Oxford Square Capital Corp. (NASDAQ:OXSQ) Q4 2022 Earnings Call Transcript
Oxford Square Capital Corp. (NASDAQ:OXSQ) Q4 2022 Earnings Call Transcript March 21, 2023
Operator: Hello, everyone and welcome to the Oxford Square Capital Fourth Quarter 2022 Earnings Conference Call. My name is Bruno and I will be the operator of today. I will now hand over to your host, Jonathan Cohen, CEO. Please go ahead.
Jonathan Cohen: Thanks very much. Good morning, everyone and welcome to the Oxford Square Capital Corp fourth quarter 2022 earnings conference call. I am 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.
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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 will turn the presentation back to Jonathan.
Jonathan Cohen: Thanks, Bruce. For the quarter ended December 31, Oxford Square's net investment income was approximately $6.5 million or $0.13 per share and our net asset value per share stood at $2.78. This compares to net investment income of approximately $5.6 million or $0.11 per share and a net asset value per share of $3.34 for the prior quarter. For the fourth quarter, we reported total investment income of approximately $11.9 million as compared to approximately $11.4 million for the prior quarter. That increase in total investment income was principally driven by an increase in interest income from our loan portfolio, partially offset by a decrease in income from our CLO equity investments. In the fourth quarter, we recorded net unrealized depreciation on investments of approximately $29.4 million or $0.59 per share compared to net unrealized depreciation on investments of approximately $16.8 million or $0.34 per share for the prior quarter.
In the fourth quarter, we reported realized gains on investments of approximately $100,000 compared to realized gains of approximately $50,000 for the prior quarter. During the fourth quarter, our investment activity consisted of purchases of approximately $6.1 million and sales and repayments of approximately $200,000. As of December 31, we have cash and cash equivalents of approximately $9 million. On March 16, 2023, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending April, May and June of 2023. 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, to discuss the loan market.
Kevin Yonon: Thank you, Jonathan. During the quarter ended December 31, 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 91.92% of par as of September 30 to 93.06% of par as of November 16 before dropping to 92.44% of par as of December 30. According to LCD, during the quarter, there were significant pricing dispersion related to credit quality with BB-rated loan prices increasing 195 basis points or 2.04%, B-rated loan prices increasing 94 basis points or 1.02% and CCC-rated loan prices decreasing 603 basis points or 7.53% on average. The 12-month trailing default rate for the Morningstar LSTA U.S. Leveraged Loan Index decreased to 0.72% by principal amount at the end of the quarter from 0.9% at the end of September 2022.
Additionally, the distress ratio, defined as the percentage of loans with a price below 80% of par, ended the quarter at 7.4% compared to approximately 6% at the end of September 2022. During the quarter ended December 31, 2022, primary market issuance was approximately $33 billion, representing a 70.8% decline versus the quarter ended December 31, 2021. For 2022, primary market issuance declined 62.5% versus 2021. This was driven by lower refinancing, M&A and LBO activity. At the same time, U.S. loan fund outflows, as measured by Lipper, were approximately $10.5 billion for the quarter ended December 31, 2022, and approximately $9 billion for calendar 2022. 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. Additional information about Oxford Square's fourth quarter performance has been posted to our website at oxfordsquarecapital.com. With that, operator, we're happy to open the call up for any questions.
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