Oxford Square Capital Corp. (NASDAQ:OXSQ) Q3 2019 Results Conference Call October 30, 0000 9:00 AM ET

Company Participants

Jonathan Cohen - Chief Executive Officer
Saul Rosenthal - President
Bruce Rubin - Chief Financial Officer
Kevin Young - Managing Director and Portfolio Manager

Operator

Good day and welcome to the Oxford Square Capital Corp. Third Quarter 2019 Earnings Release and Conference Call. All participants will be in a listen only mode, [Operator Instructions]after today's presentation there will an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Jonathan Cohen, Chief Executive Officer, please go ahead.

Jonathan Cohen

Thank you, good morning everyone and welcome to the Oxford Square Capital Corp. Third Quarter 2019 Earnings Conference Call. I'm joined today by Saul Rosenthal our President, Bruce Rubin our Chief Financial Officer and Kevin Young our managing director and portfolio manager. Bruce, could you please open the call this morning with a disclosure regarding forward-looking statements.

Bruce Rubin

Sure Jonathon. 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 we'll 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 view 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 return the call back to Jonathan.

Jonathan Cohen

Thank you, Bruce. Oxford Square's net investment income or NII was $0.19 per share for the quarter ended September 30 and our net asset value per share stood at $5.42 compared to a net asset value per share of $6.31 as of June 30th.

Our total return during the quarter ended September 30th was negative 10.9%. That total return reflected the change in net asset value per share for the period as well as the impact of the monthly $0.067 distributions.

For the third quarter, we reported GAAP NII of approximately $8.9 million or $0.19 per share compared to $12.8 million or $0.27 per share for the quarter ended June 30. That decrease was primarily due to the one time recognition of approximately $5.7 million of payment in kind cumulative dividends associated with our preferred equity position in the prior quarter.

In the third quarter of 2019, we recorded net realized losses and unrealized depreciation on investors approximately $42 million or $0.88 per share. In total we had a net decrease in net assets from operations of approximately $33.1 million or $0.69 per share compared to a net decrease of $7.5 million or $0.16 per share for the prior quarter. We note that as of September 30th, we held a single investment on nonaccrual status with a fair value of $2.4 million.

During third quarter of 2019, we made no new investments and we had principle repayments in sales of $5.2 million. On October 18, 2019 we entered into a $10 million repurchase transaction facility with Nomura Securities, which the company may use for working capital purposes.

On October 25th 2019, our Board of Directors declared monthly distributions of $0.067 per share for the months ending January, February and March of 2020. Additional details regarding record and payment data information can be found in our press release that was issued earlier this morning. With that, I'll turn the call over to our portfolio manager Kevin Young.

Kevin Young

Thank you Jonathan. During the quarter ended September 30th, the loan market exhibited price declines across certain segments of the market. As of September 30th, the S&P/LSTA Leverage Loan Index decreased to 96 spot 34 from 96 spot 79 as of June 30th. This decline continued into the fourth quarter with LSTA index declining further to 95 spot 54 as of October 25th.

We believe this pricing pressure has been principally driven by continued U.S. loan mutual fund and ETS outflows and accelerated downgrades from credit rating agencies that may have led to technical selling by CLOs to maintain compliance with certain cash within certain CLO indentures.

In the secondary loan market CCC rated loans have exhibited greater price deterioration compared to BB and B rated loans. The percentage of US loans trading at prices at par or higher increased to approximately 34% at the end of September from approximately 8% at the end of June.

However, the percentage of loans trading at prices of 80% par or below has increased to approximately 4.1% at the end of September from approximately 2.5% at the end of June. Additionally, bifurcation of the primary loan market demand has resulted in the spread differential between higher and lower quality loans increasing to its widest level since 2017. In this environment 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.

Jonathan Cohen

Thanks very much Kevin. We note that additional information about Oxford Square Capital Corp'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

Great. Thanks very much, I'd like to thank everybody on the call and listening to the replay for their interest in Oxford Square and we look forward to speaking to you soon. Thanks very much.

Operator

The conference is now concluded. Thank you for attending today's presentation, you may now disconnect.