Oaktree BDC Cuts Distribution, Uses Affiliate Backstop After Tender Demand Exceeds Cap

Oaktree Strategic Credit Fund, a non-traded business development company advised by Oaktree Fund Advisors, cut its monthly distribution and disclosed that an affiliated entity purchased investor shares through a promissory note after the BDC received tender requests exceeding its quarterly repurchase limit during the first quarter of 2026.

The fund’s board of trustees reset the monthly distribution to $0.16 per share, effective March 25, 2026 – a reduction the company attributed to a more conservative portfolio posture, lower leverage, higher liquidity reserves, and the impact of lower base rates and tighter credit spreads on income. The $0.16 monthly distribution represents an annualized net distribution rate of 8.5% for Class I shares, based on the Feb. 28 net asset value of $22.64 per share. The $0.02 per share reduction is equivalent to an 11.1% cut.

Separately, Oaktree Strategic Credit Fund disclosed that approximately 13.9 million shares – equal to 6.8% of shares outstanding as of Dec. 31, 2025 – were validly tendered in the Q1 2026 tender offer, which expired March 16. The fund’s standard quarterly repurchase offer covers up to 5% of shares outstanding. The fund exercised a regulatory provision allowing it to expand the offer by an additional 2%, bringing the total to 7%, but tender demand still exceeded that expanded limit.

To satisfy all tender requests without proration, Brookfield OSCF Investor LLC, an affiliate of Oaktree Fund Advisors, purchased 1.7% of outstanding shares from an existing investor. Payment was made through a promissory note issued March 24 to be repaid in cash on or before June 15, 2026. The affiliate purchase was made at the same NAV-based price as the tender offer, according to the filing.

In total, investors holding 8.5% of shares outstanding as of the end of 2025, received liquidity in Q1 2026. The company said in its investor FAQ that the affiliate’s involvement “demonstrates the ongoing alignment between the company and its investment adviser” and that the fund “continues to maintain ample liquidity.” No shares were prorated or denied.

The fund reported that NAV per share declined from $22.87 as of Jan. 31, 2026, to $22.64 as of Feb. 28, 2026, a decrease of approximately 1%. As of Feb. 28, the fund’s aggregate NAV was approximately $4.7 billion and the fair value of its investment portfolio was approximately $7.3 billion, with $2.9 billion in outstanding debt. The fund’s net debt-to-equity leverage ratio was approximately 0.57 times.

In its FAQ, the fund stated that the distribution reset and the elevated tender volume are “not related,” describing both as occurring against the same market backdrop without being causally linked. Management cited its decision to remain underinvested in payment-in-kind loans and annual recurring revenue loans as evidence of disciplined credit positioning.

Oaktree Strategic Credit Fund is a non-traded BDC advised by Oaktree Fund Advisors, LLC, an affiliate of Oaktree Capital Management. Brookfield Asset Management acquired a majority interest in Oaktree in 2019. The fund is currently publicly offering up to $5 billion in shares across Classes I, D, S, and T.

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