OFS Credit Company, Inc. (OCCI): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at OFS Credit Company, Inc. (OCCI) right now, and frankly, the picture isn't simple for this CLO-focused fund. With its external advisor taking a hefty 1.75% base management fee and shareholders seeing the stock trade at a deep discount to its October 2025 estimated Net Asset Value (NAV) of about \$5.41, you need to know where the real pressure points are. We're mapping OCCI through Porter's Five Forces, and what we see is a tough fight: high supplier power from the manager, significant customer leverage because investors can sell shares easily on the NASDAQ, and a crowded field where its \$148.14M Assets Under Management (AUM) feels small next to rivals. Let's break down exactly how these forces-from the threat of substitutes like corporate bonds to the regulatory barriers facing new entrants-shape OCCI's competitive standing below.

OFS Credit Company, Inc. (OCCI) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the cost structure embedded in the external management agreement for OFS Credit Company, Inc. (OCCI), and it clearly shows where the power lies in this relationship. The supplier here is the management team, OFS Capital Management, LLC, and their fee structure gives them considerable leverage over OFS Credit Company, Inc. (OCCI).

The structure of the fees is the primary mechanism for supplier power. The Base Management Fee is set at an annual rate of 1.75% of the Company's Total Equity Base. This fee is calculated and payable quarterly in arrears, meaning it's a fixed, non-negotiable cost baked into the operating model, regardless of short-term performance fluctuations.

Furthermore, the Incentive Fee acts as a strong lever for the Advisor. This fee is set at 20% of Pre-Incentive Fee Net Investment Income. When investment performance is strong, this percentage share of the upside significantly increases the compensation for OFS Capital Management, LLC, directly impacting the net returns available to common stockholders.

The fact that OFS Credit Company, Inc. (OCCI) is externally managed inherently concentrates power with the Advisor, OFS Capital Management, LLC. This arrangement means the day-to-day operations and investment decisions are outsourced, making the relationship critical and difficult to quickly alter without significant disruption. The Advisor and its affiliates also have ownership stakes, which can further align interests but also solidify their position.

This cost structure contributes to a relatively high overall burden on the fund's assets. The Total Expense Ratio, as reported for the period ending October 31, 2025, stands at 12.20%. This figure directly reduces the returns shareholders realize from the investment portfolio.

Here's a quick look at how those expenses, which flow to the management supplier and related parties, stack up as of October 31, 2025, based on reported figures:

The power of the supplier is further evidenced by the components that make up the total cost of management. You can see the breakdown of the total expense ratio, which highlights the various charges flowing out:

• Management Fees: 2.80% of assets.
• Interest Expense Fees: 3.29%.
• Other Expenses (combined): 6.11%.

To be fair, the Board of Directors reviews these fees, having concluded in prior periods that the total advisory fees paid to OFS Advisor were reasonable when compared to peers. Still, the current 12.20% Total Expense Ratio is a concrete number you must factor in when assessing net shareholder returns.

Finance: draft sensitivity analysis on NAV change if Base Management Fee drops by 25 basis points by Friday.

OFS Credit Company, Inc. (OCCI) - Porter's Five Forces: Bargaining power of customers

For OFS Credit Company, Inc. (OCCI), the customer base is primarily its shareholders, and their bargaining power is shaped by the high liquidity of the stock and the market's perception of value relative to the underlying assets.

Customers (shareholders) have low switching costs; they can sell shares easily on the NASDAQ. This ease of exit means that if investors are dissatisfied with the price or management, they can liquidate their position quickly, exerting downward pressure on the market price. For instance, the average daily trading volume was reported at 328,356 shares near the end of 2025.

OCCI trades at a significant discount to its estimated NAV of $5.41 - $5.51 as of October 31, 2025. To put this into perspective, the stock price closed at $4.88 on October 23, 2025. This trading level represents a discount of approximately 11.4% against the high end of the estimated NAV range of $5.51.

The high forward dividend yield, near 28.51%, shows investor demand for high compensation. This yield is based on the declared monthly distribution of $0.115 per share for December 2025, leading to an annualized payout of $1.38.

Retail investors, a key customer segment, are defintely price-sensitive to the fund's discount. The market capitalization stood at $56,223,908 as of the search date.

Here's a quick look at how the market price compares to recent NAV estimates, illustrating the customer's leverage point:

The discount creates a direct bargaining chip for customers, as they are essentially buying the underlying assets at a reduced price, but the persistence of the discount signals a lack of confidence in management's ability to close that gap. This dynamic is further emphasized by the Dividend Reinvestment Plan (DRIP), which offers shareholders a 5% discount to the market price when reinvesting distributions.

The customer's power is also visible through the market's reaction to reported figures:

• Shareholders can sell shares easily on the NASDAQ.
• The discount to NAV suggests current pricing does not reflect asset value.
• The high yield attracts income-focused customers.
• Price sensitivity is high due to the discount gap.
• The recent NAV of $6.13 (July 31, 2025) dropped to the $5.41 - $5.51 range by October 31, 2025.

OFS Credit Company, Inc. (OCCI) - Porter's Five Forces: Competitive rivalry

You're looking at the CLO fund space, and honestly, it's a tough neighborhood for a smaller player like OFS Credit Company, Inc. (OCCI). The rivalry here isn't about who has the flashiest new product; it's a direct, head-to-head battle for investor capital, primarily fought on the grounds of yield and price performance.

The CLO fund space is crowded with similar closed-end funds and BDCs. When you line up OFS Credit Company, Inc. (OCCI) against peers like Oxford Lane Capital Corp. (OXLC) and Eagle Point Credit Co LLC (ECC), the scale difference is immediately apparent. OFS Credit Company, Inc. (OCCI)'s Assets Under Management (AUM) of $148.14M is small relative to larger rivals. For instance, Oxford Lane Capital Corp. (OXLC) reports an AUM of $1.74B as of the latest data available, and Eagle Point Credit Co LLC (ECC) reports a total platform AUM of over $12 billion across its entire platform as of Q2 2025, with the fund itself at $833.79M.

Because the products-investments in CLO debt and equity-are highly similar, competition boils down to what you deliver to the shareholder right now and what the market thinks your assets are worth tomorrow. OFS Credit Company, Inc. (OCCI)'s investment portfolio carried an interest income yield of 14.38% based on average amortized cost for the fiscal quarter ended July 31, 2025, while its CLO equity cash flow yield was 17.48% based on amortized cost for the same period. You have to keep those yields competitive, but yield alone isn't enough if the market is punishing the share price.

The market's perception of value is critical, and here, OFS Credit Company, Inc. (OCCI) has faced significant headwinds. OFS Credit Company, Inc. (OCCI)'s 1-year price return of -31.83% indicates underperformance against the S&P 500. For comparison, the S&P 500 price performance for the 1-Year period ending November 24, 2025, was 12.33%. That gap suggests investors are demanding a higher discount or a significantly higher yield to compensate for the perceived risk or lack of scale compared to the broader market.

Here's a quick look at how OFS Credit Company, Inc. (OCCI) stacks up on size and recent performance metrics against one key peer:

The pressure from direct substitutes-other investment vehicles promising similar income streams-is intense. You see this reflected in the market's valuation of the shares:

• OCCI's NAV per common share was reported at $6.13 as of July 31, 2025.
• As of November 21, 2025, ECC traded at a discount to its latest reported NAV.
• OCCI trades at a significant discount, with a share price around $4.84 against a $5.46 NAV as of October 31, 2025, representing a -9.45% premium/discount.
• The forward P/E ratio for OFS Credit Company, Inc. (OCCI) stands at 5.44, while the trailing P/E is 20.17.

Ultimately, in this segment, if you can't match the scale of the giants, you must win on execution and yield perception. Finance: review the Q4 2025 deployment strategy against the yield targets set in Q3 2025 by end of next week.

OFS Credit Company, Inc. (OCCI) - Porter's Five Forces: Threat of substitutes

You're assessing the competitive landscape for OFS Credit Company, Inc. (OCCI), and the threat from substitutes is a key area where investors look for easier, more liquid ways to get similar income profiles. Honestly, the market offers plenty of alternatives that compete directly for the same pool of income-seeking capital.

High-yield corporate bonds and leveraged loan ETFs are direct, liquid substitutes for CLO debt. These exchange-traded products offer immediate liquidity, which is a significant advantage over the typically less liquid nature of CLO tranches. For example, as of late November 2025, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) reported a 30 Day SEC Yield of 6.31%, while the iShares Broad USD High Yield Corporate Bond ETF (USHY) offered a 30 Day SEC Yield of 6.80%. In the leveraged loan space, the Invesco Senior Loan ETF (BKLN) showed a 30 day SEC unsubsidized yield of 6.79% as of September 30, 2025.

To put OFS Credit Company, Inc.'s own performance in context against these substitutes, consider the yields they are competing against. For the fiscal quarter ended July 31, 2025, OFS Credit Company, Inc.'s interest income yield on its investment portfolio stood at 14.38%, and its CLO equity cash flow yield was 17.48%.

Other closed-end funds and Business Development Companies (BDCs) offer similar high-income structures, often with the added benefit of being publicly traded, like OFS Credit Company, Inc. itself. Investors can easily substitute OFS Credit Company, Inc. with other CLO-focused funds like Oxford Lane Capital Corporation (OXLC). As of November 25, 2025, Oxford Lane Capital Corporation (OXLC) reported a forward dividend yield of 35.05%, though this is accompanied by a high expense ratio of 12.45% and an Assets Under Management (AUM) of $1.74B. To give you a broader view of the BDC space, the median return for unlisted public BDCs for the first three quarters of 2025 was 6.2%.

Direct private credit funds offer institutional investors an alternative to OFS Credit Company, Inc.'s structured credit. This segment has seen massive growth, with AUM reaching $1.7 trillion at the start of 2025, projected to hit $5 trillion by 2029. Direct lending, the largest private credit strategy, has historically provided compelling returns, averaging 11.6% during seven periods of rising rates since 2008. KKR's Global Head of Private Credit noted that achieving a 10%+ gross return on an unlevered basis is attractive.

The substitutability is high because the underlying asset class-senior secured loans-is the same for many of these products. Still, the differences in structure matter.

• High-yield corporate bonds offer better liquidity than most CLO debt tranches.
• Leveraged loan ETFs track the underlying collateral more directly.
• BDCs like OXLC often carry higher expense ratios than direct CLO investments.
• Private credit offers customization but demands illiquidity for its premium.

The competition is about yield versus liquidity and structure complexity. If market sentiment favors simplicity, the ETF space pulls capital away from OFS Credit Company, Inc.

Finance: draft a comparison of OCCI's Q3 2025 NAV per share change versus the average price change of HYG and BKLN for the same period by Monday.

OFS Credit Company, Inc. (OCCI) - Porter's Five Forces: Threat of new entrants

When you look at OFS Credit Company, Inc. (OCCI), the threat of new entrants isn't about a flood of identical competitors tomorrow; it's about the high walls built by regulation and specialized knowledge. Honestly, setting up a similar shop requires more than just capital; it demands a specific license to operate in this niche.

High regulatory barriers exist, as OCCI is a registered closed-end fund under the Investment Company Act of 1940. This structure subjects OFS Credit Company, Inc. to a specific set of rules governing public investment vehicles, which is a significant hurdle for any new firm not already navigating that compliance landscape. Furthermore, the investment focus itself creates a moat.

The need for specialized CLO structuring and credit analysis expertise is a significant barrier. It isn't enough to understand corporate debt; you need deep, proven skill in structuring Collateralized Loan Obligations (CLOs) and analyzing the underlying collateral, which is often middle-market debt. New entrants face a steep learning curve to match the underwriting rigor required to succeed in this asset class.

OCCI's advisor has a 25-year history in the leveraged loan market, making replication difficult for newcomers. That depth of experience, held by OFS Capital Management, translates into established relationships with lenders and issuers, which is crucial for deal flow. You can't buy 25 years of market reputation overnight.

To give you a sense of the scale and complexity that a new entrant must contend with, look at the market activity as of late 2025. The CLO market is massive, with projections suggesting it could surpass $1 trillion by 2028, up from approximately $660 billion in 2023. New entrants are looking at a market that saw substantial activity just in the first half of 2025 alone.

Still, we can't ignore the reality that capital finds a way. Large asset managers can launch new CLO-focused funds, quickly overcoming scale barriers. These behemoths often have existing infrastructure, regulatory experience, and deep pools of capital that allow them to deploy significant resources quickly, effectively bypassing the initial capital constraint that stops smaller players.

The barriers to entry can be summarized by the required operational components:

• Regulatory registration as a closed-end fund.
• Proven track record in CLO equity structuring.
• Credit teams with deep leveraged loan analysis skills.
• Established relationships for sourcing quality collateral.

For a new manager, even with significant capital, establishing the necessary operational framework and securing the first few successful CLO deals against established players like OFS Credit Company, Inc. remains a tough proposition. The market demands proven execution, not just potential.

Finance: draft a sensitivity analysis on the impact of a 15 bps widening in AAA spreads on OCCI's projected Q1 2026 NII by next Tuesday.