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Financial report summary
?Risks
- Changes in interest rates, changes in the method for determining LIBOR and the potential replacement of LIBOR may affect our cost of capital and net investment income.
- A general increase in interest rates will likely have the effect of increasing our net investment income, which would make it easier for our Adviser to receive incentive fees.
- A significant portion of our investment portfolio is and will continue to be recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is and will continue to be uncertainty as to the value of our portfolio investments.
- Our ability to achieve our investment objective depends on our Adviser’s ability to support our investment process; if our Adviser were to lose key personnel or they were to resign, our ability to achieve our investment objective could be significantly harmed.
- Our business model depends to a significant extent upon strong referral relationships, and the inability of the personnel associated with our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- We may face increasing competition for investment opportunities, which could reduce returns and result in losses.
- The incentive fee we pay to our Adviser relating to capital gains may be effectively greater than 17.5%.
- Our ability to enter into transactions with our affiliates is restricted.
- A failure on our part to maintain our qualification as a Business Development Company would significantly reduce our operating flexibility.
- Regulations governing our operation as a Business Development Company and RIC affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
- Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- We may be unable to invest a significant portion of the net proceeds from an offering of our securities on acceptable terms within an attractive timeframe.
- We may allocate the net proceeds from an offering in ways with which you may not agree.
- Our base management fee may induce our Adviser to incur leverage.
- Our incentive fee may induce our Adviser to make speculative investments.
- There are significant potential conflicts of interest that could adversely impact our investment returns.
- Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.
- We are subject to certain risks associated with our credit facilities.
- We may enter into reverse repurchase agreements, which are another form of leverage.
- Because we intend to distribute at least 90% of our taxable income each taxable year to our stockholders in connection with our election to be treated as a RIC, we will continue to need additional capital to finance our growth.
- We may not be able to pay you distributions, our distributions may not grow over time and a portion of our distributions may be a return of capital.
- We will be subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a RIC under Subchapter M of the Code or do not satisfy the Annual Distribution Requirement.
- We may have difficulty paying our required distributions if we are required to recognize income for U.S. federal income tax purposes before or without receiving cash representing such income.
- We may in the future choose to pay distributions partly in our own stock, in which case you may be subject to tax in excess of the cash you receive.
- Our investments in portfolio companies may be risky, and we could lose all or parts of our investments.
- We may be exposed to higher risks with respect to our investments that include OID or PIK interest.
- If we acquire the securities and obligations of distressed or bankrupt companies, such investments may be subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions.
- Our portfolio companies may prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.
- The lack of liquidity in our investments may adversely affect our business.
- We may not have the funds or ability to make additional investments in our portfolio companies.
- Our portfolio companies may be highly leveraged.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- The disposition of our investments may result in contingent liabilities.
- There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
- If we make unsecured debt investments, we may lack adequate protection in the event our portfolio companies become distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event such portfolio companies default on their indebtedness.
- We may incur greater risk with respect to investments we acquire through assignments or participations of interests.
- Defaults by our portfolio companies would harm our operating results.
- Our portfolio companies may experience financial distress and our investments in such companies may be restructured.
- We may not realize gains from our equity investments.
- We are subject to certain risks associated with foreign investments.
- We may have foreign currency risks related to our investments denominated in currencies other than the U.S. dollar.
- We may expose ourselves to risks if we engage in hedging transactions.
- We are a non-diversified investment company within the meaning of the Investment Company Act, and therefore have few restrictions with respect to the proportion of our assets that may be invested in securities of a single industry or issuer.
- Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
- Shares of closed-end investment companies, including Business Development Companies, may trade at a discount to their net asset value.
- Investing in our common stock may involve an above average degree of risk.
- The market price of our common stock may fluctuate significantly.
- Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
- Certain provisions of our restated certificate of incorporation and our bylaws as well as the Delaware General Corporation Law could deter takeover attempts and have an adverse impact on the price of our common stock.
- Stockholders may incur dilution if we issue securities to subscribe to, convert to or purchase shares of our common stock.
- Because the market price of OCSL Common Stock and the net asset value per share of our common stock and OCSL Common Stock (as defined below) will fluctuate, our stockholders cannot be sure of the market value of the consideration they will receive in connection with the Mergers until the closing date of the Mergers.
- Sales of shares of OCSL Common Stock after the completion of the Mergers may cause the trading price of OCSL Common Stock to decline.
- Most of our stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Mergers.
- OCSL may be unable to realize the benefits anticipated by the Mergers, including estimated cost savings, or it may take longer than anticipated to achieve such benefits.
- If the Mergers do not close, we will not benefit from the expenses incurred in pursuit of the Mergers.
- The termination of the Merger Agreement could negatively impact us.
- The Merger Agreement limits our ability to pursue alternatives to the Mergers.
- The Mergers are subject to closing conditions, including stockholder approvals, that, if not satisfied or (to the extent legally allowed) waived, will result in the Mergers not being completed, which may result in material adverse consequences to our business and operations.
- We may, to the extent legally allowed, waive one or more conditions to the Mergers without resoliciting stockholder approval.
- We will be subject to operational uncertainties and contractual restrictions while the Mergers are pending.
- Economic recessions or downturns, such as the current recession, may have a material adverse effect on our business, financial condition and results of operations, and could impair the ability of our portfolio companies to repay debt or pay interest.
- Global economic, political and market conditions, including downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition.
- Future control deficiencies could prevent us from accurately and timely reporting our financial results.
- We may experience fluctuations in our quarterly results.
- We incur significant costs as a result of being a publicly traded company.
- We may be the target of litigation or similar proceedings in the future.
Management Discussion
- Net increase (decrease) in net assets resulting from operations includes net investment income, net realized gains (losses) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends and fees and total expenses. Net realized gains (losses) is the difference between the proceeds received from dispositions of investment related assets and liabilities and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment related assets and liabilities carried at fair value during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.