Q2 2023 Oxford Square Capital Corp Earnings Call

Participants

Bruce Lawrence Rubin; CFO, CAO, Treasurer & Secretary; Oxford Square Capital Corp.

Jonathan H. Cohen; CEO & Interested Director; Oxford Square Capital Corp.

Kevin P. Yonon; MD & Portfolio Manager of Oxford Square Management; Oxford Square Capital Corp.

Presentation

Operator

Hello, everyone, and welcome to Oxford Square Capital Corp.'s Second Quarter 2023 Earnings Conference Call. My name is Bruno, and I'll be operating your call today. (Operator Instructions)
I will now hand over to your host and CEO, Jonathan Cohen. Please go ahead.

Jonathan H. Cohen

Thanks very much. Good morning, everyone, and welcome to the Oxford Square Capital Corp. Second Quarter 2023 Earnings Conference Call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our CFO; and Kevin Yonon, our Managing Director and Portfolio Manager.
Bruce, could you open the call today with a discussion regarding forward-looking statements?

Bruce Lawrence 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 H. Cohen

Thank you, Bruce. For the quarter ended June 30, Oxford Square's net investment income was approximately $6.7 million or $0.13 per share, which was approximately $200,000 greater than for the prior quarter. Our net asset value per share stood at $2.88 compared to a net asset value per share of $2.80 for the prior quarter.
For the second quarter, we recorded total investment income of approximately $13.5 million as compared to approximately $12.9 million in the prior quarter. That increase in total investment income was principally driven by an increase in interest income from our loan portfolio.
In the second quarter, we recorded net unrealized appreciation on investments of approximately $8.3 million or $0.16 per share compared to net unrealized depreciation on investments of approximately $200,000 in the prior quarter. In the second quarter, we recorded realized losses on investments of approximately $3.3 million. There were no realized gains or losses in the prior quarter.
During the second quarter, our investment activity consisted of sales of approximately $13.9 million and repayments of approximately $400,000. There were no purchases made during the quarter. As of June 30, we held cash and cash equivalents of approximately $43 million. Subsequent to quarter end, on July 24, we redeemed $40 million of the $64.4 million in aggregate principal amount of issued and outstanding 2024 6.5% notes. The notes were redeemed at 100% of their principal amount of $25 per note plus accrued and unpaid interest.
On August 3, 2023, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending October, November, December of 2023. Our Board also declared a special distribution of $0.12 per share, which has a record date of September 15, 2023, and a payment date of September 29, 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. Kevin?

Kevin P. Yonon

Thank you, Jonathan. During the quarter ended June 30, 2023, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA US Leveraged Loan Index, increased from 93.38% of par as of March 31 to 94.24% of par as of June 30.
According to LCD, during the quarter, there was some pricing dispersion with BB-rated loan prices increasing 69 basis points or 0.7%, B-rated loan prices increasing 134 basis points or 1.43% and CCC-rated loan prices increasing 212 basis points or 2.76% on average.
The 12-month trailing default rate for the Morningstar LSTA US Leveraged Loan Index increased to 1.71% by principal amount at the end of the quarter from 1.35% at the end of March 2023. Additionally, the distress ratio, defined as a percentage of loans with a price below 80% of par, ended the quarter at 6% compared to approximately 6.3% at the end of March 2023.
During the quarter ended June 30, 2023, U.S. leverage loan primary market issuance was $47.7 billion, representing a 15% decline versus the quarter ended June 30, 2022. This was driven by refinancing activity as both M&A and LBO activity remained slow. At the same time, U.S. loan fund outflows, as measured by Lipper, were approximately $6.1 billion for the quarter ended June 30, 2023.
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 H. Cohen

Thanks, Kevin. Additional information about Oxford Square Capital Corp.'s second quarter performance has been posted to our website at www.oxfordsquarecapital.com.
And with that, operator, we're happy to poll for any questions.

Operator

(Operator Instructions) We have no questions registered. So I would like to hand back to Mr. Jonathan, our CEO. Please go ahead.

Jonathan H. Cohen

Thank you very much. I'd like to thank everyone who participated in this call and everyone who listens to the replay. We look forward to speaking to you again soon. Thanks very much.

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.