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Welcome, and thank you for joining Oaktree Specialty Lending Corporation's Second Fiscal Quarter 2026 Conference Call. [Operator Instructions] Today's conference call is being recorded.

I'll now turn the call over to Alison Mermey, OCSL's Head of Investor Relations.

Thank you, operator. Our second quarter 2026 earnings release, which we issued this morning, along with the accompanying slide presentation, can be accessed on the Investors section of our website, oaktreespecialtylending.com.

Before we begin, I want to remind you that the comments on today's call include forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to the relevant SEC filings for a discussion of these factors in further detail. Oaktree undertakes no duty to update or revise any forward-looking statements. I'd also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in an Oaktree fund. Investors and others should note that OCSL uses the Investors section of its corporate website to announce material information. The company encourages investors, the media and others to review information that it shares on its website.

Now I'll turn the call over to Matt Pendo, President of OCSL. Matt?

Thank you, Alison, and good morning, everyone. I will begin with an overview of our second quarter fiscal 2026 results, after which Armen Panossian, our CEO and Co-Chief Investment Officer, will share his perspective on the market environment. Raghav Khanna, our Co-Chief Investment Officer, will then cover portfolio activity; and Chris McKown, our CFO and Treasurer, will close with a review of our financial results before we open the call for questions.

Despite external noise around private credit and BDCs, our team remained focused on reducing nonaccruals and positioning our balance sheet for flexibility. As of March 31, 2026, nonaccruals were 2.6% of the total debt portfolio measured at fair value, down from 3.1% last quarter and 4.6% 1 year ago. As an update post quarter, in April, we sold 2 legacy nonaccrual positions, Dominion Diagnostics and All Web Leads. We expect to make further progress reducing nonaccruals and realizing cash proceeds that we can deploy into performing assets over the coming months.

Managing our balance sheet is a high priority as we position OCSL for a more attractive investment environment. During the quarter, we sold a portion of our liquid credit positions at cost, a strategic decision to build dry powder, maintain leverage below the midpoint of our target range and rotate out of lower-yielding public credit. We ended the second quarter with available liquidity of $671 million, up $100 million from last quarter and net leverage of 1.04x, down from 1.07x last quarter.

Turning to financial highlights. Net asset value per share was $15.69 as of March 31, 2026, compared to $16.30 as of December 31, 2025. The decline was driven primarily by unrealized mark-to-market write-downs of software loans during the quarter. The fair value of our performing software loans declined by approximately 310 basis points, largely consistent with movements in broadly syndicated software loans. Importantly, we believe that these markdowns generally are not indications of deteriorating fundamentals in the underlying portfolio companies, but rather reflecting the repricing of risk in the broader markets.

Adjusted net investment income for the quarter was $33.7 million or $0.38 per share as compared with $36.1 million or $0.41 per share in the prior quarter. The decrease reflected lower reference rates, lower nonrecurring income and ending leverage below the midpoint of our target range.

For the quarter, our Board declared a total cash dividend of $0.34 per share. Due to our conservative use of leverage, we have adjusted our base dividend to $0.30 per share while maintaining our supplemental dividend at 50% of excess adjusted net investment income above our base dividend. The dividends are payable on June 30, 2026, to stockholders of record as of June 15, 2026.

With that, I'll turn the call over to Armen to share his perspective on the market environment and what we see ahead.

Thank you, Matt. It was an eventful quarter for private credit. We believe the volatility that we are seeing reflects a period of recalibration rather than a systemic issue. Rising impairments, questions surrounding valuations, the use of leverage, liquidity mismatches, software exposure in an AI-driven world and refinancing risks are all part of the current dialogue surrounding private credit. This may help explain -- at least in part -- why market sentiment may appear more negative than borrower performance alone would suggest as the confluence of concerns weigh on investor confidence.

The current debate around private credit risks may conflate a range of distinct factors and lead to overly broad conclusions. It is important to differentiate between the fundamentally sound concept of private credit, namely tailored nonbank lending from specific challenges affecting certain segments of the market. Direct lending or making private loans to finance midsized buyouts isn't inherently flawed. The question for any manager is whether their portfolio assets and liabilities were built to handle a market correction.

At Oaktree, we have more than 3 decades of experience investing in sub-investment-grade credit and navigating market cycles. This moment is familiar to us. For example, in 2020, OCSL's positioning was the result of deliberate choices we made well before the COVID-related market dislocation arrived. By late 2019, we had cleaned up the legacy portfolio that was acquired from the prior adviser, reduced leverage and built liquidity in the fund. When dislocation arrived in March 2020, we had the dry powder and the conviction to go on offense.

In 2020, we deployed nearly $1 billion of capital and produced nearly an 11% total economic return in a year when many managers retrenched. Today, OCSL is executing with a similar mindset. We continue to make progress toward turning around underperforming assets, operating below the midpoint of our leverage target, remaining disciplined in deployment and maintaining strong liquidity.

We did not predict the current environment, but we are prepared to invest into it. Market volatility increased this quarter and AI-related concerns and geopolitical unrest resulted in wider spreads across public liquid credit markets. At the same time, elevated net redemptions in nontraded BDCs prompted many managers to reassess their cost of capital and liquidity positions, pushing private credit into a phase of price discovery.

Towards quarter end, market conditions stabilized and the private credit deal pipeline began to rebuild. We are encouraged that spreads on new private credit investments have widened to SOFR plus 500 to 550 basis points, approximately 50 to 100 basis points above the 2025 tights, and supports improved forward returns. We are also seeing modest improvements in documentation and more lender-friendly structures.

While markets have rebounded from their lows, we expect continued volatility and increasing dispersion over the coming quarters. Our view is that secondary private transactions, whether through partial or full portfolio sales, will reshape the private credit landscape as certain market participants look to optimize their asset portfolio or satisfy liquidity demands. We believe Oaktree is well positioned to evaluate and potentially capitalize on all opportunities.

Our global platform is a meaningful advantage in this environment. We evaluate private credit alongside liquid credit, distressed debt, asset-backed finance and -- increasingly -- the Brookfield ecosystem. That ability to compare relative value across credit and now equity informs both our risk management and deployment decisions in ways a single strategy manager can't replicate. Together, we will have a fully integrated information network across asset classes, industries, geographies and public and private markets.

We are already tracking dozens of emerging opportunities in real time, sharing notes across teams and identifying dislocations. The breadth of our combined relationships with sponsors, companies and advisers will give us access to deal flow that many lenders do not see and allows us to be selective. Disciplined underwriting, selectivity and active portfolio management will remain the critical drivers of long-term performance.

Now I will turn the call over to Raghav, for a detailed review of our portfolio and investment activity.

Thanks, Armen. As Matt and Armen mentioned, investment activity was measured in the second quarter as we kept our focus on controlling risk and maintaining balance sheet flexibility.

During the quarter, we sold certain liquid credit positions at cost to build dry powder. We also saw a healthy pace of private portfolio prepayments. Proceeds from prepayments, exits and other paydowns and sales were $334 million, up from $179 million in the previous quarter and $279 million last year. A notable prepayment was Mindbody, and ARR software loan. Despite the challenging market backdrop for software, we exited Mindbody at par through a refinancing to a competitor.

This leaves us with only 1 ARR loan in the portfolio, representing 76 basis points of fair value, down from total ARR exposure of 214 basis points last quarter. Our limited exposure to ARR structures is an example of how we deliberately stayed underinvested in an area of private credit where we believed stress could emerge.

New investment commitments in the quarter totaled $204 million, down 36% from the prior quarter. Deal activity slowed due to software sector volatility and escalating geopolitical tensions. As Armen mentioned, our deal pipeline began to rebuild towards the end of March and into early April. We are encouraged that new private credit deals are pricing with wider spreads and structured with better lender protections. The weighted average yield on new debt investments was 9.2%, 50 basis points higher than the December quarter.

An example of a new private deal from the second quarter is Jonah Energy, a highly structured loan to a heavy asset, low obsolescence or Halo company. The company is a Denver-based independent oil and gas developer with producing assets in 6 states. In January, Jonah signed a purchase agreement to acquire Grit Oil & Gas, an upstream oil and gas operator located in the Eagle Ford Basin in Texas. While the deal was originally contemplated by the asset-backed finance market, Jonah prioritized speed of execution to capitalize on oil price appreciation driven by the conflict in Iran. As a result, the company shifted to direct lending and partnered with Oaktree to leverage our flexibility and ability to move quickly. Oaktree funds participated in approximately $200 million or 1/3 of the first lien term loan to support the acquisition. The first lien term loan was priced at SOFR plus 600 with mandatory amortization, favorable excess cash flow sweeps and multiple maintenance covenants. This transaction reflects the strength of Oaktree's broader platform, deep adviser relationships, the ability to partner across strategy and to be opportunistic in a volatile market environment.

Turning to our software exposure. Based on GIC Industry Group classification, software represents 21% of the portfolio at fair value across 29 issuers. That is down approximately 140 basis points from last quarter, primarily reflecting the exit of Mindbody. Taking a broad and conservative classification for software and technology, we estimate exposure is approximately 26% of the portfolio, including certain investments in health care technology, interactive media and services.

As outlined on Page 8 of the earnings presentation, we apply a 7-factor business resilience framework supplemented by operating KPIs and financial metrics. Each investment is scored and categorized into high, medium and low AI risk buckets.

Within our performing debt portfolio, 2 investments representing 2.9% of fair value are classified as having high AI risk. These companies have a weighted average LTM EBITDA of approximately $96 million, which was generally stable from the prior quarter. LTVs increased to high 50%, up from low 40% last quarter, reflecting multiple compression in public market comparables. For issuers in the medium and low AI risk categories, weighted average LTM EBITDA is approximately $385 million. LTVs are around high 40s to low 50s percentage, which we view as reasonable despite recent multiple compression.

For many of these companies, we see AI as a potential tailwind with management teams and sponsors actively exploring ways to leverage the technology to enhance margins and strengthen competitive positioning. Excluding nonaccruals, the weighted average mark on our software portfolio was 96% as of March 31, 2026, down approximately 310 basis points from last quarter. These markdowns largely reflect the repricing of risk and corresponding spread widening across liquid credit. Our private credit software marks were consistent with levels seen in the broadly syndicated loan market. In most cases, these markdowns do not suggest deterioration in underlying company performance.

Moving to our nonaccruals. At quarter end, 10 investments were on nonaccrual, representing 2.6% of the total debt portfolio at fair value, down 50 basis points from December 2025 and down 200 basis points from March 2025. In March, we restructured Astra after it emerged from Chapter 11 and exited the position shortly after quarter end, modestly below our mark. The decision was driven by our preference for reallocating our resources and capital towards better risk-adjusted opportunities. We also continue to make progress on Avery, where we have seen an uptick in condo sales and units under escrow.

During the quarter, 12 units were sold or placed under contract compared to our full year underwriting assumption of 6 unit sales. Avery's March 31 valuation assumes only a portion of the units under contract close, although we are cautiously optimistic that we will close more units in the future. After quarter end, we sold Dominion and All Web Leads, 2 legacy nonaccrual positions acquired from the prior BDC manager. On Dominion, we received $7 million of cash proceeds versus a mark of $5 million as of December 31. For the March quarter, we moved the first out to accrual status, marked the first out to par and wrote up the second out modestly.

All Web Leads sold to a strategic buyer with an AI-focused value creation angle at a price in line with our March 31 mark. We received approximately 20% of the March 31 mark in cash at close, with the remainder of the consideration coming via a seller note and equity, positioning us to potentially recover more than the March 31 mark over time. As legacy nonaccrual investments, Dominion and All Web Leads demonstrate our patient, disciplined and active approach to portfolio management. We continue to work on realizing proceeds from other nonaccruals and equity positions in a way that optimizes outcomes for OCSL shareholders.

Looking at total portfolio metrics as of March 31, 84% of total portfolio investments at fair value were first lien senior secured debt and the weighted average yield on debt investments was 9.3%, stable quarter-over-quarter. The portfolio remains well diversified with the average position representing 0.7% of our debt portfolio at fair value and no single position exceeding 2% of fair value. The median EBITDA of our portfolio companies was approximately $182 million, a slight decrease from the prior quarter due to exits on large cap deals. Portfolio company weighted average leverage and interest coverage ratios were 5.2x and 2.1x, respectively, consistent with the last quarter. We remain focused on managing our existing portfolio and resolving challenged credits while maintaining flexibility to capitalize on new investment opportunities ahead.

With that, I'll turn the call over to Chris, to review our financial results.

Thank you, Raghav. In our second fiscal quarter ended March 31, 2026, adjusted total investment income was $69.7 million, a decrease compared to $74.5 million in the prior quarter. The decrease was primarily due to lower reference rates and lower non-recurring income attributable to lower prepayment and exit fees. Net expenses decreased by 6% compared to the prior quarter, primarily reflecting a reduction in Part 1 incentive fees as a result of our total return hurdle.

We delivered adjusted net investment income of $33.7 million or $0.38 per share compared to $36.1 million or $0.41 per share in the prior quarter. These results reflected lower total investment income, partially offset by lower interest expense and lower Part 1 incentive fees. NAV per share was $15.69, down from $16.30 last quarter. The drivers of NAV were about evenly split between write-downs and certain nonaccruals, mark-to-market volatility in quoted names and spread widening on private credit marks.

OCSL continues to be prudent around the use of payment-in-kind income, with PIK representing approximately 5.5% of adjusted total investment income during the quarter. This is down from 6.3% last quarter due to the sale of athenahealth PIK preferred at our mark. Approximately 2/3 of our PIK income relates to investments that were structured with the option to PIK at origination.

Our net leverage ratio at quarter end was 1.04x, down from 1.07x last quarter, and total debt outstanding was $1.5 billion. The decreased leverage mirrors portfolio rotation and asset sales during the period. Our long-term target leverage ratio of 0.9x to 1.25x remains unchanged, although our plan is to run leverage towards the mid- to low end of that range. As of March 31, the weighted average interest rate on debt outstanding was 5.9%, down from 6.1% in the prior quarter, primarily driven by lower reference rates. Unsecured debt represented 64% of total debt at quarter end, up from the prior quarter.

We have ample dry powder to take advantage of market opportunities with liquidity of approximately $671 million, including $51 million of cash on hand and $620 million of undrawn capacity under our credit facility, up from $576 million of total liquidity at the end of December. Unfunded commitments, including those related to the joint ventures were approximately $250 million.

Turning to our joint ventures. Together, the JVs held approximately $521 million of investments across 130 portfolio companies and generated aggregate returns on equity of approximately 10% during the quarter. Leverage at the JVs was 1.9x, up modestly from last quarter.

With that, I'll turn the call back to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Rick Shane with JPMorgan.

Look, when we sort of calculate the implied return to the dividend of about 8.6% of book, that equates to about a 5% spread to 3-month base rates. As we think about your business model over the long term, where would you put that return -- base rate plus 5% in sort of your cycle? Is that a trough in the cycle? Is that a realistic long-term objective? Help us understand sort of what the return profile as a function of base rate should be.

It's Raghav. I can start and then Chris and Brett can chime in. So as I'm sure you know, there's really 2 levers that we're playing with.

The first is what is the unlevered asset yield. Again, probably no surprise given the enormous amount of capital that's been raised in direct lending, in perpetual BDC vehicles, in particular, I would say that market direct lending spreads probably troughed out in December at in the mid- to maybe high 400s. Since then, we have seen -- I wouldn't call it a dramatic yet repricing, but certainly a significant enough repricing of risk where regular way direct lending deals, so probably the lowest returning deals that we see in our pipeline. These are first lien deals to private equity sponsors are in the low to mid-50s. So certainly have improved by 50 to 75 basis points.

I would say more on a forward basis, if you look at the SOFR curve -- thanks to the war in the Middle East and the ensuing inflation expectations going up -- the SOFR curve is probably 50 to 60 basis points higher than where it troughed out pre the Middle East situation. So that's number 2.

Away from sponsor deals, I would say we do a mix of, obviously, both sponsor and nonsponsor deals. We do corporate lending as well as asset-backed deals, U.S., Europe. On a blended basis, I would say that when you mix it all together, low 500s for sponsor deals, low 600 to 700 in some of the more interesting areas of lending that we're seeing, which are less commoditized. Our pipeline is in the high 500s on a spread basis and just under 600, call it, including OID. So you put it all together, on a forward basis, obviously, the portfolio on the ground will churn over time. But on a forward basis, I would say that spreads on new deals are far more attractive, at least 100 basis points more attractive than they were even 3 months ago.

Second, the SOFR curve is certainly helping on the asset side. And then the third piece is leverage. We took the decision to sell a number of names out of our public book. That has a near-term cost, obviously, as you can imagine, which is you have less income-producing assets, your ROE declines as a result. That's the cost. The benefit is that as we're seeing our private pipeline reprice higher, we actually have a lot of liquidity to invest in that pipeline.

So for us, the opportunity is not theoretical. And so over time, I do suspect that we will maybe gradually increase leverage if this pipeline opportunity continues and hopefully expand. So both on the unlevered asset yield side, I think that is getting better. And then second, to finance that pipeline, I do expect leverage will go up slowly, and both of those should help ROE.

One quick follow-up. There's been a lot of conversation about the markets improving since December. And the empirical thing that we all want to run through our model is the widening of spreads. But what's interesting is every time a company makes that comment, they follow it with better protections, better covenants. Obviously, that's not something that we can plug into a model. But it's also something I'm not necessarily sure we fully understand. Can you just give us a couple of examples of how deal protections are improving so we can think about that?

Yes. I mean, like the big picture technical in the market is if you look at just the unlisted and perpetual BDC space, that part of the asset class really became the marginal dollar of that was setting price and risk. That space raised $110 billion in 2025. And I'm not sure what the numbers are going to be, but they're more likely to be negative this year with net outflows than positive.

So that's a pretty -- it's not a huge part of the market, like BDCs together, public and private are about 25% of the private credit market, not huge. But from a stock perspective, they're not huge. From a flow perspective, they were very large. And we suspect that that's the one change that is driving both pricing improvements in new deals, but also the noneconomic terms you talked about.

So what are those improvements we're seeing? So one is pick requests on new deals have declined to -- I don't want to say 0, but let's say, close to 0. So that's just going -- is going away. Second is, again, you're right, hard to see, but I'm sure you're familiar with the concept of adjusted EBITDA, which I would say in the Gogo days leading up to 4Q 2025, adjusted EBITDA was getting more and more unrealistic versus what we call cash EBITDA and the true cash earnings profile of the borrowers. That is getting better now again. So that's two.

Three is LME protection, which is -- there's always been like a push and pull between borrowers and lenders. I would say, certainly, borrowers had probably more leverage in 2025 than lenders did. Those are also getting better. And then the fourth thing I would say is the -- I would say the maintenance covenant is coming back, especially for larger deals in any kind of a meaningful way. But the direction of travel is the right direction, which is even in some large cap deals that we have in our pipeline, which we describe as over $100 million of EBITDA, we are starting to see the maintenance covenant come back. So all of those are like marginal improvements, but they're all going in the right direction.

[Operator Instructions] There are no further questions at this time. I will now turn the call back over to Alison Mermey for closing remarks.

Thank you all for joining us on today's call. Please feel free to reach out to me and the team with any questions you may have. Have a great day.

Ladies and gentlemen, this concludes today's call. You may now disconnect.

Welcome, and thank you for joining Oaktree Specialty Lending Corporation's First Fiscal Quarter 2026 Conference Call. Today's conference call is being recorded.

I'll now turn the call over to Alison Mermey, OCSL's Head of Investor Relations.

Our first quarter 2026 earnings release which we issued this morning along with the accompanying slide presentation can be accessed on the Investors section of our website, oaktreespecialtylending.com.

Before we begin, I want to remind you that the comments on today's call include forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to the relevant SEC filings for a discussion of these factors in further detail. Oaktree undertakes no duty to update or revise any forward-looking statements.

I'd also like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in an Oaktree fund. Investors and others should note that OCSL uses the Investors section of its corporate website to announce material information. The company encourages investors, the media and others to review information that it shares on its website.

Now I'll turn the call over to Matt Pendo, President of OCSL. Matt?

Thanks, Alison, and good morning, everyone. I'll begin the call with an overview of our first quarter results. Armen Panossian, our CEO and Co-CIO, will then share some commentary on the current market environment and Raghav Khanna, our Co-CIO, who will provide details on our portfolio and investment activity. Our CFO and Treasurer, Chris McKown, will then review our financial performance before we open the call for questions.

This year is off to a good start, and we delivered solid results for the first fiscal quarter of 2026. Adjusted net investment income for the quarter was $36.1 million or $0.41 per share up modestly from the prior quarter. Once again, we fully covered our quarterly dividend with earnings. These results reflect our team's disciplined capital deployment into income-generating assets as well as the actions we took last year to optimize the liability side of our balance sheet.

Importantly, this was the first full quarter reflecting the impact of the September rate cut, and despite lower base rates, earnings remain stable.

Consistent with our dividend policy and first quarter earnings, our Board declared a quarterly cash dividend of $0.40 per share payable on March 31, 2026, to stockholders of record as of March 16, 2026. As discussed on our fiscal 2025 year end call, we have several levers to help offset lower base rates and support net investment income. One of the key levers is our ability to prudently deploy capital into attractive investment opportunities.

To that point, new fund investments, including drawdowns from existing commitments totaled $314 million, up from $220 million in the prior quarter. The average all-in spread and yield of new private investments was 525 basis points and 9%, respectively. We have ample financial flexibility to continue deploying capital as we ended the quarter with over $576 million of available liquidity. We are intensely focused on reducing nonaccruals and equity positions as another key lever for improving earnings power.

In the first quarter, nonaccruals relatively stable sequentially and down nearly 85 basis points year-over-year. At quarter end, nonaccruals represented 3.1% of the total debt portfolio measured at fair value. For several of our nonaccrual positions, we are optimistic about the potential outcomes and are actively working to maximize recovery value.

This quarter, we restructured our investment in Avery and put a portion of the loan back on accrual status, which is consistent with the broader objective of converting nonearning assets into income-producing assets. Avery continues to sell units and it appears to be happening at an increased pace. Any proceeds from monetization of nonaccruals or equity positions will be reinvested into income-generating investments. We will continue to evaluate these levers and their potential contribution to our earnings and dividends.

As always, we remain committed to strong alignment with our shareholders as we navigate an evolving credit landscape. Now I'll turn the call over to Armen for an update on the market environment.

Thanks, Matt. Current trends in private credit mirror the bifurcation we're seeing in the broader economy. Macro factors, including persistent inflation, tariffs and ongoing technology disruption are amplifying structural strength and weaknesses, creating a clear divide between the winners and losers. Companies with scale, profitability and financial stability of ample access to capital and those that are struggling have limited or no access at all.

Over the past 2 years, sponsors have favored recapitalizations over exits in a muted M&A environment, creating a backlog of transactions waiting to come to market. With the rate pressures easing, sponsors are increasingly turning to the M&A market to deliver much needed liquidity for their LPs. While large cap activity accelerated in the December quarter, middle market volumes were still below historical averages. That said, we are starting to feel more confident that middle market M&A activity will improve over the course of the year.

Since the Fed rate cut in September, we have seen greater price discipline in the market and believe that spreads in private credit have now bottomed out at SOFR plus 450 to 475 basis points. We think this may be supported by elevated redemptions in the perpetual BDC space, easing the demand for new paper. We are cautiously optimistic that spreads will remain stable in 2026 with the potential to widen.

Importantly, direct lending transactions continue to offer an approximate 150 basis point spread premium relative to broadly syndicated loans similar credit quality. PIK interest remains prevalent in direct lending transactions, underscoring sponsors preference for flexible capital structures. We continue to stay extremely disciplined in our use of PIK.

In the first quarter, PIK as a percentage of adjusted total investment income, was 6.3%, which is below the public BDC industry average. Even with tighter than normal spreads and looser terms, we are still seeing compelling investment opportunities as reflected in our strong level of originations this quarter. In the current market environment, we are prioritizing loans to businesses with resilient models, defensible market positions and durable long-term outlooks that align with our bottoms-up value-driven approach to underwriting.

One area we are monitoring closely is the impact of AI on private credit and the broader economy. Software and applications have consistently been the primary secular beneficiaries of major technology shifts. And we believe AI will increase the total addressable market for software. That said, we expect outcomes to be uneven with increasing dispersion between players as success depends heavily on execution and speed of adoption.

For 2026, we see an active backdrop supported by robust hyperscale investment and a more active software M&A environment as incumbents look to consolidate amid public valuation multiples that are at multiyear lows. At the same time, we are mindful that current levels of AI-related spending are a meaningful driver of broader economic growth and that disappointment in realized returns or adoption time line could result in a pullback in the AI investment.

Against this backdrop of increasing dispersion and uncertainty, we believe our scaled global investment platform positions us well. While U.S. middle market direct lending remains the foundation of Oaktree's global private credit platform, our expertise across multiple strategies and our ability to underwrite complex transactions, expand our opportunity set and allows us to be highly selective.

Specifically, the depth and breadth of our sponsor, corporate and adviser relationships provide access to proprietary deal flow across asset-backed finance, European direct lending, infrastructure lending and capital solutions. We remain constructive from a long-term outlook for private credit. In this environment, disciplined underwriting, selectivity and active portfolio management will remain critical drivers of long-term performance.

Raghav will now talk more about our portfolio and new investments. Raghav?

Thanks, Armen. Before turning to our standard discussion of portfolio activity, I want to build on Armen's comments on software and spend a few minutes outlining our approach to investing in the software sector. Our foundational approach to software investing has not changed in light of AI but we have become more selective in this sector. At its core, our framework focuses on software providers that are deeply embedded in customers' daily workflows and business processes require meaningful buying from multiple stakeholders and have high switching costs.

AI has raised the quality bar for software investments. And as a result, we have added incremental criteria to our underwriting for both new investments and existing portfolio companies. We prioritize software businesses with multiple control points, data gravity, business context, high mission criticality and a coherent and credible AI road map. This has contributed to a higher pass rate on new opportunities relative to prior years.

In addition, over the past 12 months, approximately 18% of our total software positions have been repaid, underscoring the quality of our underwriting decisions. Further details of the software portfolio are shown on Page 8 of the earnings presentation. As of December 31, software represented approximately 23% of investments at fair value, across 28 issuers, 94% of our software positions are first lien term loans, and we have only 2 ARR-based loans, representing approximately 2% of fair value.

Turning to the broader portfolio. As of December 31, 85% of the total portfolio was comprised of first lien senior secured debt and the weighted average yield on debt investments was 9.3%. We remain committed to a diversified portfolio. The average position makes up less than 1% and no position makes up more than 2% of our portfolio at fair value. Portfolio company weighted average leverage and interest coverage remained unchanged at 5.2x and 2.2x, respectively.

Our team delivered a meaningful increase in investment activity, which grew our portfolio size by approximately $100 million to $2.95 billion. Newly funded investment activity totaled $314 million, up 42% sequentially.

Paydowns and exits were stable at $179 million, resulting in $135 million of net new investments for the quarter. This increase in deal flow reflects the breadth of Oaktree's private credit platform, combined with recent targeted investments in global sourcing and origination and specialized investment talent, which have meaningfully expanded the top of our funnel despite the lower volume in U.S. middle market direct lending.

We continue to prioritize first lien senior secured investments in resilient market-leading businesses supported by disciplined underwriting. First lien loans represented 92% of our new originations and the all-in weighted average spread on new originations during the quarter was approximately 500 basis points.

One transaction I want to highlight this quarter is our investment in Premier Inc., a health care services company that operates a large national group purchasing organization for a network of hospitals and health care providers. The company also provides a range of complementary offerings such as health care software, supply chain management, data and analytics and consulting services.

In November, Patient Square Capital completed the Take-Private transaction of Premier at a total enterprise value of $2.6 billion. Oaktree has been growing its relationship with the sponsor and was deeply involved through the complex underwriting and negotiation process. Oaktree funds acted as joint lead arranger, providing nearly 40% of the first lien term loan and 30% of the revolving credit facility. The term loan carries an all-cash coupon of SOFR plus 650 and has 2 points of original issue discount. We were attracted to this transaction based on Premier's strong competitive positioning, secular tailwinds for health care spending and high customer switching costs.

During the quarter, there was 1 new addition to our nonaccrual list. We placed a second out term loan on Pluralsight on nonaccrual. Our prior position was restructured in August of 2024 and this quarter, we placed a restructured loan on nonaccrual due to the ongoing challenging industry dynamics and the company's softer-than-expected outlook.

At quarter end, there were 11 investments on nonaccrual, and as Matt noted, they represented 3.1% of the total debt portfolio measured at fair value. We continue to actively manage these positions with a goal of converting nonearning assets into income-producing investments over time.

I will now turn the call over to Chris to review our financial results.

Thank you, Raghav. In our first fiscal quarter ending December 31, 2025, we delivered adjusted net investment income of $36.1 million or $0.41 per share as compared to $35.4 million or $0.40 per share in the prior quarter. This increase reflects lower levels of Part I incentive fee expense which offset lower total investment income quarter-over-quarter.

NAV per share was $16.30 down from $16.64 in the fourth quarter due to unrealized depreciation on certain debt and equity investments. The largest detractor in our portfolio was Pluralsight, which Raghav discussed in his remarks. We marked the equity position down to 0 and marked down the second out term loan reflects this challenged position.

Adjusted total investment income decreased to $74.5 million. This compares to $76.9 million in the fourth quarter and was primarily driven by lower interest income due to lower reference rates and lower original issue discount acceleration which was partially offset by higher fee income, largely from higher prepayment and exit fees.

Net expenses declined modestly compared to the fourth quarter primarily reflecting a $4 million reduction in Part I incentive fees, primarily as a result of our total return hurdle. OCSL continues to be cautious around the usage of payment and guidance with PIK representing 6.3% of adjusted total investment income in the quarter. Approximately 2/3 of our PIK income is related to investments that had the ability to PIK at origination.

Our net leverage ratio at quarter end was 1.07x, up from 0.97x last quarter, and total debt outstanding was $1.6 billion. The increased leverage mirrored our strong deployments during the quarter, our long-term target leverage ratio of 0.9x to 1.25x remains unchanged. As of December 31, the weighted average interest rate on debt outstanding was 6.1%, down from 6.5% from the prior quarter, primarily driven by lower reference rates. Unsecured debt represented 59% of total debt at quarter end, down slightly from the prior quarter. We have ample dry powder to fund investment commitments with liquidity of approximately $576 million, including $81 million of cash and $495 million of undrawn capacity on our credit facility. Unfunded commitments excluding those related to the joint ventures were $247 million.

Turning to our 2 joint ventures. Together, the JVs currently hold $511 million of investments primarily in broadly syndicated loans spread across 135 portfolio companies. During the first fiscal quarter, the JVs generated ROEs of 12% in aggregate. Leverage at the JV was 1.7x, unchanged from last quarter. In addition, we received a $525,000 dividend from the Kemper JV.

With that, I'll turn the call back to the operator for Q&A.

[Operator Instructions]. Your first question comes from Finian O'Shea with Wells Fargo.

Hi, everyone. Good morning. On the portfolio, I'm not sure if you guys gave one of those performance 1 through 5 kind of category breakdowns. But in any case, can you give us the picture of the portion of the portfolio at this point that is sort of underperforming its current security or underwrite and where -- sort of where we are in migrating out of the legacy type issues?

Hi, Fin, it's Raghav. So I'd point you to Page 13 -- sorry, it's not in there. So the way we think about our underperforming assets are, you obviously have the nonaccruals, which you can see the restructured equities. And then the third thing we monitor are positions that are trading or have been marked well below par, and that's obviously an indicator of stress. And in that portion, most of the loans and positions we have that are under -- considerably below par are actually public positions, some of which we actually bought around in the high 80s to 90s and have traded down a few points below that. Most of them we expect to rebound. There are a couple of names which are in the technology space that are -- as I'm sure you can see in the market that are facing a little bit of pressure.

Just on that point, by the way, when we speak to our trading desk, a lot of those technology names are trading down on like $2 million and $3 million trades, mostly from CLO sellers who are trying to manage their WARF tests and rating tests. We're not seeing huge selling in those positions. So we're watching those names in particular, the technology names that are broadly syndicated loans and have freighted down. But there's not a lot of trading actually happening. There's not a lot of selling. It's mostly small selling from CLO sellers.

Okay. I guess, that's helpful. I guess, a follow-up, sticking with that topic. You gave some helpful views or color on AI risk to software. Are you, let's say, to the extent there is volume, are there interesting names on the screen. It looked like you had a good amount of liquid this quarter. Should we expect that to continue?

Yes. So one of the benefits we have is we obviously have a large public markets business in our high-yield business and in our senior notes business. So we're actually triaging all of the software names and technology in addition to obviously, very closely monitoring our private positions by developing AI scorecards and other types of scorecards to, again, triage. Because I think your sentiment is right that there is a bit of a baby out with the backwater situation, and that's something we are looking at.

Again, when we look at what is the right point to step in, it doesn't feel like that right now just because, again, the trading volume we've seen is either small ticket sales from CLOs or dealers trying to make a market. And these like $2 million, $3 million order trades are basically being used to mark positions down 2, 3 points. So it looks very attractive when you look on a screen, at least for some of these names where the AI risk is low, but there isn't enough volume to actually want to step in and try to be a buyer.

Your next question comes from Ethan Kaye with Lucid Capital Markets.

So you disclosed median portfolio EBITDA increasing from $150 million to $190 million sequentially. It feels like a pretty big change for 1 quarter. You did talk about there being maybe some more activity in the upper middle market as compared to the core middle market. But wondering really kind of what drove that? Was it a strategic result or more so a byproduct of the deal environment and company growth?

Yes. So it's -- you're right. So it was really driven by our new originations that we funded in the fourth quarter, which were pretty large companies. They were all large cap. Mostly on the sponsor side, mostly in the U.S., there were a couple of non-sponsor situations, a couple of non-U.S., really just European situations that we funded in the fourth quarter but they were typically much larger EBITDA. So most of the growth in the median EBITDA, I would say, was a mix shift from those originations in the fourth quarter. But the overall portfolio EBITDA has also been growing. That, I would say, was a smaller portion of the increase you're seeing in the median EBITDA.

Got it. Great. And then one other. So I'm hoping you can kind of walk through the $32 million or so of unrealized depreciation. We talked about Pluralsight, which appears to be about 1/3 of that net number, but can you kind of talk through whether there was maybe any other themes or drivers of kind of the markdowns in the quarter?

It's Chris. I'll make a few comments and add any color. So you're right, Pluralsight was the single largest driver, accounting for about 38% of the total mark. Beyond that, we did take some smaller marks and a few other private positions. And then we did see some of the quoted names trade down, which impacted some of the names we hold on balance sheet as well as some of the JVs.

Your next question comes from Paul Johnson with KBW.

I mean just a little bit more in terms of the -- your sort of perspective on software. I guess, how would you kind of characterize at this point, top line growth and EBITDA trends sort of broadly? Have you noticed any sort of change in the growth rates there, back up in any sort of new activity for deals? I mean, how has that impacted the market, I guess, beyond kind of the weakness in some of the secondary loan prices?

Thanks for the question. This is Armen. Look, I think big picture, I would say that it's too early to actually see performance degradation in any software name, and it's probably going to take a fair bit of time to actually see any sort of dispersion in performance due to AI or disruption in performance to AI. There have been a lot of splashy headlines, but it has not translated big picture into a widespread issue across the names. The reason for the concern isn't necessarily near-term weakness in performance.

It's more that the concern around the long run calls into question the refinanceability of these loans when they mature. And that's why everybody should be looking at their software exposure because to the extent that a subset of software names, whether they're in your private equity book or in your private credit book, to the extent some of them are more susceptible to long-term dislocation due to AI, the more likely it is that the private equity sponsor fails to support them when in maturity occurs even in advance of a real issue in performance.

The other thing I would say is if some number of these software businesses are eventually disrupted by AI, it may turn out to be that they are binary in their outcomes. What I mean by that is if the business appears to be at risk of an AI, a meaningful AI competitor, you could see, depending on the nature of the contracts and the nature of the business, you could see a pretty rapid degradation of performance in those businesses over time. And therefore, from an equity perspective and from a credit perspective, the recoveries could be quite problematic. So it is a significant reason to be concerned about in the medium to long term, but it's not going to really emerge in the short run.

And on this point, I think it's worth mentioning real quick, the concept of covenants in software deals. Covenants and software deals mirror the same sort of -- mirror the same sort of condition as just large cap versus core or small-cap private credit. And what I mean by that is this, there are software deals that have covenants, EBITDA covenants, and they tend to be smaller or midsized companies. But as businesses become large cap and as they are possibly financeable in the broadly syndicated loan market, those software loans do not have any covenants. So it's like cov-lite, as you'd imagine, in another industry outside of software in a large-cap deal, you don't see covenants in a small or midsized deal, you do see covenants typically.

And the covenants and software deals are usually 1 of 2 types. One is an EBITDA-based covenant, as you would see in a normal business that is financed off of a leverage multiple, and the other would be ARR or annual recurring revenue. And those transactions that are recurring revenue based, again, if they're middle market or lower middle market, they will have typically an ARR covenant whereby they have a total debt to ARR cap, and that covenant usually falls away in about 3 years, and it converts into a more traditional leverage-based covenant.

So the covenants are -- can become a problem for ARR deals as they approach that 3-year anniversary typically and those deals that have such a covenant again, large cap is less likely to have it than small cap. But it is yet sort of an additional factor that may ring the alarm bell a little bit sooner or earlier than the maturity.

And in our case, by the way, in terms of OCSL, we really only have 2 ARR deals in our portfolio period. And one of them is already free cash flow positive and expected to repay imminently. The other is a very large transaction, a very large company with a very large private equity sponsor. We think it's pretty well insulated from AI competition, but we think we've done -- we think we've been pretty forward-looking on the ARR side at least to avoid those situations that do not cash flow and therefore, need some sort of access to the public markets or some sort of availability in the financing markets. We wanted to avoid those situations now for several years. And so that's not really an issue in our portfolio.

I think, Paul, it's Matt. We put a new page in the deck, Page 8 that breaks out our software exposure in OCSL, which I think -- to give us any comments if you have on it. But when we lay out there kind of your question on kind of performing in the business. So if you look at kind of the EBITDA growth since we funded the deals, it's up about 20%. So it gives you a sense of -- we have growth there. The EBITDA margin is around 40%. So these are EBITDA positive companies. And about 18%, almost 20% of our software loans have repaid over the last 12 months. So a reflection of thoughtful and hopefully successful underwriting. But so we have those out on Page 8, which is -- in what we posted. Hopefully, that's helpful as well.

Yes. Thank you for that. It's very good color there, and Armen, I appreciate the helpful answer there as well. One more bigger question, bigger picture question, if I may, kind of on this topic. Sort of 2 part. But on that slide, you mentioned there's a 47% weighted average LTV ratio. I'm just curious, is that an LTV ratio and underwrite? Or is that more a current LTV ratio, obviously, based on valuations and leverage today. That's the first part of the question.

And then the other part of the question is bigger picture. How much of valuation sort of reset do you think that broadly the software space can absorb in the equity multiples before we do start to see widespread sort of restructurings and losses? And bigger trouble within the software industry, just given that, obviously, these are companies that are typically financed with lower LTV ratios underwrite, and I'll hand it off there.

This is Armen. I'll answer that, Paul. I mean -- so first of all, on that slide, that is the LTV at underwrite, not a current estimate.

It's 12/31, it's the current one.

It's the current one at 12/31?

Yes.

Okay. So at 12/31, it would -- so that is our estimate of the LTV as of 12/31. And then in terms of the amount of degradation in the equity multiple that it could sustain. I would say, generally speaking, if you do see LTVs rise to 60%. That's getting to the point where they -- it calls into question the refinanceability of the loan.

Generally speaking, today, outside of software when there is an LBO, you're seeing something like 50% to 55% LTV at the max. You're not seeing 70% or 65% LTV deals generally. So what would happen, theoretically, assuming these businesses aren't burning a terrible amount of cash and they get to within a reasonable time frame of maturity, once the sponsor calls up the market and says, hey, I want to refinance. And the response is going to be, well, you're going to need to put in more equity to kind of make this closer to a 50-50 LTV again.

And the sponsors will then have to judge whether it makes sense to do that or not based on the future sort of risk factors and earnings potential of the business, but also the stage of deployment of the fund that those investments are in. If a fund cannot call capital, well, then that sponsor can't support the business. If the fund is already a winner and has already returned a lot of capital, then it's more likely to let go of those straggler businesses that need additional capital to kind of punch through a refinancing or a maturity. And so there -- the sponsor is less likely to support the business in that event. So there's a lot of economic and noneconomic factors that come into play to judge the sponsor's willingness to support a business, if and when the LTV of the loan exceeds again, probably that 55% or 60% LTV threshold level.

Appreciate it. That's all for me. Thank you very much, guys.

[Operator Instructions]. There are no further questions at this time. I'll now turn the call back over to Alison Mermey for any closing remarks.

Thank you all for joining us on today's call. Please feel free to reach out to me and the team with any questions you may have. Have a great day.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Welcome, and thank you for joining Oaktree Specialty Lending Corporation's First Fiscal Quarter and Full Year 2025 Conference Call. Today's conference call is being recorded. I'll now turn the call to Clark Koury, OCSL's Head of Investor Relations.

Thank you, operator. Our fourth quarter and full year 2025 earnings release, which we issued this morning, along with the accompanying slide presentation can be accessed on the Investors section of our website, oaktreespecialtylending.com.

Before we begin, I want to remind you that the comments on today's call include forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to the relevant SED filings for a discussion of these factors in further detail.

Oaktree undertakes no duty to update or revise any forward-looking statements. I'd also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in Oaktree Fund. Investors and others should note that OCSL uses the Investors section of its corporate website to announce material for me. The company encourages investors, the media and others to review information that it shares on its website.

Now I will turn the call over to Matt Pendo, President of OCSL. Matt?

Thank you, Clark, and thank you all for joining our call today. I'll begin the call with an overview of our results for the fiscal year and fourth quarter. Armen Panossian, our CEO and Co-CIO will then share commentary on the current market environment. And Raghav Khanna, our co-CIO, will provide details on our portfolio and investment activity. Chris McKown, our CFO and Treasurer, will then review our financial results before we open the call for questions.

The fourth quarter and second half of fiscal 2025 reflected steady improvement for OCSL even as the macro environment remains choppy. As we will discuss in more detail, our team worked hard to turn around non-income-producing physicians, find interesting investment opportunities and reduce our cost of capital.

In the fourth quarter, we achieved adjusted net investment income of $0.40 per share, up from $0.37 in the prior quarter. This sequential improvement reflects the return to more normalized prepayment fees, higher dividend income and lower interest expense from our refinancing earlier this year and lower base rates. Additionally, we continue to make progress reducing our nonaccruals, a key strategic focus. At year-end, nonaccruals were 2.8% of the portfolio measured at fair value, down 20 basis points from the third quarter and down 100 basis points from last year.

Last week, the Board approved a dividend of $0.40 per share for the quarter, consistent with our dividend policy and fourth quarter earnings. While the Federal Reserve September rate cut did not affect fourth quarter earnings, lower base rates will impact net investment income in the December quarter.

As we've said before, we have several levers at both the corporate and JV levels to help offset lower base rates and support net investment income. First, we can prudently increase balance sheet leverage to enhance earnings power and deploy capital into interesting investment opportunities. Our balance sheet is conservatively levered at 0.97x and provides us with ample financial flexibility.

Second, we can continue to optimize our JVs. Finally, reducing nonaccruals and equity positions will improve our earnings power. We have line of sight into one, putting a portion of our previously nonaccruing loans on to accrual status two, monetizing a portion of our nonaccrual and three, monetizing equity positions. Any proceeds we received from realizations of nonaccruals and equity will be reinvested into income-generating assets.

On an ongoing basis, we will continue to evaluate these levers and their potential contributions to earnings and our dividend.

Now I will pass the call over to Armen for an update on the market environment.

Thanks, Matt. Turning to the current market environment, we see many conflicting themes.Private credit deal flows showed modest improvement during the quarter, although the overall quality of deals was mixed. We continue to see a steady supply of high-quality opportunities alongside an increasing number of lower quality deals coming to market. Sponsors are pursuing dividend recapitalizations more often as exit activity remains subdued compared to historical levels.

Momentum in Europe slowed relative to what we observed in our third quarter given ongoing political and economic uncertainty, but we still see some interesting deal from that region. Ample liquidity in the broadly syndicated loan and private net markets has driven sponsors to dual-track financing. We have seen an increasing share of $1 billion-plus LBOs, opting for the broadly syndicated market and the tightening of the illiquidity premium.

However, since the Fed rate cut in September, we have witnessed slightly more price discipline and are cautiously optimistic that private credit spreads have bottomed out at SOFR plus 450. Pick and looser covenants remain popular tools for private debt managers to win mandates and allocations, but we remain extremely disciplined in our credit documentation and acceptance of PIC.

As a percentage of total investment income, PIK was 6.4% at quarter end. We prefer to use PIK judiciously and in situations such as financing a high ROE project or carve-out acquisition that requires the PIK option only for a defined period, after which a project or acquisition generates the necessary cash flow to cover the debt full cash interest payment.

Despite a mixed environment, our long-term outlook on private credit remains bullish. Issuers continue to value the speed and assurance of deal execution with a sophisticated partner. For investors, we think private debt will continue to deliver a premium spread relative to other floating rate asset classes and with lower volatility. To talk more about our portfolio and new investments, I will turn it over to Raghav.

Thanks, Armen. I'll start with a review of our investment activity in the fourth quarter. Our pipeline improved during the quarter yet given heightened competition and tighter spreads, as Armen mentioned, we're taking a highly selective approach to new investments. We continue to prioritize senior secured loans to market-leading businesses with durable fundamentals, reliable cash flow and strong downside protection.

At the same time, we're focused on diversifying the portfolio, avoiding industry concentration risk and limiting exposure to more cyclical sectors. Turning to origination and repayment activity for the quarter. New funded investment commitments, including drawdowns from existing commitments amounted to $220 million up 54% from the prior quarter.

Prepayments from exits, other paydowns and sales were $177 million, and the weighted average spread on deployments during the quarter was approximately SOFR plus. First lien loans represented 88% of our new originations. One notable investment during the quarter was Walgreens Boots Alliance, an integrated health care, pharmacy and retailer with a 170-year heritage. The company was taken private by Sycamore Partners for over $20 billion and the sponsor subsequently split the conglomerate into 4 operating businesses.

This segment required its own bespoke lending solution and the sponsor but lenders who could move quickly to underwrite the distinct challenges and transformation opportunities of the retail and pharmaceutical businesses.

Oaktree strategies worked collaboratively to consider various cap capital structures. Ultimately, Oaktree funds acted as joint lead arranger for the $2.5 billion first in last out, first term loan to support the U.S. retail business. The file was priced at SOFR plus 700 with 2 to 5 points of OID, which is attractive for the industry risk and complexity of the deal.

Oaktree's deep expertise in inventory appraisal and long track record of investing in silos, made us comfortable with the collateral coverage of the loan. This transaction is a great example of how Oaktree is positioned to capitalize uncomplicated yet compelling investment opportunities.

Turning to our portfolio. Over 40% of our portfolio companies were marked up during the quarter by about 70 basis points on a weighted average basis, reflecting improving fundamentals in several portfolio companies. As of September 30, 83% of our portfolio was comprised of first lien senior secured debt and the weighted average yield on debt investments was 9.8%.

The median EBITDA of our portfolio companies was approximately $150 million, an $11 million decrease from the prior quarter. Portfolio company weighted average leverage increased slightly to 5.2x from 5.1x and weighted average interest coverage remained unchanged at 2.2x.

As Matt mentioned, we have made tangible progress reducing nonaccruals and resolving challenged investments, which contributed to a decline in nonaccruals this quarter. I'll cover those now starting with an update on Mosaic companies. We have been working closely with Mosaic to realize value for the separation of 3 business segments. Two of these segments were sold and the third is in a liquidation process.

As you may recall, these efforts resulted in a significant cash paydown during the June quarter, and we received additional cash paydowns in the September quarter and after quarter end. Inception to date, the paydowns we received amount to a little over 7% of our original invested cost. And when combined with coupon payments, have resulted in generating positive IRR over the life of this loan.

We believe the proactive actions we took following Mosaic's tariff-related headwinds earlier this year helped maximize our recovery in a challenging situation. We also made progress in monetizing our investment in Open Therapeutics, whose loan is secured by certain royalty rights and public shares of ADC Therapeutics.

Following an increase in ADC's share price, we sold a portion of our ADC shares and used the proceeds to reduce the outstanding loan amount. Our remaining position in Open Therapeutics continues to be marked at 99.5. We're selecting our view that we will continue monetizing the collateral, supporting this loan and recover substantially all of the remaining loan balance. While the issuer is not new to our nonaccrual list, we added Bay Mark's first lien loan to nonaccrual status.

The company's second lien loan was put on nonaccrual in the third quarter. We are working closely with other lenders and the company to maximize value. I'll now turn the call over to Chris to review our financial results.

Thank you, Raghav. In our fourth fiscal quarter ending September 30, 2025, we delivered adjusted net investment income of $35.4 million or $0.40 per share as compared to $32.5 million or $0.37 per share in the prior quarter. The increase for the quarter reflects the return to normalized levels of fee income and interest expense following the onetime items that impacted the results in the third quarter.

NAV per share was $16.64 down from $16.76 in the third quarter due to unrealized depreciation on certain debt and equity investments. Adjusted total investment income increased to $76.9 million compared to $74.3 million in the third quarter primarily driven by higher prepayment fees and dividend income. Net expenses declined modestly compared to the third quarter. Interest expense decreased due to the refinancing of our syndicated credit facility completed earlier this year and lower reference rates.

Additionally, as you may recall, our June quarter results were impacted by noncash and nonrecurring interest related to the acceleration of deferred financing costs, primarily in connection with the termination of the Citibank SPV facility. Our weighted average cost of borrowings was 6.5% at September 30 and down from 6.6% in the third quarter.

Further, we waived approximately $1.9 million in incentive fees as a result of our total return hurdle. Our leverage ratio at quarter end was 0.97x and up slightly from 0.93x last quarter, and total debt outstanding was $1.5 billion. Our target leverage range of 0.9x to 1.25x remains unchanged, and driven by our disciplined pace of capital deployment, we remain at the low end of the range.

Unsecured debt represented 64% of total debt at quarter end, down slightly from prior quarter. We have ample dry powder to fund investment commitments with liquidity of approximately $695 million, including $80 million of cash and $615 million of undrawn capacity on our credit facility. Unfunded commitments excluding those related to the joint ventures, were $258.9 million, approximately $246.9 million of which can be drawn immediately as the remaining amount is subject to portfolio companies meet certain milestones before the funds can be drawn.

Turning to our 2 joint ventures. Together, the JVs currently hold $513 million of investment primarily in broadly syndicated loans spread across 73 portfolio companies. During the fourth fiscal quarter, the JVs generated ROEs of 12.4% in aggregate. Leverage at the JV was 1.7x compared to 1.3x last quarter. In addition, we received a $525,000 dividend from the Kemper JV.

With that, I'll turn the call back to the operator to open the call for questions.

[Operator Instructions]

And our first question comes from the line of Melissa Wedel with JP Morgan.

Definitely noted that you're around in the level of new net funding activity this quarter. I know that typically, December is a seasonally busy quarter, but I'm just curious if you have any early insight into sort of expectations around investment activity in the December quarter this year. And any outsized repayments that we should be thinking about?

Melissa, it's Armen. In terms of outsized repayments, we don't expect any at this time for the quarter, end of December. As far as deployment, nothing really stands out either direction, either on the heavy side or the life side relative to past December quarters. We certainly have seen some tightening in the spreads. And so we're judicious about how we're deploying, but I don't see us materially deviating from past quarters in terms of deployment or leverage levels for the quarter.

Okay. I appreciate that. One of the other things related to your comment about spreads tightening, I did notice that the yield on new investments this quarter was a step higher, about 60 bps higher compared to last quarter. I'm assuming that relates to sort of the complexity of the Walgreens deal complexity and size of the Walgreens deal. I guess, one, is that right?

And then two, what's your view on sort of a pipeline for transactions like that where there might be more complexity and pricing involved?

Melissa, it's Chris. Thanks for the question. I'll start, and maybe Armen can add a little bit in terms of pipeline. Yes, in terms of the quarter-on-quarter change, I mean you're right in noting Walgreens. I think the other thing I would just note about the June quarter is that on balance, we had a little bit higher originations into Euribor indexed loans. So when you're looking at the absolute coupons, June was a little bit lower as a result of that. We do hedge all of that back to U.S. dollars. There is a little bit of a pickup when you take into account that hedging impact, but that does create a little bit of noise kind of quarter-to-quarter

Armen, do you going to add anything?

Yes. We do have a very active origination function in nonsponsored direct lending. I think Walgreens stands out as a pretty high spread loan. I don't see anything that we would be originating in the December quarter. That's quite that high in spread. But we do have a few things that we're working on that might be sort of higher than the 450 to 500 spread that's typical sponsor lending. But I think it's too early to, at this point, to provide forward guidance I just don't think that the Walgreens deal is not repeatable, I don't think, in the fourth quarter. Sorry, fourth calendar quarter.

And your next question comes from the line of Sean Paul Adams with B. Riley Securities.

On the nonaccruals still on the books, it seems like there's still a heavy skew towards health care and pharma. Can you just share a little bit more color about what's going on in those particular segments?

Sure. This is Armen. We have -- or we had a couple of sort of chunky visions in the life sciences space, it's not many in number, but it's -- there were unfortunately some larger positions that continue to be the subject of workouts, SiO2 being, I would say, the most material of them, which is a name that we've talked about on past calls but that's really what it is.

We continue to sort of work out situations that at this point, or several years have been in the portfolio for several years. They're all sort of stable to maybe slightly improving but still not at the position where we're either going to exit or whether we're going to move them into accrual status, unfortunately. -- we're not adding -- we haven't added other kind of life sciences or health care names that have created problems in the recent quarters.

But again, these there's a small handful of positions that were put on a few years ago continue to sort of weigh on the nonaccrual bucket.

Got it. And as a quick follow-up, is there any workout strategies going on with those long-standing accruals?

The more operational workouts. They're not -- they have already been, from a capital structure perspective, restructured. But operational improvements are being made. We're working closely with management teams to drive that performance. And when possible, we are working with the management to sell assets and either fund cash burn or repay or make distributions to our position. But there's nothing -- I wouldn't say that there's anything significant or monumental that would be happening in the near term with respect to those positions. It's just kind of blocking and tackling with an operational turnaround.

[Operator Instructions]

Thank you. I'm not showing any further questions in the queue. I would now like to turn it back to Clark Koury for closing remarks.

Great. Thank you, operator, and thanks to everybody for joining. Please reach out with any questions. We're happy to jump on the bump. Have a great day.

And this does conclude today's conference call. Thank you all for joining. You may now disconnect.

Welcome, and thank you for joining Oaktree Specialty Lending Corporation's Third Fiscal Quarter 2025 Conference Call. Today's conference call is being recorded.

Before we begin, I want to remind you that comments on today's call include forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to the relevant SEC filings for a discussion of these factors in further detail. Oaktree undertakes no duty to update or revise any forward-looking statements.

I'd also like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in an Oaktree fund. Investors and others should note that OCSL uses the Investors section of its corporate website to announce material information. The company encourages investors, the media and others to review the information that it shares on its website.

I'll now turn the call over to Clark Koury, OCSL's Head of Investor Relations. Please go ahead.

Thank you, operator. Our third quarter earnings release, which we issued this morning, along with the accompanying slide presentation, can be accessed on the Investors section of our website, oaktreespecialtylending.com.

Joining me on the call today are Armen Panossian, CEO and Co-CIO; Raghav Khanna, Co-CIO; Matt Pendo, President; and Chris McKown, CFO and Treasurer.

Now I'll turn over the call to Matt to provide an overview of our performance for the quarter. Matt?

Thanks, Clark, and thank you all for joining our call today. This quarter, NAV was up slightly, and we made progress restructuring or exiting certain challenged names within the portfolio and reducing nonaccruals, which declined as a percentage of both fair value and cost.

Adjusted net investment income declined to $0.37 per share, primarily due to the impact of certain nonrecurring and noncash items related to refinancing activities. We also experienced a lower-than-usual amount of nonrecurring income. Chris will share more details on nonrecurring income a bit later in the presentation. Regarding our dividend, our Board approved a base dividend of $0.40 per share for the quarter.

Turning to our balance sheet. There were several positive outcomes during the quarter. As mentioned on last quarter's call, we successfully amended and extended the maturity of our senior secured revolving facility, reducing the interest rate from SOFR plus 2% to a range of SOFR plus 1.75% to 1.875%. This enabled us to terminate a higher cost ABL facility with pricing of SOFR plus 2.35%. Taken together, these will reduce our overall interest expense, which will be accretive to earnings going forward. There were some onetime costs as a result of these developments as we wrote off unamortized deferred financing costs that impacted our NII.

With a strong balance sheet, ample liquidity and leverage at its lowest level in 3 years, we have meaningful dry powder to further diversify the portfolio and position OCSL for sustained growth.

Now I'll turn the call to Armen to provide an overview of the market environment.

Thanks, Matt. uncertainty surrounding the implementation of increased tariffs and their potential impact on inflation, the economy and monetary policy deterred M&A activity, which remain muted. Consequently, most lending in the marketplace pivoted to refinancing existing debt rather than de novo buyouts. Robust CLO issuance in recent months has created some competition for deal flow, pulling some deals out of the private market and into the broadly syndicated loan market. These dynamics, coupled with the continued strength of fundraising for private credit, pushed credit spreads tighter.

Liquid credit markets also tightened, but it's important to note that private credit still offers an attractive premium. However, spreads on newly originated loans have reverted to the levels we saw at the start of the calendar year. Pricing for large cap sponsor loans is in the SOFR plus [ 4 25 to 4 75 ] basis points range, and spreads are 25 to 50 basis points higher in the core to upper middle market.

OCSL has deep expertise in originating and structuring loans for middle market companies, and we are finding more value in this part of the market in the current environment.

Beyond core middle market lending in the U.S., we are seeing pockets of opportunity in asset-backed financing and life sciences, areas where Oaktree has extensive capabilities. We are observing increased opportunities in Europe, supported by a strengthening economic outlook and favorable valuation metrics. Concurrently, we are seeking to expand our capabilities across the Asia Pacific region and within infrastructure debt. Against this backdrop, credit quality has remained stable, and most problems are tied to company-specific issues where management teams have not executed in line with expectations, creating financial pressure on their balance sheets and capital structure.

We are also keeping a close eye on areas of potential risk within the portfolio, including the use of PIK income. In this regard, we have maintained a conservative stance and continue to rank near the low end of our peer set in PIK as a percentage of total income at 6.7%. Even as spreads have tightened, our focus remains on high-quality companies with strong credit profiles.

We believe the long-term outlook for direct lending will remain favorable. Yields are compelling on a gross unlevered basis, including at the top of the capital structure. The absence of mark-to-market volatility and the historically tight band of returns across different market environments make this asset class appealing to investors seeking income and capital preservation.

Now I'll pass the call to Raghav Khanna to give an update on our portfolio.

Thanks, Armen. I'll start with investment activity for the quarter. While our overall investment activity was tempered due to the slower market environment, we leaned into opportunities that squarely met our portfolio objectives and disciplined underwriting standards. The weighted average yield on our new debt investments was 9.1% comparable to 9.5% in the prior quarter, reflecting continued tight spreads in the marketplace. All our originations in the quarter were first lien loans, consistent with our strategy of investing at the top of the capital structure to provide greater downside protection.

We are excited about our current pipeline and continue to see compelling investment opportunities even amid persistent inflation, elevated interest rates and tariff-related uncertainty. In this environment, we are selectively deploying capital into mature market-leading businesses with solid fundamentals and consistent cash flows. We are also maintaining a granular diversified approach to portfolio construction, avoiding an industry concentration risk and steering clear of more cyclical businesses.

The strength of Oaktree's global platform is a competitive advantage for OCSL. As one of a handful of lenders that has the scale to lead or participate in larger financings, our platform gives us access to high-quality transactions that are often unavailable to smaller lenders. In addition, Oaktree's broad sourcing capabilities span both sponsored and non-sponsored deals, stress and rescue lending, high-yield public credit and asset-backed transactions. This breadth allows us to evaluate a wide range of attractive opportunities in any market environment, and allows us to lean into opportunities with the best risk-adjusted returns.

As of June 30, the median EBITDA of our portfolio companies was approximately $161 million, a $3 million increase from the prior quarter. The weighted average leverage in our portfolio decreased slightly from 5.2 to 5.1x, and the weighted average interest coverage slightly increased from 2.1 to 2.2.

Now I'll share the details on 2 recent investments during the quarter that demonstrate our focus on portfolio diversification and first lien lending. Both were sourced through the broader Oaktree platform and underscore how we are leveraging the firm's extensive sponsor relationships and broaden market access to co-invest in compelling opportunities.

I'll begin with Draken International, a provider of operational training solutions to air forces around the world. The business has close relationships with both the U.S. and U.K. air forces. This investment expands our exposure in the countercyclical aerospace and defense industry, where demand for cost-effective pilot training continues to rise amid persistent global pilot shortages. With long-term government contracts in place, Draken generates recurring revenues by serving a critical market with predictable demand.

This investment also aligns with our strategy to partner with institutional sponsors, Blackstone, in this instance, to originate senior secured loans for resilient businesses operating in sectors with long-term demand visibility. Oaktree was the sole lender in this new transaction, which Draken used to refinance existing debt. Oaktree committed to $217 million, of which $177 million was funded upfront. The deal was priced at SONIA plus [ 5 50 ] with 2 points of upfront fees. OCSL was allocated $31.9 million, of which $26 million was funded upfront.

Turning to Lyons Magnus. Founded in 1851, Lyons Magnus is a leading food and beverage manufacturer of plant-based beverages and flavor ingredients, serving the food service, health care and dairy industries. Lyons Magnus maintains a top 3 market share position across its core product categories and has long-standing relationships with leading QSRs, food service distributors and health care providers, including the likes of Starbucks, McDonald's and Sysco, customers that generate stable recurring revenue for the business. This is a great example of our focus on investing in established businesses with long-standing customer relationships, diversified product offerings and strong margin profiles.

Lyons Magnus used the proceeds of the transaction to refinance its existing capital structure. This investment was sourced directly by Oaktree through a long-standing relationship with the sponsor, Paine Schwartz Partners. Oaktree acted as joint lead arranger on the deal, providing $150 million commitment or 34% of the total transaction, and $133 million was funded upfront. OCSL was allocated $12.7 million, of which $11.2 million was funded upfront.

Now turning to our existing portfolio, where we are seeing encouraging signs of progress in addressing nonaccruals. During the quarter, one company, BayMark, was added to the nonaccrual list, and one company, Telestream Holdings, was removed.

BayMark is one of the largest substance abuse and recovery treatment providers in North America. It is experiencing operational issues with its revenue cycle management systems and underperformance in certain business segments, resulting in cash flow and liquidity pressures. The company is working with turnaround professionals, and we are actively engaged with management to help them achieve the best possible outcome for the company and our loan. These situations take time to resolve, but our team has the experience and the discipline to navigate them effectively and drive favorable resolutions.

We're pleased to report that Telestream Holdings, a video software platform that provides on-demand digital video tools to broadcasters, media companies and content creators was removed from nonaccrual status after completing a comprehensive restructuring that helped reduce the company's debt burden and eased liquidity constraints.

Additionally, we're beginning to realize meaningful exits and recoveries from previously challenged positions, which were contributing factors to the decline in nonaccruals as a percentage of the overall portfolio. One notable example is Mosaic, where we received cash paydowns totaling $25.7 million or just over 50% of our total position during the quarter. We remain focused on working through challenged positions and maximizing recoveries.

Moving now to exit and repayment activity during the quarter. Investment exits decreased to $249 million, down from $279 million in the prior quarter. One exit worth mentioning is Alto, a digital pharmacy company which was merged into LetsGetChecked to create a comprehensive platform combining pharmacy, diagnostics and virtual care. The loan for Alto had been marked at 85 and 95 as of December 31, 2024, and March 31, 2025, respectively, and was taken out at par in connection with the merger.

Looking to the second half of the year, we are very encouraged by the depth and diversity of the opportunities we are seeing across sectors, structures and sponsors. We are leaning hard into our strengths, our deep industry relationships, broad market access and due diligence and underwriting expertise to continue building a well-diversified portfolio that can deliver sustained long-term performance.

And with that, I will now turn the call over to Chris.

Thank you, Raghav. Let's review our financial results. In our third fiscal quarter ending June 30, 2025, we delivered adjusted net investment income of $32.5 million or $0.37 per share as compared to $38.7 million or $0.45 per share in the prior quarter. The decrease for the quarter was primarily driven by nonrecurring and noncash expenses related to refinancing activities as well as a decline in nonrecurring income, which we generally define as things like prepayment fees and OID acceleration.

To drill into that a bit, our trailing 8-quarter median amount of nonrecurring income has been about $3.8 million or $0.043 per share based on current shares outstanding. Our June quarter nonrecurring income came in around $2.1 million less or a little over $0.02 less than this median level.

Adjusted total investment income in the quarter declined $2.9 million compared to the prior quarter, primarily due to the reasons I just mentioned as well as a modestly smaller average portfolio, the impact of tightening spreads and lower dividend income from the Kemper JV.

Net expenses increased $3.5 million from the prior quarter, driven by a $2.9 million increase in interest expense due to $3.9 million of nonrecurring and noncash expense related to the acceleration of certain deferred financing costs in connection with the termination of the Citibank SPV facility and the amendment of our revolving credit facility. This was partially offset by lower average borrowings outstanding during the quarter and reduced interest rates for the amended credit facility. Our weighted average interest rate at June 30 was 6.6% compared to 6.7% at the end of the prior quarter.

Our net leverage ratio at quarter end was 0.93x, flat from last quarter, and total debt outstanding was $1.46 billion. Unsecured debt represented 65% of total debt at quarter end, consistent with last quarter. We have ample dry powder to fund investment commitments with liquidity of approximately $730 million, including $80 million of cash and $650 million of undrawn capacity on our credit facilities.

Unfunded commitments, excluding those related to the joint ventures, were $278 million, approximately $264 million of which can be drawn immediately as the remaining amount is subject to portfolio companies meeting certain milestones before the funds can be drawn.

Our target leverage ratio remains unchanged at 0.9x to 1.25x, and we are currently at the low end of that range due to a combination of successful investment exits in recent quarters and our prudent approach to deploying capital.

Turning to our 2 joint ventures. Together, the JVs currently hold $442 million of investments, primarily in broadly syndicated loans spread across 54 portfolio companies. During the third fiscal quarter, the JVs generated ROEs of 10.5% in aggregate. Leverage at the JVs was 1.3x, unchanged from 1.3x last quarter. In addition, we received a $525,000 dividend from the Kemper JV.

With that, I'll turn the call back to the operator to open the call for questions.

[Operator Instructions] And your first question today will come from Finian O'Shea with Wells Fargo.

First question on spreads this quarter. I think you were mid- to upper 5s, which is tracking better than most peers. Obviously, a very good thing, but the other side of the coin is we ask sort of how you were able to generate that? Maybe if it was nonsponsor, higher leverage? Or any color you could give us there.

Fin, it's Raghav. Thanks for the question. So you're right, both for the quarter and for the year, we have been able to achieve, on first lien spreads which are, call it, mid-500s, including OID. There's a few factors that have played into it. So one is that does include the lower spread deals that you are seeing in the market currently. So we do have some deals that we've done this year, which are that [ 4 50 to 4 75 ] in range. And then OID will take you to just around 500.

But we also have some higher-yielding deals. There's been a couple of life science deals, which have been higher yielding. That's helped. Some of the non-U.S. deals we've done, such as the Draken deal, which we mentioned, which is SONIA plus [ 5 50 ] with 2 points of OID. That's helping as well. European spreads are slightly wider than what we're seeing in the U.S.

And then the third thing I would say is that there is a premium for refinancing deals versus brand-new de novo [indiscernible]. It's not huge, but it could be 50 to 75 basis points. And on the margin, that's helping as well.

Okay. It's helpful. And then just sort of back of the napkin here with the moving parts that you hopefully outlined on earnings, the onetime, the facility fee and so forth. Those seem to roughly offset if that, the impact of the look back and you're still below the dividend. So I guess is the -- should we assume the main obvious lever to drive earnings that would be levering up? And then can you give color on how the discussions with rating agencies are in that regard given recent loss rates. Would they would they be comfortable with you going up to 1.25 or so if that is the plan?

Thanks, Fin, it's Matt. So the plan isn't to go to 1.25, just to kind of hit that number. But the plan is to kind of be at the midpoint of our range. Our range is 0.9 to 1.25. Right now, we're at 0.93. So which I think is the lowest we've been for quite a while.

And I think if we continue -- we have active dialogue with the rating agencies. They're aware of our plans. But one of our plan, to your point, to take leverage up -- is to take leverage up to create more earnings to support the dividend. So that's one we feel comfortable with where we are with the agencies in doing that. Again, take it up to the midpoint of our range, not the top end of our range.

I think as Raghav mentioned, our pipeline is pretty diverse and pretty robust. So we feel good about the ability to deploy. We also -- just kind of given where we are in the quarter, we have some visibility into repayment activity for the September quarter. We also -- and another lever is the JV. The JV is now really focused on broadly syndicated loans. So taking some leverage up slightly there. Our target there is 1.5x. We're at like [ 1.3 ] right now. So that's another lever.

And then it's to take cash from the equity and the nonaccruals and put those into interest-earning assets. So we talked about this quarter about Alto and Mosaic, which are 2 examples. Another example in July, we got the cash for the EOS Fitness, and there was a nice gain there, so we can redeploy that. So those are -- that's the kind of the strategy. We're comfortable with the rating agencies in executing that. It won't necessarily happen in one quarter, but that's the plan. And again, given kind of the pipeline, visibility on repayments, some of the legacy nonearning assets, put that all together, that's kind of how we think about things.

[Operator Instructions] And your next question today will come from Melissa Wedel with JPMorgan.

I wanted to start with some of the onetime items. You've touched on them both in the press release but also on this call. When we back those out from the quarter, it kind of gets to earnings power, a bit above the base dividend, but not by a ton. I just wanted to revisit the level at which you reset the base dividend at $0.40 a share. I just wanted to gauge your confidence in that level, especially with the forward curve sort of implying 100 bps of rate cuts in the next year or so.

Melissa, it's Matt. Thanks for the question. So I think -- I don't want to like project out the dividend, the dividend subject to the Board. So I don't want to do that. I think kind of the color a little bit kind of last question -- the onetime items that we outlined in terms of the...

Matt, I'm sorry, you've cut out of it. It's hard to hear you.

Being more normalized. And then if you add on top of that... [Technical Difficulty]

Ladies and gentlemen, it appears we have lost connection to our speaker line. Please standby while we reconnect. Thank you for your patience.

Melissa, can you hear us?

I can hear you.

Okay. Okay. Sorry, we had some technical difficulties. So I'm going to -- did I answer your -- we're unclear where we cut out. What -- did I answer any part of your question?

You cut out pretty early, actually. Sorry, if you could recap it.

Sure, sure. So I don't want to get into kind of the habit of projecting the dividend. The dividend is up to the Board and they approve it every quarter. So I want to just focus kind of on where we were for this quarter and the $0.40, which is our base dividend.

If you look at the add-backs that Chris covered earlier, so you've got to adjust for that. If you walk through kind of the -- what I just did with Fin regarding deployments and our pipeline there, our visibility into the prepayment activity for the quarter, some of the progress we've made in turning noninterest-earning assets into interest-bearing assets. So you add all that together, that kind of got us comfortable with the base dividend of $0.40.

As you look forward, and there's obviously things outside of our control, such as base rate and spreads, we're obviously -- we'll tackle those kind of quarter-by-quarter as they present themselves. But that's a little bit how we were kind of thinking about the $0.40 for this quarter.

Okay. I appreciate that. When you -- you mentioned seeing some attractive opportunities particularly in asset-backed and also maybe infrastructure and even outside the U.S. I was hoping you could give a little bit more color on what particular flavor of asset-backed opportunities you're looking at and infrastructure. Is there a certain kind of collateral that you're looking more carefully at and then others that you wouldn't consider. Anything you can share would be helpful.

Yes. So Melissa, it's Raghav. It's actually a very diversified pipeline of asset-backed deals we're looking at. It ranges really from everything, from the rental car leases to small loans that are used to by homeowners to finance HVAC systems. So there's really no one particular threat.

The only kind of overarching threat here really is that the assets, unlike in the corporate loans that we make, the assets and these asset-backed deals are a pool of contractual assets such as loans or leases. The other area that we have spent time on, but this is a market that has tightened, is the SRT market. That is an area we have been spending some time on, but most of the SRT trades are either at levels which are inside [ 3 50 ] spread, so not particularly interesting or are higher up on the risk spectrum and not interesting from a risk perspective. But away from SRTs, we're still finding a pretty decent portfolio of pipeline of assets in -- asset-backed deals.

And Melissa, this is Armen. The only other thing I would add is what we're not doing, much or any of an asset-backed is really consumer unsecured debt. That's not something that we feel like we have an edge on. But where there is a corporate underlying borrower assets that are used in the corporate context, for example, equipment receivables or even in industries that we know very well, like telecom and fiber optics, there are asset-backed deals there that we are seeing across Oaktree platform and evaluating them for the BDC. Obviously, not all of them will fit. But generally, it's in categories and industries that we know well, and it's just asset-backed as a different wrapper, different structure for deployment into that same industry.

This concludes our question-and-answer session. I would like to turn the conference back over to Clark Koury for any closing remarks.

Thank you for everybody for joining the call today. Please feel free to reach out directly to us to the extent you have any questions. We appreciate all of your support. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.