Oaktree Specialty Lending Corporation · NASDAQ:OCSL
Oaktree Specialty Lending — Fifth Street Finance — Investor Presentation (March 2009)
26 slides from Oaktree Specialty Lending's investor presentation, Mar 31, 2009
Slide 1: Fifth Street Finance Corp. Investor Presentation
Fifth Street Finance Corp. Investor Presentation (NYSE: FSC) March 2009 www.fifthstreetfinance.com
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements. These statements include, without limitation, information with respect to future events or our future financial performance, results of operations, and on our financial condition. These forward looking statements are n
Slide 3: Fifth Street Overview
Fifth Street Overview Lower middle market, externally managed BDC Current assets under management of over $400 Million1 $141 Million IPO in June 2008 led by Goldman Sachs, UBS, Wachovia, Bank of Montreal and Stifel Nicolaus; listed on the NYSE as ticker "FSC" BDC investments total $271 Million2 as o
Slide 4: Dynamic Business Model
Dynamic Business Model Specialty finance company providing financing for small to mid-sized companies Disciplined investment process with a proven 10+ year track record Recurring revenue stream-weighted average portfolio debt yield is 16.5% vs. industry average of approximately 12.3% 100% of the loa
Slide 5: Why Fifth Street Today
Why Fifth Street Today Superior Portfolio - Business model allows us to capture alpha Inefficient Market - Opportunity to invest at premium rates 85% of this portfolio has been generated during the credit dislocation, after July 1, 2007 Weighted average debt yield of 16.5%; cash yield of 13.4%1 99%
Slide 6: How Fifth Street will Continue to Deliver
How Fifth Street will Continue to Deliver Team - Expertise and experience with a scaleable methodology Brand - Premium provider of capital in the lower middle market Relationships - Deep relationships with key group of sponsors Transparency - Focus on a high degree of disclosure
Slide 7: Strong Value Proposition: Stock Trading Below NAV, Consistent Dividends
Conservative Portfolio Accounting Strong Value Proposition Stock Trading Below NAV Consistent Dividends Value Net unrealized depreciation of $35 Million since inception on total investment portfolio of $271 Million1 Primarily due to general economic conditions Stock trading at 57%2 of December 31, 2
Slide 8: BDC Structure and Regulation
BDC Structure and Regulation Business Development Companies ("BDCs") are uniquely positioned financing vehicles that provide debt and equity capital to private and small publicly- owned enterprises. BDC's were created by Congress in 1980 with the stated mission of facilitating the flow of capital to
Slide 9: High-Quality Investments with Substantial Cash Yields
Gladstone Capital PennantPark BlackRock Kelso MCG Capital Patriot Capital Apollo Investment Allied Capital Ares Capital Triangle Capital Fifth Street East 0.098 0.104 0.11 0.119 0.121 0.121 0.121 0.1279 0.144 0.134 0.031 High-Quality Investments with Substantial Cash Yields Higher Weighted Average Y
Slide 10: Portfolio Mix at Fair Value
Portfolio Mix at Fair Value 1 Q1 2008 data provided by internal financials. 1
Slide 11: Diversified Portfolio
Diversified Portfolio1 1 As of December 31, 2008 at fair value. 2 Other includes: Emulsions manufacturing; Entertainment - theaters; Food distributors; Leisure facilities; Data processing and outsourced services; Merchandise display; Media - Advertising; Capital goods; ; Commodity chemical; Housewar
Slide 12: Rating % by Fair Value
Rating % by Fair Value Investment Rating 1 - Investment is performing above expectations and/or a capital gain is expected; Investment Rating 2 - Investment is performing substantially within our expectations, and its risks remain neutral or favorable compared to the potential risks at the time of t
Slide 13: Secured Portfolio with Low Leverage
High-Quality Investments with Substantial Cash Yields Secured Portfolio with Low Leverage Secured Portfolio1 Total Debt to EBITDA Investment Portfolio: $271.2 Million1 1 At December 31, 2008 at fair value. 2 Source: Standard & Poor's Leveraged Buyout Review Q4 2008. Represents average of LBOs in 2H0
Slide 14: Strong Relationships
Strong Relationships "Lender of choice" for sponsors that invest in small and mid-sized companies Significant benefits of strategic partnerships including: Incremental due diligence Additional layer of monitoring Additional source of operating expertise Significant opportunity to increase market pen
Slide 15: Growing Target Market
Growing Target Market Large pool of private equity capital focused on investments in small and mid-sized companies These private equity firms have less access to capital Smaller deal size Fragmented market Recent credit market dislocation Less access to capital has resulted in favorable lending envi
Slide 16: Experienced Management Team that is Aligned with Shareholders
Experienced Management Team that is Aligned with Shareholders Management
Slide 17: Experienced Management Team: Other Senior Professionals
Experienced Management Team that is Aligned with Shareholders Other Senior Professionals
Slide 18: Intense Focus on Managing Credit Risk
Intense Focus on Managing Credit Risk Conservative Underwriting Criteria Structuring Methodology Target Transaction Characteristics Substantial excess enterprise value Significant investment by private equity sponsor Predictable positive operating cash flow On-going and available liquidity First or
Slide 19: Comprehensive Investment Process
Portfolio Management Origination Intense Focus on Managing Credit Risk Comprehensive Investment Process Underwriting Deal opportunities are sourced and screened Full investment summary Propriety deal scoring model Preliminary due diligence Initial Investment Committee ("IC") review Draft term sheet
Slide 20: Diversified Portfolio
Diversified Portfolio As of December 31, 2008 1 At fair value as of December 31, 2008. Portfolio Fair Value at 12/31/08 $271.2
Slide 21: Asset Quality
Asset Quality As of December 31, 2008 Portfolio is performing as expected 100% of portfolio valued by an outside valuation firm Portfolio loans are assessed and rated quarterly on a scale from 1 to 5 based on underlying credit and performance statistics Loan Ratings as of December 31, 2008 Investmen
Slide 22: Summary Financials
Summary Financials ‘At and for the quarter ended $.in thousands December 31, 2008 ‘Statements of Operations Data: Total Investment Income 12,585 Base management fees 4371 Incentive fees 2/053 Al other expenses 951 Net Investment Income 8,210 Unrealized depreciation of investments (18,482) Net decrea
Slide 23: Corporate Governance
Corporate Governance Independent (5) Byron J. Haney, CPA (Chair of the Audit Committee) - 20+ years of business experience, including serving as chief financial officer of a private retail store chain. Currently serves on the Board of Directors of Sterling Chemicals, Inc. (public company) Frank C. M
Slide 24: Summary Investment Highlights
Summary Investment Highlights Yield High-quality investments with substantial cash yields Safety Intense focus on managing credit risk Relationships Strong relationships with private equity sponsors focused on small and mid-sized companies Experienced management team that is aligned with investors S
Slide 25: FSC Corporate Information
FSC Corporate Information Board of Directors Adam C. Berkman, CPA Brian S. Dunn Byron J. Haney, CPA Frank C. Meyer Douglas F. Ray Bernard D. Berman Leonard M. Tannenbaum Corporate Counsel Sutherland, Asbill & Brennan, LLP Transfer Agent American Stock Transfer & Trust Company, LLC Tel: (212) 936-510
Slide 26: Portfolio
Portfolio As of December 31, 2008 $13.5MM Second Lien Term Loan Equity Investment $7.0MM Second Lien Term Loan $11.0MM Second Lien Term Loan Equity Investment $25.0MM Second Lien Term Loan Equity Investment $10.3MM Second Lien Term Loan $16.8MM Second Lien Term Loan $9.7MM Second Lien Term Loan Equi
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