Oxford Square Capital Corp. (NASDAQ:OXSQ) Q3 2024 Earnings Conference Call November 5, 2024 9:00 AM ET

Company Participants

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

Conference Call Participants

Operator

Good day, everyone, and welcome to today's Oxford Square Capital Corp. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later you will have an opportunity to ask questions during a question-and-answer session. [Operator Instructions]. Please note this call is being recorded. [Operator Instructions].

It is now my pleasure to turn the program over to CEO, Jonathan Cohen.

Jonathan Cohen

Thank you very much. Good morning, everyone, and welcome to the Oxford Square Capital Corp. third 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 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 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 $6.2 million or $0.10 per share compared with $7.7 million or $0.13 per share in the prior quarter. Our net asset value per share stood at $2.35 compared to a net asset value per share of $2.43 for the prior quarter. During the quarter, we distributed $0.105 per share to our common stock shareholders.

For the third quarter, we recorded total investment income of approximately $10.3 million as compared to approximately $11.4 million in the prior quarter. In the third quarter, we recorded combined net unrealized and realized losses on investments of approximately $7.1 million or $0.11 per share compared to combined net unrealized and realized losses on investments of approximately $2.5 million or $0.04 per share for the prior quarter. During the third quarter, our investment activity consisted of purchases of approximately $47.7 million and repayments of approximately $27.9 million.

During the quarter ended September, we issued a total of approximately 5.1 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $14.5 million. On October 31st, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending January, February, and March of 2025. 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 Yonon

Thank you, Jonathan. During the quarter ended September 30th, U.S. loan market performance modestly improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA US Leveraged Loan Index increased from 96.54% of par as of June 28th to 96.71% of par as of September 30th.

According to LCD, during the quarter, there was some pricing dispersion with BB-rated loan prices increasing 28 basis points, B-rated loan prices decreasing 32 basis points, and CCC-rated loan prices increasing 215 basis points on average. While the 12-month trailing default rate for the loan index decreased to 0.8% by principal amount at the end of the quarter from 0.9% at the end of June, we note that out-of-court restructurings, exchanges, and subpar buybacks, which are not captured in this cited default rate remain elevated. Additionally, the distress ratio, defined as a percentage of loans with prices below 80% of par, ended the quarter at 3.43% compared to 4.42% at the end of the second quarter.

During the quarter ended September 30, 2024, US Leveraged Loan primary market issuance, excluding amendments and repricing transactions was $109.8 billion, representing a 45% increase versus the quarter ended September 30, 2023. This was driven by higher non-refinancing issuance, including M&A and LBO activity and opportunistic activity, including the funding of dividends versus the prior year comparable quarter.

At the same time, U.S. loan fund outflows, as measured by Lipper were approximately $3.5 billion for the quarter ended September 30th. 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. We note that additional information about Oxford Square's third quarter performance has been posted to our website at www.oxfordsquarecapital.com.

With that, operator, we're happy to poll for any questions.

Question-and-Answer Session

Operator

Of course. [Operator Instructions]. I don't see any questions in the queue. I'll turn the program back over to our presenters for any additional or closing remarks.

Jonathan Cohen

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

Operator

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.