Earnings Call: Q3 2022

Nov 7, 2022

Good morning, and welcome to Oxford Square Capital Corp Third Quarter 2022 End Conference Call. My name is Brica, and I will be your operator for today's conference. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. On your touch phone keypad. I would now like to turn the call over to Jonathan Cohen for some introductory comments. So Jonathan, you may begin. Thanks very much. Good morning, everyone, and welcome to the Oxford Square Capital Corp. 3rd quarter 2022 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? Thank you, 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 as it 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 from 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 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 30, Oxford Square's net investment income was approximately $5,600,000 Or $0.11 per share, and our net asset value per share is $3.34 This compares to net investment income of Approximately $4,300,000 or $0.09 per share and a net asset value of $3.67 for the prior quarter. For the Q3, we recorded total investment income of approximately $11,400,000 as compared to approximately $9,900,000 in the prior quarter. That increase in total investment income Principally driven by an increase in interest income and income from our CLO equity investments. In the Q3, we recorded net unrealized depreciation On investments of approximately $16,800,000 or $0.34 per share compared to net unrealized depreciation on investments Approximately $46,200,000 or $0.93 per share for the prior quarter. In the Q3, we recorded realized gains on investments of approximately $56,000 compared to realized losses of $1,500,000 During the Q3, our investment activity consisted of purchases of approximately $3,900,000 and sales and repayments of approximately $12,800,000 As of September 30, we held cash and cash equivalents of approximately $14,400,000 On October 20, our Board of Directors declared monthly distributions of $0.035 per share For each of the months ending January, February March of 2023, additional details Regarding record and payment data, 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 Yonan to discuss loan market. Thank you, Jonathan. During the quarter ended September 30, 2022, the U. S. Loan market was volatile. U. S. Loan prices, as defined by the Morningstar LSTA U. S. Leveraged Loan Index, increased from 92.16 percent of par As of June 30 to 95.50 percent of par as of August 12 before dropping to 91.92 percent of par as of September 30. According to LCD, during the quarter, there was pricing dispersion related to credit quality, with BB rated loan prices increasing 119 basis 132 basis points or 1.62 percent on average. The 12 month trailing default rate for the Morningstar LSTA U. S. Leverage owned index Increased to 0.9% by principal amount at the end of the quarter from 0.28% at the end of June 2022. Additionally, the distress ratio, defined as a percentage of loans with a price below 80% at par, ended the quarter at approximately 6% Compared to 3.65 percent at the end of June 2022. During the quarter ended September 30, 2022, Primary market issuance was approximately $21,000,000,000 representing an 87% decline versus the quarter ended September 30, 2021. For the year to date period ended September 30, 2022, primary market issuance declined 61% versus the prior year to date period. This was driven by lower refinancing M and A and LDO activity. At the same time, U. S. Fund outflows, As measured by Lipper, we're approximately $11,500,000,000 for the quarter ended September 30. We continue to focus on Our portfolio management strategy is 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. We note that additional information about Oxford Square's 3rd 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. Thank you. Operator, we don't hear any questions. I can confirm we have no questions. So I'd like to turn it back to Jonathan for some final remarks. Thanks very much. I'd like to thank everybody who listens This call is listening now and who listens on the replay for their interest in Oxford Square Capital Corp. We look forward to speaking to you again soon. Thanks very much. Thank you for joining. That does conclude today's call. You may now disconnect your lines.