Oxford Square Capital Corp
NASDAQ:OXSQ
Earnings Call Analysis
Summary
Q3-2023
Oxford Square Capital Corp. reported its third-quarter 2023 earnings with a slight decrease in net investment income to $6.4 million or $0.11 per share, down from $6.7 million or $0.13 per share from the previous quarter. The company's net asset value (NAV) per share dropped to $2.78 from $2.88, highlighting a $13.9 million unrealized depreciation in investments. Despite these declines, the company maintained a distribution of $0.225 per share during the quarter and declared monthly distributions of $0.035 per share for early 2024. Share issuance added $4.4 million in net proceeds, increasing shareholder NAV by $0.01 per share. The reported cash and cash equivalents were $12.4 million, and $7 million of outstanding notes was redeemed post-quarter.
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Good morning, ladies and gentlemen. Welcome to the Oxford Square Capital Corp. Third Quarter 2023 Earnings Conference Call. My name is [ Jo Quido ]. I will be the moderator for today's 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.
Good morning, everyone. 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 Chief Financial Officer; and Kevin Yonon, our Managing Director and Portfolio Manager. Bruce, could you open the call with a disclosure regarding forward-looking statements.
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 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.
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 depreciation 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. Then the notes were redeemed at 100% of their principal amount of $25 per note plus accrued and unpaid interest.
During the quarter ended 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, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending January, February and March of 2024. Additional information 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.
Thank you, Jonathan. During the quarter ended September 30, 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 Index increased from 94.24% of par as of June 30 to 95.55% of par as of September 29. 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, into the quarter at 4.36% compared to approximately 6% at the end of June 2023.
During the quarter ended September 30, 2023, U.S. leveraged loan primary market issuance was $70.7 billion representing a 1.37% increase versus the quarter ended September 30, 2022. This was driven by refinancing and M&A activity, while LBO activity remained 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.
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.
[Operator Instructions] There are no questions waiting at this time. So I would now like to pass the conference back over to the management team for closing remarks.
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.
That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.