Oaktree Specialty Lending Corporation Direct Lending Approach
OAKTREE
OCSL Specialty Lending Corporation
Oaktree's Rigorous Diligence Process
Company Analysis
Actively engage and assess company management
teams
Identify and understand key business and demand
drivers
• Evaluate core risks within businesses and industries
• "Think like an owner" regarding cash flow
Financial Analysis
•
Analyze consistency, stability, and reliability of
cash flows
• Evaluate quality of earnings and conversion of
EBITDA to cash
• Review historical performance through cycles and
•
potential impact of downturn in end markets
Compare key metrics to competitors
Downside-focus
• Consider impact on business and cash flows under
downside case scenarios
• Focus on potential secular and business model risks
•
Develop exit strategy in the event of downside case
• Consider appropriate risk mitigants (structure,
covenants, etc.)
Value
• Consider risk/reward relative to others in the
industry and the market
• Focus on competitors' cost of capital and alternative
investment options
•
Question overall industry valuation compared to
risk profile in evaluating investment potential of the
space
• Consider value of liquidity and the appropriate
"illiquidity premium"View entire presentation