Oxford Square Capital - Q2 2024

Transcript

Operator (participant)

Please note, today's call will be recorded, and I'll be standing by if you should need any assistance. It is now my pleasure to turn the call over to Jonathan Cohen, CEO. Please go ahead.

Jonathan Cohen (CEO)

Thanks very much. Good morning, everyone. Welcome to the Oxford Square Capital Corp. second quarter 2024 earnings conference call. I'm joined today by Saul Rosenthal, our President, Bruce Rubin, our Chief Financial Officer, and Kevin Yonon, our Managing Director and Portfolio Manager. Bruce, could you open the call with a discussion regarding forward-looking statements?

Bruce Rubin (CFO)

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 this morning. Please note that this call is the property of Oxford Square Capital Corp., and the 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 can 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 (CEO)

Thanks, Bruce. For the quarter end of June, Oxford Square's net investment income was approximately $7.7 million or $0.13 per share, compared with $6.5 million dollars, or $0.11 per share in the prior quarter. Our net asset value per share stood at $2.43, compared to a net asset value of $2.42 for the prior quarter. During the quarter, we distributed $0.105 per share in common stock distributions. For the second quarter, we recorded total investment income of approximately $11.4 million dollars, as compared to approximately $10.7 million in the prior quarter.

In the second quarter, we recorded net unrealized and realized losses on investments of approximately $2.5 million, or $0.04 per share, compared to net unrealized and realized losses on investments of approximately $8.3 million or $0.14 per share in the prior quarter. During the quarter, our investment activity consisted of purchases of approximately $28.8 million, sales of approximately $3.4 million, and repayments of approximately $15.8 million. During the quarter ended June, we issued a total of approximately 2.9 million shares of our common stock, pursuant to an at-the-market offering, resulting in net proceeds of approximately $8.9 million.

On August eighth, our board of directors declared monthly distributions of $0.035 per share for each of the months ending November, October, and December of 2024. Additional details regarding record and payment date information 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?

Kevin Yonon (Managing Director and Portfolio Manager)

Thank you, Jonathan. During the quarter into June 30, 2024, U.S. loan market performance modestly weakened versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA US Leveraged Loan Index, decreased from 96.69% of par as of March 28, 2024, to 96.54% of par as of June 28, 2024. According to LCD, during the quarter, there was some pricing dispersion, with BB-rated loan prices decreasing 19 basis points, B-rated loan prices decreasing 18 basis points, and triple C-rated loan prices increasing 187 basis points on average.

The twelve-month trailing market default rate for the Morningstar LSTA US Leveraged Loan Index decreased to 0.92% by principal amount at the end of the quarter, from 1.14% at the end of March 2024. The twelve-month trailing market default rate increased to 4.31% as of the end of June 2024, when including out-of-court liability management transactions. Additionally, the distress ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 4.42%, compared to 3.51% at the end of March 2024.

During the quarter ended June 30, 2024, U.S. leveraged loan primary market issuance, excluding amendments and repricing transactions, was $145 billion, representing a 204% increase versus the quarter ended June 30, 2023. This was driven by opportunistic activity, including refinancings and add-ons, while M&A and LBO activity remained relatively limited. At the same time, U.S. loan fund inflows, as measured by Lipper, were approximately $4.6 billion for the quarter ended June 30, 2024. We continue to focus on portfolio management strategies designed to maximize our long-term total return, and as a permanent capital vehicle, we've historically 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 (CEO)

Thanks, Kevin. We note that additional information about Oxford Square's second quarter performance has been posted to our website at www.oxfordsquarecapital.com. And, operator, we're happy to now, pull for any questions.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself by pressing star two. Once again, if you would like to ask a question, please press star one. Again, that's star one for any questions. At this time, I show no questions in queue. I would like to turn the call back to Mr. Jonathan Cohen, CEO. Please go ahead.

Jonathan Cohen (CEO)

Thanks very much. We'd like to thank everybody for their interest in Oxford Square, and we look forward to speaking again soon. Thank you very much.

Operator (participant)

Thank you. This does conclude today's Oxford Square Capital Corp second quarter 2024 earnings conference call. You may disconnect your line at this time, and have a wonderful day.