Form 8-K Oaktree Strategic Income For: Dec 01

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 1, 2017

 

 

 

Oaktree Strategic Income Corporation

(Exact name of registrant as specified in its charter)

 

Delaware		814-01013		61-1713295
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

333 South Grand Avenue, 28th Floor
Los Angeles, CA		90071
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (213) 830-6300

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging Growth Company  ☒

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

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

On December 1, 2017, Oaktree Strategic Income Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter and year ended September 30, 2017. A copy of the press release is attached hereto as Exhibit 99.1.

On December 1, 2017, the Company will host a conference call to discuss its financial results for the fiscal quarter and year ended September 30, 2017. In connection therewith, the Company provided an investor presentation on its website at http://www.oaktreestrategicincome.com. A copy of the investor presentation is attached hereto as Exhibit 99.2.

The information disclosed under this Item 2.02, including Exhibits 99.1 and 99.2 hereto, is being “furnished” and is not deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor is it deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

99.1	Press release of Oaktree Strategic Income Corporation dated December 1, 2017

 

99.2	Oaktree Strategic Income Corporation Fourth Quarter and Fiscal Year 2017 Earnings Presentation

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				OAKTREE STRATEGIC INCOME CORPORATION
Date: December 1, 2017				By:		/s/ Mel Carlisle
						Name: Mel Carlisle
						Title: Chief Financial Officer

Exhibit 99.1

 

Oaktree Strategic Income Corporation Announces Fourth Fiscal Quarter 2017 Financial Results

LOS ANGELES, CA. December 1, 2017—Oaktree Strategic Income Corporation (formerly known as Fifth Street Senior Floating Rate Corp. through October 17, 2017) (NASDAQ: OCSI) (“Oaktree Strategic Income” or the “Company”), a specialty finance company, today announced its unaudited financial results for the fourth fiscal quarter ended September 30, 2017.

Fourth Fiscal Quarter 2017 Highlights

 

•

Net investment income of $5.5 million, or $0.19 per share;

 

•

Net asset value per share as of September 30, 2017 of $9.97;

 

•

Originated $108.7 million of new investment commitments and received $71.3 million in connection with full repayments and exits of investments; and

 

•

On August 7, 2017, the Company’s Board of Directors declared a fourth quarter dividend of $0.19 per share, payable on December 29, 2017 to stockholders of record on December 15, 2017.

Recent Developments

 

•

On October 17, 2017, Oaktree Capital Management, L.P. was appointed as the investment adviser of the Company and Edgar Lee was appointed Chief Executive Officer. Other members of the executive leadership team include Matt Pendo, Chief Operating Officer, Mel Carlisle, Chief Financial Officer, and Kim Larin, Chief Compliance Officer.

Management Commentary

“We are very excited to be managing Oaktree Strategic Income,” said Edgar Lee, Chief Executive Officer of Oaktree Strategic Income. “The vast majority of the portfolio is invested in senior secured loans to established middle-market companies that are performing well. We have begun making new investments and over time, we intend to increase our exposure to larger, more liquid first lien loans in both the broadly syndicated and private placement markets. We believe the Oaktree platform and our ability to co-invest alongside other Oaktree funds positions us well to deliver stable income and attractive returns to our stockholders over time.”

Portfolio and Investment Activity

As of September 30, 2017, the fair value of the investment portfolio was $560.4 million and total assets were $608.7 million. The investment portfolio consisted of investments in 67 companies and also included the Company’s investment in FSFR Glick JV LLC (“Glick JV”).

At fair value, 89.5% of the Company’s portfolio as of September 30, 2017 consisted of senior secured floating-rate debt investments, including 84.9% of first lien loans and 4.6% of second lien loans; 10.3% consisted of a subordinated note in Glick JV; and 0.2% in equity investments in other portfolio companies.

As of September 30, 2017, Glick JV had $126.7 million in assets, including senior secured loans to 23 portfolio companies. The joint venture generated income of $1.2 million for Oaktree Strategic Income during the fourth quarter.

The weighted average yield on the Company’s debt investments as of September 30, 2017, including the return on our subordinated note investment in Glick JV, was 7.5%, including 7.3% representing cash payments.

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During the quarter ended September 30, 2017, the Company originated $108.7 million of investment commitments in 10 new and seven existing portfolio companies and funded $108.4 million across new and existing portfolio companies.

During the quarter, the Company received $71.3 million in connection with the full repayments and exits of eight of its investments, and an additional $23.2 million in connection with other paydowns and sales of investments.

Results of Operations

Total investment income for the quarter ended September 30, 2017 was $11.8 million, including $10.9 million of cash interest income from portfolio investments.

Net expenses for the quarter ended September 30, 2017 were $6.3 million. Net expenses increased slightly from $6.2 million in the quarter ended June 30, 2017.

Net unrealized depreciation on the investment portfolio for the quarter was $20.0 million, which was primarily due to significant write-downs on a number of the Company’s portfolio companies, including $10.3 million on one of the Company’s investments.

Liquidity and Capital Resources

As of September 30, 2017, the Company had $43.0 million of cash and cash equivalents, total principal value of debt outstanding of $263.0 million, and $67.0 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 3.26% as of September 30, 2017.

As of September 30, 2017, the Company’s total leverage ratio was 0.90x debt-to-equity.

Dividend Declaration

On August 7, 2017, the Company’s Board of Directors declared a fourth quarter dividend of $0.19 per share, payable on December 29, 2017 to stockholders of record on December 15, 2017.

Dividends are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company’s stockholders.

Portfolio Asset Quality

As of September 30, 2017, there were three investments on which the Company had stopped accruing cash and/or PIK interest or original issue discount (“OID”) income that, in the aggregate, represented 5.6% of the debt portfolio at cost and 1.1% at fair value.

 

($ in thousands)
Non-Accrual - Debt Investments		As of September 30, 2017				As of June 30, 2017
Non-Accrual Investments at Fair Value		$	6,293			$	7,922
Non-Accrual Investments/Total Investments at Fair Value			1.1	%			1.4	%

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Oaktree Strategic Income Corporation

Consolidated Statements of Assets and Liabilities

 

		September 30, 2017				June 30, 2017				September 30, 2016
ASSETS
Investments at fair value:
Control investments (cost September 30, 2017: $71,340,632; cost June 30, 2017: $71,117,506; cost September 30, 2016: $71,117,506)		$	57,606,674			$	61,614,406			$	63,316,667
Affiliate investments (cost September 30, 2017: $17,479,053; cost June 30, 2017: $18,006,812; cost September 30, 2016: $15,953,798)			935,913				11,778,272				13,006,458
Non-control/Non-affiliate investments (cost September 30, 2017: $516,270,639; cost June 30, 2017: $500,706,398; cost September 30, 2016: $513,397,659)			501,894,073				491,785,575				497,281,256
Total investments at fair value (cost September 30, 2017: $605,090,324; cost June 30, 2017: $589,830,716; cost September 30, 2016: $600,468,963)			560,436,660				565,178,253				573,604,381
Cash and cash equivalents			35,604,127				19,258,982				19,778,841
Restricted cash			7,408,260				7,651,878				9,036,838
Interest, dividends and fees receivable			3,014,075				2,883,409				4,579,935
Due from portfolio companies			286,260				305,501				336,429
Receivables from unsettled transactions			505,000				846,065				12,869,092
Deferred financing costs			1,222,933				1,348,806				2,063,133
Other assets			185,336				344,196				148,492
Total assets		$	608,662,651			$	597,817,090			$	622,417,141
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities		$	482,877			$	466,921			$	1,246,286
Base management fee and incentive fee payable			2,236,187				2,163,704				2,987,721
Due to FSC CT			450,517				427,646				402,073
Interest payable			1,996,171				1,946,228				1,798,653
Payables from unsettled transactions			49,029,789				12,831,700				—
Amounts payable to syndication partners			—				—				18,750
Director fees payable			98,008				122,450				236,275
Credit facilities payable			82,956,800				86,656,800				107,426,800
Notes payable (net of $2,224,132, $2,296,658 and $2,514,236 of unamortized financing costs as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively)			177,775,868				179,503,342				177,485,764
Secured borrowings at fair value (proceeds September 30, 2016: $5,000,000)			—				—				4,985,425
Total liabilities			315,026,217				284,118,791				296,587,747
Commitments and contingencies
Net assets:
Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding at September 30, 2017, June 30, 2017 and September 30, 2016			294,668				294,668				294,668
Additional paid-in-capital			373,995,934				373,995,934				373,995,934
Net unrealized depreciation on investments and secured borrowings			(44,653,664	)			(24,652,463	)			(26,850,007	)
Net realized loss on investments			(24,354,622	)			(24,371,682	)			(10,969,707	)
Accumulated overdistributed net investment income			(11,645,882	)			(11,568,158	)			(10,641,494	)
Total net assets (equivalent to $9.97, $10.65 and $11.06 per common share at September 30, 2017, June 30, 2017 and September 30, 2016, respectively)			293,636,434				313,698,299				325,829,394
Total liabilities and net assets		$	608,662,651			$	597,817,090			$	622,417,141

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Oaktree Strategic Income Corporation

Consolidated Statements of Operations

 

		Three months ended September 30, 2017				Three months ended June 30, 2017				Three months ended September 30, 2016				Year ended September 30, 2017				Year ended September 30, 2016
Interest income:
Control investments		$	1,290,389			$	1,452,148			$	1,383,409			$	5,541,299			$	5,065,350
Affiliate investments			—				130,217				97,191				331,804				182,194
Non-control/Non-affiliate investments			9,559,293				10,406,975				10,736,098				38,489,924				42,152,565
Interest on cash and cash equivalents			68,306				36,094				15,319				166,896				68,630
Total interest income			10,917,988				12,025,434				12,232,017				44,529,923				47,468,739
PIK interest income:
Control investments			223,125				—				—				223,125				—
Affiliate investments			—				63,551				48,595				164,331				91,097
Non-control/Non-affiliate investments			—				—				13,182				20,965				75,968
Total PIK interest income			223,125				63,551				61,777				408,421				167,065
Fee income:
Affiliate investments			—				3,351				3,148				9,647				6,296
Non-control/Non-affiliate investments			1,022,638				498,497				206,405				2,199,909				3,071,634
Total fee income			1,022,638				501,848				209,553				2,209,556				3,077,930
Dividend and other income:
Control investments			—				—				700,000				187,420				2,712,500
Allowance for control investments			(343,272	)			(420,192	)			—				(763,464	)			—
Total dividend and other income			(343,272	)			(420,192	)			700,000				(576,044	)			2,712,500
Total investment income			11,820,479				12,170,641				13,203,347				46,571,856				53,426,234
Expenses:
Base management fee			1,420,696				1,419,603				1,516,133				5,654,699				6,134,304
Part I incentive fee			815,491				1,143,101				1,477,820				3,236,320				5,211,729
Professional fees			543,226				280,008				664,247				1,515,536				4,193,532
Board of Directors fees			153,008				127,464				81,275				538,072				546,300
Interest expense			2,645,090				2,661,975				2,546,007				10,769,842				9,594,441
Administrator expense			205,152				127,533				98,269				661,170				504,299
General and administrative expenses			516,854				480,490				483,778				2,030,756				1,955,177
Total expenses			6,299,517				6,240,174				6,867,529				24,406,395				28,139,782
Base management fee waived			—				—				(6,232	)			(6,232	)			(6,232	)
Insurance recoveries			—				—				—				(250,000	)			—
Net expenses			6,299,517				6,240,174				6,861,297				24,150,163				28,133,550
Net investment income			5,520,962				5,930,467				6,342,050				22,421,693				25,292,684
Unrealized appreciation (depreciation) on investments:
Control investments			(4,230,858	)			103,555				(214,065	)			(5,933,119	)			(5,979,787	)
Affiliate investments			(10,314,600	)			(1,633,615	)			(566,607	)			(13,595,800	)			(2,947,340	)
Non-control/Non-affiliate investments			(5,455,743	)			(4,272,744	)			2,426,107				1,739,837				(8,067,972	)
Net unrealized appreciation (depreciation) on investments			(20,001,201	)			(5,802,804	)			1,645,435				(17,789,082	)			(16,995,099	)
Net unrealized (appreciation) depreciation on secured borrowings			—				—				14,575				(14,575	)			14,575
Realized gain (loss) on investments and secured borrowings:
Non-control/Non-affiliate investments			17,060				11,535				590,889				(13,384,915	)			(12,769,777	)
Net realized gain (loss) on investments and secured borrowings			17,060				11,535				590,889				(13,384,915	)			(12,769,777	)
Net increase (decrease) in net assets resulting from operations		$	(14,463,179	)		$	139,198			$	8,592,949			$	(8,766,879	)		$	(4,457,617	)
Net investment income per common share — basic and diluted		$	0.19			$	0.20			$	0.22			$	0.76			$	0.86
Earnings (loss) per common share — basic and diluted		$	(0.49	)		$	—			$	0.29			$	(0.30	)		$	(0.15	)
Weighted average common shares outstanding — basic and diluted			29,466,768				29,466,768				29,466,768				29,466,768				29,466,768
Distributions per common share		$	0.19			$	0.19			$	0.225			$	0.80			$	0.90

 

Note: All interim financial results presented in this release are unaudited. Financial results for the year ended September 30, 2017 are subject to the completion of the Company’s annual audit.

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Conference Call Information

Oaktree Strategic Income will host a conference call to discuss results for its fiscal quarter and year ended September 30, 2017 on December 1, 2017 at 1:00 p.m. Eastern Time / 10:00 a.m. Pacific Time. The conference call may be accessed by dialing (877) 507-4376 (U.S. callers) or +1 (412) 317-5239 (non-U.S. callers), participant password “Oaktree Strategic Income.” During the earnings conference call, Oaktree Strategic Income intends to refer to an investor presentation that will be available on the Investors section of the Oaktree Strategic Income website, www.oaktreestrategicincome.com. Alternatively, a live webcast of the conference call can be accessed through the Investors section of Oaktree Strategic Income website, www.oaktreestrategicincome.com.

For those individuals unable to listen to the live broadcast of the conference call, a replay will be available for 30 days on Oaktree Strategic Income’s website, or by dialing (877) 344-7529 (U.S. callers) or +1 (412) 317-0088 (non-U.S. callers), access code 10114279, beginning approximately one hour after the broadcast.

About Oaktree Strategic Income Corporation

Oaktree Strategic Income Corporation (NASDAQ: OCSI) is a specialty finance company dedicated to providing customized capital solutions for middle-market companies in both the syndicated and private placement markets. The Company seeks to generate a stable source of current income while minimizing the risk of principal loss and, to a lesser extent, capital appreciation by providing middle-market companies with primarily first lien secured debt financings that pay the Company interest at rates which are determined periodically on the basis of a floating interest rate. The Company is regulated as a business development company under the Investment Company Act of 1940, as amended. Oaktree Strategic Income is managed by Oaktree Capital Management, L.P. For additional information, please visit Oaktree Strategic Income’s website at www.oaktreestrategicincome.com

Forward-Looking Statements

Some of the statements in this press release constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements may include statements as to: our future operating results and distribution projections; our business prospects and the prospects of our portfolio companies; and the impact of the investments that we expect to make. In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in our annual report on Form 10-K. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or regulated investment companies; and other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.

We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Contacts

Investor Relations:

Oaktree Strategic Income Corporation

Michael Mosticchio

(212) 284-1900

[email protected]

Media Relations:

Financial Profiles, Inc.

Moira Conlon

(310) 478-2700

[email protected]

4th Quarter and Fiscal Year 2017 Earnings Presentation December 1, 2017 Nasdaq: OCSI Exhibit 99.2

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Forward Looking Statements Some of the statements in this presentation constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this presentation may include statements as to: our future operating results and distribution projections; the ability of our Investment Adviser to find lower-risk investments to reposition our portfolio and to implement our Investment Adviser’s future plans with respect to our business; our business prospects and the prospects of our portfolio companies; the impact of the investments that we expect to make; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; and the cost or potential outcome of any litigation to which we may be a party. In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this presentation involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in our annual report on Form 10-K. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or regulated investment companies; and other considerations that may be disclosed from time to time in our publicly disseminated documents and filings. We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Unless otherwise indicated, data provided herein is dated as of September 30, 2017.

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Managed by Oaktree Capital Management Assets Under Management ($ in billions)2 ($ in billions) Investment Areas1 Historical Assets Under Management Founded in 1995, Oaktree is a leading global investment management firm focused on credit investing Applies a contrarian, value-oriented and risk-controlled investment strategy across a variety of asset classes Assets under management of $99.5 billion as of September 30, 2017 Manages assets for a wide variety of clients including many of the most significant investors in the world 75 of the 100 largest U.S. pension plans The main pension fund of 38 states in the United States Over 400 corporations Over 350 university, charitable and other endowments and foundations Over 350 non-U.S. institutional investors and 16 sovereign wealth funds Corporate Debt $41.1 Distressed Debt $25.3 Control Investing $14.5 Real Estate $8.8 Convertible Securities $5.5 Listed Equities $4.3 As of September 30, 2017 1Includes offices of affiliates of Oaktree-managed funds. Oaktree headquarters is based in Los Angeles. 2Assets under management presented above exclude $75 million of assets in the Japan Opportunities strategy.

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The Oaktree Advantage Scale Premier credit manager and leader among alternative investment managers for more than 20 years $99.5 billion in assets under management; 70% in credit strategies A team of more than 250 highly experienced investment professionals with significant origination, structuring and underwriting expertise Relationships Trusted partner to financial sponsors and management teams based on long-term commitment and focus on lending across economic cycles Strong market presence and established relationships with many sources of investment opportunities – private equity sponsors, capital raising advisers and borrowers Access to proprietary deal flow and first look at investment opportunities Track Record Disciplined portfolio management approach demonstrated across market cycles Long history of private credit investing $10 billion invested in over 200 directly originated loans since 2005 Flexibility Expertise to structure comprehensive, flexible and creative credit solutions for companies of all sizes across numerous industry sectors Capacity to invest in large deals and to sole underwrite transactions

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Oaktree Strategic Income Investment Objectives A specialty finance company dedicated to providing customized capital solutions for middle-market companies in both the broadly syndicated and private placement markets Focus on businesses with resilient business models, strong fundamentals and seasoned management teams Seek to generate stable, current income by investing primarily in first lien, floating-rate loans Minimize the risk of principal loss, with less focus on capital appreciation opportunity Mitigate interest rate risk by targeting floating-rate investments Emphasis on fundamental credit analysis, consistency and downside protection are key tenets of Oaktree’s investment philosophy, all of which are strongly aligned with the interests of Oaktree Strategic Income stockholders

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Fourth Quarter and Fiscal Year 2017 Highlights Highlights As of September 30, 2017 Total Assets $608.7 million Net Asset Value Per Share $9.97 Cash and Cash Equivalents $35.6 million Total Leverage Ratio 0.90x Q4 Results of Operations Net investment income of $5.5 million, or $0.19 per share $108.7 million in new investment commitments $108.4 million in fundings $71.3 million in prepayments and exits Dividend of $0.19 per share FY 2017 Results of Operations Net investment income of $22.4 million, or $0.76 per share $290.8 million in new investment commitments $290.6 million in fundings $215.3 million in prepayments and exits Dividends of $0.80 per share

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Portfolio Summary as of September 30, 2017 (As % of total portfolio, at fair value) Top 10 Industries (As % of total portfolio, at fair value) Portfolio Composition $560M Portfolio invested in 67 companies 7.5% Weighted average yield on debt investments 100% Of the debt portfolio consists of floating-rate loans

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Historical Financial Highlights Including pro forma share of the return on Glick JV debt investments. ($ in thousands) Operating Results Q4’17 Q3’17   Q2’17 Q1’17 Q4’16 17-Sep 17-Jun 17-Mar 16-Dec 16-Sep Net investment income $5,521 $5,930 $5,086 $5,884 $6,342 Net unrealized appreciation (depreciation) on investments (20,001) (5,803) 13,242 (5,242) 1,660 Net realized gain (loss) on investments 17 12 (13,496) 83 591 Net increase (decrease) in net assets resulting from operations ($14,463) $139 $4,832 $725 $8,593 Net investment income per common share $0.19 $0.20 $0.17 $0.20 $0.22 Net realized and unrealized appreciation (depreciation) per share ($0.68) ($0.20) ($0.01) ($0.18) $0.07 Earnings (loss) per share – basic ($0.49) $0.00 $0.16 $0.02 $0.29 Earnings (loss) per share – diluted ($0.49) 0.00 0.16 0.02 0.29 Distributions per common share $0.19 $0.19 $0.19 $0.23 $0.225 Select Balance Sheet and Other Data         Investment Portfolio (at fair value) $560,437 $565,178 $545,922 $540,103 $573,604 Debt Outstanding 260,733 266,160 275,388 249,815 289,898 Total Net Assets 293,636 313,698 319,158 319,924 325,829 Net Asset Value per share $9.97 $10.65 $10.83 $10.86 $11.06 Total Leverage 0.90x 0.86x 0.87x 0.79x 0.90x Shares Outstanding (in thousands) 29,467 29,467 29,467 29,467 29,467 Number of Portfolio Companies, at period end 67 68 61 61 63 Weighted Average Yields, at period end         Debt Investments Total(1) 7.5% 7.9% 8.4% 8.5% 8.6% Cash Component 7.3% 7.6% 8.1% 8.2% 8.3% Note: Results contained herein occurred during management by Fifth Street Management LLC.

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Historical Portfolio Metrics ($ in thousands)   As of and For Three Months Ended 30-Sep-17 30-Jun-17 31-Mar-17 31-Dec-16 30-Sep-16 Investments at Fair Value $560,437 $565,178 $545,922 $540,103 $573,604 Number of Portfolio Companies 67 68 61 61 63 Average Portfolio Company Debt Investment Size $8,500 $8,200 $8,600 $8,700 $8,900 Asset Class:         Senior Secured Debt 89.5% 88.3% 87.6% 87.3% 87.6% Glick JV 10.3% 10.9% 11.3% 11.4% 11.0% Equity 0.2% 0.8% 1.1% 1.2% 1.4% Interest Rate Type:         % Floating Rate 100% 100% 100% 100% 100% Yields:         Weighted Average Total Yield of Debt and Income Producing Securities 7.5% 7.9% 8.4% 8.5% 8.6% Weighted Average Cash Component of Interest Rate of Debt and Income Producing Securities 7.3% 7.6% 8.1% 8.2% 8.3% Investment Activity at Cost:         New Investment Commitments $108,700 $58,000 $82,800 $41,300 $28,200 New Funded Investment Activity $108,400 $66,900 $77,600 $37,600 $26,200 New Investment Commitments:         Number of New Investment Commitments in New and Existing Portfolio Companies 17 12 11 8 4 Average New Investment Commitment $6,394 $4,833 $7,527 $5,163 $7,050 Note: Results contained herein occurred during management by Fifth Street Management LLC.

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Portfolio Credit Quality and Funding ($ in thousands) Non-Accrual - Debt Investments 30-Sep-17 30-Jun-17 Non-Accrual Investments at Fair Value $6,293 $7,922 Non-Accrual Investments / Total Investments at Fair Value 1.12% 1.41% Note: Results contained herein occurred during management by Fifth Street Management LLC. Funding Source Capacity Outstanding Interest Rate Maturity 2015 Debt Securitization $180 million $180 million 3.07% weighted average(1) May 2025 Citibank Revolving Credit Facility $125 million $76.5 million LIBOR + 200-400 bps January 2020 East West Bank Facility $25 million $6.5 million LIBOR + 300-375 bps January 2021 Sources of Funding (as of September 30, 2017) Non-Accrual – Debt Investments (1) The weighted average interest rate as of September 30, 2017.

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Contact: Michael Mosticchio, Investor Relations [email protected]

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