10-Q 1 oscf-0630202210xq.htm 10-Q Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
 
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
 
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 814-01471
Oaktree Strategic Credit Fund
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
DELAWARE
(State or jurisdiction of
incorporation or organization)
 
87-6827742
(I.R.S. Employer
Identification No.)
333 South Grand Avenue, 28th Floor
Los Angeles, CA
(Address of principal executive office)
 
90071
(Zip Code)
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE:
(213) 830-6300
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   x     NO   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES   ¨   NO   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  o
 
Accelerated filer  o
Non-accelerated filer  x
Smaller reporting company  o
Emerging growth company  x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)    YES  ¨     NO  x

Securities registered pursuant to Section 12(b) of the Act
Title of Each ClassTrading Symbol(s)Name of Exchange on Which Registered
N/AN/AN/A
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at August 9, 2022
Class I shares of beneficial interest, $0.01 par value
12,045,529
Class S shares of beneficial interest, $0.01 par value
1,027,015





OAKTREE STRATEGIC CREDIT FUND

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022


TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
 




 

 


 

 


 



 

 



PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.
Oaktree Strategic Credit Fund
Consolidated Statement of Assets and Liabilities
(in thousands, except per share amounts)
(unaudited)
June 30, 2022
ASSETS
Assets:
Investments – Non-control/Non-affiliate, at fair value (cost: $328,624)$316,656 
Cash and cash equivalents167,094 
Due from affiliates621 
Interest receivable1,973 
Deferred financing costs3,482 
Deferred offering costs2,803 
Deferred tax asset28 
Other assets481 
Total assets$493,138 
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities$913 
Subscriptions received in advance16,359 
Due to affiliates2,289 
Interest payable260 
Payables from unsettled transactions115,350 
Credit facility payable90,000 
Total liabilities225,171 
Commitments and contingencies (Note 11)
Net assets:
Common shares, $0.01 par value per share; unlimited shares authorized, 11,301 shares issued and outstanding113 
Additional paid-in-capital277,456 
Accumulated distributable earnings (loss)(9,602)
Total net assets (equivalent to $23.71 per common share) (Note 10)267,967 
Total liabilities and net assets$493,138 
See notes to Consolidated Financial Statements.



3

Oaktree Strategic Credit Fund
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)



Three months ended
June 30, 2022
For the period from December 10, 2021 (commencement of operations) to
June 30, 2022
Interest income:
Non-control/Non-affiliate investments$3,523 $5,059 
Interest on cash and cash equivalents 48 48 
Total interest income3,571 5,107 
PIK interest income:
Non-control/Non-affiliate investments10 20 
Total PIK interest income10 20 
Fee income:
   Non-control/Non-affiliate investments
93 113 
   Total fee income93 113 
Total investment income3,674 5,240 
Expenses:
Base management fee286 286 
Professional fees212 415 
Board of trustees fees90 150 
Organization expenses549 549 
Amortization of continuous offering costs255 255 
Interest expense953 1,274 
Administrator expense60 84 
General and administrative expenses121 124 
Total expenses2,526 3,137 
Management fees waived (Note 9)(286)(286)
Expense support (Note 9)(804)(804)
Net expenses1,436 2,047 
Net investment income2,238 3,193 
Unrealized appreciation (depreciation):
Non-control/Non-affiliate investments(11,946)(11,968)
Net unrealized appreciation (depreciation)(11,946)(11,968)
Realized gains (losses):
Non-control/Non-affiliate investments(51)(43)
Net realized gains (losses)(51)(43)
Provision for income tax (expense) benefit(15)(16)
Net realized and unrealized gains (losses), net of taxes(12,012)(12,027)
Net increase (decrease) in net assets resulting from operations$(9,774)$(8,834)
Net investment income per common share — basic and diluted$0.35 $0.79 
Earnings (loss) per common share — basic and diluted (Note 5)$(1.53)$(2.18)
Weighted average common shares outstanding — basic and diluted6,407 4,051 
See notes to Consolidated Financial Statements.



4

Oaktree Strategic Credit Fund
Consolidated Statements of Changes in Net Assets
(in thousands, except per share amounts)
(unaudited)



Three months ended
June 30, 2022
For the period from December 10, 2021 (commencement of operations) to
June 30, 2022
Operations:
Net investment income$2,238 $3,193 
Net unrealized appreciation (depreciation)(11,946)(11,968)
Net realized gains (losses)(51)(43)
Provision for income tax (expense) benefit(15)(16)
Net increase (decrease) in net assets resulting from operations(9,774)(8,834)
Capital share transactions:
Distributions to shareholders— (768)
Capital contributions177,569 277,569 
Net increase (decrease) in net assets from capital share transactions177,569 276,801 
Total increase (decrease) in net assets167,795 267,967 
Net assets at beginning of period100,172 — 
Net assets at end of period$267,967 $267,967 
Net asset value per common share$23.71 $23.71 
Common shares outstanding at end of period11,301 11,301 

See notes to Consolidated Financial Statements.




5

Oaktree Strategic Credit Fund
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)







For the period from December 10, 2021 (commencement of operations) to
June 30, 2022
Operating activities:
Net increase (decrease) in net assets resulting from operations$(8,834)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Net unrealized (appreciation) depreciation11,968 
Net realized (gains) losses43 
PIK interest income(20)
Accretion of original issue discount on investments(441)
Amortization of deferred financing costs176 
Amortization of deferred offering costs255 
Deferred taxes(28)
Purchases of investments(342,878)
Proceeds from the sales and repayments of investments14,677 
Changes in operating assets and liabilities:
(Increase) decrease in due from affiliates (621)
(Increase) decrease in interest receivable(1,973)
(Increase) decrease in other assets (481)
Increase (decrease) in accounts payable, accrued expenses and other liabilities304 
Increase (decrease) in due to affiliates 942 
Increase (decrease) in interest payable260 
Increase (decrease) in payables from unsettled transactions115,350 
Net cash used in operating activities(211,301)
Financing activities:
Distributions paid in cash(768)
Borrowings under credit facility90,000 
Borrowings of secured borrowings44,588 
Proceeds from secured borrowings(44,588)
Proceeds from issuance of common shares277,569 
Deferred financing costs paid(3,658)
Deferred offering costs paid(1,102)
Subscriptions received in advance16,359 
Net cash provided by financing activities378,400 
Effect of exchange rate changes on foreign currency(5)
Net increase (decrease) in cash and cash equivalents167,094 
Cash and cash equivalents, beginning of period— 
Cash and cash equivalents, end of period$167,094 
Supplemental information:
Cash paid for interest$838 
Non-cash financing activities:
Deferred offering costs incurred $1,956 
Reconciliation to the Statement of Assets and LiabilitiesJune 30, 2022
Cash and cash equivalents$167,094 
Total cash and cash equivalents$167,094 

See notes to Consolidated Financial Statements.



6

Oaktree Strategic Credit Fund
Consolidated Schedule of Investments
June 30, 2022
(dollar amounts in thousands)
(unaudited)






Portfolio Company/Type of Investment (1)(2)(3)(4) Cash Interest Rate (5)IndustryPrincipal (6)CostFair ValueNotes
Non-Control/Non-Affiliate Investments
(7)
Access CIG, LLCDiversified Support Services
First Lien Term Loan, LIBOR+3.75% cash due 2/27/20255.32 %$1,995 $1,915 $1,889 (5)
Second Lien Term Loan, LIBOR+7.75% cash due 2/27/20269.32 %4,000 3,980 3,840 (5)
5,895 5,729 
AIP RD Buyer Corp.Distributors
Second Lien Term Loan, SOFR+7.75% cash due 12/23/20299.35 %4,563 4,478 4,394 (5)(8)
4,560 Common Units in RD Holding LP428 410 (8)
4,906 4,804 
Altice Financing S.A.Integrated Telecommunication Services
Fixed Rate Bond, 5.75% cash due 8/15/2029200 165 161 (10)
165 161 
Altice France S.A.Integrated Telecommunication Services
First Lien Term Loan, LIBOR+4.00% cash due 8/14/20265.41 %2,000 1,905 1,833 (5)(10)
Fixed Rate Bond, 5.50% cash due 10/15/20291,450 1,233 1,112 (10)
3,138 2,945 
American Auto Auction Group, LLCConsumer Finance
Second Lien Term Loan, SOFR+8.75% cash due 1/2/202910.80 %6,901 6,771 6,694 (5)(8)
6,771 6,694 
American Tire Distributors, Inc.Distributors
First Lien Term Loan, LIBOR+6.25% cash due 10/20/20287.00 %3,990 3,970 3,783 (5)
3,970 3,783 
Anastasia Parent, LLCPersonal Products
First Lien Term Loan, LIBOR+3.75% cash due 8/11/20256.00 %6,680 5,621 5,360 (5)
5,621 5,360 
APX Group Inc.Electrical Components & Equipment
Fixed Rate Bond, 5.75% cash due 7/15/2029275 228 213 (10)
228 213 
ASP Unifrax Holdings, Inc.Trading Companies & Distributors
First Lien Term Loan, LIBOR+3.75% cash due 12/12/20256.00 %4,109 3,951 3,657 (5)
Fixed Rate Bond, 7.50% cash due 9/30/20291,200 1,157 835 
Fixed Rate Bond, 5.25% cash due 9/30/2028250 221 200 
5,329 4,692 
ASP-R-PAC Acquisition Co LLCPaper Packaging
First Lien Term Loan, LIBOR+6.00% cash due 12/29/20277.67 %4,923 4,833 4,805 (5)(8)(10)
First Lien Revolver, LIBOR+6.00% cash due 12/29/2027— (11)(14)(5)(8)(9)(10)
4,822 4,791 
Astra Acquisition Corp.Application Software
First Lien Term Loan, LIBOR+5.25% cash due 10/25/20286.92 %5,861 5,663 5,123 (5)
5,663 5,123 
Asurion, LLCProperty & Casualty Insurance
Second Lien Term Loan, LIBOR+5.25% cash due 1/20/20296.92 %7,000 6,338 5,982 (5)
6,338 5,982 
athenahealth Group Inc.Health Care Technology
5,809 Shares of Series A Preferred Stock in Minerva Holdco, Inc., 10.75%5,693 5,347 (8)
5,693 5,347 



7

Oaktree Strategic Credit Fund
Consolidated Schedule of Investments
June 30, 2022
(dollar amounts in thousands)
(unaudited)






Portfolio Company/Type of Investment (1)(2)(3)(4) Cash Interest Rate (5)IndustryPrincipal (6)CostFair ValueNotes
BioXcel Therapeutics, Inc.Pharmaceuticals
First Lien Term Loan, 10.25% cash due 4/19/2027$3,130 $2,998 $3,004 (8)(10)
First Lien Delayed Draw Term Loan, 10.25% cash due 4/19/2027— — — (8)(9)(10)
First Lien Revenue Interest Financing Delayed Draw Term Loan due 9/30/2032— — — (5)(8)(9)(10)
12,453 Common Stock Warrants (exercise price $20.04) expiration date 4/19/202974 71 (8)(10)
3,072 3,075 
Boxer Parent Company Inc.Systems Software
First Lien Term Loan, LIBOR+3.75% cash due 10/2/20255.42 %3,988 3,794 3,726 (5)
3,794 3,726 
BYJU's Alpha, Inc.Application Software
First Lien Term Loan, LIBOR+5.50% cash due 11/24/20267.01 %4,987 4,938 4,264 (5)(10)
4,938 4,264 
Carvana Co.Automotive Retail
Fixed Rate Bond, 5.625% cash due 10/1/2025800 688 616 (10)
688 616 
CCO Holdings LLCCable & Satellite
Fixed Rate Bond, 4.50% cash due 5/1/20321,281 1,060 1,042 (10)
1,060 1,042 
Cengage Learning, Inc.Education Services
First Lien Term Loan, LIBOR+4.75% cash due 7/14/20265.75 %3,611 3,420 3,268 (5)
3,420 3,268 
CITGO Holding, Inc.Oil & Gas Refining & Marketing
First Lien Term Loan, LIBOR+7.00% cash due 8/1/20238.67 %4,938 4,920 4,885 (5)
4,920 4,885 
CITGO Petroleum Corp.Oil & Gas Refining & Marketing
First Lien Term Loan, LIBOR+6.25% cash due 3/28/20247.92 %3,990 3,957 3,966 (5)
3,957 3,966 
Clear Channel Outdoor Holdings, Inc.Advertising
First Lien Term Loan, LIBOR+3.50% cash due 8/21/20264.74 %4,987 4,570 4,310 (5)(10)
Fixed Rate Bond, 5.125% cash due 8/15/2027726 623 615 (10)
Fixed Rate Bond, 7.75% cash due 4/15/2028174 167 127 (10)
5,360 5,052 
CommScope Technologies LLCCommunications Equipment
Fixed Rate Bond, 5.00% cash due 3/15/2027500 424 370 (10)
Fixed Rate Bond, 6.00% cash due 6/15/2025500452 433 (10)
876 803 
Condor Merger Sub Inc.Systems Software
Fixed Rate Bond, 7.375% cash due 2/15/20304,527 4,501 3,693 
4,501 3,693 
Connect U.S. Finco LLCAlternative Carriers
First Lien Term Loan, LIBOR+3.50% cash due 12/11/20265.17 %1,995 1,878 1,842 (5)(10)
1,878 1,842 
Convergeone Holdings, Inc.IT Consulting & Other Services
First Lien Term Loan, LIBOR+5.00% cash due 1/4/20266.67 %4,987 4,512 4,289 (5)
4,512 4,289 
Delivery Hero FinCo LLCInternet & Direct Marketing Retail
First Lien Term Loan, SOFR+5.75% cash due 8/12/20276.88 %3,000 2,955 2,828 (5)(10)
2,955 2,828 



8

Oaktree Strategic Credit Fund
Consolidated Schedule of Investments
June 30, 2022
(dollar amounts in thousands)
(unaudited)






Portfolio Company/Type of Investment (1)(2)(3)(4) Cash Interest Rate (5)IndustryPrincipal (6)CostFair ValueNotes
Dealer Tire, LLCDistributors
First Lien Term Loan, LIBOR+4.25% cash due 12/12/20255.92 %$1,995 $1,920 $1,917 (5)
1,920 1,917 
DirecTV Financing, LLCCable & Satellite
First Lien Term Loan, LIBOR+5.00% cash due 8/2/20276.67 %7,812 7,486 7,214 (5)
7,486 7,214 
Domtar CorpPaper Products
First Lien Term Loan, LIBOR+5.50% cash due 11/30/20286.69 %2,985 2,960 2,881 (5)
2,960 2,881 
DTI Holdco, Inc.Research & Consulting Services
First Lien Term Loan, SOFR+4.75% cash due 4/26/20296.28 %8,000 7,730 7,511 (5)
7,730 7,511 
Eagle Parent Corp.Industrial Machinery
First Lien Term Loan, SOFR+4.25% cash due 4/1/20296.30 %2,993 2,920 2,878 (5)
2,920 2,878 
Establishment Labs Holdings Inc.Health Care Technology
First Lien Term Loan, 9.00% cash due 4/21/202710,136 9,985 9,983 (8)(10)
First Lien Delayed Draw Term Loan, 9.00% cash due 4/21/2027— (8)(9)(10)
9,988 9,986 
Frontier Communications Holdings, LLCIntegrated Telecommunication Services
Fixed Rate Bond, 6.00% cash due 1/15/20302,517 2,256 1,944 (10)
2,256 1,944 
Gibson Brands, Inc.Leisure Products
First Lien Term Loan, LIBOR+5.00% cash due 8/11/20286.41 %4,980 4,800 4,258 (5)(8)
4,800 4,258 
Grove Hotel Parcel Owner, LLCHotels, Resorts & Cruise Lines
First Lien Term Loan, SOFR+8.00% cash due 6/21/20279.45 %17,684 17,332 17,330 (5)(8)
First Lien Delayed Draw Term Loan, SOFR+8.00% cash due 6/21/2027— (70)(71)(5)(8)(9)
First Lien Revolver, SOFR+8.00% cash due 6/21/2027— (35)(35)(5)(8)(9)
17,227 17,224 
Harbor Purchaser Inc.Education Services
First Lien Term Loan, SOFR+5.25% cash due 4/9/20296.88 %8,550 8,189 7,775 (5)
8,189 7,775 
Impel Neuropharma, Inc.Health Care Technology
First Lien Revenue Interest Financing Term Loan due 2/15/20314,768 4,768 4,768 (5)(8)
First Lien Term Loan, SOFR+8.75% cash due 3/17/202710.95 %4,768 4,678 4,682 (5)(8)
9,446 9,450 
Innocoll Pharmaceuticals LimitedHealth Care Technology
First Lien Term Loan, 11.00% cash due 1/26/20274,316 4,139 4,046 (8)(10)
First Lien Delayed Draw Term Loan, 11.00% cash due 1/26/2027— — — (8)(9)(10)
36,087 Tranche A Warrant Shares (exercise price $4.23) expiration date 1/26/202985 79 (8)(10)
4,224 4,125 



9

Oaktree Strategic Credit Fund
Consolidated Schedule of Investments
June 30, 2022
(dollar amounts in thousands)
(unaudited)






Portfolio Company/Type of Investment (1)(2)(3)(4) Cash Interest Rate (5)IndustryPrincipal (6)CostFair ValueNotes
Iris Holding, Inc.Metal & Glass Containers
First Lien Term Loan, SOFR+4.75% cash due 6/28/20286.86 %$5,000 $4,600 $4,579 (5)(8)(10)
4,600 4,579 
Kings Buyer, LLCEnvironmental & Facilities Services
First Lien Term Loan, LIBOR+6.50% cash due 10/29/20278.75 %4,864 4,815 4,742 (5)(8)
First Lien Revolver, LIBOR+6.50% cash due 10/29/20278.75 %235 228 218 (5)(8)(9)
5,043 4,960 
LABL IncOffice Services & Supplies
First Lien Term Loan, LIBOR+5.00% cash due 10/29/20286.67 %5,708 5,464 5,301 (5)
5,464 5,301 
LSL Holdco, LLCHealth Care Distributors
First Lien Term Loan, LIBOR+6.00% cash due 1/31/20287.67 %9,134 8,964 8,860 (5)(8)
First Lien Revolver, LIBOR+6.00% cash due 1/31/20287.67 %406 387 376 (5)(8)(9)
9,351 9,236 
LTI Holdings, Inc.Electronic Components
First Lien Term Loan, LIBOR+3.50% cash due 9/6/20255.17 %6,982 6,648 6,515 (5)
6,648 6,515 
McAfee Corp.Systems Software
First Lien Term Loan, SOFR+4.00% cash due 3/1/20295.15 %7,000 6,568 6,393 (5)
6,568 6,393 
Mesoblast, Inc.Biotechnology
First Lien Term Loan, 8.00% cash 1.75% PIK due 11/19/20262,274 2,084 2,012 (8)(10)
First Lien Delayed Draw Term Loan, 8.00% cash 1.75% PIK due 11/19/2026— — — (8)(9)(10)
66,347 Warrant Shares (exercise price $7.26) expiration date 11/19/2028152 44 (8)(10)
2,236 2,056 
MHE Intermediate Holdings, LLCDiversified Support Services
First Lien Delayed Draw Term Loan, SOFR+6.00% cash due 7/21/20278.23 %1,660 1,590 1,527 (5)(8)(9)
1,590 1,527 
MRI Software LLCApplication Software
First Lien Delayed Draw Term Loan, LIBOR+5.50% cash due 2/10/2026— (18)(140)(5)(8)(9)
(18)(140)
NFP Corp.Other Diversified Financial Services
Fixed Rate Bond 6.875% cash due 8/15/20282,284 2,151 1,891 
2,151 1,891 
OEConnection LLCApplication Software
Second Lien Term Loan, LIBOR+7.00% cash due 9/25/20278.60 %5,355 5,258 5,141 (5)(8)
5,258 5,141 
OFSI BSL CLO XI, Ltd.Multi-Sector Holdings
Class E Notes, SOFR+7.60% cash due 7/18/20319.12 %2,500 2,150 2,150 (5)(8)(10)
2,150 2,150 
Peloton Interactive, Inc.Leisure Products
First Lien Term Loan, SOFR+6.50% cash due 5/25/20278.35 %7,000 6,728 6,689 (5)(10)
6,728 6,689 
PFNY Holdings, LLCLeisure Facilities
First Lien Term Loan, LIBOR+7.00% cash due 12/31/20268.00 %8,300 8,152 8,134 (5)(8)
First Lien Delayed Draw Term Loan, LIBOR+7.00% cash due 12/31/20269.25 %705 691 689 (5)(8)(9)
First Lien Revolver, LIBOR+7.00% cash due 12/31/2026— (7)(8)(5)(8)(9)
8,836 8,815 



10

Oaktree Strategic Credit Fund
Consolidated Schedule of Investments
June 30, 2022
(dollar amounts in thousands)
(unaudited)






Portfolio Company/Type of Investment (1)(2)(3)(4) Cash Interest Rate (5)IndustryPrincipal (6)CostFair ValueNotes
Profrac Holdings II, LLCIndustrial Machinery
First Lien Term Loan, SOFR+8.50% cash due 3/4/202510.01 %$5,800 $5,645 $5,684 (5)(8)
5,645 5,684 
Radiology Partners Inc.Health Care Distributors
First Lien Term Loan, LIBOR+4.25% cash due 7/9/20255.89 %6,253 5,863 5,639 (5)
Fixed Rate Bond, 9.25% cash due 2/1/20281,950 1,938 1,467 
7,801 7,106 
Renaissance Holding Corp.Diversified Banks
First Lien Term Loan, LIBOR+3.25% cash due 5/30/20254.92 %2,244 2,138 2,132 (5)
2,138 2,132 
RP Escrow Issuer LLCHealth Care Distributors
Fixed Rate Bond, 5.25% cash due 12/15/2025333 304 288 
304 288 
SM Wellness Holdings, Inc.Health Care Services
First Lien Term Loan, LIBOR+4.75% cash due 4/17/20285.89 %6,445 6,235 6,219 (5)(8)
6,235 6,219 
SPX Flow, Inc.Industrial Machinery
First Lien Term Loan, SOFR+4.50% cash due 4/5/20296.13 %8,447 8,101 7,894 (5)
8,101 7,894 
Surgery Center Holdings, Inc.Health Care Facilities
First Lien Term Loan, LIBOR+3.75% cash due 8/31/20264.95 %6,995 6,728 6,538 (5)
6,728 6,538 
Tacala, LLCRestaurants
Second Lien Term Loan, LIBOR+7.50% cash due 2/4/20289.17 %6,560 6,374 6,155 (5)
6,374 6,155 
TIBCO Software Inc.Application Software
Second Lien Term Loan, LIBOR+7.25% cash due 3/3/20288.92 %4,000 3,980 3,947 (5)
3,980 3,947 
Touchstone Acquisition, Inc.Health Care Supplies
First Lien Term Loan, LIBOR+6.00% cash due 12/29/20287.67 %8,592 8,432 8,335 (5)(8)
8,432 8,335 
Uniti Group LPSpecialized REITs
Fixed Rate Bond, 6.50% cash due 2/15/20291,750 1,609 1,287 (10)
Fixed Rate Bond, 4.75% cash due 4/15/2028700 601 577 (10)
2,210 1,864 
WP CPP Holdings, LLCAerospace & Defense
First Lien Term Loan, LIBOR+3.75% cash due 4/30/20254.99 %7,744 7,295 6,508 (5)
7,295 6,508 
WWEX Uni Topco Holdings, LLCAir Freight & Logistics
First Lien Term Loan, LIBOR+4.00% cash due 7/26/20285.46 %6,982 6,593 6,380 (5)
6,593 6,380 
Zayo Group Holdings, Inc.Alternative Carriers
First Lien Term Loan, LIBOR+3.00% cash due 3/9/20274.67 %6,000 5,513 5,388 (5)
Fixed Rate Bond, 6.125% cash due 3/1/2028534476 387 
Fixed Rate Bond, 4.00% cash due 3/1/2027700578 582 
6,567 6,357 
 Total Non-Control/Non-Affiliate Investments (118.2% of net assets)$328,624 $316,656 
 Cash and Cash Equivalents (62.4% of net assets)$167,094 $167,094 
Total Portfolio Investments, Cash and Cash Equivalents (180.5% of net assets)$495,718 $483,750 


See notes to Consolidated Financial Statements.



11

Oaktree Strategic Credit Fund
Consolidated Schedule of Investments
June 30, 2022
(dollar amounts in thousands)
(unaudited)






(1)All debt investments are income producing unless otherwise noted. All equity investments are non-income producing unless otherwise noted.
(2)See Note 3 in the accompanying notes to the Consolidated Financial Statements for portfolio composition by geographic region.
(3)Each of the Company's investments is pledged as collateral under the Company's senior secured credit facility.
(4)Interest rates may be adjusted from period to period on certain term loans and revolvers. These rate adjustments may be either temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements or permanent in nature per loan amendment or waiver documents.
(5)The interest rate on the principal balance outstanding for most floating rate loans is indexed to the London Interbank Offered Rate ("LIBOR") and/or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. Certain loans are also indexed to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) ("SOFR"). The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement and the cash interest rate as of period end. All LIBOR shown above is in U.S. dollars unless otherwise noted. As of June 30, 2022, the reference rates for the Company's variable rate loans were the 30-day LIBOR at 1.67%, the 90-day LIBOR at 2.25%, the 180-day LIBOR at 2.88%, the 360-day LIBOR at 3.61%, the 30-day SOFR at 1.53% and the 90-day SOFR at 2.05%. Most loans include an interest floor, which generally ranges from 0% to 1%. SOFR based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread.
(6)Principal includes accumulated payment in kind ("PIK") interest and is net of repayments, if any.
(7)Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments. Control Investments generally are defined by the Investment Company Act of 1940, as amended (the "Investment Company Act"), as investments in companies in which the Company owns more than 25% of the voting securities and/or has the power to exercise control over the management or policies of the company. Affiliate Investments generally are defined by the Investment Company Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.
(8)As of June 30, 2022, these investments are categorized as Level 3 within the fair value hierarchy established by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820") and were valued using significant unobservable inputs.
(9)Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.
(10)Investment is not a qualifying asset as defined under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of June 30, 2022, qualifying assets represented 87.5% of the Company's total assets and non-qualifying assets represented 12.5% of the Company's total assets.



See notes to Consolidated Financial Statements.





12

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


Note 1. Organization
Oaktree Strategic Credit Fund (the “Company”) is a Delaware statutory trust formed on November 24, 2021 and is structured as a non-diversified, closed-end management investment company. On February 3, 2022, the Company elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company intends to elect to be treated, and intends to qualify annually thereafter, as a registered investment company (a “RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). Effective as of February 3, 2022, the Company is externally managed by Oaktree Fund Advisors, LLC (the "Adviser") pursuant to an investment advisory agreement (the “Investment Advisory Agreement”), between the Company and the Adviser. The Adviser is a subsidiary of Oaktree Capital Group, LLC ("OCG"). In 2019, Brookfield Asset Management Inc. ("Brookfield") acquired a majority economic interest in OCG. OCG operates as an independent business within Brookfield, with its own product offerings and investment, marketing and support teams.

The Company’s investment objective is to generate stable current income and long-term capital appreciation. The Company seeks to invest primarily in a diversified portfolio of private debt across industries and transaction types, targeting bespoke, highly negotiated loans and private equity-related financings such as those backing leveraged buyouts.

In connection with its formation, the Company has the authority to issue an unlimited number of common shares of beneficial interest (“Common Shares”) at $0.01 per share par value. The Company offers on a continuous basis up to $5.0 billion aggregate offering price of Common Shares (the “Maximum Offering Amount”) pursuant to an offering registered with the Securities and Exchange Commission. The Company offers to sell any combination of three classes of Common Shares, Class S shares, Class D shares and Class I shares, with a dollar value up to the Maximum Offering Amount. The share classes have different ongoing distribution and/or shareholder servicing fees.

The Company accepted purchase orders and held investors’ funds in an interest-bearing escrow account until the Company received purchase orders for Common Shares of at least $100.0 million, excluding subscriptions by Oaktree Fund GP I, L.P. in respect of the Class I shares purchased by Oaktree Fund GP I, L.P. prior to March 31, 2022, in any combination of purchases of Class S shares, Class D shares and Class I shares.

As of June 1, 2022, the Company had satisfied the minimum offering requirement and the Board had authorized the release of proceeds from escrow. As of June 30, 2022, the Company has issued and sold 11,301,370 Class I shares for an aggregate purchase price of $277.6 million of which, $100.0 million was purchased by an affiliate of the Adviser.

Note 2. Significant Accounting Policies
Basis of Presentation:
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the consolidated financial statements have been made. The Company is an investment company following the accounting and reporting guidance in FASB ASC Topic 946, Financial Services - Investment Companies ("ASC 946").
Use of Estimates:
The preparation of the consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.
Consolidation:
The accompanying consolidated financial statements include the accounts of the Company and its consolidated subsidiary. The consolidated subsidiary is wholly-owned and, as such, consolidated into the consolidated financial statements. The assets of the consolidated subsidiary are not directly available to satisfy the claims of the creditors of the Company. As an



13

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


investment company, portfolio investments held by the Company are not consolidated into the consolidated financial statements but rather are included on the Consolidated Statement of Assets and Liabilities as investments at fair value.


Fair Value Measurements:

The Board, with the assistance of the audit committee of the Board (the “Audit Committee”), the Adviser and independent valuation firms engaged on the recommendation of the Adviser and at the direction of the Board, determines the fair value of its assets on at least a quarterly basis, in accordance with the terms of FASB ASC Topic 820, Fair Value Measurement. The Audit Committee is comprised of four persons, each of whom is not an “interested person” of the Company as defined in Section 2(a)(19) of the Investment Company Act (an “Independent Trustee”). The Company's investments are valued at fair value. For purposes of periodic reporting, the Company values its assets in accordance with GAAP and based on the principles and methods of valuation summarized below. GAAP requires that a “fair value” be assigned to all assets and establishes a single authoritative definition of fair value that includes a framework for measuring fair value and enhanced disclosures about fair value measurements.
GAAP establishes a hierarchal disclosure framework, which prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market price observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.
Financial assets and liabilities measured and reported at fair value are classified as follows:

Level I - Quoted unadjusted prices for identical instruments in active markets to which the Company has access at the date of measurement.

Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are directly or indirectly observable.

Level III - Valuations for which one or more significant inputs are unobservable. These inputs reflect our assessment of the assumptions that market participants use to value the investment based on the best available information. Level III inputs include prices obtained from brokers in markets for which there are few transactions, less public information exists or prices vary among broker market makers.
In some instances, an instrument may fall into different levels of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the value measurement. The assessment of the significance of an input requires judgment and considers factors specific to the instrument. The transfer of assets into or out of each fair value hierarchy level as a result of changes in the observability of the inputs used in measuring fair value are accounted for as of the beginning of the reporting period. Transfers resulting from a specific event, such as a reorganization or restructuring, are accounted for as of the date of the event that caused the transfer.

The Company conducts valuations of its investments as follows:

Valuation of Investments Without Observable Market Prices:

In the absence of observable market prices, the Company values Level III investments on a quarterly basis using the valuation methodologies described below.

Generally, the quarterly valuation process for Level III investments begins with each portfolio company, property or security being initially valued by the Adviser's valuation team in conjunction with the investment team. The preliminary valuations are then reviewed and approved by the valuation team, the valuation committee, which consists of senior members of the investment team, and designated investment professionals as well as the valuation officer who is independent of the investment teams. The Audit Committee reviews the preliminary valuations provided by the valuation committee and makes a recommendation to the Board regarding the fair value of the investments in our portfolio. The Board ultimately determines in good faith the fair value of each investment in the Company's portfolio. Results of the valuation process are evaluated each quarter, including an assessment of whether the underlying calculations should be adjusted or recalibrated. In connection with this process, the Company evaluates



14

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


changes in fair value measurements from period to period for reasonableness, considering items such as industry trends, general economic and market conditions, and factors specific to the investment.

Certain Level III assets, such as securities in an inactive market, securities for which price quotes of similar securities are available or investments which may require adjustment for investment-specific factors or restrictions, are valued using prices obtained from pricing vendors or brokers. The Company seeks to obtain at least two quotations for the subject or similar securities, typically from pricing vendors. If the Company is unable to obtain two quotes from pricing vendors, or if the prices obtained from pricing vendors are not within the Company's set threshold, the Company seeks to obtain a quote directly from a broker making a market for the asset. However, given the nature of the Company's portfolio, the Company does not expect that all of our Level III assets will be valued at least annually using prices obtained from pricing vendors or brokers. Generally, the Company does not adjust any of the prices received from these sources, and all prices are reviewed by the Company. The Adviser evaluates the prices obtained from pricing vendors or brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. The Adviser also performs back-testing of valuation information obtained from pricing vendors and brokers against actual prices received in transactions. In addition to ongoing monitoring and back-testing, the Adviser performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process.

Non-publicly traded debt and equity securities and other securities or instruments for which reliable market quotations are not available are valued by the Adviser using valuation methodologies applied on a consistent basis. These securities may initially be valued at the acquisition price as the best indicator of fair value. The Adviser reviews the significant unobservable inputs, valuations of comparable investments and other similar transactions for investments valued at acquisition price to determine whether another valuation methodology should be utilized. Subsequent valuations will depend on facts and circumstances known as of the valuation date and the application of valuation methodologies further described below under “– Valuation of Non-Exchange-Traded Investments.” The fair value may also be based on a pending transaction expected to close after the valuation date. These valuation methodologies involve a significant degree of management judgment. Accordingly, valuations do not necessarily represent the amounts which may eventually be realized from sales or other dispositions of investments in the future. Fair values may differ from the values that would have been used had a ready market for the investment existed, and the differences could be material to the consolidated financial statements.

Valuation of Exchange-Traded Investments

Securities listed on one or more national securities exchanges are valued at their last reported sales price on the date of valuation. If no sale occurred on the valuation date, the security is valued at the mean of the last “bid” and “ask” prices on the valuation date. Securities that are not marketable due to legal restrictions that may limit or restrict transferability are generally valued at a discount from quoted market prices. The discount would reflect the amount market participants would require due to the risk relating to the inability to access a public market for the security for the specified period and would vary depending on the nature and duration of the restriction and the risk and volatility of the underlying securities. Securities with longer duration restrictions or higher volatility are generally valued at a higher discount. Such discounts are generally estimated based on put option models or analysis of market studies. Instances where discounts are applied to quoted prices of restricted listed securities are expected to be infrequent.
Valuation of Non-Exchange-Traded Investments
Investments in corporate and government debt which are not listed or admitted to trading on any securities exchange are valued at the mean of the last bid and ask prices on the valuation date based on quotations supplied by recognized quotation services or by reputable broker dealers.
If the quotations obtained from pricing vendors or brokers are determined to not be reliable or are not readily available, the Company values such investments using different valuation techniques described below.

The transaction precedent technique utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable.

The market yield technique utilizes expected future cash flows, discounted using estimated current market rates. Discounted cash flow calculations may be adjusted to reflect current market conditions and/or the perceived credit risk of the borrowers. Consideration is also given to a borrower’s ability to meet principal and interest obligations; this may include an evaluation of collateral or the underlying value of the borrower, utilizing either the market or income techniques.



15

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)



The market technique utilizes valuations of comparable public companies or transactions and generally seeks to establish the enterprise value of the portfolio company using a market multiple technique. This technique takes into account a specific financial measure (such as earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, free cash flow, net operating income, net income, book value or net asset value) believed to be most relevant for the given company. Consideration may also be given to such factors as acquisition price of the security, historical and projected operational and financial results for the portfolio company, the strengths and weaknesses of the portfolio company relative to its comparable companies, industry trends, general economic and market conditions and other factors deemed relevant. The applicability and weight assigned to the market technique is determined based on the availability of reliable projections and comparable companies and transactions.

The income technique utilizes a discounted cash flow method that incorporates expected timing and level of cash flows, as well as assumptions in determining growth rates, income and expense projections, discount rates, capital structure, terminal values and other factors. The applicability and weight assigned to the income technique is determined based on the availability of reliable projections and comparable companies and transactions.

The valuation of securities may be impacted by expectations of investors’ receptiveness to a public offering of the securities, the size of the holding of the securities and any associated control, information with respect to transactions or offers for the securities (including the transaction pursuant to which the investment was made and the period of time elapsed from the date of the investment to the valuation date) and applicable restrictions on the transferability of the securities.
Investments made by the Company are, by nature, generally considered to be long-term investments and are not intended to be liquidated on a short-term basis. Additionally, these valuation methodologies involve a significant degree of management judgment. Accordingly, valuations by the Company do not necessarily represent the amounts which may eventually be realized from sales or other dispositions of investments in the future. Estimated fair values may differ from the values that would have been used had a ready market for the investment existed, and the differences could be material to the consolidated financial statements.
The Company may estimate the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions, including the current stock price (by using an enterprise value analysis as described above), the expected period until exercise, expected volatility of the underlying stock price, expected dividends and the risk-free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.
When the Company determines its net asset value as of the last day of a month that is not also the last day of a calendar quarter, the Company intends to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, pursuant to the Company's valuation policy, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation or, in the case of securities acquired after such date, cost, unless, in either case, the Adviser determines that since the most recent quarter end or the date of acquisition for securities acquired after quarter end, as the case may be, a significant observable change has occurred with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Company's valuation policy. Additionally, the Adviser may otherwise determine to update the most recent quarter end valuation of an investment without reliable market quotations that the Adviser considers to be material to the Company using a range of values from an independent valuation firm.
With the exception of the line items entitled "deferred financing costs," "deferred offering costs," "other assets," "deferred tax asset," and "credit facility payable," which are reported at amortized cost, all assets and liabilities on the Consolidated Statement of Assets and Liabilities approximate fair value. The carrying value of the line items titled "due from affiliates," "interest receivable," "accounts payable, accrued expenses and other liabilities," "subscriptions received in advance," "interest payable," "payables from unsettled transactions" and "due to affiliates" approximate fair value due to their short maturities.
Secured Borrowings:
Securities sold and simultaneously repurchased at a premium are reported as financing transactions in accordance with FASB ASC Topic 860, Transfers and Servicing ("ASC 860"). Amounts payable to the counterparty are due on the repurchase settlement date and, excluding accrued interest, such amounts are presented in the accompanying Statement of Assets and Liabilities as secured borrowings. Premiums payable are separately reported as accrued interest.



16

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


Investment Income:
Interest Income
Interest income, adjusted for accretion of original issue discount ("OID"), is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations. As of June 30, 2022, there were no investments on non-accrual status.
In connection with its investment in a portfolio company, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.
For the Company's secured borrowings, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the counterparty is recorded within interest expense in the Statement of Operations.
PIK Interest Income
The Company's investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; the Company's assessment of the portfolio company's business development success; information obtained by the Company in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. The Company's determination to cease accruing PIK interest is generally made well before the Company's full write-down of a loan or debt security. In addition, if it is subsequently determined that the Company will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on the Company’s debt investments increases the recorded cost bases of these investments in the consolidated financial statements including for purposes of computing the capital gains incentive fee payable by the Company to the Adviser. To maintain its status as a RIC, certain income from PIK interest may be required to be distributed to the Company’s shareholders, even though the Company has not yet collected the cash and may never do so.
Fee Income
The Adviser or its affiliates may provide financial advisory services to portfolio companies in connection with structuring a transaction and in return the Company may receive fees for capital structuring services. These fees are generally nonrecurring and are recognized by the Company upon the investment closing date. The Company may also receive additional fees in the ordinary course of business, including servicing, amendment, and prepayment fees, which are classified as fee income and recognized as they are earned or the services are rendered.
The Company has also structured exit fees across certain of its portfolio investments to be received upon the future exit of those investments. These fees are typically paid to the Company upon the earliest to occur of (i) a sale of the borrower or substantially all of the assets of the borrower, (ii) the maturity date of the loan or (iii) the date when full prepayment of the loan occurs. The receipt of such fees is contingent upon the occurrence of one of the events listed above for each of the investments. These fees are included in net investment income over the life of the loan.




17

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


Dividend Income
The Company generally recognizes dividend income on the ex-dividend date for public securities and the record date for private equity investments. Distributions received from private equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from private equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
Cash and Cash Equivalents:
Cash and cash equivalents consist of demand deposits and highly liquid investments with maturities of three months or less, when acquired. The Company places its cash and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and cash equivalents are included on the Company's Consolidated Schedule of Investments and cash equivalents are classified as Level 1 assets.
Receivables/Payables from Unsettled Transactions:
Receivables/payables from unsettled transactions consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.
Deferred Financing Costs:
Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities. Deferred financing costs incurred in connection with credit facilities are capitalized as an asset when incurred. Deferred financing costs incurred in connection with all other debt arrangements are a direct deduction from the related debt liability when incurred. Deferred financing costs are amortized using the effective interest method over the term of the respective debt arrangement. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense.
Organization and Offering Costs

Costs associated with the organization of the Company will be expensed as incurred. Costs associated with the offering of Common Shares of the Company are capitalized as "deferred offering costs" on the Consolidated Statement of Assets and Liabilities and amortized over a twelve-month period from incurrence.

For each of the three months ended June 30, 2022 and the period from December 10, 2021 (commencement of operations) to June 30, 2022, the Company expensed organization costs of $549. As of June 30, 2022, the Company incurred $3,058 of offering costs which were capitalized. For each of the three months ended June 30, 2022 and the period from December 10, 2021 (commencement of operations) to June 30, 2022, the Company amortized offering costs of $255.
Income Taxes:

On February 3, 2022, the Company elected to be regulated as a BDC under the Investment Company Act. The Company also intends to elect to be treated as a RIC under the Code as soon as reasonably practicable. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.



18

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses.
In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.
The Company holds certain portfolio investments through a taxable subsidiary. The purpose of the Company's taxable subsidiary is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiary is consolidated for financial reporting purposes, and portfolio investments held by it are included in the Company’s consolidated financial statements as portfolio investments and recorded at fair value. The taxable subsidiary is not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the liability method to account for its taxable subsidiary's income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.
Recently Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31, 2022. As of June 30, 2022, the adoption of this guidance did not have an impact on the Company's consolidated financial statements.
Note 3. Portfolio Investments
Portfolio Composition
As of June 30, 2022, the fair value of the Company's investment portfolio was $316.7 million and was composed of investments in 67 portfolio companies.
As of June 30, 2022, the Company's investment portfolio consisted of the following:
 
 June 30, 2022
Cost: % of Total Investments
Senior Secured Debt$305,191 92.88 %
Subordinated Debt17,001 5.17 %
Preferred Equity5,693 1.73 %
Common Equity 739 0.22 %
Total$328,624 100.00 %




19

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


 June 30, 2022
Fair Value: % of Total Investments% of Net Assets
Senior Secured Debt$296,194 93.54 %110.53 %
Subordinated Debt14,511 4.58 %5.42 %
Preferred Equity5,347 1.69 %2.00 %
Common Equity604 0.19 %0.23 %
Total$316,656 100.00 %118.17 %

The composition of the Company's debt investments as of June 30, 2022 by floating rates and fixed rates was as follows:
 June 30, 2022
 Fair Value% of Debt Investments
Floating rate $273,817 88.13 %
Fixed rate 36,888 11.87 %
Total$310,705 100.00 %


The geographic composition of the Company's portfolio is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business. The following tables show the portfolio composition by geographic region at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets:
 June 30, 2022
Cost:% of Debt Investments
United States$305,562 92.98 %
Costa Rica9,988 3.04 %
India4,938 1.50 %
France3,303 1.01 %
Germany2,955 0.90 %
United Kingdom1,878 0.57 %
Total$328,624 100.00 %

 June 30, 2022
Fair Value: % of Total Investments% of Net Assets
United States$294,630 93.05 %109.95 %
Costa Rica9,986 3.15 %3.73 %
India4,264 1.35 %1.59 %
France3,106 0.98 %1.16 %
Germany2,828 0.89 %1.06 %
United Kingdom1,842 0.58 %0.69 %
Total$316,656 100.00 %118.17 %





20

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


The composition of the Company's portfolio by industry at cost as a percentage of total investments and at fair value as a percentage of total investments and net assets as of June 30, 2022 was as follows:
June 30, 2022
Cost: % of Total Investments
Health Care Technology$29,351 8.95 %
Application Software19,821 6.03 %
Health Care Distributors17,456 5.31 %
Hotels, Resorts & Cruise Lines17,227 5.24 %
Industrial Machinery16,666 5.07 %
Systems Software14,863 4.52 %
Education Services11,609 3.53 %
Leisure Products11,528 3.51 %
Distributors10,796 3.29 %
Oil & Gas Refining & Marketing8,877 2.70 %
Leisure Facilities8,836 2.69 %
Cable & Satellite8,546 2.60 %
Alternative Carriers8,445 2.57 %
Health Care Supplies8,432 2.57 %
Research & Consulting Services7,730 2.35 %
Diversified Support Services7,485 2.28 %
Aerospace & Defense7,295 2.22 %
Consumer Finance6,771 2.06 %
Health Care Facilities6,728 2.05 %
Electronic Components6,648 2.02 %
Air Freight & Logistics6,593 2.01 %
Restaurants6,374 1.94 %
Property & Casualty Insurance6,338 1.93 %
Health Care Services6,235 1.90 %
Personal Products5,621 1.71 %
Integrated Telecommunication Services5,559 1.69 %
Office Services & Supplies5,464 1.66 %
Advertising5,360 1.63 %
Trading Companies & Distributors5,329 1.62 %
Environmental & Facilities Services5,043 1.53 %
Paper Packaging4,822 1.47 %
Metal & Glass Containers4,600 1.40 %
IT Consulting & Other Services4,512 1.37 %
Pharmaceuticals3,072 0.93 %
Paper Products2,960 0.90 %
Internet & Direct Marketing Retail2,955 0.90 %
Biotechnology2,236 0.68 %
Specialized REITs2,210 0.67 %
Other Diversified Financial Services2,151 0.65 %
Multi-Sector Holdings2,150 0.65 %
Diversified Banks2,138 0.65 %
Communications Equipment876 0.27 %
Automotive Retail688 0.21 %
Electrical Components & Equipment228 0.07 %
Total$328,624 100.00 %



21

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


June 30, 2022
Fair Value: % of Total Investments% of Net Assets
Health Care Technology$28,908 9.15 %10.76 %
Application Software18,335 5.79 %6.84 %
Hotels, Resorts & Cruise Lines17,224 5.44 %6.43 %
Health Care Distributors16,630 5.25 %6.21 %
Industrial Machinery16,456 5.20 %6.14 %
Systems Software13,812 4.36 %5.15 %
Education Services11,043 3.49 %4.12 %
Leisure Products10,947 3.46 %4.09 %
Distributors10,504 3.32 %3.92 %
Oil & Gas Refining & Marketing8,851 2.80 %3.30 %
Leisure Facilities8,815 2.78 %3.29 %
Health Care Supplies8,335 2.63 %3.11 %
Cable & Satellite8,256 2.61 %3.08 %
Alternative Carriers8,199 2.59 %3.06 %
Research & Consulting Services7,511 2.37 %2.80 %
Diversified Support Services7,256 2.29 %2.71 %
Consumer Finance6,694 2.11 %2.50 %
Health Care Facilities6,538 2.06 %2.44 %
Electronic Components6,515 2.06 %2.43 %
Aerospace & Defense6,508 2.06 %2.43 %
Air Freight & Logistics6,380 2.01 %2.38 %
Health Care Services6,219 1.96 %2.32 %
Restaurants6,155 1.94 %2.30 %
Property & Casualty Insurance5,982 1.89 %2.23 %
Personal Products5,360 1.69 %2.00 %
Office Services & Supplies5,301 1.67 %1.98 %
Advertising5,052 1.60 %1.89 %
Integrated Telecommunication Services5,050 1.59 %1.88 %
Environmental & Facilities Services4,960 1.57 %1.85 %
Paper Packaging4,791 1.51 %1.79 %
Trading Companies & Distributors4,692 1.48 %1.75 %
Metal & Glass Containers4,579 1.45 %1.71 %
IT Consulting & Other Services4,289 1.35 %1.60 %
Pharmaceuticals3,075 0.97 %1.15 %
Paper Products2,881 0.91 %1.08 %
Internet & Direct Marketing Retail2,828 0.89 %1.06 %
Multi-Sector Holdings2,150 0.68 %0.80 %
Diversified Banks2,132 0.67 %0.80 %
Biotechnology2,056 0.65 %0.77 %
Other Diversified Financial Services1,891 0.60 %0.71 %
Specialized REITs1,864 0.59 %0.70 %
Communications Equipment803 0.25 %0.30 %
Automotive Retail616 0.19 %0.23 %
Electrical Components & Equipment213 0.07 %0.08 %
Total$316,656 100.00 %118.17 %




22

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


Fair Value Measurements
The following table presents the financial instruments carried at fair value as of June 30, 2022 on the Company's Consolidated Statement of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:
Level 1Level 2Level 3Total
Senior secured debt $— $175,979 $120,215 $296,194 
Subordinated debt— 12,361 2,150 14,511 
Common equity— — 604 604 
Preferred equity— — 5,347 5,347 
Total investments at fair value$ $188,340 $128,316 $316,656 

When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are significant to the overall fair value measurement. However, Level 3 financial instruments typically have both unobservable or Level 3 components and observable components (i.e. components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology.
The principal value of the credit facility approximates fair value due to its variable rate and is included in Level 3 of the hierarchy.
The following table provides a roll-forward of the changes in fair value from March 31, 2022 to June 30, 2022, for all investments for which the Company determined fair value using unobservable (Level 3) factors:
Senior Secured Debt Subordinated DebtPreferred EquityCommon Equity Total
Fair value as of March 31, 2022$77,000 $— $5,760 $647 $83,407 
Purchases45,437 2,150 — 74 47,661 
Sales and repayments(3,880)— — — (3,880)
Transfers in (a)2,944 — — — 2,944 
Capitalized PIK interest income10 — — — 10 
Accretion of OID201 — — — 201 
Net unrealized appreciation (depreciation)(1,497)— (413)(117)(2,027)
Fair value as of June 30, 2022$120,215 $2,150 $5,347 $604 $128,316 
Net unrealized appreciation (depreciation) relating to Level 3 assets still held at June 30, 2022 and reported within net unrealized appreciation (depreciation) in the Consolidated Statements of Operations for the three months ended June 30, 2022$(1,497)$— $(413)$(117)$(2,027)
__________
(a) There were transfers into Level 3 from Level 2 for certain investments during the three months ended June 30, 2022 as a result of a change in the number of market quotes available and/or a change in market liquidity.




23

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


The following table provides a roll-forward of the changes in fair value from December 10, 2021 (commencement of operations) to June 30, 2022, for all investments for which the Company determined fair value using unobservable (Level 3) factors:
Senior Secured Debt Subordinated DebtPreferred EquityCommon Equity Total
Purchases$133,553 $2,150 $5,693 $767 $142,163 
Sales and repayments(12,156)— — (28)(12,184)
Capitalized PIK interest income20 — — — 20 
Accretion of OID306 — — 306 
Net unrealized appreciation (depreciation)(1,508)(346)(135)(1,989)
Fair value as of June 30, 2022$120,215 $2,150 $5,347 $604 $128,316 
Net unrealized appreciation (depreciation) relating to Level 3 assets still held at June 30, 2022 and reported within net unrealized appreciation (depreciation) in the Consolidated Statements of Operations for the period from December 10, 2021 (commencement of operations) to June 30, 2022$(1,508)$— $(346)$(135)$(1,989)

Significant Unobservable Inputs for Level 3 Investments
The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which were carried at fair value as of June 30, 2022:
AssetFair ValueValuation TechniqueUnobservable InputRangeWeighted
Average (a)
Senior secured debt$71,398 Market YieldMarket Yield(b)10.0%-16.0%12.4%
27,207Transaction Precedent Transaction Price(c)N/A-N/AN/A
21,610Broker QuotationsBroker Quoted Price(d)N/A-N/AN/A
Subordinated debt2,150Broker QuotationsBroker Quoted Price(d)N/A-N/AN/A
Common equity & preferred equity5,880Enterprise ValueEBITDA Multiple(e)10.0x-15.0x14.3x
71Transaction Precedent Transaction Price(c)N/A-N/AN/A
Total$128,316 
_____________________
(a) Weighted averages are calculated based on fair value of investments.
(b) Used when market participant would take into account market yield when pricing the investment.
(c) Used when there is an observable transaction or pending event for the investment.
(d) The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. The Company evaluates the quotations provided by pricing vendors and brokers based on available market information, including trading activity of the subject or similar securities, or by performing a comparable security analysis to ensure that fair values are reasonably estimated. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by the Adviser.
(e) Used when market participant would use such multiple when pricing the investment.

Note 4. Fee Income
For the three months ended June 30, 2022 and the period from December 10, 2021 (commencement of operations) to June 30, 2022, the Company recorded total fee income of $93 and $113, respectively, of which $20 and $40, respectively, was recurring in nature. Recurring fee income consisted of servicing fees and exit fees.




24

OAKTREE STRATEGIC CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)


Note 5. Share Data and Distributions
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share, pursuant to FASB ASC Topic 260-10, Earnings per Share, for the three months ended June 30, 2022 and the period from December 10, 2021 (commencement of operations) to June 30, 2022:
   (Share amounts in thousands)Three months ended
June 30, 2022
For the period from December 10, 2021 (commencement of operations) to
June 30, 2022
Earnings (loss) per common share — basic and diluted:
Net increase (decrease) in net assets resulting from operations
$(9,774)$(8,834)
Weighted average common shares outstanding
6,407 4,051 
Earnings (loss) per common share — basic and diluted
$(1.53)$(2.18)

Changes in Net Assets
The following table presents the changes in net assets for the three months ended June 30, 2022 and the period from December 10, 2021 (commencement of operations) to June 30, 2022:
Common Shares
  (Share amounts in thousands)SharesPar ValueAdditional Paid-in-CapitalAccumulated Distributable Earnings (Loss)Total Net Assets
Capital contributions1,000 $10 $24,990 $— $25,000 
Net investment income— — — 75 75 
Net unrealized appreciation (depreciation)— — — (3)(3)
Balance at December 31, 20211,000 $10 $24,990 $72 $25,072 
Capital contributions3,000 30 74,970 — 75,000 
Net investment income— — — 880 880 
Net unrealized appreciation (depreciation)— — — (19)(19)
Net realized gains (losses)— — — 
Provision for income tax (expense) benefit— — — (1)(1)
Distributions to shareholders— — — (768)(768)
Balance at March 31, 20224,000 $40 $99,960 $172 $100,172 
Capital contributions7,301 73