Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you discuss the impact of the management fee reduction on dividend coverage and your confidence in fully earning the dividend over the next 12 to 18 months?
A: Mathew M. Pendo, President of OCSL, explained that the reduction in management fees to 1% enhances their ability to cover dividends. He highlighted that the quarter's timing affected results, suggesting that it's not ideal to annualize this quarter's figures. He expressed confidence in covering the dividend, considering the pipeline and the impact of the fee waiver.
Q: What are your expectations for new investment activity and prepayments in the coming quarters?
A: Armen Panossian, CEO & CIO, noted that OCSL has already funded $100 million in the current quarter and anticipates a strong quarter for originations based on a healthy pipeline. He mentioned the unpredictability of unexpected repayments but observed an uptick in M&A deal activity.
Q: How does the recent fee cut relate to the expected returns from new originations, considering the current spread environment?
A: Armen Panossian clarified that the portfolio's shift towards a higher percentage of first-lien positions reflects a strategic risk management approach rather than expectations about future spreads. The fee reduction aligns with providing stable and dependable dividends by maintaining a conservative portfolio structure.
Q: Can you provide insights into the performance and valuation trends of the portfolio, excluding non-performing assets (NPAs)?
A: Christopher McKown, CFO, indicated that excluding NPAs, the portfolio's performance was relatively stable quarter-on-quarter. Matthew Stewart, COO, added that the primary write-downs were associated with specific nonperforming assets.
Q: With the ongoing restructuring and recent fee reduction, how confident are you in managing the remaining credit issues in the portfolio?
A: Armen Panossian expressed confidence in the plans in place to optimize recoveries for challenged investments and in the conservative valuation approach to the portfolio. He emphasized leveraging Oaktree's capabilities to achieve favorable outcomes for shareholders.
Q: What trends are you observing in portfolio company revenue and EBITDA on a year-over-year basis?
A: Armen Panossian observed that, generally, portfolio companies have shown stable to modestly increasing revenue and stable EBITDA. He noted that these trends reflect the businesses' performance excluding the impact of increased borrowing costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
