Item 1.01 |
Entry into a Material Definitive Agreement. |
A&R Advisory Agreement
On January 23, 2023, in connection with the consummation of the Mergers (as defined below), Oaktree Specialty Lending Corporation, a Delaware corporation (“OCSL”), entered into a second amended and restated investment advisory agreement (the “A&R Advisory Agreement”) with Oaktree Fund Advisors, LLC (the “Adviser”). The A&R Advisory Agreement amends and restates the existing investment advisory agreement, dated as of March 19, 2021, by and between OCSL and the Adviser (the “Current Advisory Agreement”) to (1) waive an aggregate of $9.0 million of base management fees otherwise payable to the Adviser 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 Mergers 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 closing of the Mergers and (2) revise the calculation of the incentive fees to eliminate certain unintended consequences of the accounting treatment of the Mergers on the incentive fees payable to the Adviser.
Under the A&R Advisory Agreement, the definition of “Pre-Incentive Fee Net Investment Income” (from which the incentive fee on income is calculated) was amended to exclude any amortization or accretion of any purchase premium or purchase discount to interest income resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in Pre-Incentive Fee Net Investment Income. In addition, under the A&R Advisory Agreement, the calculation of realized capital gains, realized capital losses and unrealized capital depreciation (from which the incentive fee on capital gains is calculated) was amended to (1) not include any such amounts resulting solely from merger-related accounting adjustments in connection with the assets acquired in the Mergers, including any premium or discount paid for the acquisition of such assets, solely to the extent that the inclusion of such merger-related accounting adjustments, in the aggregate, would result in an increase in the incentive fee on capital gains and (2) include any such amounts associated with the investments acquired in the Mergers for the period from August 6, 2018 to the date of closing of the Mergers, solely to the extent that the exclusion of such amounts, in the aggregate, would result in an increase in the incentive fee on capital gains.
None of the other terms changed in the A&R Advisory Agreement as compared to the Current Advisory Agreement, and the services to be provided by the Adviser and the term of the agreement remain the same.
The description above is only a summary of the material provisions of the A&R Advisory Agreement and is qualified in its entirety by reference to a copy of the A&R Advisory Agreement, which is filed as Exhibit 10.1 to this current report on Form 8-K.
OSI2 Citibank Facility
On January 23, 2023, as a result of the consummation of the Mergers, OCSL became party to the OSI2 Citibank Facility (as described below).
OSI 2 Senior Lending SPV, LLC (“OSI 2 SPV”), OCSL’s wholly-owned and consolidated subsidiary, is party to a loan and security agreement dated as of July 26, 2019, which was subsequently amended on September 20, 2019, July 2, 2020, December 31, 2020, March 31, 2021 and December 2, 2022 (as amended, the “OSI2 Citibank Loan Agreement”), with the lenders from time to time party thereto and the other parties referenced below. Under the terms of the OSI2 Citibank Loan Agreement, OCSL serves as the collateral manager and seller and OSI 2 SPV serves as borrower with Citibank, N.A., as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent.
The OSI2 Citibank Loan Agreement provides for a senior secured revolving credit facility (the “OSI2 Citibank Facility”) of up to $250 million (the “Citibank Maximum Commitment”) in aggregate principal amount, subject to the lesser of (i) the borrowing base, which is an amount based on advance rates that vary depending on the class of