OXSQG - Oxford Square Capital Corp's (OXSQ) Q3 2023 Earnings Call Transcript

2023-11-07 10:52:10 ET

Oxford Square Capital Corp. (OXSQ)

Q3 2023 Earnings Conference Call

November 7, 2023 09:00 am ET

Company Participants

Jonathan Cohen - CEO

Saul Rosenthal - President

Bruce Rubin - CFO

Kevin Yonon - Managing Director and Portfolio Manager

Conference Call Participants

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to the Oxford Square Capital Corp. Third Quarter 2023 Earnings Conference Call. My name is Jo Peter [ph]. I'll be the moderator for today's call. All lines will be muted on a presentation portion of the call. [Operator Instructions]. I would now like to pass the conference over to your host, Jonathan Cohen. Jonathan, please go ahead. CEO, please go ahead.

Jonathan Cohen

Good morning, everyone and welcome to the Oxford Square Capital Corp. third quarter 2023 earnings conference call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our CFO; and Kevin Yonon, our Managing Director and Portfolio Manager. Bruce, could you open the call with a disclosure regarding forward-looking statements?

Bruce Rubin

Sure, Jonathan. Today's conference call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was issued earlier this morning. Please note that this call is the property of Oxford Square Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

At this point, please direct your attention to the customary disclosure in this morning's press release regarding forward-looking information. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future events and financial performance. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those indicated in these projections. We do not undertake to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com.

With that, I'll turn the presentation back to Jonathan.

Jonathan Cohen

Thank you, Bruce. For the quarter ended September, Oxford Square's net investment income was approximately $6.4 million or $0.11 per share compared to $6.7 million or $0.13 per share for the prior quarter. Our net asset value per share stood at $2.78 compared to a net asset value per share of $2.88 for the prior quarter. During the quarter, we distributed $0.225 per share which included $0.12 per share of special distributions.

For the third quarter, we recorded total investment income of approximately $13 million as compared to approximately $13.5 million in the prior quarter. In the third quarter, we recorded net unrealized appreciation on investments of approximately $13.9 million or $0.28 per share compared to net unrealized appreciation on investments of approximately $8.3 million or $0.16 per share for the prior quarter. In the third quarter, we recorded realized losses of approximately $13.6 million or $0.24 per share. We recorded realized losses on investments of approximately $3.3 million or $0.07 per share in the prior quarter.

During the third quarter, our investment activity consisted of sales of approximately $1.9 million and repayments of approximately $14.2 million. No purchases were affected during the quarter. As of September 30, we held cash and cash equivalents of approximately $12.4 million. Subsequent to quarter end on November 3, we redeemed $7 million of the $14.4 million in aggregate principal amount of issued and outstanding 2024 6.5% notes. The notes were redeemed at 100% of their principal amount of $25 per note plus accrued and unpaid interest. During the quarter end of September, we issued a total of approximately 1.4 million shares of our common stock pursuant to an at-the-market offering resulting in net proceeds of approximately $4.4 million and net appreciation to shareholders of approximately $0.01 per share of NAV for the quarter.

On November 2 ^nd , our Board of Directors declared monthly distributions of $3.05 per share for each of the months ending January, February, and March of 2024. Additional information's regarding record and payment date can be found in our press release that was issued this morning.

With that I'll turn the call over to our Portfolio Manager, Kevin Yonon.

Kevin Yonon

Thank you, Jonathan. During the quarter end of September 30th 2023, U.S. loan market performance improved versus the prior quarter. U.S. loan prices as defined by the Morningstar LSTA U.S. Leveraged Loan increased from 94.24% of par as of June 30th to 95.55% par as of September 29th.

According to LCD, during the quarter, there were some pricing dispersion with BB-rated loan prices increasing 56 basis points or 0.57%, B-rated loan prices increasing 142 basis points or 1.49%, and CCC-rated loan prices increasing 145 basis points or 1.84% on average.

The 12-month trailing default rate for the Morningstar LSTA U.S. Leveraged Loan Index decreased to 1.27% by principal amount at the end of the quarter from 1.71% at the end of June 2023. Additionally, the distress ratio, defined as the percentage of loans with a price below 80% of par, ended the quarter at 4.36% compared to approximately 6% at the end of June 2023.

During the quarter into September 30th, 2023. U.S. leverage loan primary market issuance was $70.7 billion, representing a 237% increase versus the quarter-ended September 30th, 2022. This was driven by refinancing and M&A activity, while LBO activity remains relatively slow. At the same time, U.S. loan fund inflows as measured by Lipper, were approximately $500 million for the quarter-ended September 30, 2023, while outflows were approximately $13.8 billion on a year-to-date basis.

We continue to focus on portfolio management strategies designed to maximize our long-term total return. And as a permanent capital vehicle, we historically have been able to take a longer-term view towards our investment strategy.

With that, I will turn the call back over to Jonathan.

Jonathan Cohen

Thanks, Kevin. Additional information about Oxford Square's third quarter performance has been posted to our website at www.oxfordsquarecapital.com. And with that operator, we're happy to open the call up for any questions.

Question-and-Answer Session

Operator

Jonathan Cohen

Thanks very much. We'd like to thank everyone for their participation on this call or listening to the replay. We look forward to speaking to you soon. Thanks very much.

Operator

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

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