Earnings Call Transcript - OCSL Q2 2021

Operator, Operator

Welcome and thank you for joining Oaktree Specialty Lending Corporation Second Fiscal Quarter 2021 Conference Call. Today's conference call is being recorded. At this time, all participants are in a listen-only mode. Now I would like to introduce Michael Mosticchio of Investor Relations, who will host today's conference call. Mr. Mosticchio, you may begin.

Michael Mosticchio, Investor Relations

Thank you, operator, and welcome to Oaktree Specialty Lending Corporation's second fiscal quarter conference call. Our earnings release, which we issued this morning, and the accompanying slide presentation can be accessed on the Investors section of our website at oaktreespecialtylending.com.

Matt Pendo, CEO

Thank you, Mike, and welcome, everyone. We appreciate your interest in and support of OCSL, and we hope everyone listening is well. We continued to generate momentum in the second quarter with earnings, origination activity, and credit quality all strong. We reported NAV per share of $7.09, up 4% from the prior quarter. The increase reflected both continuing market spread tightening and price appreciation on certain liquid debt investments during the quarter. As with last quarter, our NAV continues to exceed its pre-COVID high and is up more than 7% from the end of calendar 2019. We continue to produce steady strong results. Adjusted net investment income per share, which excludes the impact of asset acquisition accounting related to the merger with Oaktree Strategic Income Corporation, was $0.14, up slightly from the prior quarter. Based on our consistent performance and confidence in the potential to further improve earnings, our Board increased our quarterly dividend by 8% to $0.13 per share, the fourth consecutive quarterly increase. This also marked a 37% increase from a year earlier. We continue to actively identify attractive new deals during the quarter, and excluding the assets we acquired as part of the OCSI merger, we originated $318 million of new investment commitments. Of these, 80% were first lien loans.

Armen Panossian, CIO

Thanks, Matt, and good morning, everyone. The credit and equity markets continue to advance along with declining unemployment, an improving economy, and a forecast for strong GDP growth in the second half of 2021. The vaccine rollout programs, while varied by country, have proven successful to date overall in the United States and other developed countries, adding to optimism. We share in the confidence, and yet, ours is cautious optimism. Exceptional fiscal and monetary stimulus has supported the recovery and helped fuel investor confidence, liquidity, and the availability of credit. We believe equity valuations already reflect expectations for strong economic growth and therefore, may be inflated, as the ultimate success of vaccinations and corresponding GDP expansion still remains uncertain. Mindful of that uncertainty, we continue to approach new investments defensively, guarding against the downside in our investments and securing appropriate compensation for risk. All of that noted, we are actively investing in generating strong risk-adjusted returns for our shareholders. We are drawing upon the full breadth of Oaktree's scale and resources to invest across multiple markets with a diversified group of issuers. We are further building the portfolio with investments in consistently performing companies and in sectors that present relatively low risk, notably including those that proved resilient throughout the pandemic from life sciences to application software. We are also lending to businesses that are not easily underwritten via traditional cash flow-based methodologies, and we continue to carefully study the rescue lending landscape, an area in which we have found appealing opportunities. We also continue to pursue unique opportunities where competition is limited, leveraging Oaktree's ability to negotiate and structure customized private deals that provide downside risk management by mitigating specific risks of the issuer. Now turning to the overall portfolio. At the end of the second quarter, the portfolio was well diversified with $2.3 billion at fair value across 137 companies. The portfolio grew as a result of the $504 million of assets we acquired from OCSI and net new investment fundings. 86% of the portfolio was invested in senior secured loans, and our median portfolio company EBITDA at March 31 was approximately $100 million as we continue to focus on lending to larger, more diversified businesses.

Mel Carlisle, CFO

Thank you, Armen. Good morning, everyone. Before getting into the discussion of the income statement, I would like to discuss the GAAP accounting that is related to our merger with OCSI because of its unique treatment of asset valuations. Although the merger was structured as a NAV or NAV exchange under GAAP, the merger was accounted for using the asset acquisition method. Under this framework, the fair value of the consideration paid by OCSL to acquire OCSI was based on the number of OCSL shares issued and stock price immediately prior to the merger close.

Matt Pendo, CEO

Thank you, Mel. Over the last three quarters, we have generated an improved return on equity compared to prior year quarters, which is evidence that our efforts in this area are paying off. Operating results have been strong. Following our robust origination activity, credit quality continues to be excellent. The defensive repositioning that we have carried out since 2017 has largely been completed, and our pipeline of potential transactions remains solid. As a result of this strong performance, we have increased the dividend from $0.095 to $0.13 per share in the past year. That said, we continue to believe that OCSL is well positioned to grow ROE further from here. First, we remain focused on positioning the portfolio for an improved yield by rotating out of lower-yielding investments and into higher-yielding proprietary loans. We continue to make good progress here in the second quarter, exiting $49 million of these types of investments. As of quarter-end, $163 million of senior secured loans priced at or below LIBOR plus 4.5% remained in the portfolio, including approximately $102 million of loans that we acquired in the OCSI merger. Our new investments during the quarter came in at an average yield of 8.2%. So there is continued upside to be realized. Another opportunity for us to increase ROE is by deploying more leverage at the portfolio level. As of March 31, we are operating just below the low end of our long-term target of 0.85 to 1.0 times. So we would expect to continue to enhance returns as we make incremental investments and deploy higher leverage. However, we will only grow the portfolio as we find opportunities that are consistent with our investment approach that we believe offer an attractive risk-reward. We also have the opportunity to further optimize both of our joint ventures. We can accomplish this by not only judiciously increasing leverage of the JV, but also by rotating out of lower-yielding investments into higher-yielding ones. We believe that disciplined growth of the JVs will also be accretive to ROE over time. Finally, we expect to realize synergies from our recent merger with OCSI, which we anticipate will benefit our ROE going forward. These include approximately $2 million of annual expense savings and the waiver of $750,000 per quarter in management fees for eight quarters. Further, as I mentioned earlier, we are working on streamlining our capital structure to reduce our overall cost of capital while enhancing our funding flexibility. In conclusion, we are very pleased with our strong second quarter results. We are happy to have completed the seamless merger with OCSI as we have achieved further scale, portfolio diversity, and expected earnings accretion. We are excited about our future and remain optimistic that we will continue to identify new attractive risk-adjusted investment opportunities, which will allow us to deliver improved returns to our shareholders. Thank you for joining us on today's call and for your continued interest in OCSL. With that, we're happy to take your questions. Operator, please open the lines.

Operator, Operator

And the first question will come from Devin Ryan with JMP Securities. Please go ahead.

Devin Ryan, Analyst

Maybe just to start off here with a market question. I heard the commentary around where valuations are and maybe how optimistic the implied outlook is. And so I always appreciate hearing your views on what you're seeing in the market. And if possible, just good to get some differentiation between what you're seeing on the sponsor side versus the non-sponsored side, if there is any? And then just where kind of some of those more attractive opportunities are today, given the backdrop you started with.

Armen Panossian, CIO

Thanks for the question, Devin. This is Armen. So I've mentioned this on prior calls, but when we look at the opportunity set, we look at fundamentals, technicals, and valuation. So when we look at the fundamentals, I would say, sequentially, we've had three quarters of improved performance in most businesses in the U.S. and globally, quarter-over-quarter. A lot of companies in the energy space even have had really solid performance in the last couple of quarters with rising oil prices. So the fundamentals, I would say, are trending in the right direction but not yet reflective of a complete recovery from the pandemic. One of the issues still holding back the fundamentals is a labor shortage, especially of skilled labor in the United States. And then the second is, there have been supply chain disruptions over the last few quarters. So getting certain types of products has been a challenge for some businesses. We see it, especially in luxury products. We see it in chips. There's been a lot of talk about a global chip shortage. So the fundamentals are certainly heading in the right direction, but still not to post-pandemic levels. In terms of valuation, with the tremendous amount of stimulus that's been pumped into the economy, valuations have gotten really high generally. So there was a little bit of a pullback a couple of months ago in valuations of some of the higher-flying tech companies on the stock exchange, really commensurate with a rising interest rate environment. The 10-year treasury touched just above 1.7% and has come back down. But that little moment there was a sign of potential times to come, where the conditions that we're seeing in the economy today could give rise to inflation and could give rise to higher interest rates. Therefore, our expectation would be that very high multiple valuation companies and stocks will potentially have some downside if we do see that rising rate environment play through on the heels of what's likely to be at least a transitory inflationary backdrop. So we are very cautious about valuations. I think a lot of private equity firms are also cautious about them. We're seeing some deal flow on the LBO side, for sure, but I think folks are kind of wondering what happens with valuations if the rising rate environment does kick in. In terms of technicals, there's a lot of capital out there, both in the public markets and the private debt markets. We are seeing the impact of that capital in terms of the recent deal flow that's been making it in the market. This has been definitely in 2021, not prior to that. Generally speaking, legal and economic terms have deteriorated over the last couple of months because there are several managers out there that have raised very large funds that are looking for deals and the most consistent way of sourcing that deal flow is through the LBO sponsor back market and by providing large solutions, large loans in support of those LBOs at terms that are tighter and more flexible from a legal perspective than they were even pre-pandemic. So we are very cautious about the quality of the deal flow we're seeing on the LBO sponsor side. We are participating in it, but I would say that we are finding better opportunities on the non-sponsored side these days. As I've said on prior calls, it's hard to predict the timing of our non-sponsor deal activity. But our pipeline today is largely composed of non-sponsor deals, really leveraging the Oaktree platform and some of the off-the-center of the fairway type of deal flow that we see as an institution. So we will try to find some good LBO opportunities as well, but I would say that the trend in terms of legal and economic terms on that side of our origination is heading or has had towards a less attractive position.

Devin Ryan, Analyst

As a follow-up, the remaining $164 million of non-core investments in the portfolio. I'd imagine those are primarily less liquid. At this point, the liquid positions were sold off leading into or following the merger? Or I just want to make sure that's a fair assessment. And then whether there's any transparency kind of into a timeline for rotation there?

Armen Panossian, CIO

Yes. I think your statement is correct. They are less liquid. It's challenging to determine the timing of an exit, but you should know that we are very focused on exiting those positions. The good news is with the recovery in the economy, those positions, their valuations have improved since the bottom. So we would hope and expect that we will see some resolution over the coming quarters, but I wouldn't be able to provide forward-looking guidance on what that could look like.

Matt Pendo, CEO

Yes. And Devin, it's Matt. What our strategy with the non-core from the beginning was rather than do a large portfolio sale at a relatively low price to work each situation independently and try to maximize value, which I think we've done a good job of and we'll continue to do that. To Armen's point, every day, every quarter, we're working on exiting investments. We're exiting the non-core investments. And so that's been good. Some of the investments have been converted up materially as last quarter, given the performance of the company. So we're focused on it every day. To Armen's point, it's tough to pick a timeline, but it is something that we want to keep making progress towards every quarter.

Operator, Operator

The next question will be from Kyle Joseph with Jefferies. Please go ahead.

Kyle Joseph, Analyst

Congrats on the good quarter and getting the merger across the finish line. Repayments are obviously difficult to predict, but can you give us a sense, given you talked about a hot market and just your expectations for repayments this year versus maybe last as a benchmark?

Armen Panossian, CIO

Yes, Kyle, it's a good question, but it requires a little bit of a crystal ball. We haven't been hit with a lot of repayments, but we expect that just given the nature of some of our origination that some of our portfolio companies are good spec candidates, some of our portfolio companies are good refi candidates on the LBO side. So I wouldn't be surprised if we see elevated repayments this calendar year versus last year. But I wouldn't be able to dimensionalize the size of that, unfortunately.

Kyle Joseph, Analyst

And then, obviously, your credit has been very strong, looking at your NPAS. But just in terms of the underlying portfolio performance, can you give us a sense of whether it's revenue or EBITDA growth in the first quarter and how that compared to the fourth quarter and kind of the outlook here as we have lapped some of the more difficult comps, and given that, what your expectations are for credit for the remainder of the year?

Armen Panossian, CIO

In the third and fourth quarters of last year, most companies saw revenues decline by 5% to 25%. Our portfolio was in that range too. However, strong management teams were able to reduce costs significantly during that time, allowing them to maintain healthy cash flow without facing restructuring issues. This focus on cost containment continued into the first quarter, where we did not see additional cost reductions, but revenues have increased sequentially. When comparing the first quarter revenues of this year to the third and fourth quarters of last year, we see an increase of approximately 4% to 10%. This combination of revenue growth and effective cost management is contributing to solid EBITDA growth on a sequential basis. Year-over-year, most businesses are at best flat from the first quarter of last year, and many are still below pre-pandemic levels. This disparity is important as valuation multiples and loan terms are aligned with pre-pandemic conditions, while business performance has not returned to those levels.

Operator, Operator

And the next question will be from Bryce Rowe with Hubby Group. Please go ahead.

Bryce Rowe, Analyst

I wanted to ask about the comments around the cautious optimism from an outlook perspective and how you think about where you want to be in terms of your balance sheet leverage target on the low end, middle part of it, or towards the higher end of that balance sheet leverage target, given the outlook.

Armen Panossian, CIO

Thanks for the question, Bryce. So going into March of last year, we were running at or below our leverage target. That really allowed us to get pretty opportunistic in our investments with rescue loans with public market trading activities in a variety of different asset classes. That was really because we were entering that period, feeling that terms and conditions in the private credit markets broadly were just not as attractive as we would like them to be. We're still finding pretty attractive investments in the private credit markets right now, especially in the non-sponsor space. But I would expect, given our tone of cautious optimism, we will be in probably closer to the low end of our target range. Barring any surprises to the upside in terms of non-sponsor deal flow that we may be able to find that we think is mispriced risk. So we're always looking for those types of idiosyncratic opportunities. They could present themselves even when the markets are pretty strong and with some of the harder to understand or underwrite businesses. We do still see a lot of deal flow in our life sciences area and some of the other areas that are outside of the LBO sponsor activity area. If we did see some surprises to the upside on our origination on the non-sponsor side, I could see us trending towards the middle part of our range. I don't think we'll be on the high end of our range in the next couple of months. It's hard to predict beyond what I see in our pipeline today, though.

Matt Pendo, CEO

Yes, it's Matt. Just to share everyone's benefit, our target range is 0.85 to 1. And we're still very comfortable with that range.

Bryce Rowe, Analyst

I wanted to ask about the liability structure, the capital structure, obviously, it's been a point of emphasis over the last couple of quarters with the pending transaction with OCSI. Now that that's done, obviously, you're making some progress in having remixed some of the liability structure already. Just kind of curious how you're thinking about the one remaining SPV there now and how you might try to take further advantage of what we're seeing in the unsecured debt markets right now.

Matt Pendo, CEO

Thanks for the question. We have a well-balanced capital structure. We recently amended and extended our revolving credit facility, receiving a very positive response from both existing and new banks. This allowed us to make some important and favorable adjustments to pricing and the borrowing base. Additionally, we retired a costly SPV facility that had a high interest rate, compared to our revolving facility, which has a lower rate. The existing SPV facility we have is much more attractively priced than the one we repaid, and we plan to keep it. We continue to be mindful of our capital structure. Over a year ago, we successfully completed an unsecured bond deal, which remains an option for us. Overall, we've made good progress so far and will remain thoughtful about our approach, aiming to capitalize on any market opportunities for attractive investments.

Bryce Rowe, Analyst

And maybe one more for Mel. Mel, you mentioned the Kemper JV possibly paying a dividend here in the third fiscal quarter. Any guidance around what that dividend might look like?

Mel Carlisle, CFO

Can't give you guidance on the amount of the dividend at this time. We're going to monitor it over the next quarter and consult with our partner there. So more to come on that.

Operator, Operator

And the next question is from Ryan Lynch with KBW. Please go ahead.

Ryan Lynch, Analyst

I was curious about how you balance your goal of increasing return on equity with the cautious approach towards deploying capital. If you're not very optimistic about the sponsored lending environment, that could impact the volume of deals you add to your portfolio. Additionally, you have objectives of divesting lower-yielding and non-core investments, while the broader market appears to be strong in the BSL area. This may introduce some refinancing risks that could lead to portfolio repayments. How do you manage the desire to increase leverage to boost ROE in light of the potential challenges in achieving net growth in the upcoming quarters?

Armen Panossian, CIO

Yes. It's a good question, Ryan. This is Armen. So we have a variety of levers we could pull to help drive ROE. We do have part of our portfolio in low-yielding assets that are publicly traded that are a source of cash. A portion of the OCSI portfolio that was merged into OCSL is such a source. So that's one area where if we just rotate it from the lower yielding nature of some of those assets into even just average yielding, LBO and non-sponsor deal flow that we're seeing, that will be accretive to the ROE without even increasing leverage. There is the leverage opportunity, and to increase leverage, what I would just say is, for us to drive up leverage to the top end of our target or even through the top end of our target to do LBO deals, specifically first lien LBOs now are pricing at LIBOR plus 475 to 500 in the middle market. These are the more traditional first lien, pretty low levered. For us, that's not an optimal use of increasing leverage. We'd rather increase leverage in connection with originating 8%, 9%, 10% type of paper in the non-sponsor area. We've talked about this in the past, but just being part of Oaktree, we do see a lot of deal flow that traditional sponsor chasing managers typically don't see or don't spend the time to try to originate. That's where we are able to drive some incremental growth in ROE through higher-yielding opportunities. Getting paid an attractive return for what we assess as being lower risk than other situations. Incorporate is a good example of a deal that we did in the quarter. This is a public company. The investment came through our special situations group initially that was potentially discussing a junior equity or debt solution for the company. It changed into a senior solution for us with less than three turns of leverage and a requirement that the company go and raise preferred equity beneath us. We got paid a nice return that was wide of LBO sponsor loans, especially if the company was under three turns of leverage; in a sponsor deal, that would be LIBOR plus 450 to 500, and we were paid close to LIBOR plus 700 with OID and fees. That's a long way of saying that we just have to get more creative on the origination side rather than relying on the market, the private credit market to deliver us the beta of the market. We are really looking for alpha opportunities. We're finding alpha opportunities. In 2020, when the economy was in disarray, we were able to find a lot in the rescue lending area. Even though that particular opportunity has waned on a broad basis across industries, it is still there in pockets. It could be in the energy space; it could be in other areas that we're still seeing some pretty nice deal flow or potential deal flow. In the situational lending area, these are companies that are hard to understand, hard to underwrite, and where we are seeing a fair bit of deal flow. They don't fit nicely in the underwriting standards of other managers because there isn't fresh equity capital coming in or there isn't a clean sort of debt-to-EBITDA story. As a result, we're able to get very tight legal terms and wide economic terms. We're spending a lot of our time on the sides of the fairway rather than in the center of the fairway, and we're finding the ability to continue to net, originate on a positive basis. So rather than contracting the portfolio, we're still expanding. In the first calendar quarter this year, you saw that. We did expand the portfolio. Even though a lot of the competitive dynamics that I mentioned earlier were still in play this quarter. It's really being part of Oaktree that is our competitive advantage, and we'll continue to utilize our competitive advantage to drive ROE higher without having to simply rely on higher leverage to deliver that ROE. Just one last point before I get off my soapbox. Last year, higher leverage proved to be a disadvantage because as the economy tumbled, leverage providers did pull back, we saw folks have to issue equity at discounts to NAV. We saw a lot of managers, whether BDC or non-BDC, pull back from the market because they were unsure about what sort of issues they were going to have in their portfolio with their leverage providers, etc. We were extremely active in trading, extremely active in origination, and we think we could strike a balance between now and that next dislocation to still be able to go on the offensive when that happens as well.

Matt Pendo, CEO

Yes. And Ryan, this is Matt. Just picking up on that last point, I agree with you. It is hard to originate, but that's okay. One of the things I think has happened, and Armen hit it a little bit on the last comment, but going into the pandemic and post-pandemic, we were very, very active during the pandemic across Oaktree and particularly in OCSL. I think that really helped increase our market share, our mind share, our kind of conversations, both sponsor and non-sponsor. It's definitely created a tailwind in terms of just our presence in the marketplace and direct lending. I think that really helped us and will continue to.

Armen Panossian, CIO

Just to be clear, this is Armen again. Just to be clear, on the LBO side, we will do some LBO deals this year, next quarter, the following quarter. So don't get me wrong. What I would like to point out, though, is that our hit rate will be lower. We will see a lot more deals, and our look-to-book will be just lower. And that's okay, and we're going to fill what we don't do on the LBO side with what we are able to find on the non-sponsor side.

Operator, Operator

The next question is from Melissa Wedel with JPMorgan. Please go ahead.

Melissa Wedel, Analyst

Today. One of the things that jumped out in going through your slide deck was the number of new companies that you allocated capital to during the March quarter. What stood out about that is that we seem to be hearing from a lot of teams that there's increased confidence or increased comfort in deploying capital to existing portfolio companies, companies that you have been working with already, and you can see growing out of the environment. I'm curious if there's anything in particular that drove this high allocation to 18 new companies in the portfolio? And is that indicative of sort of a return to normal on your due diligence process for new companies?

Armen Panossian, CIO

Thanks for the question, Melissa. We didn't experience any significant macro influences on our origination this quarter. Instead, we encountered a robust flow of deals across various sectors that we effectively structured. We participated in some leveraged buyout deals, but we also leveraged the Oaktree platform for several proprietary deals. Negotiations were ongoing in the fourth quarter that were funded in the first quarter, indicating some dislocation in traditional lending areas that typically would have supported those transactions. We executed some well-structured and well-priced real estate deals in recent quarters, as the dislocation in the real estate market extended beyond that in corporate credit markets. Our origination efforts were not driven by a macro perspective aimed at chasing recovery; instead, we focused on securing solidly structured and reasonably priced deals that are not heavily tied to cyclical businesses. We feel positive about our approach. Oaktree primarily engages in detailed, bottom-up credit analysis and does not adopt a macro perspective. We don't make macro predictions or allow macro conditions to dictate our risk-taking. We acknowledge the macro environment and incorporate that into our risk assessments but don't base our actions on favorable conditions. To us, that approach could lead to significant problems.

Operator, Operator

And the next question is from Jordan Latin with Wells Fargo Securities. Please go ahead.

Finian O’Shea, Analyst

It's O’Shea speaking for Jordan this afternoon. I'd like to delve a bit deeper into the topic of leverage, which you addressed thoroughly. To summarize, your relatively low leverage target stems from your ability to identify quality deals, even when they offer higher spreads. This seems to contrast with what many of your peers do, as they tend to lower leverage in higher-yielding areas and increase it in lower-yielding strategies. So, my first question is whether it's accurate to say that your target is influenced by the lack of appealing non-sponsor and specialty deals?

Armen Panossian, CIO

Yes, I would say there is a lack of opportunities, but it is definitely more challenging to consistently find non-sponsor deal flow compared to sponsored deal flow. I liken the process of originating in this area to what an insurance underwriter does. When an insurance company seeks to increase the premium it manages, they relax their underwriting terms and accept more risk, enabling them to adjust their approach with a good level of control. This is somewhat similar to the sponsor business, where we observe a significant amount of deal flow. We can easily increase our activity and leverage, which can enhance returns. However, this also introduces additional risk, and we believe it is not wise to increase returns when it becomes more difficult to locate opportunities. It doesn't mean we can simply resort to increasing leverage to make things work in our favor. I think we will remain within our leverage targets. We have numerous deals in our non-sponsor pipeline that will demonstrate the effectiveness of the Oaktree platform in the coming quarters. We have already shown the strength of the Oaktree platform over the past few quarters.

Finian O’Shea, Analyst

I understand from your discussion with Ryan that you're aiming to expand that funnel. I'm not sure if the goal is to increase access to non-sponsor opportunities or to explore sectors like life sciences and real estate, as you've indicated with others. Regardless, it seems that this task is becoming more challenging with the rise of private markets and their institutionalization and maturation. I can imagine that these deals are becoming increasingly competitive. It appears that waiting for opportunities to improve your book and achieve a better return on equity could require substantial patience. Would you say you are being patient to identify more of those deals, or do you have a proactive strategy to discover appealing markets that would encourage you to reach a typical debt-to-equity ratio of around $120 million?

Armen Panossian, CIO

Well, we have an active game plan to originate deal flow. We're definitely not waiting around for somebody to throw something over the transom to us. But I hope that's not the deduction that anybody receives from any of my commentary. Yes, it is hard to find deal flow. I wouldn't say that it's getting more competitive, actually, just because these are harder to understand situations. We don't find ourselves getting a term sheet from an intermediary saying, 'Hey, will you hit this on this non-sponsor deal?' It’s literally a company sponsor, family office, management team coming to us saying, 'Hey, I need a strategic partner to help me grow and manage a transitional period in my company.' I need someone who's going to take the time to understand how to structure something that works in size. We find that it isn't a highly competitive market there, but it takes time. It takes time. It takes people who are on the ground originating. It takes people around Oaktree across all strategies, saying this isn't a good fit here, but it might be a good fit over in another area of the firm that I work in. We benefit from having many more people than what is kind of on the page, helping us originate in this non-traditional area. It is not a passive activity for us. We are not waiting to see what advisers throw our way. We're finding a lot of deal flow, and we are also leveraging the Brookfield relationship to drive some deal flow that is proprietary. Will we get to 1.2 times or above our range? It's possible, but I think we're focusing on walking before we run. We have lower-yielding assets that we could sell. We have non-core assets that we're looking to exit. We have a lot of room between the 0.84 turns of leverage we're at right now versus north of 1:1 to get through before we talk about going through our leverage target. I don't know if I'm answering your question or not, but it's a blocking and tackling exercise every quarter. We have a lot of folks in place constantly looking for deal flow, and we're able to originate in tough environments.

Matt Pendo, CEO

If you refer to Pages 5 and 6 in our investor deck, you'll find valuable data regarding originations, both by quarter and monthly. In the current quarter, the environment is highly competitive. We originated 2.5 on the private side, 63 on the public side, and 10 for the second year. In the previous quarter, those figures were 81, 84, and 22. This provides a clear picture of our performance on a month-to-month and quarter-by-quarter basis. The most recent month indicates a very competitive market, yet we are identifying attractive investment opportunities. However, we will remain cautious and prudent, utilizing the strengths of the Oaktree platform and the market share gains we've experienced over the past year.

Operator, Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Michael Mosticchio for any closing remarks.

Michael Mosticchio, Investor Relations

Great. Thanks, Chad, and thank you all for joining us on today's earnings conference call. A replay of this call will be available for 30 days on OCSL's website in the Investors section or by dialing (877) 344-7529 for U.S. callers or 1(412) 317-0088 for non-U.S. callers with the replay access code 10153868, beginning approximately 1 hour after this broadcast.

Operator, Operator

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.