Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
Our common stock trades on the Nasdaq Global Select Market under the symbol "OCSL." The following table sets forth, for each fiscal quarter during the last two most recently completed fiscal years and for the current fiscal year, the range of high and low sales prices of our common stock as reported on the Nasdaq Global Select Market, the premium (discount) of sales price to our net asset value, or NAV, and the distributions declared by us for each fiscal quarter.
Sale Price
NAV (1) High Low Premium (Discount) of High Sales Price to NAV (2) Premium (Discount) of Low Sales Price to NAV (2) Cash Distribution per Share (3)
Year ended September 30, 2021
First quarter $ 6.85 $ 5.66 $ 4.52 ( 17.4 ) % ( 34.0 ) % $ 0.110
Second quarter $ 7.09 $ 6.36 $ 5.47 ( 10.3 ) % ( 22.8 ) % $ 0.120
Third quarter $ 7.22 $ 6.92 $ 6.19 ( 4.2 ) % ( 14.3 ) % $ 0.130
Fourth quarter $ 7.28 $ 7.40 $ 6.58 1.6 % ( 9.6 ) % $ 0.145
Year ended September 30, 2022
First quarter $ 7.34 $ 7.62 $ 7.03 3.8 % ( 4.2 ) % $ 0.155
Second quarter $ 7.26 $ 7.81 $ 7.13 7.6 % ( 1.8 ) % $ 0.016
Third quarter $ 6.89 $ 7.61 $ 6.20 10.4 % ( 10.0 ) % $ 0.165
Fourth quarter $ 6.79 $ 7.25 $ 5.87 6.8 % ( 13.5 ) % $ 0.170
Year ending September 30, 2023
First quarter (through November 11, 2022) * $ 6.89 $ 5.86 * * $0.32 (4)
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* Not determinable at the time of filing.
(1) NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(2) Calculated as the respective high or low sales price less NAV, divided by NAV.
(3) Represents the distribution declared in the specified quarter. We have adopted an “opt out” dividend reinvestment plan for our common stockholders. Distributions by us are generally taxable to U.S. stockholders as ordinary income or capital gains.
(4) On November 10, 2022, our Board of Directors declared a quarterly distribution of $0.18 per share payable on December 30, 2022 to stockholders of record on December 15, 2022. On November 10, 2022, our Board of Directors also declared a special distribution of $0.14 per share payable on December 30, 2022 to stockholders of record on December 15, 2022.
The last reported price for our common stock on November 11, 2022 was $6.66 per share, which represented a 1.9 % discount to our NAV as of September 30, 2022. As of November 11, 2022, we had 58 stockholders of record, which did not include stockholders for whom shares are held in nominee or “street” name.
Sales of Unregistered Securities
We did not engage in any sales of unregistered securities during the fiscal year ended September 30, 2022.
Stock Performance Graph
The following graph compares the cumulative 5-year total return provided to shareholders on Oaktree Specialty Lending Corporation’s common stock relative to the cumulative total returns of the Standard & Poor’s 500 Index, the Russell 2000 Financial Services Index and the S&P BDC Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on September 30, 2017 and its relative performance is tracked through September 30, 2022. The stock performance graph shows returns during management by Fifth Street Management LLC, or the
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Former Adviser, for the periods from September 30, 2017 through October 16, 2017 and during management by Oaktree and its affiliates for the period from October 17, 2017 through September 30, 2022.
September 30, 2017 September 30, 2018 September 30, 2019 September 30, 2020 September 30, 2021 September 30, 2022
Oaktree Specialty Lending Corporation $ 100.00 $ 98.62 $ 111.04 $ 112.83 $ 177.97 $ 166.19
S&P 500 $ 100.00 $ 117.91 $ 122.93 $ 141.55 $ 184.02 $ 155.55
Russell 2000 Financial Services $ 100.00 $ 106.79 $ 105.34 $ 81.07 $ 134.44 $ 113.96
S&P BDC Index $ 100.00 $ 104.06 $ 112.05 $ 89.94 $ 138.81 $ 118.23
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Stock Repurchase Program
We did not repurchase shares of our common stock during the years ended September 30, 2022 and 2021.
Fee and Expenses
The following table is intended to assist stockholders in understanding the costs and expenses that an investor in shares of our common stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this Form 10-K contains a reference to fees or expenses paid by “you” or “us”, or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in us. Such expenses also include those of our consolidated subsidiaries.
Stockholder transaction expenses:
Sales load (as a percentage of offering price) — % (1)
Offering expenses (as a percentage of offering price) — % (2)
Dividend reinvestment plan fees Up to $15 (3)
Total stockholder transaction expenses (as a percentage of offering price) —% (4)
Annual expenses (as a percentage of net assets attributable to common stock):
Base management fees 3.10 % (5)
Incentive fees (17.5%) 2.24 % (6)
Interest payments on borrowed funds (including other costs of servicing and offering debt securities) 5.28 % (7)
Other expenses 0.74 % (8)
Acquired fund fees and expenses 1.36 % (9)
Total annual expenses 12.72 % (10)
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(1) If applicable, the prospectus or prospectus supplement relating to an offering of our common stock will disclose the applicable sales load.
(2) In the event that we conduct an offering of our securities, the related prospectus or prospectus supplement will disclose the estimated offering expenses.
(3) The expenses of administering our dividend reinvestment plan are included in “Other expenses.” The plan administrator’s fees under the plan are paid by us. If a participant elects by notice to the plan administrator in advance of termination to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a transaction fee of up to $15 plus a $0.10 per share fee from the proceeds.
(4) Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus supplement, if any.
(5) Under the Investment Advisory Agreement, the base management fee is calculated at an annual rate of 1.50% of our total gross assets at the end of each quarter, including any investments made with borrowings, but excluding cash and cash equivalents; provided, however, the base management fee will be calculated at an annual rate of 1.00% of the value of our total gross assets, including any investments made with borrowings, but excluding cash and cash equivalents, that exceeds the product of (i) 200% (calculated in accordance with the Investment Company Act and giving effect to exemptive relief we have received with respect to debentures issued by a small business investment company subsidiary) and (ii) our net assets. For purposes of this table, we have assumed $2.6 billion of total gross assets (excluding cash and cash equivalents), which was the actual amount of our total gross assets as of September 30, 2022 and does not reflect the waiver by Oaktree of $750,000 of base management fees in each quarter or the waiver of fees following completion of the OCSI Merger. The base management fee net of such waiver would be 2.99% of net assets attributable to common stock. See “Item 1. Business - Investment Advisory Agreement - Management and Incentive Fee.”
(6) The incentive fee consists of two parts. Under the Investment Advisory Agreement, the incentive fee on income is calculated and payable quarterly in arrears based upon our pre-incentive fee net investment income 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 our net assets at the end of the most recently completed quarter, of 1.50%, subject to a “catch up” feature. In addition, pre-incentive fee net investment income does not include any amortization or accretion of any purchase premium or purchase discount to interest income resulting solely from merger-related accounting adjustments in connection with the assets acquired in the OCSI Merger, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such
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merger-related accounting adjustments, in the aggregate, would result in an increase in pre-incentive fee net investment income. See “Item 1. Business - Investment Advisory Agreement - Management and Incentive Fee” for additional information.
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 our 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 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 gains incentive fees under the Investment Advisory Agreement. Any realized capital gains or losses and unrealized capital depreciation with respect to our 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. In addition, the calculation of realized capital gains, realized capital losses and unrealized capital depreciation does (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the OCSI Merger, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the capital gains incentive fee and (2) include any such amounts associated with the investments acquired in the OCSI Merger for the period from October 1, 2018 to the date of closing of the OCSI Merger, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the capital gains incentive fee. See “Item 1. Business - Investment Advisory Agreement - Management and Incentive Fee” for additional information.
The incentive fee referenced in the table above is based on annualized actual amounts of the incentive fee on income incurred during the three months ended September 30, 2022 and the capital gains incentive fee payable under the Investment Advisory Agreement as of September 30, 2022.
(7) “Interest payments on borrowed funds (including other costs of servicing and offering debt securities)” is calculated as (1) the weighted average interest rate in effect as of September 30, 2022 multiplied by the actual debt outstanding as of September 30, 2022 of $1,350.0 million plus (2) unused fees and the expected amortization of deferred financing costs and discounts based on the unamortized financing costs and discounts as of September 30, 2022. The weighted average interest rate for our borrowings as of September 30, 2022 was 4.4% (exclusive of deferred financing costs and inclusive of the impact of an interest rate swap designated as a hedging instrument). The amount of leverage that we employ at any particular time will depend on, among other things, our Board of Directors’ assessment of market and other factors at the time of any proposed borrowing.
(8) “Other expenses” are based on estimated amounts for the current fiscal year. These expenses include certain expenses allocated to us under the Investment Advisory Agreement, including travel expenses incurred by the Adviser’s personnel in connection with investigating and monitoring our investments, such as investment due diligence.
(9) Our stockholders indirectly bear the expenses of underlying funds or other investment vehicles that would be an investment company under section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the Investment Company Act ("Acquired Funds") in which we invest. This amount includes the annual expenses of SLF JV I and the Glick JV, which we refer to collectively as the "JVs". There are no fees paid by the JVs to the Adviser. See Note 3 to our Consolidated Financial Statements in this Form 10-K for more information on the JVs. The annual expenses of the JVs include interest payments on the subordinated notes held by Kemper and GF Debt Funding 2014 LLC, or GF Debt Funding, an entity advised by affiliates of GF Equity Funding, as applicable, which represented 10.3% of such expenses, and exclude interest payments on the subordinated notes held by us.
(10) “Total annual expenses” is presented as a percentage of net assets attributable to common stockholders because our common stockholders bear all of our fees and expenses and includes all fees and expenses of our consolidated subsidiaries. “Total annual expenses” does not reflect any potential provision (benefit) for income taxes because of the uncertainties associated with determining such amounts in future periods.
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Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock assuming that we hold no cash or liabilities other than debt. In calculating the following expense amounts, we have assumed that our annual operating expenses remain at the levels set forth in the table above. The example does not include any sales load or offering expenses.
An investor would pay the following expenses on a $1,000 investment 1 Year 3 Years 5 Years 10 Years
Assuming a 5% annual return (assumes no return from net realized capital gains) $ 100 $ 292 $ 474 $ 885
Assuming a 5% annual return (assumes return entirely from net realized capital gains) $ 108 $ 314 $ 507 $ 929
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee based on pre-incentive fee net investment income under the Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger a greater incentive fee, our expenses, and returns to our investors, would be higher. For purposes of this example, we have assumed that as of October 1, 2021, the sum of our realized capital losses and unrealized capital depreciation on a cumulative basis since October 1, 2018 equaled zero. In addition, while the example assumes reinvestment of all distributions at NAV, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the cash distribution payable to a participant by either (i) the greater of (a) the current NAV per share of our common stock and (b) 95% of the market price per share of our common stock at the close of trading on the payment date fixed by our Board of Directors in the event that we use newly issued shares to satisfy the share requirements of the dividend reinvestment plan or (ii) the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased by the administrator of the dividend reinvestment plan in the event that shares are purchased in the open market to satisfy the share requirements of the dividend reinvestment plan, which may be at, above or below NAV.
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Financial Highlights
(Share amounts in thousands) Year ended
September 30,
2022 Year ended
September 30,
2021 Year ended
September 30,
2020 Year ended
September 30,
2019 Year ended
September 30,
2018 (1)
Net asset value per share at beginning of period $7.28 $6.49 $6.60 $6.09 $6.16
Net investment income (2) 0.82 0.60 0.51 0.48 0.43
Net unrealized appreciation (depreciation) (2)(5) (0.75) 0.73 (0.14) 0.27 0.73
Net realized gains (losses) (2) 0.09 0.16 (0.10) 0.14 (0.83)
(Provision) benefit for taxes on realized and unrealized gains (losses) (2) — — 0.01 — —
Distributions of net investment income to stockholders (0.65) (0.51) (0.39) (0.38) (0.27)
Tax return of capital — — — — (0.13)
Issuance of common stock — (0.19) — — —
Net asset value per share at end of period $6.79 $7.28 $6.49 $6.60 $6.09
Per share market value at beginning of period $7.06 $4.84 $5.18 $4.96 $5.47
Per share market value at end of period $6.00 $7.06 $4.84 $5.18 $4.96
Total return (3) (6.71)% 57.61% 2.10% 12.56% (1.49)%
Common shares outstanding at beginning of period 180,361 140,961 140,961 140,961 140,961
Common shares outstanding at end of period 183,374 180,361 140,961 140,961 140,961
Net assets at beginning of period $1,312,823 $914,879 $930,630 $858,035 $867,657
Net assets at end of period $1,245,563 $1,312,823 $914,879 $930,630 $858,035
Average net assets (4) $1,308,518 $1,150,662 $871,305 $909,264 $841,583
Ratio of net investment income to average net assets (4) 11.36% 8.44% 8.26% 7.47% 7.13%
Ratio of total expenses to average net assets (4) 8.68% 9.65% 7.57% 9.65% 9.51%
Ratio of net expenses to average net assets (4) 8.45% 9.51% 8.16% 8.78% 9.35%
Ratio of portfolio turnover to average investments at fair value 26.99% 39.66% 38.99% 32.50% 67.66%
Weighted average outstanding debt (6) $1,361,151 $964,390 $647,080 $573,891 $608,553
Average debt per share (2) $7.47 $5.95 $4.59 $4.07 $4.32
Asset coverage ratio at end of period (7) 188.64% 201.68% 227.22% 294.91% 232.98%
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(1) Beginning on October 17, 2017, the Company is externally managed by Oaktree or its affiliates. Prior to October 17, 2017, the Company was externally managed by the Former Adviser.
(2) Calculated based upon weighted average shares outstanding for the period.
(3) 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. Total return does not include sales load.
(4) Calculated based upon the weighted average net assets for the period.
(5) For the year ended September 30, 2021, the amount shown for net unrealized appreciation (depreciation) includes the effect of the timing of common stock issuances in connection with the OCSI Merger.
(6) Calculated based upon the weighted average of principal debt outstanding for the period.
(7) Based on outstanding senior securities of $1,350.0 million, $1,280.0 million, $714.8 million, $476.1 million and $643.4 million as of September 30, 2022, 2021, 2020, 2019 and 2018, respectively.
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Year ended
September 30,
2017 Year ended
September 30,
2016 Year Ended
September 30,
2015 Year Ended
September 30,
2014 Year Ended
September 30,
2013
Net asset value at beginning of period $7.97 $9.00 $9.64 $9.85 $9.92
Net investment income (4) 0.51 0.72 0.75 1.00 1.04
Net unrealized appreciation (depreciation) (4) (0.69) (0.33) (0.46) (0.23) 0.12
Net realized gains (losses) (4) (1.21) (0.84) (0.19) 0.02 (0.24)
Distributions of net investment income to stockholders (0.47) (0.67) (0.79) (0.94) (0.90)
Tax return of capital — (0.05) — (0.06) (0.25)
Net issuance/repurchase of common stock 0.05 0.14 0.05 — 0.16
Net asset value at end of period $6.16 $7.97 $9.00 $9.64 $9.85
Per share market value at beginning of period $5.81 $6.17 $9.18 $10.29 $10.98
Per share market value at end of period $5.47 $5.81 $6.17 $9.18 $10.29
Total return (1) 2.84% 7.02% (27.18)% (0.97)% 4.89%
Common shares outstanding at beginning of period 143,259 150,263 153,340 139,041 91,048
Common shares outstanding at end of period 140,961 143,259 150,263 153,340 139,041
Net assets at beginning of period $1,142,288 $1,353,094 $1,478,475 $1,368,872 $903,570
Net assets at end of period $867,657 $1,142,288 $1,353,094 $1,478,475 $1,368,872
Average net assets (2) $1,018,498 $1,229,639 $1,413,357 $1,393,635 $1,095,225
Ratio of net investment income to average net assets (2) 7.13% 8.68% 8.13% 10.23% 10.50%
Ratio of total expenses to average net assets (2) 10.49% 13.09% 10.69% 10.91% 9.95%
Ratio of net expenses to average net assets (2) 10.35% 11.48% 10.65% 10.86% 9.74%
Ratio of portfolio turnover to average investments at fair value 39.06% 23.39% 23.02% 25.50% 38.22%
Weighted average outstanding debt (3) $982,372 $1,190,105 $1,228,413 $1,110,021 $597,596
Average debt per share (4) $6.95 $8.07 $8.02 $7.82 $5.42
Asset coverage ratio at end of period (5) 227.40% 220.84% 238.95% 259.50% 394.86%
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(1) 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. Total return does not include sales load.
(2) Calculated based upon the weighted average net assets for the period.
(3) Calculated based upon the weighted average of principal debt outstanding for the period.
(4) Calculated based upon weighted average shares outstanding for the period.
(5) Based on outstanding senior securities of $680.7 million, $946.5 million, $975.3 million, $928.4 million and $464.3 million as of September 30, 2017, 2016, 2015, 2014 and 2013, respectively.
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Item 6. Selected Financial Data
Not applicable.
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