T. ROWE PRICE OHA SELECT PRIVATE CREDIT FUND ANNOUNCES DECEMBER 31, 2023 FINANCIAL RESULTS AND CLOSES PRIVATE PLACEMENT OF $300M 5-YEAR SENIOR UNSECURED NOTES
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Insights
The financial results and private placement announcement by T. Rowe Price OHA Select Private Credit Fund (OCREDIT) are indicative of a significant capital management strategy and growth trajectory. The company's successful ramp from $50 million in initial equity commitments to a portfolio exceeding $1 billion demonstrates robust fund performance and investor confidence. The issuance of $300 million in 5-Year Senior Unsecured Notes at a fixed interest rate of 7.77% is particularly noteworthy as it aligns with the current credit market conditions where investors are seeking higher yields amidst a fluctuating interest rate environment.
OCREDIT's net investment income (NII) per share increase and earnings per share (EPS) growth reflect a strong earnings quality and operational efficiency. The net unrealized appreciation signifies potential for future gains, while the increase in net asset value (NAV) per share suggests a positive trend in asset valuation. It is important to note that the ending debt-to-equity ratio of 0.79x, compared to the prior quarter's 0.78x, remains within a manageable range, indicating a balanced approach to leverage. However, investors should monitor this metric closely as excessive leverage can pose risks to financial stability.
The company's investment portfolio, predominantly composed of first lien senior secured loans, highlights a conservative risk profile with a focus on capital preservation. The floating rate nature of the debt investments is a strategic advantage in a rising interest rate environment, as it allows for interest income to potentially increase in tandem with rate hikes, thereby protecting margins.
The private credit market, where OCREDIT operates, has been expanding as traditional banks have become more regulated, creating opportunities for alternative lenders. OCREDIT's focus on senior private lending is strategic, tapping into a growing demand for private credit solutions among mid-sized companies. The fund's diverse investment across 22 industries suggests a well-diversified portfolio, which can mitigate industry-specific risks and provide stability in returns.
The significant increase in total fair value of investments and total assets for OCREDIT highlights the fund's aggressive investment activity and asset growth. This, coupled with consistent distributions, including a special distribution, showcases the fund's ability to return capital to shareholders while still expanding its asset base. The annualized distribution yield of 9.9% is attractive, especially when considering the current low-interest-rate environment, which often leaves income-focused investors searching for higher-yielding opportunities.
Investors should consider the implications of OCREDIT's growth strategy on the broader private credit and business development company (BDC) sectors. As funds like OCREDIT continue to scale, they may exert competitive pressure on yields and drive innovation in deal structuring within the private lending space.
The Master Note Purchase Agreement for the issuance of $300 million in Series 2024A Senior Notes is a critical legal document that outlines the terms and conditions of the notes offering. The fixed interest rate of 7.77% per annum until 2029 provides investors with clarity regarding their expected income from these notes. It is essential for investors to understand the covenants and restrictions associated with these notes, as they can affect the company's operational flexibility and financial obligations.
Furthermore, the classification of the notes as 'Senior Unsecured' means they are given a high priority in case of liquidation, although they are not backed by specific collateral. This positioning in the capital structure is crucial for investors to assess the risk-return profile of the notes.
It is also worth noting that the private placement nature of the notes offering implies a more selective process of investor solicitation, often targeting institutional investors. This can have implications for the liquidity and marketability of the notes, as they may not be as readily tradable as publicly issued securities.
"We are pleased with OCREDIT's performance and ramp to-date, having grown from
QUARTERLY HIGHLIGHTS
- Net investment income (NII) per share was
$1.03 12.7% 1; - Earnings per share was
$1.42 15.96% 3; - Net unrealized appreciation on investments was
$9.2 million - Net asset value per share as of December 31, 2023 was
$28.00 1.9% from$27.49 - Gross and net investment fundings were
$228.9 million $208.3 million - Ending debt-to-equity was 0.79x, as compared to 0.78x as of September 30, 2023;
- The Company had debt outstanding of
$558.6 million 8.0% . During the fourth quarter, the Company had net borrowings of$175 million - On March 7, 2024, the Company entered into a Master Note Purchase Agreement governing the issuance of
$300.0 million 7.77% per year; - During the fourth quarter, the Company issued 7,179,054 of Class I common shares for proceeds of
$200.6 million $125.1 million
DIVIDENDS
During the fourth quarter, the Company declared total distributions of
From January 1, 2024 through March 13, 2024, the Company declared the following distributions:
($ per share) | January 29, 2024 | February 27, 2024 |
Base Distribution | ||
Variable Distribution | ||
Total Distribution |
SELECTED FINANCIAL HIGHLIGHTS
($ in millions, unless otherwise noted) | Q4 2023 | Q3 2023 | |
Net investment income per share | |||
Net investment income | |||
Earnings per share | |||
($ in millions, unless otherwise noted) | As of December 31, 2023 | As of September 30, 2023 | |
Total fair value of investments | |||
Total assets | |||
Total net assets | |||
Net asset value per share | |||
INVESTMENT ACTIVITY
For three months ended December 31, 2023, net investment fundings were
($ in millions, unless otherwise noted) | Q4 2023 | Q3 2023 |
Investment Fundings | ||
Sales and Repayments | ||
Net Investment Activity |
As of December 31, 2023, the Company's investment portfolio had a fair value of
ABOUT T.
T. Rowe Price OHA Select Private Credit Fund (the "Company" or "OCREDIT") is a non-diversified, closed-end management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Company has also elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"). OHA Private Credit Advisors LLC (the "Adviser") is the investment adviser of the Company. The Adviser is registered as an investment adviser with the
Please visit www.ocreditfund.com for additional information.
FORWARD-LOOKING STATEMENTS
Certain information contained in this communication constitutes "forward-looking statements" within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology, such as "outlook," "indicator," "believes," "expects," "potential," "continues," "may," "can," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates", "confident," "conviction," "identified" or the negative versions of these words or other comparable words thereof. These may include financial projections and estimates and their underlying assumptions, statements about plans, objectives, and expectations with respect to future operations, statements regarding future performance, statements regarding economic and market trends and statements regarding identified but not yet closed investments. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. OCREDIT believes these factors also include but are not limited to those described under the section entitled "Risk Factors" in its prospectus, and any such updated factors included in its periodic filings with the Securities and Exchange Commission (the "SEC"), which are accessible on the SEC's website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this document (or OCREDIT's prospectus and other filings). Except as otherwise required by federal securities laws, OCREDIT undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
ABOUT OAK HILL ADVISORS
Oak Hill Advisors (OHA) is a leading global credit-focused alternative asset manager with over 30 years of investment experience. OHA works with institutions and individuals and seeks to deliver a consistent track record of risk-adjusted returns with downside focus. The firm manages approximately
With over 420 experienced professionals across six global offices, OHA brings a collaborative approach to offering investors a single platform to meet their diverse credit needs. OHA is the private markets platform of T. Rowe Price Group, Inc. (NASDAQ – GS: TROW). For more information, please visit oakhilladvisors.com.
ABOUT T. ROWE PRICE
Founded in 1937, T. Rowe Price (NASDAQ – GS: TROW) helps individuals and institutions around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Clients rely on the award-winning firm for its retirement expertise and active management of equity, fixed income, alternatives, and multi-asset investment capabilities. T. Rowe Price has
T. Rowe Price OHA Select Private Credit Fund Consolidated Statements of Assets and Liabilities (in thousands, except per share amounts) | ||
As of | ||
December 31, 2023 | December 31, 2022 | |
Assets | ||
Investments at fair value: | ||
Non-controlled/non-affiliated investments (cost of | $ 1,148,412 | $ 71,758 |
Cash, cash equivalents and restricted cash | 105,456 | 19,486 |
Interest receivable for non-controlled/non-affiliated investments | 15,498 | 356 |
Deferred financing costs | 6,021 | 335 |
Deferred offering costs | 1,705 | - |
Receivable for investments sold | 9,044 | 65 |
Total assets | $ 1,286,136 | $ 92,000 |
LIABILITIES | ||
Debt (Note 6) | $ 558,630 | $ 31,000 |
Payable for investments purchased | 151 | 10,894 |
Interest and debt fee payable | 4,846 | 103 |
Distribution payable | 11,573 | - |
Board of Trustees fee payable | - | 92 |
Unrealized depreciation on foreign currency forward contracts | 1,048 | - |
Accrued expenses and other liabilities | 5,457 | 216 |
Total liabilities | $ 581,705 | $ 42,305 |
Commitments and contingencies (Note 8) | ||
NET ASSETS | ||
Class I shares, | 252 | 20 |
Additional paid in capital | 687,139 | 49,980 |
Distributable earnings (loss) | 17,040 | (305) |
Total net assets | $ 704,431 | $ 49,695 |
Total liabilities and net assets | $ 1,286,136 | $ 92,000 |
Net asset value per share | $ 28.00 | $ 24.85 |
See accompanying notes to consolidated financial statements.
EDGAR Entity Landing Page (sec.gov)
T. Rowe Price OHA Select Private Credit Fund Consolidated Statements of Operations (in thousands, except per share amounts) | ||
For the Year December 31, | For the Period | |
Investment income from non-controlled / non-affiliated | ||
Interest income | $ 56,379 | $ 487 |
Other income | 3,465 | 130 |
Total investment income | 59,844 | 617 |
Expenses: | ||
Interest and debt fee expense | 19,516 | 129 |
Management fees | 2,522 | - |
Income incentive fees | 4,178 | - |
Professional fees | 1,299 | 208 |
Board of Trustees fees | 389 | 92 |
Administrative service expenses | 550 | 13 |
Organizational costs | 94 | - |
Other general & administrative expenses | 1,463 | - |
Amortization of deferred offering costs | 1,102 | - |
Total expenses before fee waivers and expense support | 31,113 | 442 |
Expense support | (402) | - |
Management fees waiver | (2,522) | - |
Income incentive fee waiver | (4,178) | - |
Total expenses net of fee waivers and expense support | 24,011 | 442 |
Net investment income before taxes | 35,833 | 175 |
Excise tax expense | 275 | - |
Net investment income | 35,558 | 175 |
Realized and unrealized gain (loss): | ||
Realized gain (loss): | ||
Non-controlled/non-affiliated investments | 51 | 8 |
Foreign currency transactions | 114 | - |
Foreign currency forward contracts | 194 | - |
Net realized gain (loss) | 359 | 8 |
Net change in unrealized appreciation (depreciation): | ||
Non-controlled/non-affiliated investments | 17,174 | (488) |
Foreign currency forward contracts | (1,048) | - |
Net change in unrealized appreciation (depreciation) | 16,126 | (488) |
Net realized and unrealized gain (loss) | 16,485 | (480) |
Net increase (decrease) in net assets resulting from | $ 52,043 | $ (305) |
Net investment income per common share | $ 3.85 | $ (0.09) |
Increase in net assets resulting from operations per common | $ 5.64 | $ (0.15) |
Weighted average common shares outstanding | 9,227,235 | 2,000,000 |
See accompanying notes to consolidated financial statements.
EDGAR Entity Landing Page (sec.gov)
For a more detailed description of OCREDIT's investment guidelines and risk factors, please refer to the prospectus. Consider the investment objectives, risks, and charges and expenses carefully before investing or sending money. For a free prospectus containing this and other information, call 1-855-405-6488 or visit www.troweprice.com. Read it carefully.
OCREDIT is a non-exchange traded business development company ("BDC") that expects to invest at least
Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Securities regulators have also not passed upon whether this offering can be sold in compliance with existing or future suitability or Regulation Best Interest standard to any or all purchasers.
As of October 4, 2023, OCREDIT is available in 51 states and territories, excluding
As of October 4, 2023, OCREDIT is not registered for offer or sale outside of
BDCs may charge management fees, incentive fees, as well as other fees associated with servicing loans. These fees will detract from the total return.
OCREDIT may in certain circumstances invest in companies experiencing distress increasing the risk of default or failure. OCREDIT is not listed on an exchange which heightens liquidity risk for an investor. OCREDIT has limited prior operating history and there is no assurance that it will achieve its investment objectives. The Company's public offering is a "blind pool" offering and thus investors will not have the opportunity to evaluate the Company's investments before they are made. Investors should not expect to be able to sell shares regardless of performance and should consider that they may not have access to the money invested for an extended period of time and may be unable to reduce their exposure in a market downturn.
OCREDIT employs leverage, which increases the volatility of OCREDIT's investments and will magnify the potential for loss. Fixed-income securities are subject to credit risk, call risk, and interest rate risk. As interest rates rise, bond prices fall. Investments in high-yield bonds involve greater risk. International investments can be riskier than
OCREDIT is "non-diversified," meaning it may invest a greater portion of its assets in a single company. OCREDIT's share price can be expected to fluctuate more than that of a comparable diversified fund. OCREDIT may invest in derivatives, which may be riskier or more volatile than other types of investments because they are generally more sensitive to changes in market or economic conditions.
Account opening and closing fees may apply depending on the amount invested and the timing of the account closure. There may be costs associated with the investments in the account such as periodic management fees, incentive fees, loads, other expenses or brokerage commissions. Fees for optional services may also apply.
Opinions and estimates offered herein constitute the judgment of Oak Hill Advisors, L.P. as of the date this document is provided to an investor and are subject to change as are statements about market trends. All opinions and estimates are based on assumptions, all of which are difficult to predict and many of which are beyond the control of Oak Hill Advisors, L.P. In preparing this document, Oak Hill Advisors, L.P. has relied upon and assumed, without independent verification, the accuracy and completeness of all information. Oak Hill Advisors, L.P. believes that the information provided herein is reliable; however, it does not warrant its accuracy or completeness. Certain information contained in the press release discusses general market activity, industry, or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Diversification cannot assure a profit or protect against loss in a declining market. Potential investors are urged to consult a tax professional regarding the possible economic, tax, legal, or other consequences of investing in OCREDIT in light of their particular circumstances.
In
© 2024 Oak Hill Advisors. All Rights Reserved. OHA is a trademark of Oak Hill Advisors, L.P. T. ROWE PRICE is a trademark of T. Rowe Price Group, Inc. All other trademarks shown are the property of their respective owners. Use does not imply endorsement, sponsorship, or affiliation of Oak Hill Advisors with any of the trademark owners.
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1 Computed as (a) the annual stated interest rate or yield plus the annual accretion of discounts or less the annual amortization of premiums, as applicable, on income producing securities, divided by (b) the total relevant investments at amortized cost or fair value, as applicable. |
2 Inception is November 14, 2022. |
3 Annualized return based on net asset value calculated as the change in net asset value per share during the respective period, assuming distributions that have been declared are reinvested on the effects of the performance of the Company during the period. Past performance is no guarantee of future results. |
4 Does not include common shares sold through the Company's distribution reinvestment plan. |
5 Future distribution payments are not guaranteed. |
View original content:SOURCE Oak Hill Advisors; T. Rowe Price Associates, Inc.
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