.55

 
—

Independent Power Producers & Energy Traders
 
1.52

 
—

Electrical Components & Equipment
 
1.31

 
1.39

Advertising
 
1.24

 
2.59

Diversified Support Services
 
1.18

 
1.30

Airlines
 
1.05

 
1.12

Integrated Telecommunication Services
 
1.05

 
2.01

Industrial Machinery
 
1.02

 
1.17

General Merchandise Stores
 
1.00

 
1.18

Health Care Distributors
 
0.92

 
1.53

IT Consulting & Other Services
 
0.86

 
0.96

Apparel, Accessories & Luxury Goods
 
0.82

 
0.92

Movies & Entertainment
 
0.75

 
1.29

Construction & Engineering
 
0.75

 
1.67

Oil & Gas Equipment & Services
 
0.64

 
0.95

Trading Companies & Distributors
 
0.63

 
0.72

Commercial Printing
 
0.55

 
0.41

Education Services
 
0.50

 
—

Food Retail
 
0.50

 
1.04

Restaurants
 
0.46

 
0.19

Health Care Facilities
 
0.24

 
—

Distributors
 
0.24

 
—

Leisure Facilities
 
0.22

 
0.33

Construction Materials
 
0.13

 
—

Building Products
 
0.11

 
—

Specialty Stores
 
0.11

 
—

Communications Equipment
 
0.10

 
—

Thrifts & Mortgage Finance
 
0.03

 
0.05

Interactive Media & Services
 
—

 
1.56

Leisure Products
 
—

 
1.05

Household Appliances
 
—

 
0.53

Environmental & Facilities Services
 
—

 
0.41

Human Resource & Employment Services
 
—

 
0.05

Department Stores
 
—

 
0.03

Total
 
100.00
%
 
100.00
%
___________________
(1)
This industry includes our investments in SLF JV I, collateral loan obligations and certain limited partnership interests.

79


Loans and Debt Securities on Non-Accrual Status
During the three months ended March 31, 2020, with the exception of one portfolio company that modified its scheduled interest payment to PIK in order to preserve liquidity, all of our portfolio companies made their scheduled interest payments.
During the three months ended March 31, 2020, two debt investments were added to cash non-accrual status after experiencing price deterioration in the quarter. As of each of March 31, 2020 and September 30, 2019, there were three investments on which we had stopped accruing cash and/or PIK interest or OID income.
The percentages of our debt investments at cost and fair value by accrual status as of March 31, 2020 and September 30, 2019 were as follows:
 
 
March 31, 2020
 
September 30, 2019
 
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
 
Cost
 
% of Debt
Portfolio
 
Fair
Value
 
% of Debt
Portfolio
Accrual
 
$
1,443,128

 
98.22
%
 
$
1,306,989

 
99.55
%
 
$
1,311,849

 
95.72
%
 
$
1,305,718

 
99.79
%
PIK non-accrual (1)
 
12,661

 
0.86

 
—

 
—

 
12,661

 
0.92

 
—

 
—

Cash non-accrual (2)
 
13,572

 
0.92

 
5,864

 
0.45

 
46,107

 
3.36

 
2,706

 
0.21

Total
 
$
1,469,361

 
100.00
%
 
$
1,312,853

 
100.00
%
 
$
1,370,617

 
100.00
%
 
$
1,308,424

 
100.00
%
 ___________________
(1)
PIK non-accrual status is inclusive of other non-cash income, where applicable.
(2)
Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

Senior Loan Fund JV I, LLC
In May 2014, we entered into a limited liability company, or LLC, agreement with Trinity Universal Insurance Company, a subsidiary of Kemper Corporation, or Kemper, to form SLF JV I. We co-invest in senior secured loans of middle-market companies and other corporate debt securities with Kemper through our investment in SLF JV I. SLF JV I is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by Kemper. All portfolio decisions and investment decisions in respect of SLF JV I must be approved by the SLF JV I investment committee, which consists of one representative selected by us and one representative selected by Kemper (with approval from a representative of each required). Since we do not have a controlling financial interest in SLF JV I, we do not consolidate SLF JV I.
SLF JV I is capitalized pro rata with LLC equity interests as transactions are completed and may be capitalized with additional subordinated notes issued to us and Kemper by SLF JV I. On December 28, 2018, we and Kemper directed the redemption of our holdings of mezzanine notes issued by SLF Repack Issuer 2016, LLC, a wholly-owned, special purpose issuer subsidiary of SLF JV I. Upon such redemption, the assets collateralizing the mezzanine notes, which consisted of equity interests of SLF JV I Funding LLC, or the Equity Interests, were distributed in-kind to each of us and Kemper, based upon our respective holdings of mezzanine notes. Upon such distribution, we and Kemper each then directed that a portion of our respective Equity Interests holdings be contributed to SLF JV I in exchange for LLC equity interests of SLF JV I and the remainder be applied as payment for the subordinated notes of SLF JV I.  SLF Repack Issuer 2016, LLC was dissolved following the foregoing redemption and liquidation. The subordinated notes issued by SLF JV I, or the SLF JV 1 Subordinated Notes, and the mezzanine notes issued by SLF Repack Issuer 2016, LLC, or the SLF Repack Notes, collectively are referred to as the SLF JV I Notes. Prior to their redemption on December 28, 2018, the SLF Repack Notes consisted of Class A mezzanine secured deferrable floating rate notes and Class B mezzanine secured deferrable fixed rate notes. The SLF JV I Subordinated Notes are (and the SLF Repack Notes were, prior to their redemption) senior in right of payment to SLF JV I LLC equity interests and subordinated in right of payment to SLF JV I’s secured debt. As of March 31, 2020 and September 30, 2019, we and Kemper owned, in the aggregate, 87.5% and 12.5%, respectively, of the LLC equity interests of SLF JV I and the outstanding SLF JV I Subordinated Notes.
SLF JV I has a senior revolving credit facility with Deutsche Bank AG, New York Branch, or, as amended, the Deutsche Bank I Facility, which permitted up to $250.0 million of borrowings (subject to borrowing base and other limitations) as of March 31, 2020 and September 30, 2019. Borrowings under the Deutsche Bank I Facility are secured by all of the assets of SLF JV I Funding LLC, a special purpose financing subsidiary of SLF JV I. As of March 31, 2020, the reinvestment period of the Deutsche Bank I Facility was scheduled to expire June 28, 2021 and the maturity date for the Deutsche Bank I Facility was June 29, 2026. As of March 31, 2020, borrowings under the Deutsche Bank I Facility accrued interest at a rate equal to the 3-month LIBOR plus 1.85% per annum during the reinvestment period and 3-month LIBOR plus 2.00% per annum during the amortization period. Under the Deutsche Bank I Facility, $193.9 million and $170.2 million of borrowings were outstanding as of March 31, 2020 and September 30, 2019, respectively.
As of March 31, 2020 and September 30, 2019, SLF JV I had total assets of $329.6 million and $360.9 million, respectively. SLF JV I's portfolio primarily consisted of senior secured loans to 53 and 51 portfolio companies as of March 31, 2020 and September 30, 2019,

80


respectively. The portfolio companies in SLF JV I are in industries similar to those in which we may invest directly. As of March 31, 2020, our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of $92.2 million in aggregate at fair value. As of September 30, 2019, our investment in SLF JV I consisted of LLC equity interests and SLF JV I Subordinated Notes of $126.3 million in aggregate at fair value.
As of each of March 31, 2020 and September 30, 2019, we and Kemper had funded approximately $165.5 million to SLF JV I, of which $144.8 million was from us. As of March 31, 2020 and September 30, 2019, we and Kemper had the option to fund additional SLF JV I Notes, subject to additional equity funding to SLF JV I. As of each of March 31, 2020 and September 30, 2019, we had commitments to fund LLC equity interests in SLF JV I of $17.5 million, of which $1.3 million was unfunded.
Below is a summary of SLF JV I's portfolio, followed by a listing of the individual loans in SLF JV I's portfolio as of March 31, 2020 and September 30, 2019:

 
 
March 31, 2020
 
September 30, 2019
Senior secured loans (1)
 
$337,016
 
$340,960
Weighted average interest rate on senior secured loans (2)
 
5.54%
 
6.57%
Number of borrowers in SLF JV I
 
53
 
51
Largest exposure to a single borrower (1)
 
$10,686
 
$10,835
Total of five largest loan exposures to borrowers (1)
 
$51,441
 
$50,510
__________________
(1) At principal amount.
(2) Computed using the weighted average annual interest rate on accruing senior secured loans at fair value.

81



SLF JV I Portfolio as of March 31, 2020
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
5.53
%
Diversified Support Services
$
9,253

 
$
9,213

 
$
7,622

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,312

(4)
AI Convoy (Luxembourg) S.À.R.L.
First Lien Term Loan, LIBOR+3.50% cash due 1/18/2027
5.34
%
Aerospace & Defense
9,200

 
9,154

 
8,257

 
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
5.49
%
Electrical Components & Equipment
6,092

 
5,953

 
5,137

(4)
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
4.70
%
Integrated Telecommunication Services
9,709

 
9,398

 
9,296

 
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+5.25% cash due 12/31/2023
6.32
%
Pharmaceuticals
9,879

 
9,586

 
8,594


Anastasia Parent, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/11/2025
5.20
%
Personal Products
2,843

 
2,360

 
1,658

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
8.25
%
Application Software
4,615

 
4,542

 
4,398

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application Software
—

 
(6
)
 
(18
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,536

 
4,380

 
Aurora Lux Finco S.À.R.L.
First Lien Term Loan, LIBOR+6.00% cash due 12/24/2026
7.00
%
Airport Services
6,500

 
6,344

 
6,111

(4)
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
3.99
%
Data Processing & Outsourced Services
9,825

 
9,807

 
8,134

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
5.24
%
Systems Software
7,571

 
7,483

 
6,366

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
4.92
%
Oil & Gas Equipment & Services
7,369

 
7,342

 
3,887

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
 
 
 
7,194

 
5,683

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
5,683

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
6.00
%
Oil & Gas Refining & Marketing
7,920

 
7,841

 
7,009

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/11/2026
5.49
%
Alternative Carriers
8,367

 
8,162

 
6,746

(4)
Curium Bidco S.à.r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
5.07
%
Biotechnology
5,970

 
5,925

 
5,672

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/16/2026
4.99
%
Internet Services & Infrastructure
8,000

 
7,980

 
7,193

 
Dealer Tire, LLC
First Lien Term Loan, LIBOR+4.25% cash due 12/12/2025
5.24
%
Distributors
948

 
904

 
788

(4)
Delta 2 (Lux) S.à.r.l.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2024
3.50
%
Movies & Entertainment
5,167

 
4,649

 
4,665

 
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 4/17/2026
5.20
%
Application Software
4,974

 
4,950

 
4,372

 
eResearch Technology, Inc.
First Lien Term Loan, LIBOR+4.50% cash due 2/4/2027
5.95
%
Application Software
7,500

 
7,425

 
6,653


Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.21
%
Integrated Telecommunication Services
7,162

 
7,068

 
6,846


GFL Environmental, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/30/2025
4.00
%
Environmental & Facilities Services
718

 
663

 
700

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
5.25
%
Systems Software
7,820

 
7,767

 
6,726



82


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
3.74
%
Interactive Media & Services
$
8,592

 
$
8,470

 
$
8,119

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+8.00% cash due 5/1/2026
8.99
%
Research & Consulting Services
6,000

 
5,977

 
5,190

(4)
Helios Software Holdings, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/24/2025
5.32
%
Systems Software
3,990

 
3,950

 
3,438

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.68
%
Alternative Carriers
10,686

 
10,563

 
9,905


KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
5.00
%
Household Products
8,000

 
7,976

 
7,237


Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
8.00
%
Internet Services & Infrastructure
4,524

 
4,450

 
4,185

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/14/2025
8.07
%
Internet Services & Infrastructure
476

 
468

 
440

(4)
Total Mindbody, Inc.
 
 
 
 
 
4,918

 
4,625

 
MRI Software LLC
First Lien Term Loan, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
3,411

 
3,379

 
3,019

(4)
 
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026
 
Application Software
—

 
(4
)
 
(68
)
(4)(5)
 
First Lien Revolver, LIBOR+5.50% cash due 2/10/2026
6.57
%
Application Software
169

 
166

 
130

(4)(5)
Total MRI Software LLC
 
 
 
 
 
3,541

 
3,081

 
Navicure, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/22/2026
4.99
%
Health Care Technology
6,000

 
5,970

 
5,565


New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
6.45
%
Oil & Gas Equipment & Services
1,138

 
1,138

 
1,138

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & Gas Equipment & Services
 
 
—

 
697

(4)
Total New IPT, Inc.
 
 
 
 
 
1,138

 
1,835

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
5.57
%
Electrical Components & Equipment
6,860

 
6,835

 
5,831


Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
6.00
%
Application Software
5,962

 
5,935

 
5,315


OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/25/2026
5.45
%
Application Software
7,271

 
7,234

 
5,871

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/25/2026
 
Application Software
—

 
(3
)
 
(133
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,231

 
5,738

 
Olaplex, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 1/8/2026
7.50
%
Personal Products
5,000

 
4,904

 
4,675

(4)
 
First Lien Revolver, LIBOR+6.50% cash due 1/8/2025
7.50
%
Personal Products
540

 
530

 
505

(4)
Total Olaplex, Inc.
 
 
 
 
 
5,434

 
5,180

 
Quikrete Holdings, Inc.
First Lien Term Loan, LIBOR+2.50% cash due 2/1/2027
3.49
%
Construction Materials
2,280

 
2,106

 
2,109

 
Sabert Corporation
First Lien Term Loan, LIBOR+4.50% cash due 12/10/2026
5.50
%
Metal & Glass Containers
4,350

 
4,307

 
4,046

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.50% cash due 2/28/2022
7.57
%
Aerospace & Defense
2,173

 
2,156

 
1,793

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
3.74
%
Casinos & Gaming
6,483

 
6,461

 
5,262


SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
6.78
%
Footwear
8,376

 
8,362

 
6,575


Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
5.95
%
Health Care Services
9,800

 
9,732

 
8,232


Star US Bidco LLC
First Lien Term Loan, LIBOR+4.25% cash due 3/17/2027
5.94
%
Industrial Machinery
2,973

 
2,943

 
2,587

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
6.49
%
Diversified Support Services
4,844

 
4,771

 
3,633

 

83


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 10/1/2026
5.32
%
Personal Products
$
7,980

 
$
7,940

 
$
7,262

(4)
Supermoose Borrower, LLC
First Lien Term Loan, LIBOR+3.75% cash due 8/29/2025
5.20
%
Application Software
4,913

 
4,566

 
3,960

(4)
Surgery Center Holdings, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 9/2/2024
4.25
%
Health Care Facilities
4,987

 
4,966

 
3,868

(4)
Thruline Marketing, Inc.
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
949

 
449

(4)
Thunder Finco (US), LLC
First Lien Term Loan, LIBOR+4.25% cash due 11/26/2026
5.24
%
Movies & Entertainment
8,000

 
7,920

 
6,260

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
5.00
%
Application Software
10,509

 
10,440

 
9,887

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
4.25
%
Movies & Entertainment
4,831

 
4,787

 
4,306

(4)
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
5.95
%
Application Software
6,859

 
6,826

 
5,941

(4)
Verscend Holding Corp.
First Lien Term Loan, LIBOR+4.50% cash due 8/27/2025
5.49
%
Health Care Technology
4,133

 
4,099

 
3,926


VM Consolidated, Inc.
First Lien Term Loan, LIBOR+3.25% cash due 2/28/2025
4.24
%
Data Processing & Outsourced Services
10,542

 
10,554

 
9,593

(4)
WideOpenWest Finance, LLC
First Lien Term Loan, LIBOR+3.25% cash due 8/18/2023
4.25
%
Cable & Satellite
962

 
867

 
897

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
9.53
%
Aerospace & Defense
6,000

 
5,953

 
4,120

(4)
 
 
 
 
$
337,016

 
$
341,737

 
$
299,572

 
__________________
(1) Represents the current interest rate as of March 31, 2020. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of March 31, 2020, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 0.99%, the 60-day LIBOR at 1.26%, the 90-day LIBOR at 1.45% and the 180-day LIBOR at 1.07%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of March 31, 2020 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.
(4) This investment is held by both us and SLF JV I as of March 31, 2020.
(5) Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
 

SLF JV I Portfolio as of September 30, 2019
Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Access CIG, LLC
First Lien Term Loan, LIBOR+3.75% cash due 2/27/2025
6.07
%
Diversified support services
$
9,300

 
$
9,256

 
$
9,201

 
AdVenture Interactive, Corp.
927 shares of common stock
 
Advertising
 
 
1,390

 
1,295

(4)
AI Ladder (Luxembourg) Subco S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 7/9/2025
6.60
%
Electrical components & equipment
6,145

 
5,992

 
5,659

(4)
Air Newco LP
First Lien Term Loan, LIBOR+4.75% cash due 5/31/2024
6.79
%
IT consulting & other services
9,900

 
9,875

 
9,916

 
AL Midcoast Holdings LLC
First Lien Term Loan, LIBOR+5.50% cash due 8/1/2025
7.60
%
Oil & gas storage & transportation
9,900

 
9,801

 
9,764

 
Altice France S.A.
First Lien Term Loan, LIBOR+4.00% cash due 8/14/2026
6.03
%
Integrated telecommunication services
7,444

 
7,282

 
7,439

 
Alvogen Pharma US, Inc.
First Lien Term Loan, LIBOR+4.75% cash due 4/1/2022
6.79
%
Pharmaceuticals
7,656

 
7,656

 
6,963

 
Apptio, Inc.
First Lien Term Loan, LIBOR+7.25% cash due 1/10/2025
9.56
%
Application software
4,615

 
4,534

 
4,530

(4)
 
First Lien Revolver, LIBOR+7.25% cash due 1/10/2025
 
Application software
—

 
(7
)
 
(7
)
(4)(5)
Total Apptio, Inc.
 
 
 
 
 
4,527

 
4,523

 

84


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Blackhawk Network Holdings, Inc.
First Lien Term Loan, LIBOR+3.00% cash due 6/15/2025
5.04
%
Data processing & outsourced services
$
9,875

 
$
9,855

 
$
9,858

 
Boxer Parent Company Inc.
First Lien Term Loan, LIBOR+4.25% cash due 10/2/2025
6.29
%
Systems software
7,609

 
7,518

 
7,336

(4)
Brazos Delaware II, LLC
First Lien Term Loan, LIBOR+4.00% cash due 5/21/2025
6.05
%
Oil & gas equipment & services
7,406

 
7,376

 
6,855

 
C5 Technology Holdings, LLC
171 Common Units
 
Data Processing & Outsourced Services
 
 
—

 
—

(4)
 
7,193,539.63 Preferred Units
 
 
 
 
7,194

 
7,194

(4)
Total C5 Technology Holdings, LLC
 
 
 
 
 
7,194

 
7,194

 
Cast & Crew Payroll, LLC
First Lien Term Loan, LIBOR+4.00% cash due 2/9/2026
6.05
%
Application software
4,975

 
4,925

 
5,018

 
CITGO Petroleum Corp.
First Lien Term Loan, LIBOR+5.00% cash due 3/28/2024
7.10
%
Oil & gas refining & marketing
7,960

 
7,880

 
8,010

(4)
Connect U.S. Finco LLC
First Lien Term Loan, LIBOR+4.50% cash due 9/23/2026
7.10
%
Alternative Carriers
8,000

 
7,840

 
7,888

(4)
Curium Bidco S.à r.l.
First Lien Term Loan, LIBOR+4.00% cash due 7/9/2026
6.10
%
Biotechnology
6,000

 
5,955

 
6,030

 
Dcert Buyer, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 8/8/2026
6.26
%
Internet services & infrastructure
8,000

 
7,980

 
7,985

 
DigiCert, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 10/31/2024
6.04
%
Internet services & infrastructure
8,250

 
8,148

 
8,249

(4)
Ellie Mae, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/17/2026
6.04
%
Application software
5,000

 
4,975

 
5,015

 
Everi Payments Inc.
First Lien Term Loan, LIBOR+3.00% cash due 5/9/2024
5.04
%
Casinos & gaming
4,764

 
4,742

 
4,776

 
Falmouth Group Holdings Corp.
First Lien Term Loan, LIBOR+6.75% cash due 12/14/2021
8.95
%
Specialty chemicals
4,938

 
4,909

 
4,910

 
Frontier Communications Corporation
First Lien Term Loan, LIBOR+3.75% cash due 6/15/2024
5.80
%
Integrated telecommunication services
6,473

 
6,400

 
6,471

 
Gentiva Health Services, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 7/2/2025
5.81
%
Healthcare services
7,920

 
7,801

 
7,974

 
Gigamon, Inc.
First Lien Term Loan, LIBOR+4.25% cash due 12/27/2024
6.29
%
Systems software
7,860

 
7,801

 
7,644

 
GoodRx, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 10/10/2025
4.81
%
Interactive media & services
7,852

 
7,835

 
7,862

 
Guidehouse LLP
Second Lien Term Loan, LIBOR+7.50% cash due 5/1/2026
9.54
%
Research & consulting services
6,000

 
5,975

 
5,925

(4)
Indivior Finance S.a.r.l.
First Lien Term Loan, LIBOR+4.50% cash due 12/19/2022
6.76
%
Pharmaceuticals
7,898

 
7,797

 
7,272

 
Intelsat Jackson Holdings S.A.
First Lien Term Loan, LIBOR+3.75% cash due 11/27/2023
5.80
%
Alternative Carriers
10,000

 
9,891

 
10,042

 
KIK Custom Products Inc.
First Lien Term Loan, LIBOR+4.00% cash due 5/15/2023
6.26
%
Household products
8,000

 
7,972

 
7,610

 
McDermott Technology (Americas), Inc.
First Lien Term Loan, LIBOR+5.00% cash due 5/9/2025
7.10
%
Oil & gas equipment & services
4,187

 
4,119

 
2,676

 
Mindbody, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 2/14/2025
9.06
%
Internet services & infrastructure
4,524

 
4,443

 
4,438

(4)
 
First Lien Revolver, LIBOR+7.00% cash due 2/15/2025
 
Internet services & infrastructure
—

 
(9
)
 
(9
)
(4)(5)
Total Mindbody, Inc.
 
 
 
 
 
4,434

 
4,429

 
Navicure, Inc.
First Lien Term Loan, LIBOR+3.75% cash due 9/18/2026
6.13
%
Healthcare technology
6,000

 
5,970

 
6,008

 
New IPT, Inc.
First Lien Term Loan, LIBOR+5.00% cash due 3/17/2021
7.10
%
Oil & gas equipment & services
1,422

 
1,422

 
1,422

(4)
 
21.876 Class A Common Units in New IPT Holdings, LLC
 
Oil & gas equipment & services
 
 
—

 
1,268

(4)
Total New IPT, Inc.
 
 
 
 
 
1,422

 
2,690

 
Northern Star Industries Inc.
First Lien Term Loan, LIBOR+4.50% cash due 3/31/2025
6.56
%
Electrical components & equipment
6,895

 
6,868

 
6,792

 

85


Portfolio Company
Investment Type
 Cash Interest Rate (1)(2)
Industry
Principal
 
Cost
 
Fair Value (3)
Notes
Novetta Solutions, LLC
First Lien Term Loan, LIBOR+5.00% cash due 10/17/2022
7.05
%
Application software
$
5,993

 
$
5,961

 
$
5,882

 
OCI Beaumont LLC
First Lien Term Loan, LIBOR+4.00% cash due 3/13/2025
6.10
%
Commodity chemicals
7,880

 
7,872

 
7,890

 
OEConnection LLC
First Lien Term Loan, LIBOR+4.00% cash due 9/24/2026
6.13
%
Application software
7,312

 
7,275

 
7,298

 
 
First Lien Delayed Draw Term Loan, LIBOR+4.00% cash due 9/24/2026
 
Application software
—

 
(3
)
 
(1
)
(5)
Total OEConnection LLC
 
 
 
 
 
7,272

 
7,297

 
Red Ventures, LLC
First Lien Term Loan, LIBOR+3.00% cash due 11/8/2024
5.04
%
Interactive media & services
3,990

 
3,971

 
4,011

 
Salient CRGT, Inc.
First Lien Term Loan, LIBOR+6.00% cash due 2/28/2022
8.05
%
Aerospace & defense
2,205

 
2,183

 
2,094

(4)
Scientific Games International, Inc.
First Lien Term Loan, LIBOR+2.75% cash due 8/14/2024
4.79
%
Casinos & gaming
6,516

 
6,491

 
6,470

 
SHO Holding I Corporation
First Lien Term Loan, LIBOR+5.00% cash due 10/27/2022
7.26
%
Footwear
8,420

 
8,403

 
7,999

 
Signify Health, LLC
First Lien Term Loan, LIBOR+4.50% cash due 12/23/2024
6.60
%
Healthcare services
9,850

 
9,775

 
9,838

 
Sirva Worldwide, Inc.
First Lien Term Loan, LIBOR+5.50% cash due 8/4/2025
7.54
%
Diversified support services
4,906

 
4,833

 
4,759

 
Sunshine Luxembourg VII SARL
First Lien Term Loan, LIBOR+4.25% cash due 9/25/2026
6.59
%
Personal products
8,000

 
7,960

 
8,048

 
Thruline Marketing, Inc.
First Lien Term Loan, LIBOR+7.00% cash due 4/3/2022
9.10
%
Advertising
1,854

 
1,851

 
1,854

(4)
 
927 Class A Units in FS AVI Holdco, LLC
 
Advertising
 
 
1,088

 
658

(4)
Total Thruline Marketing, Inc.
 
 
 
 
 
2,939

 
2,512

 
Triple Royalty Sub LLC
Fixed Rate Bond 144A 9.0% Toggle PIK cash due 4/15/2033
 
Pharmaceuticals
5,000

 
5,000

 
5,175

 
Uber Technologies, Inc.
First Lien Term Loan, LIBOR+4.00% cash due 4/4/2025
6.03
%
Application software
9,875

 
9,836

 
9,836

(4)
UFC Holdings, LLC
First Lien Term Loan, LIBOR+3.25% cash due 4/29/2026
5.30
%
Movies & entertainment
4,489

 
4,489

 
4,506

 
Uniti Group LP
First Lien Term Loan, LIBOR+5.00% cash due 10/24/2022
7.04
%
Specialized REITs
6,401

 
6,221

 
6,256

(4)
Valeant Pharmaceuticals International Inc.
First Lien Term Loan, LIBOR+2.75% cash due 11/27/2025
4.79
%
Pharmaceuticals
1,772

 
1,764

 
1,778

 
Veritas US Inc.
First Lien Term Loan, LIBOR+4.50% cash due 1/27/2023
6.60
%
Application software
6,894

 
6,856

 
6,534

(4)
Verra Mobility, Corp.
First Lien Term Loan, LIBOR+3.75% cash due 2/28/2025
5.79
%
Data processing & outsourced services
10,835

 
10,849

 
10,894

 
WP CPP Holdings, LLC
Second Lien Term Loan, LIBOR+7.75% cash due 4/30/2026
10.01
%
Aerospace & defense
6,000

 
5,949

 
5,974

(4)
 
 
 
 
$
340,960

 
$
347,985

 
$
345,032

 
__________________
(1) Represents the current interest rate as of September 30, 2019. All interest rates are payable in cash, unless otherwise noted.
(2) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All the LIBOR shown above is in U.S. dollars. As of September 30, 2019, the reference rates for SLF JV I's variable rate loans were the 30-day LIBOR at 2.04%, the 60-day LIBOR at 2.09%, the 90-day LIBOR at 2.10%, the 180-day LIBOR at 2.06%, and the PRIME at 5.00%. Most loans include an interest floor, which generally ranges from 0% to 1%.
(3) Represents the current determination of fair value as of September 30, 2019 utilizing a similar technique as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.
(4) This investment was held by both us and SLF JV I as of September 30, 2019.
(5) Investment had undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
 
As of March 31, 2020, the cost and fair value of our debt investments in the SLF JV I were $96.3 million and $92.2 million, respectively. Both the cost and fair value of our debt investment in the SLF JV I were $96.3 million as of September 30, 2019. We earned interest income of $2.1 million and $4.3 million on our investments in the SLF JV I Subordinated Notes for the three and six months ended March 31, 2020, respectively. We earned interest income of $2.3 million and $5.1 million on our investments in the SLF JV I Notes for the

86


three and six months ended March 31, 2019, respectively. The SLF JV I Subordinated Notes bear interest at a rate of one-month LIBOR plus 7.0% per annum and mature on December 29, 2028.
The cost and fair value of the LLC equity interests in SLF JV I held by us was $49.3 million and $0.0 million, respectively, as of March 31, 2020, and $49.3 million and $30.1 million, respectively, as of September 30, 2019. We did not earn dividend income for the three and six months ended March 31, 2020 and 2019 with respect to our investment in the LLC equity interests of SLF JV I. The LLC equity interests of SLF JV I are dividend producing to the extent SLF JV I has residual cash to be distributed on a quarterly basis.
Below is certain summarized financial information for SLF JV I as of March 31, 2020 and September 30, 2019 and for the three and six months ended March 31, 2020 and 2019:
 
 
March 31, 2020
 
September 30, 2019
Selected Balance Sheet Information:
 
 
 
 
Investments at fair value (cost March 31, 2020: $341,737; cost September 30, 2019: $347,985)
 
$
299,572

 
$
345,032

Cash and cash equivalents
 
14,039

 
3,674

Restricted cash
 
5,242

 
5,242

Other assets
 
10,783

 
6,912

Total assets
 
$
329,636

 
$
360,860

 
 
 
 
 
Senior credit facility payable
 
$
193,910

 
$
170,210

Debt securities payable at fair value (proceeds March 31, 2020: $110,000; proceeds September 30, 2019: $110,000)
 
105,339

 
110,000

Other liabilities
 
30,387

 
46,303

Total liabilities
 
329,636

 
326,513

Members' equity
 
—

 
34,347

Total liabilities and members' equity
 
$
329,636

 
$
360,860


 
 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
 
Six months ended March 31, 2020
 
Six months ended March 31, 2019
Selected Statements of Operations Information:
 
 
 
 
 
 
 
 
Interest income
 
$
5,546

 
$
5,551

 
$
10,939

 
$
10,989

Other income
 
291

 
80

 
297

 
89

Total investment income
 
5,837

 
5,631

 
11,236

 
11,078

Interest expense
 
4,493

 
4,709

 
9,134

 
9,863

Other expenses
 
64

 
276

 
131

 
326

Total expenses (1)
 
4,557

 
4,985

 
9,265

 
10,189

Net unrealized appreciation (depreciation)
 
(37,491
)
 
4,576

 
(34,550
)
 
1,120

Net realized gains (losses)
 
(615
)
 
19

 
(1,767
)
 
(4,986
)
Net income (loss)
 
$
(36,826
)
 
$
5,241

 
$
(34,346
)
 
$
(2,977
)
 __________
(1) There are no management fees or incentive fees charged at SLF JV I.

SLF JV I has elected to fair value the debt securities issued to us and Kemper under FASB ASC Topic 825, Financial Instruments - Fair Value Option. The debt securities are valued based on the total assets less the total liabilities senior to the mezzanine notes of SLF JV I in an amount not exceeding par under the enterprise value technique.
During the three and six months ended March 31, 2020 and 2019, we did not sell any debt investments to SLF JV I.
Discussion and Analysis of Results and Operations
Results of Operations
Net increase (decrease) in net assets resulting from operations includes net investment income, net realized gains (losses) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends and fees and net expenses. Net realized gains (losses) is the difference between the proceeds received from dispositions of investment related assets and

87


liabilities and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment related assets and liabilities carried at fair value during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.
Comparison of three and six months ended March 31, 2020 and March 31, 2019
Total Investment Income
Total investment income includes interest on our investments, fee income and dividend income.
Total investment income for the three months ended March 31, 2020 and March 31, 2019 was $34.2 million and $38.2 million, respectively. For the three months ended March 31, 2020, this amount consisted of $31.8 million of interest income from portfolio investments (which included $1.9 million of PIK interest), $2.1 million of fee income and $0.3 million of dividend income. For the three months ended March 31, 2019, this amount consisted of $36.6 million of interest income from portfolio investments (which included $2.3 million of PIK interest), $1.1 million of fee income and $0.5 million of dividend income. The decrease of $4.1 million, or 10.7%, in our total investment income for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was due primarily to a $4.7 million decrease in interest income, which was attributable to lower levels of OID accretion, primarily attributable to $4.3 million of OID accretion related to one of our investments during the three months ended March 31, 2019, and decreases in LIBOR on our floating rate investments.
Total investment income for the six months ended March 31, 2020 and March 31, 2019 was $65.1 million and $76.5 million, respectively. For the six months ended March 31, 2020, this amount consisted of $61.4 million of interest income from portfolio investments (which included $3.1 million of PIK interest), $3.1 million of fee income and $0.6 million of dividend income. For the six months ended March 31, 2019, this amount consisted of $73.2 million of interest income from portfolio investments (which included $3.1 million of PIK interest), $2.3 million of fee income and $1.0 million of dividend income. The decrease of $11.4 million, or 14.9%, in our total investment income for the six months ended March 31, 2020, as compared to the six months ended March 31, 2019, was due primarily to a $11.8 million decrease in interest income, which was attributable to lower levels of OID accretion, primarily the result of $9.9 million of OID accretion related to one of our investments during the six months ended March 31, 2019, and decreases in LIBOR on our floating rate investments.
Expenses
Net expenses (expenses net of fee waivers) for the three months ended March 31, 2020 and March 31, 2019 were $11.3 million and $20.5 million, respectively. Net expenses decreased for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, by $9.2 million, or 44.8%, due primarily to a $7.7 million decrease in base management fees and incentive fees (net of fee waivers), which was attributable to a $6.6 million reversal of previously accrued Part II incentive fees as a result of unrealized depreciation on investments during the quarter and lower Part I incentive fees due to lower investment income, and a $1.8 million decrease in interest expense primarily driven by decreases to LIBOR, partially offset by a $0.2 million increase in professional fees.
Net expenses (expenses net of fee waivers) for the six months ended March 31, 2020 and March 31, 2019 were $34.5 million and $41.5 million, respectively. Net expenses decreased for the six months ended March 31, 2020, as compared to the six months ended March 31, 2019, by $7.0 million, or 17.0%, due primarily to a $2.4 million decrease in base management fees and incentive fees (net of fee waivers), which was attributable to a $1.7 million decrease in Part I incentive fees (net of waivers) due to a reversal of previously waived fees of $0.6 million in the prior period and lower investment income during the current period and a $0.4 million decrease in base management fees due to a decrease in the size of the investment portfolio at fair value, and a $4.1 million decrease in interest expense resulting from decreases to LIBOR during the period.
Net Investment Income
As a result of the $4.1 million decrease in total investment income and the $9.2 million decrease in net expenses, net investment income for the three months ended March 31, 2020 increased by $5.1 million, or 29.0%, compared to the three months ended March 31, 2019.
As a result of the $11.4 million decrease in total investment income and the $7.0 million decrease in net expenses, net investment income for the six months ended March 31, 2020 decreased by $4.3 million, or 12.4%, compared to the six months ended March 31, 2019.



88


Realized Gain (Loss)
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of investments, secured borrowings and foreign currency and the cost basis without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with our determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.
During the three months ended March 31, 2020 and 2019, we recorded aggregate net realized gains (losses) of $(26.5) million and $25.2 million, respectively, primarily in connection with the exits or restructurings of various investments. During the six months ended March 31, 2020 and 2019, we recorded aggregate net realized gains (losses) of $(23.2) million and $43.2 million, respectively, in connection with the exits or restructurings of various investments. See “Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation” in the notes to the accompanying Consolidated Financial Statements for more details regarding investment realization events for the three and six months ended March 31, 2020 and 2019.
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation or depreciation is the net change in the fair value of our investments, secured borrowings and foreign currency during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
During the three months ended March 31, 2020 and 2019, we recorded net unrealized appreciation (depreciation) of $(163.5) million and $21.5 million, respectively. For the three months ended March 31, 2020, this consisted of $(139.8) million of net unrealized depreciation on debt investments and $(54.4) million of net unrealized depreciation on equity investments, partially offset by $28.4 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses) and $2.2 million of net unrealized appreciation of foreign currency forward contracts. The unrealized depreciation on debt and equity investments during the three months ended March 31, 2020 was largely due to increased market volatility and wider credit spreads resulting from the onset of the COVID-19 pandemic in March 2020 and the direct impact of the COVID-19 pandemic on certain of our portfolio companies, including the impact of leverage at the SLF JV I.
For the three months ended March 31, 2019, this consisted of $22.3 million of net unrealized appreciation on equity investments, $3.6 million of net unrealized appreciation on debt investments and $0.8 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(5.2) million of net unrealized depreciation related to exited investments (a portion of which results in a reclassification to realized gains).
During the six months ended March 31, 2020 and 2019, we recorded net unrealized appreciation (depreciation) of $(160.7) million and $14.5 million, respectively. For the six months ended March 31, 2020, this consisted of $(134.0) million of net unrealized depreciation on debt investments and $(50.0) million of net unrealized depreciation on equity investments, partially offset by $22.5 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $0.8 million of net unrealized appreciation of foreign currency forward contracts.
For the six months ended March 31, 2019, this consisted of $24.2 million of net unrealized appreciation related to exited investments (a portion of which results in a reclassification to realized losses), $14.0 million of net unrealized appreciation on equity investments and $0.4 million of net unrealized appreciation of foreign currency forward contracts, partially offset by $(24.1) million of net unrealized depreciation on debt investments.
Financial Condition, Liquidity and Capital Resources
We have a number of alternatives available to fund our investment portfolio and our operations, including raising equity, increasing or refinancing debt and funding from operational cash flow. We generally expect to fund the growth of our investment portfolio through additional debt and equity capital, which may include securitizing a portion of our investments. We cannot assure you, however, that our efforts to grow our portfolio will be successful. For example, our common stock has generally traded at prices below net asset value for the past several years, and we are currently limited in our ability to raise additional equity at prices below the then-current net asset value per share. We intend to continue to generate cash primarily from cash flows from operations, including interest earned, and future borrowings. We intend to fund our future distribution obligations through operating cash flow or with funds obtained through future equity and debt offerings or credit facilities, as we deem appropriate.

89


Our primary uses of funds are investments in our targeted asset classes and cash distributions to holders of our common stock. We may from time to time repurchase or redeem some or all of our outstanding notes in open-market transactions, privately negotiated transactions or otherwise. At a special meeting of our stockholders held on June 28, 2019, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us effective as of June 29, 2019. As a result of the reduced asset coverage requirement, we can incur $2 of debt for each $1 of equity as compared to $1 of debt for each $1 of equity. As of March 31, 2020, we had $704.8 million in senior securities and our asset coverage ratio was 205.9%. During the quarter, we increased our target debt to equity ratio from 0.70x to 0.85x to 0.85x to 1.0x (i.e., one dollar of equity for each $0.85 to $1.00 of debt outstanding) as we plan to continue to opportunistically deploy capital into the markets.
For the six months ended March 31, 2020, we experienced a net increase in cash and cash equivalents of $74.1 million. During that period, we used $121.6 million of net cash from operating activities, primarily from funding $379.2 million of investments, a $21.0 million of net decrease in payables from unsettled transactions, partially offset by $251.5 million of principal payments and sale proceeds received and the cash activities related to $30.7 million of net investment income. During the same period, net cash provided by financing activities was $195.7 million, primarily consisting of $90.0 million of net borrowings under the Credit Facility (as defined below) and $136.2 million net incurrence of unsecured notes, partially offset by $25.8 million of cash distributions paid to our stockholders, $3.7 million of deferred financing costs paid and $1.0 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
For the six months ended March 31, 2019, we experienced a net decrease in cash and cash equivalents and restricted cash of $0.3 million. During that period, we received $74.7 million of net cash from operating activities, primarily from $329.0 million of principal payments and sale proceeds received and the cash activities related to $35.0 million of net investment income, partially offset by funding $270.3 million of investments. During the same period, net cash used in financing activities was $75.1 million, primarily consisting of $183.8 million of net borrowings under the Credit Facility (as defined below), $228.8 million of repayments of unsecured notes, $0.7 million of repayments of secured borrowings, $26.1 million of cash distributions paid to our stockholders and $0.7 million of repurchases of common stock under our dividend reinvestment plan, or DRIP.
As of March 31, 2020, we had $89.5 million in cash and cash equivalents, portfolio investments (at fair value) of $1.4 billion, $6.2 million of interest, dividends and fees receivable, $295.2 of undrawn capacity on the Credit Facility (subject to borrowing base and other limitations), $34.0 million of net payables from unsettled transactions, $404.8 million of borrowings outstanding under our Credit Facility, $293.9 million of unsecured notes payable (net of unamortized financing costs and unaccreted discount) and unfunded commitments to portfolio companies of $91.6 million. As of March 31, 2020, we have analyzed cash and cash equivalents, availability under the Credit Facility, the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believe our liquidity and capital resources are sufficient to take advantage of market opportunities in the current economic climate.
As of September 30, 2019, we had $15.4 million in cash and cash equivalents, portfolio investments (at fair value) of $1.4 billion, $11.2 million of interest, dividends and fees receivable, $385.2 of undrawn capacity on the Credit Facility (subject to borrowing base and other limitations), $55.0 million of net payables from unsettled transactions, $314.8 million of borrowings outstanding under our Credit Facility, $158.5 million of unsecured notes payable (net of unamortized financing costs) and unfunded commitments of $88.3 million.

90


Significant Capital Transactions
The following table reflects the distributions per share that we have paid, including shares issued under our DRIP, on our common stock since October 1, 2017:
Date Declared
 
Record Date
 
Payment Date
 
Amount
per Share
 
Cash
Distribution
 
DRIP Shares
Issued (1)
 
DRIP Shares
Value
August 7, 2017
 
December 15, 2017
 
December 29, 2017
 
$
0.125

 
 $ 17.3 million
 
58,456

 
 $ 0.3 million
February 5, 2018
 
March 15, 2018
 
March 30, 2018
 
0.085

 
11.5 million
 
122,884

 
0.5 million
May 3, 2018
 
June 15, 2018
 
June 29, 2018
 
0.095

 
13.0 million
 
87,283

 
0.4 million
August 1, 2018
 
September 15, 2018
 
September 28, 2018
 
0.095

 
13.2 million
 
34,575

 
0.2 million
November 19, 2018
 
December 17, 2018
 
December 28, 2018
 
0.095

 
13.0 million
 
87,429

 
0.4 million
February 1, 2019
 
March 15, 2019
 
March 29, 2019
 
0.095

 
13.1 million
 
59,603

 
 0.3 million
May 3, 2019
 
June 14, 2019
 
June 28, 2019
 
0.095

 
13.1 million
 
61,093

 
 0.3 million
August 2, 2019
 
September 13, 2019
 
September 30, 2019
 
0.095

 
13.1 million
 
61,205

 
 0.3 million
November 12, 2019
 
December 13, 2019
 
December 31, 2019
 
0.095

 
12.9 million
 
87,747

 
0.5 million
January 31, 2020
 
March 13, 2020
 
March 31, 2020
 
0.095

 
12.9 million
 
157,523

 
0.5 million
 ______________
(1)
Shares were purchased on the open market and distributed.
Indebtedness
See “Note 6. Borrowings” in the Consolidated Financial Statements for more details regarding our indebtedness.
Credit Facility

As of March 31, 2020 and September 30, 2019, (i) the size of our senior secured revolving credit facility, or, as amended and restated, the Credit Facility, pursuant to a senior secured revolving credit agreement, with the lenders party thereto, ING Capital LLC, as administrative agent, ING Capital LLC, JPMorgan Chase Bank, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. and Bank of America, N.A., as syndication agents, was $700 million (with an “accordion” feature that permits us, under certain circumstances, to increase the size of the facility up to $1.02 billion), (ii) the period during which we may make drawings will expire on February 25, 2023 and the maturity date is February 25, 2024 and (iii) the interest rate margin for (a) LIBOR loans (which may be 1-, 2-, 3- or 6-month, at our option) was 2.00% (which can be increased up to 2.25%) and (b) alternate base rate loans was 1.00% (which can be increased up to 1.25%), each depending on our senior debt coverage ratio.

On December 13, 2019, we amended the Credit Facility to (1) reduce the required ratio of total assets (less total liabilities) to total indebtedness of us and our subsidiaries (subject to certain exceptions), from 1.65 to 1.00 to 1.50 to 1.00 and (2) modify the definition of Advance Rate to reference asset coverage of 1.50 to 1.00, rather than 1.65 to 1.00.

Each loan or letter of credit originated or assumed under the Credit Facility is subject to the satisfaction of certain conditions. Borrowings under the Credit Facility are subject to the facility’s various covenants and the leverage restrictions contained in the Investment Company Act. We cannot be assured that we will be able to borrow funds under the Credit Facility at any particular time or at all.

91


The following table describes significant financial covenants, as of March 31, 2020, with which we must comply under the Credit Facility on a quarterly basis:
Financial Covenant
 
Description
 
Target Value
 
December 31, 2019 Reported Value (1)
Minimum shareholders' equity
 
Net assets shall not be less than the greater of (a) 40% of total assets and (b) $700 million plus 50% of the aggregate net proceeds of all sales of equity interests after November 30, 2017
 
$700 million
 
$931 million
Asset coverage ratio
 
Asset coverage ratio shall not be less than the greater of 1.50:1 and the statutory test applicable to us
 
1.50:1
 
2.72:1
Interest coverage ratio
 
Interest coverage ratio shall not be less than 2.00:1
 
2.00:1
 
2.89:1
Minimum net worth
 
Net worth shall not be less than $600 million
 
$600 million
 
$887 million
 ___________ 
(1) As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Quarterly Report on Form 10-Q for the quarter ended December 31, 2019. We were in compliance with all financial covenants under the Credit Facility based on the financial information contained in this Quarterly Report on Form 10-Q.
As of March 31, 2020 and September 30, 2019, we had $404.8 million and $314.8 million of borrowings outstanding under the Credit Facility, respectively, which had a fair value of $404.8 million and $314.8 million, respectively. Our borrowings under the Credit Facility bore interest at a weighted average interest rate of 3.806% and 4.688% for the six months ended March 31, 2020 and 2019, respectively. For the three and six months ended March 31, 2020, we recorded interest expense (inclusive of fees) of $4.2 million and $8.2 million, respectively, related to the Credit Facility. For the three and six months ended March 31, 2019, we recorded interest expense (inclusive of fees) of $4.3 million and $7.5 million in the aggregate, related to the Credit Facility.
2025 Notes
On February 25, 2020, we issued $300.0 million in aggregate principal amount of our 3.500% notes due 2025, or the 2025 Notes, for net proceeds of $293.8 million after deducting OID of $2.5 million, underwriting commissions and discounts of $3.0 million and offering costs of $0.7 million. The OID on the 2025 Notes is amortized based on the effective interest method over the term of the notes.
For each of the three and six months ended March 31, 2020, we recorded interest expense of $1.1 million related to the 2025 Notes. As of March 31, 2020, there were $300.0 million of 2025 Notes outstanding, which had a carrying value and fair value of $293.9 million and $274.5 million, respectively.
2019 Notes
For the three and six months ended March 31, 2019, we recorded interest expense of $2.1 million and $5.1 million (inclusive of fees), respectively, related to our 4.875% unsecured notes due 2019, or the 2019 Notes. The 2019 Notes matured on March 1, 2019 and were fully repaid during the three months ended March 31, 2019. As of March 31, 2020 and September 30, 2019, there were no 2019 Notes outstanding.
2024 Notes
For the three and six months ended March 31, 2020, we recorded interest expense of $0.8 million and $1.9 million (inclusive of fees), respectively, related to our 5.875% unsecured notes due 2024, or the 2024 Notes. For the three and six months ended March 31, 2019, the Company recorded interest expense of $1.2 million and $2.3 million (inclusive of fees), respectively, related to the 2024 Notes.
On March 2, 2020, we redeemed 100%, or $75.0 million aggregate principal amount, of the issued and outstanding 2024 Notes. The redemption price per 2024 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.0 million in connection with the redemption of the 2024 Notes during the three and six months ended March 31, 2020. As of March 31, 2020, there were no 2024 Notes outstanding. As of September 30, 2019, there were $75.0 million of 2024 Notes outstanding, which had a carrying value and fair value of $73.9 million and $77.4 million, respectively.
2028 Notes
For the three and six months ended March 31, 2020, we recorded interest expense of $1.1 million and $2.5 million (inclusive of fees), respectively, related to our 6.125% unsecured notes due 2028, or the 2028 Notes. For the three and six months ended March 31, 2019, we recorded interest expense of $1.4 million and $2.7 million (inclusive of fees), respectively, related to the 2028 Notes.
On March 13, 2020, we redeemed 100%, or $86.3 million aggregate principal amount, of the issued and outstanding 2028 Notes. The redemption price per 2028 Note was $25 plus accrued and unpaid interest. We recognized a loss of $1.5 million in connection with the redemption of the 2028 Notes during the three and six months ended March 31, 2020. As of March 31, 2020, there were no 2028 Notes

92


outstanding. As of September 30, 2019, there were $86.3 million of 2028 Notes outstanding, which had a carrying value and fair value of $84.6 million and $87.6 million, respectively.
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of March 31, 2020, our only off-balance sheet arrangements consisted of $91.6 million of unfunded commitments, which was comprised of $86.7 million to provide debt financing to certain of our portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. As of September 30, 2019, our only off-balance sheet arrangements consisted of $88.3 million of unfunded commitments, which was comprised of $83.5 million to provide debt financing to certain of its portfolio companies, $1.3 million to provide equity financing to SLF JV I and $3.5 million related to unfunded limited partnership interests. Such commitments are subject to our portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in our Consolidated Statements of Assets and Liabilities.

93


A list of unfunded commitments by investment (consisting of revolvers, term loans with delayed draw components, SLF JV I subordinated notes and LLC equity interests, and limited partnership interests) as of March 31, 2020 and September 30, 2019 is shown in the table below:
 
 
March 31, 2020
 
September 30, 2019
Assembled Brands Capital LLC
 
$
33,143

 
$
35,182

WPEngine, Inc.
 
26,348

 
—

Dominion Diagnostics, LLC
 
5,887

 
—

Corrona, LLC
 
4,273

 
—

PaySimple, Inc.
 
3,985

 
12,250

Pingora MSR Opportunity Fund I-A, LP
 
3,500

 
3,500

MRI Software LLC
 
2,857

 
—

Accupac, Inc.
 
2,346

 
—

Acquia Inc.
 
2,240

 
—

New IPT, Inc.
 
2,229

 
2,229

Apptio, Inc.
 
1,538

 
1,538

Senior Loan Fund JV I, LLC
 
1,328

 
1,328

iCIMs, Inc.
 
882

 
882

Ministry Brands, LLC
 
425

 
800

Coyote Buyer, LLC
 
352

 
—

GKD Index Partners, LLC
 
231

 
1,156

P2 Upstream Acquisition Co.
 
—

 
9,000

Sorrento Therapeutics, Inc.
 
—

 
7,500

4 Over International, LLC
 
—

 
1,977

Mindbody, Inc.
 
—

 
3,048

Thruline Marketing, Inc.
 
—

 
3,000

TerSera Therapeutics, LLC
 
—

 
4,200

PLATO Learning Inc. (1)
 
—

 
746

Total
 
$
91,564

 
$
88,336

 ___________ 
(1) This investment was on cash non-accrual status as of March 31, 2020 and September 30, 2019.

Contractual Obligations
The following table reflects information pertaining to our principal debt outstanding under the Credit Facility, 2025 Notes, 2024 Notes and 2028 Notes:
 
 
Debt Outstanding
as of September 30, 2019
 
Debt Outstanding
as of March 31, 2020
 
Weighted average debt
outstanding for the
six months ended
March 31, 2020
 
Maximum debt
outstanding for the six months ended
March 31, 2020
Credit Facility
 
$
314,825

 
$
404,825

 
$
358,005

 
$
424,825

2025 Notes
 
—

 
300,000

 
57,377

 
300,000

2024 Notes
 
75,000

 
—

 
63,115

 
75,000

2028 Notes
 
86,250

 
—

 
77,766

 
86,250

Total debt
 
$
476,075

 
$
704,825

 
$
556,263

 


94


 
The following table reflects our contractual obligations arising from the Credit Facility and the 2025 Notes:
 
 
 
Payments due by period as of March 31, 2020
Contractual Obligations
 
Total
 
Less than 1 year
 
1-3 years
 
3-5 years
 
More than 5 years
Credit Facility
 
$
404,825

 
$
—

 
$
—

 
$
404,825

 
$
—

Interest due on Credit Facility
 
44,622

 
11,429

 
22,859

 
10,334

 
—

2025 Notes
 
300,000

 
—

 
—

 
300,000

 
—

Interest due on 2025 Notes
 
51,551

 
10,500

 
21,000

 
20,051

 
—

Total
 
$
800,998

 
$
21,929

 
$
43,859

 
$
735,210

 
$
—


95


Regulated Investment Company Status and Distributions
We have qualified and elected to be treated as a RIC under Subchapter M of the Code for tax purposes. As long as we continue to qualify as a RIC, we will not be subject to tax on our investment company taxable income (determined without regard to any deduction for dividends paid) or realized net capital gains, to the extent that such taxable income or gains is distributed, or deemed to be distributed as dividends, to stockholders on a timely basis.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation. Distributions declared and paid by us in a taxable year may differ from taxable income for that taxable year as such distributions may include the distribution of taxable income derived from the current taxable year or the distribution of taxable income derived from the prior taxable year carried forward into and distributed in the current taxable year. Distributions also may include returns of capital.
To maintain RIC tax treatment, we must, among other things, distribute dividends, with respect to each taxable year, of an amount at least equal to 90% of our investment company taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any), determined without regard to any deduction for dividends paid. As a RIC, we are also subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. We anticipate timely distribution of our taxable income in accordance with tax rules. We did not incur a U.S. federal excise tax for calendar years 2018 and 2019. We may incur a federal excise tax in future years.
We intend to distribute at least 90% of our annual taxable income (which includes our taxable interest and fee income) to our stockholders. The covenants contained in the Credit Facility may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement associated with our ability to be subject to tax as a RIC. In addition, we may retain for investment some or all of our net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal and taxable year fall below the total amount of our dividend distributions for that fiscal and taxable year, a portion of those distributions may be deemed a return of capital to our stockholders.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a Business Development Company under the Investment Company Act and due to provisions in our credit facilities and debt instruments. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
A RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder elects to receive his or her entire distribution in either cash or stock of the RIC, subject to certain limitations regarding the aggregate amount of cash to be distributed to all stockholders. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.
We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from U.S. withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. The following table, which may be subject to change as we finalize our annual tax filings, lists the percentage of qualified net interest income and qualified short-term capital gains for the year ended September 30, 2019, our last tax year end.
Year Ended
 
Qualified Net Interest Income
Qualified Short-Term Capital Gains
September 30, 2019
 
89.6
%
—

We have adopted a DRIP that provides for the reinvestment of any distributions that we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board of Directors declares a cash distribution, then our stockholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving a cash distribution. If our shares are trading at a premium to net asset value, we typically issue new shares to implement the DRIP, with such shares issued at the greater of the most recently computed net asset value per share of our common stock or 95% of the current market value per share of our common stock on the payment date for such distribution. If our shares are trading at a discount to net asset value, we typically purchase shares in the open market in connection with our obligations under the DRIP.

96


Related Party Transactions
We have entered into the Investment Advisory Agreement with Oaktree and the Administration Agreement with Oaktree Administrator, a wholly-owned subsidiary of Oaktree. Mr. John B. Frank, an interested member of our Board of Directors, has an indirect pecuniary interest in Oaktree. Oaktree is a registered investment adviser under the Advisers Act that is partially and indirectly owned by OCG. See “Note 11. Related Party Transactions – Investment Advisory Agreement” and “– Administrative Services” in the notes to the accompanying Consolidated Financial Statements.
Oaktree has voluntarily deferred the payment of Part I incentive fees earned during the three months ended March 31, 2020.
Recent Developments
Distribution Declaration
On April 30, 2020, our Board of Directors declared a quarterly distribution of $0.095 per share, payable in cash on June 30, 2020 to stockholders of record on June 15, 2020.
Investment Advisory Agreement

         On May 4, 2020, Oaktree effected the novation of the Investment Advisory Agreement to Oaktree Fund Advisors, LLC, a registered investment adviser under common control with Oaktree. Immediately following such novation, we and Oaktree Fund Advisors, LLC
entered into a new investment advisory agreement with the same terms, including fee structure, as the Investment Advisory Agreement.
Investment Portfolio Activity
From April 1, 2020 to April 30, 2020, originations totaled $132 million with a weighted average yield of 10.6% and were primarily comprised of opportunistic purchases made in both the private and public markets. Of these new investment commitments, 50% were first lien loans, 5% were second lien loans and 45% were subordinated debt investments.
Liquidity
As of April 30, 2020, we had $68 million of cash and cash equivalents and $260 million of undrawn capacity on our credit facility (subject to borrowing base and other limitations). Unfunded investment commitments were $122 million as of April 30, 2020, with approximately $76 million that can be drawn immediately as the remaining amount is subject to certain milestones that must be met by portfolio companies.
Credit Facility Amendment
On May 6, 2020, we amended our revolving credit facility (i) to reduce the minimum shareholders' equity covenant from $700 million to $550 million, (ii) to increase the interest rate margin up to 2.75% on LIBOR loans or 1.75% on alternative base rate loans if our minimum shareholders' equity is below $700 million depending on our senior coverage ratio and (iii) to reduce the maximum size of the facility under the "accordion" feature to the greater of $800 million or our net worth on the date of such increase.


Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in the valuations of our investment portfolio and interest rates.
Valuation Risk
Our investments may not have a readily available market price, and we value these investments at fair value as determined in good faith by our Board of Directors, with the assistance of the Audit Committee and Oaktree. There is no single standard for determining fair value in good faith and valuation methodologies involve a significant degree of management judgment. In addition, our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments. Accordingly, valuations by us do not necessarily represent the amounts which may eventually be realized from sales or other dispositions of investments. Estimated fair values may differ from the values that would have been used had a ready market for the investment existed, and the differences could be material to the financial statements.

97


Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments, cash and cash equivalents and idle fund investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent our debt investments include floating interest rates.
As of March 31, 2020, 90.6% of our debt investment portfolio (at fair value) and 90.9% of our debt investment portfolio (at cost) bore interest at floating rates. The composition of our floating rate debt investments by interest rate floor as of March 31, 2020 and September 30, 2019 was as follows: 
 
 
March 31, 2020
 
September 30, 2019
($ in thousands)
 
Fair Value
 
% of Floating Rate Portfolio
 
Fair Value
 
% of Floating Rate Portfolio
0%
 
$
489,126

 
41.1
%
 
$
489,464

 
41.6
%
>0% and <1%
 
785

 
0.1
%
 
—

 
—
%
1%
 
699,954

 
58.8
%
 
685,995

 
58.4
%
Total Floating Rate Investments
 
$
1,189,865

 
100.0
%
 
$
1,175,459

 
100.0
%

98


Based on our Consolidated Statement of Assets and Liabilities as of March 31, 2020, the following table shows the approximate annualized net increase (decrease) in net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investment and capital structure. However, there can be no assurances our portfolio companies will be able to meet their contractual obligations at any or all levels on increases in interest rates.
($ in thousands)
 
 
 
 
 
 
Basis point increase
 
Increase in Interest Income
 
(Increase) in Interest Expense
 
Net increase (decrease) in net assets resulting from operations
250
 
$
33,773

 
$
(10,121
)
 
$
23,652

200
 
27,018

 
(8,097
)
 
18,921

150
 
20,264

 
(6,072
)
 
14,192

100
 
13,509

 
(4,048
)
 
9,461

50
 
6,755

 
(2,024
)
 
4,731


Basis point decrease
 
(Decrease) in Interest Income
 
Decrease in Interest Expense
 
Net increase (decrease) in net assets resulting from operations
50
 
$
(4,183
)
 
$
2,024

 
$
(2,159
)
100
 
(6,782
)
 
3,333

 
(3,449
)
150
 
(7,303
)
 
3,333

 
(3,970
)
200 (1)
 
(7,309
)
 
3,333

 
(3,976
)
 __________
(1) The effect of a greater than 200 basis point decrease is limited by interest rate floors on certain investments.
We regularly measure exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on this review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. The following table shows a comparison of the interest rate base for our interest-bearing cash and outstanding investments, at principal, and our outstanding borrowings as of March 31, 2020 and September 30, 2019: 
 
 
March 31, 2020
 
September 30, 2019
($ in thousands)
 
Interest Bearing
Cash and
Investments
 
Borrowings
 
Interest Bearing
Cash and
Investments
 
Borrowings
Money market rate
 
$
82,928

 
$
—

 
$
9,611

 
$
—

Prime rate
 
1,221

 
—

 
48,036

 
14,000

LIBOR
 
 
 
 
 
 
 
 
30 day
 
718,343

 
404,825

 
686,880

 
300,825

60 day
 
9,000

 
—

 
9,000

 
—

90 day
 
423,728

 
—

 
402,603

 
—

180 day
 
167,265

 
—

 
20,967

 
—

EURIBOR
 
 
 
 
 
 
 
 
30 day
 
20,015

 
—

 
19,078

 
—

UK LIBOR
 
 
 
 
 
 
 
 
30 day
 
22,319

 
—

 
22,181

 
—

Fixed rate
 
135,797

 
300,000

 
185,809

 
161,250

Total
 
$
1,580,616

 
$
704,825

 
$
1,404,165

 
$
476,075



99


Item 4. Controls and Procedures

Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of March 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, in timely identifying, recording, processing, summarizing and reporting any material information relating to us that is required to be disclosed in the reports we file or submit under the Exchange Act.

There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




100


PART II

Item 1.     Legal Proceedings
Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, we are currently not a party to any pending material legal proceedings.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes during the three and six months ended March 31, 2020 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2019.
Global economic, political and market conditions caused by the current public health crisis have (and in the future could further) adversely affect our business, results of operations and financial condition and those of our portfolio companies.

A novel strain of coronavirus initially appeared in China in late 2019 and has rapidly spread to other countries, including the United States.  In an attempt to slow the spread of the coronavirus, governments in major jurisdictions, including the United States, the United Kingdom, France, Italy, South Korea and China, have placed restrictions on travel, issued “stay at home” orders and ordered the temporary closure of certain businesses, such as factories and retail stores.  As such restrictions and closures have impacted supply chains, consumer demand and/or the operations of many business, uncertainty surrounding the full economic impact of the coronavirus pandemic has contributed to significant market volatility and disruption, which may have long-term effects on the U.S. and global financial markets and have caused (and may cause further) economic uncertainties or deterioration in the United States and worldwide.

Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market.  These and any other unfavorable economic conditions created by the coronavirus and related restrictions and closures could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have negatively impacted the fair value of the investments that we hold and could limit our investment originations (including as a result of the investment professionals of our investment adviser diverting their time to the restructuring of certain investments), negatively impact our operating results and limit our ability to grow.  In addition, our success depends in substantial part on the management, skill and acumen of our investment adviser, whose operations may be adversely impacted, including through quarantine measures and travel restrictions imposed on its investment professionals or service providers, or any related health issues of such investment professionals or service providers.

In addition, the restrictions and closures and related market conditions have resulted in certain of our portfolio companies halting or significantly curtailing operations and have negatively affected the supply chains of certain of our portfolio companies.  The financial results of middle-market companies, like those in which we invest, have experienced deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults, and further deterioration will further depress the outlook for those companies. Further, adverse economic conditions have decreased and may in the future decrease the value of collateral securing some of our loans and the value of our equity investments. Such conditions have required and may in the future require us to modify the payment terms of our investments, including changes in PIK interest provisions and/or cash interest rates. The performance of certain of our portfolio companies has been, and in the future may be, negatively impacted by these economic or other conditions, which can result in our receipt of reduced interest income from our portfolio companies and/or realized and unrealized losses related to our investments, and, in turn, may adversely affect distributable income and have a material adverse effect on our results of operations.

As the potential impact of the coronavirus remains difficult to predict, the extent to which the coronavirus could negatively affect our and our portfolio companies’ operating results or the duration of any potential business or supply-chain disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments regarding the duration and severity of the coronavirus and the actions taken by governments and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control.




101

As a result of the COVID-19 pandemic and related government actions, certain of our portfolio companies are distressed, and we have opportunistically acquired the securities and obligations of distressed companies.  These and future investments in distressed companies are subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.

We have acquired, and may in the future acquire, the securities and other obligations of distressed or bankrupt companies, including opportunistic acquisitions during the COVID-19 pandemic. At times, distressed debt obligations may not produce income and may require us to bear certain extraordinary expenses (including legal, accounting, valuation and transaction expenses) in order to protect and recover our investment. Therefore, when we invest in distressed debt, our ability to achieve current income for our stockholders may be diminished, particularly where the portfolio company has negative EBITDA.

We also are subject to significant uncertainty as to when and in what manner and for what value the distressed debt we acquire will eventually be satisfied whether through a refinancing, restructuring, liquidation, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation. In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt held by us, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made.

Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of our participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
None.


Item 3. Defaults Upon Senior Securities
None.

Item 4.     Mine Safety Disclosures
Not applicable.


Item 5. Other Information
None.


102


Item 6. Exhibits

 
 
 
 
Fifth Supplemental Indenture, dated as of February 25, 2020, relating to the 3.500% Notes due 2025, between the Company and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 filed with the Registrant’s Form 8-K (File No. 814-00755) filed on February 25, 2020).
 
 
 
 
Form of 3.500% Notes due 2025 (included as Exhibit A to Exhibit 4.1 hereto).
 
 
 
 
 Investment Advisory Agreement, dated as of May 4, 2020, by and between the Company and Oaktree Fund Advisors, LLC.
 
 
 
 
Amendment No. 2 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of May 6, 2020, among the Company, as Borrower, the lenders party thereto from time to time and ING Capital LLC, as administrative agent for the lenders thereunder.
 
 
 
  
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
 
 
  
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
 
 
 
  
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
 
 
 
  
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
*
Filed herewith.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
 
OAKTREE SPECIALTY LENDING CORPORATION
 
 
By:
 
/s/   Armen Panossian
 
 
Armen Panossian




 
 
Chief Executive Officer
 
 
By:
 
/s/    Mel Carlisle
 
 
Mel Carlisle

 
 
Chief Financial Officer and Treasurer
Date: May 6, 2020

103

Stock widget

Investing forum

Oaktree Specialty Lending Corp Reports