Oaktree Specialty Lending Corp

Previous wording

•changes or potential disruptions in our operations, the economy, financial markets or political environment, including those caused by inflation and a rising interest rate environment;

Current wording

•changes or potential disruptions in our operations, the economy, financial markets or political environment, including those caused by inflation and an elevated interest rate environment;

Previous wording

Our investment objective is 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 resilient business models with strong underlying fundamentals. 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. 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.

Current wording

Our investment objective is 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 resilient business models with strong underlying fundamentals. 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. 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. 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.

Previous wording

In the current market environment, Oaktree intends to focus on the following area, in which Oaktree believes there is less competition and thus potential for greater returns, for our new investment opportunities: (1) situational lending, which we define to include directly originated loans to non-sponsor companies that are hard to understand and value using traditional underwriting techniques, (2) select sponsor lending, which we define to include financing to support leveraged buyouts of companies with specialized sponsors that have expertise in certain industries, (3) stressed sector and rescue lending, which we define to include opportunistic private loans in industries experiencing stress or limited access to capital and (4) public credit, where we seek discounted, high quality public debt investments particularly in times of market dislocation.

Current wording

In the current market environment, Oaktree intends to focus on the following areas, in which Oaktree believes there is less competition and thus potential for greater returns, for our new investment opportunities: (1) situational lending, which we define to include directly originated loans to non-sponsor companies that are hard to understand and value using traditional underwriting techniques, (2) select sponsor lending, which we define to include financing to support leveraged buyouts of companies with specialized sponsors that have expertise in certain industries, (3) stressed sector and rescue lending, which we define to include opportunistic private loans in industries experiencing stress or limited access to capital and (4) public credit, where we seek discounted, high quality public debt investments particularly in times of market dislocation.

Previous wording

Against this backdrop, we believe attractive risk-adjusted returns can be achieved by making loans to middle market companies that typically possess resilient business models with strong underlying fundamentals. Given the breadth of the investment platform and decades of credit investing experience of Oaktree and its affiliates, 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.

Current wording

Against this backdrop, we believe attractive risk-adjusted returns can be achieved by making loans to middle market companies that typically possess resilient business models with strong underlying fundamentals. Given the breadth of the investment platform and decades of credit investing experience of Oaktree and its affiliates, we believe that we have the resources and experience to source, diligence and structure investments in these companies.

Previous wording

The fair value of our investments as of December 31, 2023 and September 30, 2023 was determined by Oaktree, as our valuation designee. We have and will continue to engage independent valuation firms to provide assistance each quarter 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. As of December 31, 2023, 93.5% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms.

Current wording

The fair value of our investments as of March 31, 2024 and September 30, 2023 was determined by Oaktree, as our valuation designee. We have and will continue to engage independent valuation firms to provide assistance each quarter 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. As of March 31, 2024, 99.9% of our portfolio at fair value was valued either based on market quotations, the transactions precedent approach or corroborated by independent valuation firms.

Previous wording

As of December 31, 2023, we held $3,018.6 million of investments at fair value, up from $2,892.4 million held at September 30, 2023, primarily driven by purchases of investments during the three months ended December 31, 2023. As of December 31, 2023 and September 30, 2023, approximately 92.4% and 89.9%, respectively, of our total assets represented investments at fair value.

Current wording

As of March 31, 2024, we held $3,047.4 million of investments at fair value, up from $2,892.4 million held at September 30, 2023, primarily driven by purchases of investments during the six months ended March 31, 2024. As of March 31, 2024 and September 30, 2023, approximately 92.4% and 89.9%, respectively, of our total assets represented investments at fair value.

Previous wording

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 December 31, 2023, there were seven investments on non-accrual status that in the aggregate represented 5.9% and 4.2% of total debt investments at cost and fair value, respectively. As of September 30, 2023, there were there four investments on non-accrual status that in aggregate represented 2.4% and 1.8% of total debt investments at cost and fair value, respectively.

Current wording

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, 2024, there were five investments on non-accrual status that in the aggregate represented 4.3% and 2.4% of total debt investments at cost and fair value, respectively. As of September 30, 2023, there were there four investments on non-accrual status that in aggregate represented 2.4% and 1.8% of total debt investments at cost and fair value, respectively.

Previous wording

During the three months ended December 31, 2023, we originated $370.3 million of investment commitments in 14 new and 10 existing portfolio companies and funded $367.6 million of investments.

Current wording

During the six months ended March 31, 2024, we originated $765.9 million of investment commitments in 34 new and 25 existing portfolio companies and funded $745.0 million of investments.

Previous wording

During the three months ended December 31, 2023, we received $213.5 million of proceeds from prepayments, exits, other paydowns and sales and exited 10 portfolio companies.

Current wording

During the six months ended March 31, 2024, we received $536.2 million of proceeds from prepayments, exits, other paydowns and sales and exited 25 portfolio companies.

Previous wording

(1)This industry includes our investments in the JVs.

Current wording

(1)This industry includes our investments in the JVs and CLOs.

Previous wording

Both the cost and fair value of our SLF JV I Notes were $112.7 million as of each of December 31, 2023 and September 30, 2023. We earned interest income of $3.6 million and $2.6 million on the SLF JV I Notes for the three months ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the SLF JV I Notes bore interest at a rate of one-month SOFR plus 7.00% per annum with a SOFR floor of 1.00% and will mature on December 29, 2028.

Current wording

Both the cost and fair value of our SLF JV I Notes were $112.7 million as of each of March 31, 2024 and September 30, 2023. We earned interest income of $3.5 million and $7.1 million on the SLF JV I Notes for the three and six months ended March 31, 2024, respectively. We earned interest income of $3.2 million and $5.8 million on the SLF JV I Notes for the three and six months ended March 31, 2023, respectively. As of March 31, 2024, the SLF JV I Notes bore interest at a rate of one-month SOFR plus 7.00% per annum with a SOFR floor of 1.00% and will mature on December 29, 2028.

Previous wording

The cost and fair value of the LLC equity interests in SLF JV I held by us was $54.8 million and $29.6 million, respectively, as of December 31, 2023, and $54.8 million and $28.9 million, respectively, as of September 30, 2023. We earned $1.4 million and $1.1 million in dividend income for the three months ended December 31, 2023 and 2022, respectively, with respect to our investment in the LLC equity interests of SLF JV I.

Current wording

The cost and fair value of the LLC equity interests in SLF JV I held by us was $54.8 million and $29.7 million, respectively, as of March 31, 2024, and $54.8 million and $28.9 million, respectively, as of September 30, 2023. We earned $1.4 million and $2.8 million in dividend income for the three and six months ended March 31, 2024, respectively, with respect to our investment in the LLC equity interests of SLF JV I. We earned $1.1 million and $2.1 million in dividend income for the three and six months ended March 31, 2023, respectively, with respect to its investment in the LLC equity interests of SLF JV I.

Previous wording

On March 19, 2021, we became party to the LLC agreement of the Glick JV. The Glick JV invests primarily in senior secured loans of middle-market companies. We co-invest in these securities with GF Equity Funding through the Glick JV. The Glick JV is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by GF Equity Funding. All portfolio decisions and investment decisions in respect of the Glick JV must be approved by the Glick JV investment committee, consisting of one representative selected by us and one representative selected by GF Equity Funding (with approval from a representative of each required). Since we do not have a controlling financial interest in the Glick JV, we do not consolidate the Glick JV. The Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act. The Glick JV is capitalized as transactions are completed. The members provide capital to the Glick JV in exchange for LLC equity interests, and we and GF Debt Funding, an entity advised by affiliates of GF Equity Funding, provide capital to the Glick JV in exchange for subordinated notes issued by the Glick JV, or the Glick JV Notes. The Glick JV Notes are junior in right of payment to the repayment of temporary contributions made by us to fund investments of the Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Glick JV Notes, respectively.

Current wording

On March 19, 2021, we became party to the LLC agreement of the Glick JV. The Glick JV invests primarily in senior secured loans of middle-market companies. We co-invest in these securities with GF Equity Funding through the Glick JV. The Glick JV is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by GF Equity Funding. All portfolio decisions and investment decisions in respect of the Glick JV must be approved by the Glick JV investment committee, consisting of one representative selected by us and one representative selected by GF Equity Funding (with approval from a representative of each required). Since we do not have a controlling financial interest in the Glick JV, we do not consolidate the Glick JV. The Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the Investment Company Act. The Glick JV is capitalized as transactions are completed. The members provide capital to the Glick

Previous wording

The cost and fair value of our aggregate investment in the Glick JV was $50.6 million and $51.0 million, respectively, as of December 31, 2023. The cost and fair value of our aggregate investment in the Glick JV was $50.3 million and $50.0 million, respectively, as of September 30, 2023. For the three months ended December 31, 2023 and 2022, our investment in the Glick JV Notes earned interest income of $1.8 million and $1.6 million, respectively. We did not earn any dividend income for the three months ended December 31, 2023 and 2022 with respect to our investment in the LLC equity interests of the Glick JV.

Current wording

The cost and fair value of our aggregate investment in the Glick JV was $51.0 million and $51.3 million, respectively, as of March 31, 2024. The cost and fair value of our aggregate investment in the Glick JV was $50.3 million and $50.0 million, respectively, as of September 30, 2023. For the three and six months ended March 31, 2024, our investment in the Glick JV Notes earned interest income of $1.8 million and $3.6 million, respectively. For the three and six months ended March 31, 2023, our investment in the Glick JV Notes earned interest income of $1.6 million and $3.2 million, respectively. We did not earn any dividend income for the three and six months ended March 31, 2024 and 2023 with respect to our investment in the LLC equity interests of the Glick JV.

Previous wording

Comparison of Three Months ended December 31, 2023 and December 31, 2022

Current wording

Comparison of Three and Six Months ended March 31, 2024 and March 31, 2023

Previous wording

Total investment income for the three months ended December 31, 2023 and 2022 was $98.0 million and $79.2 million, respectively. For the three months ended December 31, 2023, this amount consisted of $95.3 million of interest income from portfolio investments (which included $3.8 million of PIK interest), $1.3 million of fee income and $1.4 million of dividend income. For the three months ended December 31, 2022, this amount consisted of $76.1 million of interest income from portfolio investments (which included $6.1 million of PIK interest), $2.0 million of fee income and $1.1 million of dividend income. The increase of $18.8 million, or 23.8%, in our total investment income for the three months ended December 31, 2023, as compared to the three months ended December 31, 2022, was due primarily to a $19.2 million increase in interest income, which was primarily driven by the impact of higher base rates on our floating rate debt portfolio and a larger investment portfolio primarily from the assets acquired in the OSI2 Merger. This was partially offset by a $0.7 million decrease in fee income due to lower amendment fees.

Current wording

Total investment income for the six months ended March 31, 2024 and 2023 was $192.0 million and $175.5 million, respectively. For the six months ended March 31, 2024, this amount consisted of $185.3 million of interest income from portfolio investments (which included $8.7 million of PIK interest), $3.9 million of fee income and $2.8 million of dividend income. For the six months ended March 31, 2023, this amount consisted of $169.0 million of interest income from portfolio investments (which included $10.3 million of PIK interest), $4.4 million of fee income and $2.1 million of dividend income. The increase of $16.5 million, or 9.4%, in our total investment income for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, was due primarily to a $16.4 million increase in interest income, which was primarily driven by the impact of higher base rates on our floating rate debt portfolio and a larger investment portfolio primarily from the assets acquired in the OSI2 Merger, and a $0.7 million increase in dividend income. This was partially offset by a $0.5 million decrease in fee income due to lower exit fees.

Previous wording

Net expenses (expenses net of fee waivers) for the three months ended December 31, 2023 and 2022 were $53.8 million and $40.3 million, respectively. Net expenses increased for the three months ended December 31, 2023, as compared to the three months ended December 31, 2022, by $13.5 million, or 33.5%. The increase in net expenses was primarily driven by $11.5 million of higher interest expense due to the impact of rising interest rates on our floating rate liabilities and an increase in average borrowings outstanding. Further contributing to the increase were $1.3 million of increased part I incentive fees as a result of higher adjusted net investment income and $0.8 million of higher management fees (net of waivers) as a result of a larger investment portfolio.

Current wording

Net expenses (expenses net of fee waivers) for the six months ended March 31, 2024 and 2023 were $106.5 million and $90.6 million, respectively. Net expenses increased for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, by $15.8 million, or 17.5%. The increase in net expenses was primarily driven by $15.5 million of higher interest expense due to the impact of rising interest rates on our floating rate liabilities and an increase in average borrowings outstanding. Further contributing to the increase were $0.8 million of increased part I incentive fees as a result of higher adjusted net investment income and $1.2 million of higher management fees (net of waivers) as a result of a larger investment portfolio. This was partially offset by $0.9 million of lower professional fees and $0.9 million of lower general and administrative expenses.

Previous wording

Net investment income for the three months ended December 31, 2023 increased by $5.4 million compared to the three months ended December 31, 2022, primarily as a result of the $18.8 million increase in total investment income and the $13.5 million increase in net expenses.

Current wording

Net investment income for the three months ended March 31, 2024 decreased by $4.6 million compared to the three months ended March 31, 2023, primarily as a result of the $2.3 million decrease in total investment income and the $2.3 million increase in net expenses.

Previous wording

During the three months ended December 31, 2023 and 2022, we recorded aggregate net realized losses of $8.5 million and $3.2 million, respectively, in connection with the exits and restructurings of various investments and foreign currency forward contracts. See “Note 8. 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 months ended December 31, 2023 and 2022.

Current wording

During the three months ended March 31, 2024 and 2023, we recorded aggregate net realized losses of $6.6 million and $6.1 million, respectively, in connection with the exits and restructurings of various investments and foreign currency forward contracts. During the six months ended March 31, 2024 and 2023, we recorded aggregate net realized losses of $15.1 million and $9.3 million, respectively, in connection with the exits and restructurings of various investments and foreign currency forward contracts. See “Note 8. 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, 2024 and 2023.

Previous wording

During the three months ended December 31, 2023 and 2022, we recorded net unrealized depreciation of $25.0 million and $23.0 million, respectively. For the three months ended December 31, 2023, this consisted of $18.8 million of net unrealized depreciation on equity investments, $13.7 million of net unrealized depreciation on debt investments and $7.8 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $15.3 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses). For the three months ended December 31, 2022, this consisted of $18.7 million of net unrealized depreciation on debt investments and $11.0 million of net unrealized depreciation of foreign currency forward contracts, partially offset by $3.9 million of net unrealized appreciation related to exited investments (a portion of which resulted in a reclassification to realized losses) and $2.8 million of net unrealized appreciation on equity investments.

Current wording

During the three months ended March 31, 2024 and 2023, we recorded net unrealized depreciation of $25.3 million and $18.3 million, respectively. For the three months ended March 31, 2024, this consisted of $24.8 million of net unrealized depreciation on equity investments and $13.5 million of net unrealized depreciation on debt investments, partially offset by $10.9 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, 2023, this consisted of $24.5 million of net unrealized depreciation on debt investments and $4.9 million of net unrealized depreciation related to exited investments (a portion of which resulted in a reclassification to realized gains), partially offset by $9.5 million of net unrealized appreciation on equity investments and $1.6 million of net unrealized appreciation of foreign currency forward contracts.

Previous wording

Our primary uses of cash are for (1) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including our expenses, the management and incentive fees and any indemnification obligations), (3) debt service of borrowings and (4) cash distributions to stockholders. We may also from time to time repurchase or redeem some or all of our outstanding notes. 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 December 31, 2023, we had $1,662.9 million in senior securities and our asset coverage ratio was 188.66%. As of December 31, 2023, our target debt to equity ratio was 0.90x to 1.25x (i.e., one dollar of equity for each $0.90 to $1.25 of debt outstanding) and our net debt to equity ratio was 1.02x.

Current wording

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, 2024, we had $1,680.7 million in senior securities and our asset coverage ratio was 188.04%. As of March 31, 2024, our target debt to equity ratio was 0.90x to 1.25x (i.e., one dollar of equity for each $0.90 to $1.25 of debt outstanding) and our net debt to equity ratio was 1.02x.

Previous wording

For the three months ended December 31, 2023, we experienced a net decrease in cash and cash equivalents (including restricted cash) of $13.8 million. During that period, net cash provided by operating activities was $1.1 million, primarily from $217.6 million of principal payments and sale proceeds received, the cash activities related to $44.2 million of net investment income, $77.8 million of net decreases in receivables and net increases in payables from unsettled transactions and a $27.7 million decrease in due from broker, partially offset by funding $359.9 million of investments. During the same period, net cash used by financing activities was $14.6 million, primarily consisting of $47.0 million of cash distributions paid to our stockholders, partially offset by $32.4 million of proceeds from the issuance of shares under the "at the market" offering.

Current wording

For the six months ended March 31, 2024, we experienced a net decrease in cash and cash equivalents (including restricted cash) of $8.0 million. During that period, net cash used in operating activities was $16.5 million, primarily from funding $733.5 million of investments, partially offset by $540.2 million of principal payments and sale proceeds received, the cash activities related to $85.6 million of net investment income, $85.1 million of net decreases in receivables and net increases in payables from unsettled transactions and a $13.6 million decrease in due from broker. During the same period, net cash provided by financing activities was $8.5 million, primarily consisting of $78.5 million of proceeds from the issuance of shares under the "at the market" offering and $20.0 million net borrowings under credit facilities, partially offset by $89.8 million of cash distributions paid to our stockholders.

Previous wording

For the three months ended December 31, 2022, we experienced a net decrease in cash and cash equivalents (including restricted cash) of $7.1 million. During that period, net cash used in operating activities was $109.9 million, primarily from funding $261.4 million of investments and $10.0 million of net decrease in payables from unsettled transactions, partially offset by $108.8 million of principal payments and sale proceeds received, the cash activities related to $38.8 million of net investment income and a $16.3 million increase in due from portfolio companies. During the same period, net cash provided by financing activities was $103.3 million, primarily consisting of $160.0 million of net borrowings under the credit facilities, partially offset by $56.7 million of cash distributions paid to our stockholders.

Current wording

For the six months ended March 31, 2023, we experienced a net increase in cash and cash equivalents (including restricted cash) of $26.6 million. During that period, net cash used in operating activities was $63.7 million, primarily from funding $362.0 million of investments and $36.7 million of net decrease in net payables from unsettled transactions and $22.3 million of cash received in connection with the OSI2 Merger, partially offset by $262.9 million of principal payments and sale proceeds received, the cash activities related to $84.8 million of net investment income and a $20.6 million decrease in due from portfolio companies. During the same period, net cash provided by financing activities was $90.8 million, primarily consisting of $190.0 million of net borrowings under the credit facilities, partially offset by $97.8 million of cash distributions paid to our stockholders.

Previous wording

As of December 31, 2023, we had $131.7 million in cash and cash equivalents (including $19.3 million of restricted cash), portfolio investments (at fair value) of $3.0 billion, $43.0 million of interest, dividends and fees receivable, $7.9 million of due from portfolio companies, $907.5 million of undrawn capacity on our credit facilities (subject to borrowing base and other limitations), $33.3 million of net payables from unsettled transactions, $710.0 million of borrowings outstanding under our credit facilities and $912.7 million of unsecured notes payable (net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment).

Current wording

As of March 31, 2024, we had $137.5 million in cash and cash equivalents (including $12.5 million of restricted cash), portfolio investments (at fair value) of $3.0 billion, $36.5 million of interest, dividends and fees receivable, $1.8 million of due from portfolio companies, $887.5 million of undrawn capacity on our credit facilities (subject to borrowing base and other limitations), $40.6 million of net payables from unsettled transactions, $730.0 million of borrowings outstanding under our credit facilities and $905.6 million of unsecured notes payable (net of unamortized financing costs, unaccreted discount and interest rate swap fair value adjustment).

Previous wording

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 December 31, 2023, our only off-balance sheet arrangements consisted of $226.6 million of unfunded commitments, which was comprised of $199.5 million to provide debt and equity financing to certain of our portfolio companies and $27.1 million to provide financing to the JVs. Of the $199.5 million, approximately $165.9 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies or other restrictions. As of September 30, 2023, our only off-balance sheet arrangements consisted of $232.7 million of unfunded commitments, which was comprised of $205.6 million to provide debt and equity financing to certain of our portfolio companies and $27.1 million to provide financing to the JVs. Of the $205.6 million, approximately $154.2 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies or other restrictions.

Current wording

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, 2024, our only off-balance sheet arrangements consisted of $236.2 million of unfunded commitments, which was comprised of $209.1 million to provide debt and equity financing to certain of our portfolio companies and $27.1 million to provide financing to the JVs. Of the $209.1 million, approximately $179.0 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies or other restrictions. As of September 30, 2023, our only off-balance sheet arrangements consisted of $232.7 million of unfunded commitments, which was comprised of $205.6 million to provide debt and equity financing to certain of our portfolio companies and $27.1 million to provide financing to the JVs. Of the $205.6 million, approximately $154.2 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies or other restrictions.

Previous wording

During the three months ended December 31, 2023, we issued an aggregate of 98,605 shares of common stock as part of the DRIP.

Current wording

During the three and six months ended March 31, 2024, we issued an aggregate of 96,850 and 195,455 shares, respectively, of common stock as part of the DRIP.

Previous wording

In connection with the "at the market" offering, we issued and sold 1,641,416 shares of common stock during the year ended December 31, 2023 for net proceeds of $32.3 million (net of offering costs).

Current wording

In connection with the "at the market" offering, we issued and sold 3,975,169 shares of common stock during the six months ended March 31, 2024 for net proceeds of $78.3 million (net of offering costs).

Previous wording

(1) Net proceeds excludes offering costs of $0.1 million.

Current wording

(1) Net proceeds excludes offering costs of $0.2 million.

Previous wording

In connection with the "at the market" offering, we did not issue or sell any shares of common stock during the three months ended December 31, 2022.

Current wording

In connection with the "at the market" offering, we did not issue or sell any shares of common stock during the six months ended March 31, 2023.

Previous wording

(1) Shares were purchased on the open market and distributed other than with respect to the distributions paid on December 31, 2021, March 31, 2022, December 30, 2022, September 30, 2023 and December 31, 2023. New shares were issued with respect to distributions paid on December 31, 2021, March 31, 2022, December 30, 2022, September 30, 2023 and December 31, 2023.

Current wording

(1) Shares were purchased on the open market and distributed other than with respect to the distributions paid on December 31, 2021, March 31, 2022, December 30, 2022, September 29, 2023, December 29, 2023 and March 29, 2024.

Previous wording

(1) As contractually required, we report financial covenants based on the last filed quarterly or annual report, in this case our Annual Report on Form 10-K for the year ended September 30, 2023. We were in compliance with all financial covenants under the Syndicated Facility based on the financial information contained in this Quarterly Report on Form 10-Q.

Current wording

(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, 2023. We were in compliance with all financial covenants under the Syndicated Facility based on the financial information contained in this Quarterly Report on Form 10-Q.

Previous wording

As of each of December 31, 2023 and September 30, 2023, we had $430.0 million of borrowings outstanding under the Syndicated Facility, which had a fair value of $430.0 million. Our borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 7.621% and 5.849% for the three months ended December 31, 2023 and 2022, respectively. For the three months ended December 31, 2023 and 2022, we recorded interest expense (inclusive of fees) of $9.6 million and $10.0 million, respectively, related to the Syndicated Facility.

Current wording

As of March 31, 2024 and September 30, 2023, we had $450.0 million and $430.0 million of borrowings outstanding under the Syndicated Facility, which had a fair value of $450.0 million and $430.0 million, respectively. Our borrowings under the Syndicated Facility bore interest at a weighted average interest rate of 7.579% and 6.255% for the six months ended March 31, 2024 and 2023, respectively. For the three and six months ended March 31, 2024, we recorded interest expense (inclusive of fees) of $9.6 million and $19.1 million, respectively, related to the Syndicated Facility. For the three and six months ended March 31, 2023, we recorded interest expense (inclusive of fees) of $13.1 million and $23.1 million, respectively, related to the Syndicated Facility.

Previous wording

Our borrowings under the Citibank Facility bore interest at a weighted average interest rate of 6.508% for the three months ended December 31, 2022. For the three months ended December 31, 2022, we recorded interest expense (inclusive of fees) of $2.7 million related to the Citibank Facility.

Current wording

Our borrowings under the Citibank Facility bore interest at a weighted average interest rate of 6.678% for the six months ended March 31, 2023. For the three and six months ended March 31, 2023, we recorded interest expense (inclusive of fees) of $2.9 million and $5.6 million, respectively, related to the Citibank Facility.

Previous wording

2 SPV will be required to make certain mandatory amortization payments. Borrowings under the OSI2 Citibank Facility bear interest payable quarterly at a rate per year equal to (a) in the case of a lender that is identified as a conduit lender, the lesser of (i) the applicable commercial paper rate for such conduit lender and (ii) SOFR plus 2.00% per annum on broadly syndicated loans and 2.75% per annum on all other eligible loans and (b) for all other lenders under the OSI2 Citibank Facility, SOFR plus 2.00% per annum on broadly syndicated loans and 2.75% per annum on all other eligible loans, subject in all cases to a minimum overall rate of SOFR plus 2.50% per annum. After the reinvestment period, the applicable spread is 4.00% per year. There is also a non-usage fee of 0.50% per year on the unused portion of the OSI2 Citibank Facility, payable quarterly; provided that if the unused portion of the OSI2 Citibank Facility is greater than 30% of the commitments under the OSI2 Citibank Facility, the non-usage fee will be based on an unused portion of 30% of the commitments under the OSI2 Citibank Facility. The OSI2 Citibank Facility is secured by a first priority security interest in substantially all of OSI 2 SPV’s assets. As part of the OSI2 Citibank Facility, OSI 2 SPV is subject to certain limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by OSI 2 SPV including restrictions on sector concentrations, loan size, tenor and minimum investment ratings (or estimated ratings). The OSI2 Citibank Facility also contains certain requirements relating to interest coverage, collateral quality and portfolio performance, certain violations of which could result in the acceleration of the amounts due under the OSI2 Citibank Facility.

Current wording

As of March 31, 2024, we were able to borrow up to $400 million under the OSI2 Citibank Facility (subject to borrowing base and other limitations). As of March 31, 2024, the OSI2 Citibank Facility had a reinvestment period through May 25, 2025, during which advances may be made, and matures on January 26, 2027. Following the reinvestment period, OSI 2 SPV will be required to make certain mandatory amortization payments. Borrowings under the OSI2 Citibank Facility bear interest payable quarterly at a rate per year equal to (a) in the case of a lender that is identified as a conduit lender, the lesser of (i) the applicable commercial paper rate for such conduit lender and (ii) SOFR plus 2.00% per annum on broadly syndicated loans and 2.75% per annum on all other eligible loans and (b) for all other lenders under the OSI2 Citibank Facility, SOFR plus 2.00% per annum on broadly syndicated loans and 2.75% per annum on all other eligible loans, subject in all cases to a minimum overall rate of SOFR plus 2.50% per annum. After the reinvestment period, the applicable spread is 4.00% per year. There is also a non-usage fee of 0.50% per year on the unused portion of the OSI2 Citibank Facility, payable quarterly; provided that if the unused portion of the OSI2 Citibank Facility is greater than 30% of the commitments under the OSI2 Citibank Facility, the non-usage fee will be based on an unused portion of 30% of the commitments under the OSI2 Citibank Facility. The OSI2 Citibank Facility is secured by a first priority security interest in substantially all of OSI 2 SPV’s assets. As part of the OSI2 Citibank Facility, OSI 2 SPV is subject to certain limitations as to how borrowed funds may be used and the types of loans that are eligible to be acquired by OSI 2 SPV including restrictions on sector concentrations, loan size, tenor and minimum investment ratings (or estimated ratings). The OSI2 Citibank Facility also contains certain requirements relating to interest coverage, collateral quality and portfolio performance, certain violations of which could result in the acceleration of the amounts due under the OSI2 Citibank Facility.

Previous wording

As of each of December 31, 2023 and September 30, 2023, we had $280.0 million outstanding under the OSI2 Citibank Facility, which had a fair value of $280.0 million. Our borrowings under the OSI2 Citibank Facility bore interest at a weighted average interest rate of 8.204% for the three months ended December 31, 2023. For the three months ended December 31, 2023, we recorded interest expense (inclusive of fees) of $6.1 million related to the OSI2 Citibank Facility.

Current wording

As of each of March 31, 2024 and September 30, 2023, we had $280.0 million outstanding under the OSI2 Citibank Facility, which had a fair value of $280.0 million. Our borrowings under the OSI2 Citibank Facility bore interest at a weighted average interest rate of 8.079% and 7.172% for the six months ended March 31, 2024 and the period from January 23, 2023 to March 31, 2023, respectively. For the three and six months ended March 31, 2024, we recorded interest expense (inclusive of fees) of $6.0 million and $12.1 million, respectively, related to the OSI2 Citibank Facility. For the period from January 23, 2023 to March 31, 2023, we recorded interest expense (inclusive of fees) of $3.1 million related to the OSI2 Citibank Facility.

Previous wording

In connection with the 2027 Notes, we entered into an interest rate swap to more closely align the interest rates of our liabilities with our investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, we receive a fixed interest rate of 2.700% and pay a floating interest rate of the three-month SOFR plus 1.658% plus a SOFR adjustment of 0.26161% on a notional amount of $350 million. We designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship.

Current wording

In connection with the 2027 Notes, we entered into an interest rate swap to more closely align the interest rates of our liabilities with our investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, we receive a fixed interest rate of 2.700% and pay a floating interest rate of the three-month SOFR plus 1.658% plus a SOFR adjustment of 0.26161% on a notional amount of $350.0 million. We designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship.

Previous wording

In connection with the 2029 Notes, we entered into an interest rate swap to more closely align the interest rates of its liabilities with its investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, we receive a fixed interest rate of 7.100% and pays a floating interest rate of the three-month SOFR plus 3.1255% on a notional amount of $300 million. We designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship. See Note 12 for more information regarding the interest rate swap.

Current wording

In connection with the 2029 Notes, we entered into an interest rate swap to more closely align the interest rates of its liabilities with its investment portfolio, which consists of predominately floating rate loans. Under the interest rate swap agreement, we receive a fixed interest rate of 7.100% and pays a floating interest rate of the three-month SOFR plus 3.1255% on a notional amount of $300.0 million. We designated the interest rate swap as the hedging instrument in an effective hedge accounting relationship. See Note 12 for more information regarding the interest rate swap.

Previous wording

The below table presents the components of interest and other debt expenses related to the 2025 Notes, the 2027 Notes, and the 2029 Notes for the three months ended December 31, 2023:

Current wording

The below table presents the components of interest and other debt expenses related to the 2025 Notes, the 2027 Notes and the 2029 Notes for the three and six months ended March 31, 2024:

Previous wording

The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the three months ended December 31, 2022:

Current wording

The below table presents the components of interest and other debt expenses related to the 2025 Notes and the 2027 Notes for the three and six months ended March 31, 2023:

Previous wording

To maintain RIC tax treatment, we must, among other things, distribute (or be deemed to 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 year 2021. For the calendar year 2022, we incurred $0.1 million of excise tax. We do not expect to incur a U.S. federal excise tax for calendar year 2023.

Current wording

To maintain RIC tax treatment, we must, among other things, distribute (or be deemed to 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 year 2021. For the calendar year 2022, we incurred $0.1 million of excise tax. We did not incur a U.S. federal excise tax for calendar year 2023. We do not expect to incur a U.S. federal excise tax for calendar year 2024.