OXSQ - NASDAQ

Good morning, all. I would like to welcome you all to the Oxford Square Capital Corp. Fourth Quarter 2023 Earnings Call. My name is Brika, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Chief Executive Officer of Oxford Square Capital Corp., Jonathan Cohen, to begin. So Jonathan, please go ahead.

Good morning, everyone. Welcome to the Oxford Square Capital Corp. Fourth Quarter 2023 Earnings Conference Call. I'm joined today by Bruce Rubin, our Chief Financial Officer; Kevin Yonon, our Managing Director and Portfolio Manager; and Jeff Faenza, our Senior Accounting Manager. Jeff, could you open the call with a disclosure 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 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 those 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 will turn the presentation back over to Jonathan.

Thank you, Jeff. For the quarter ended December, Oxford Square's net investment income was approximately $7.8 million or $0.13 per share compared with $6.4 million or $0.11 per share for the prior quarter. Our net asset value per share stood at $2.55 compared to a net asset value per share of $2.78 for the prior quarter. During the quarter, we distributed $0.105 per share. For the fourth quarter, we recorded total investment income of approximately $12.3 million as compared to approximately $13 million in the prior quarter. In the fourth quarter, we recorded net unrealized depreciation on investments of approximately $14.8 million or $0.25 per share compared to net unrealized appreciation on investments of approximately $13.9 million or $0.24 per share in the prior quarter. In the fourth quarter, we recorded realized losses of approximately $270,000. And for the prior quarter, we recorded realized losses on investments of approximately $13.6 million or $0.24 per share. During the fourth quarter, our investment activity consisted of sales of approximately $3.7 million and repayments of approximately $800,000. We made purchases of approximately $3.5 million during the quarter ended December for that period. During the quarter, we issued a total of approximately 1.3 million shares of our common stock, pursuant to an at-the-market offering, resulting in net proceeds of approximately $3.7 million. On March 14, 2024, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending April, May and June of 2024. We note that additional details regarding record of 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?

Thank you, Jonathan. During the quarter ended December 31, 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 95.55% of par as of September 29 to 96.21% of par as of December 29. According to LCD, during the quarter, there were some pricing dispersion with BB-rated loan prices increasing 56 basis points or 0.57%, B-rated loan prices increasing 98 basis points or 1.01% and CCC-rated loan prices decreasing 56 basis points or 0.7% on average. The 12-month trailing default rate for the Morningstar LSTA US Leveraged Loan Index increased to 1.53% by principal amount at the end of the quarter from 1.2% at the end of September 2023. Additionally, the distress ratio, defined as a percentage of loans with a price below 80% of par, ended the quarter at 4.54% compared to 4.36% at the end of September 2023. During the quarter ended December 31, 2023, U.S. Leverage Loan primary market issuance was $55.3 billion, representing a 68% increase versus the quarter ended December 31, 2022. This was driven by refinancing activity, while both M&A and LBO activity remained relatively slow. At the same time, U.S. loan fund outflows, as measured by Lipper were approximately $500 million for the quarter ended December 31, 2023, while outflows were approximately $14.3 billion for the year ended December 31, 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.

Thanks very much, Kevin. Additional information about Oxford Square's fourth quarter performance has been posted to our website at www.oxfordsquarecapital.com. With that, operator, we're happy to open the call up for any questions.

[Operator Instructions] We have a question on the line from [ Roy Jefferson ].

What can you tell us about the new nonaccrual status investment?

Certainly. Thank you very much for your question. The nonaccrual is related to an investment in a private company, where we're not, unfortunately, allowed to disclose any further details beyond what's in the press release.

[Operator Instructions] I would like to hand it back to Jonathan Cohen for any final remarks.

Thank you very much. We'd like to thank everyone for their interest and for their participation on this call. We look forward to speaking to you again very soon. Thanks very much.