Houlihan Lokey Advises Oaktree Specialty Lending Corporation

Houlihan Lokey is pleased to announce that Oaktree Specialty Lending Corporation (NASDAQ:OCSL) (OCSL) has merged with Oaktree Strategic Income II, Inc. (OSI II). The transaction closed on January 23, 2023.

Under the terms of the proposed merger, OSI II stockholders received 0.9115 shares of OCSL common stock with a net asset value (NAV) equal to the NAV of shares of OSI II common stock that they hold at the time of closing. As a result of the merger, legacy OCSL stockholders and former OSI II stockholders own approximately 79.4% and 20.6%, respectively, of the combined company at closing.

On a pro forma basis, the combined company has more than $3 billion of assets as of September 30, 2022. The combined company will continue to be externally managed by Oaktree Fund Advisors, LLC (Oaktree), the investment advisor for each of OCSL and OSI II.

In connection with the transaction, Oaktree has agreed to waive $9.0 million of OCSL’s base management fees as follows: $6.0 million at a rate of $1.5 million per quarter (with such amount appropriately prorated for any partial quarter) in the first year following closing of the merger and $3.0 million at a rate of $750,000 per quarter (with such amount appropriately prorated for any partial quarter) in the second year following the closing of the merger.

The merger is expected to be accretive to the net investment income of the combined company, reflecting anticipated operational synergies through the elimination of duplicative expenses, interest expense savings resulting from a streamlined capital structure, and the waiver of $9.0 million of base management fees.

OCSL is a publicly traded BDC dedicated to providing customized one-stop credit solutions to companies with limited access to public or syndicated capital markets. OCSL’s investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions, including first and second lien loans, unsecured and mezzanine loans, and preferred equity.

OSI II was a nontraded BDC focused on lending to small- and medium-sized businesses.

Houlihan Lokey served as the exclusive financial advisor to the special committee of OCSL. This transaction highlights the firm’s continued success and market-leading position advising business development companies and managers across a variety of strategic initiatives. This is Houlihan Lokey’s third completed related-party BDC merger in the past two years, and its 11th announced BDC transaction since 2015.