Oxford Lane Capital Corp (OXLC) 2017 Q1 法說會逐字稿

Good morning, and welcome to the Oxford Lane first fiscal-quarter earnings conference call.

(Operator instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Jonathan Cohen, CEO of Oxford Lane. Please go ahead.

Thanks very much. Good morning, and welcome, everyone, to the Oxford Lane Capital Corporation first fiscal-quarter 2017 earnings conference call. I'm joined today by Saul Rosenthal, our President; and Bruce Rubin, our Chief Financial Officer and Treasurer.

Bruce, would you start this call today with a discussion regarding forward-looking statements?

Today's call is being recorded. An audio replay will be available for 30 days. Replay information is included in our Press Release that was released earlier this morning.

Please note that this call is the property of Oxford Lane Capital Corporation., and the unauthorized rebroadcast of this call in any form is strictly prohibited. I would also like to call your attention to the customary disclosure in our press release this morning, regarding forward-looking information. Today's conference call includes forward-looking statements and projections, and we the ask that you refer to our most recent filings at the SEC for important factors that could cause actual results to differ materially from 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.oxlc.com.

With that, I'll turn the presentation back to Jonathan.

Thanks, Bruce. At June 30, 2016, our net asset value per share stood at $8.78, compared with a net asset value per share March 31, 2016, at $7.04. For the quarter ended June 30, the fund recorded net realized losses of approximately $3.3 million or $0.18 per share, and net unrealized appreciation of approximately $41.6 million, or $2.22 per share for the quarter ended June 30, 2016.

As a result of those net realized losses and unrealized appreciation, we had a net increase of net assets resulting from operations of approximately $44 million, or $2.34 per share for the quarter. For the quarter ended June 30, Oxford Lane recorded GAAP total investment income of approximately $12.4 million, representing a decrease of approximately $1.3 million when compared to the quarter ended March 31, 2016. That decrease in GAAP investment income for the quarter was driven by a lower level of leverage we employed during the quarter on our CLO equity portfolio as a result of our preferred stock repurchase program.

And by the maintenance of a higher cash division during the quarter, in order to effect additional preferred stock repurchases, partially offset by higher effective yields on our CLO equity portfolio for the quarter ended June 30. The June quarter's GAAP income from our portfolio was produced as follows. Approximately $12 million from our CLL equity investments and approximately $400,000 from our CLO debt investment and other income.

Oxford Lane also recorded GAAP net investment income of approximately $5.7 million or $0.30 per common share for the quarter ended June 30, compared with the prior quarter's $6.6 million or $0.36 per share. For the quarter ended June 30, we expensed approximately $618,000 or $0.03 per share, in conjunction with our preferred stock repurchase program.

As of June 30, the following weighted average yields were calculated. The weighted average GAAP yield of our CLO's debt investments at current cost was approximately 8.9%, which remained unchanged when compared to March 31, 2016. The weighted average GAAP effective yield of our CLL equity investments at current cost was approximately 15.4%, compared with 14.3% as of March 31, 2016. The weighted average cash distribution yield of our cash income producing CLL equity investments at current cost was approximately 33.9%, compared to a 26.6% as of March 31, 2016.

The net of the cash yield calculated on a CLL equity investment is based on the cash distributions we received or were entitled to receive at each respective period end. Our core net investment or core NII was approximately $19.5 million or $1.04 per share for the quarter ended June 30. Core NII represents GAAP net investment income adjusted for additional cash distributions received or entitled to be received, if any in either case, on our CLL equity investments.

Our Board of Directors has declared a distribution of $0.60 per common share for the quarter ended September 30, 2015, payable on September 30, 2016 to stockholder of record, as of September 16. During the quarter ended June 30, we made additional CLL equity investments of approximately $20.5 million. Also during the quarter, we sold approximately $21 million of our CLO investments.

During the quarter ended June 30, we saw a rebound in syndicated corporate loan prices, with the equity LFCA leverage loan index increasing from 91 stock 51 as of 3/31/16 to 93 stock 20 as of 6/30/2016. Strife in the bottle markets, a continued rebound in commodity prices, and several CLO's pricing in the primary market drove an increase in prices in the syndicated loan market through June 30.

I'd like to turn the call now over to Deep Maji to talk a little bit more about what we saw in the market during the quarter. Deep?

Sure. Correspondingly, we saw an improvement in CLO equity and debt prices from March 31, 2016, as the NAVs of our CLL tranches increased spreads contracted in the secondary market and investor sentiment improved. As of August 8, 2016 the leveraged loan index stood at 94.09.

We believe that the CLO market continues to present us with a compelling investment opportunity [stead]. Especially as we see broader dispersion in the underlying portfolio quality, vintages and pricing.

Since we began investing in the CLO market, we have focused on both the primary and secondary markets, and have varied our emphasis according to which offered better relative value at various times. We continued to deploy our CLO investment strategy where we see opportunities to generate attractive current cash flows and/or the potential for capital appreciation.

Additionally, we continue to actively manage our portfolio when we see attractive sales opportunities in the secondary market. While we continue to generally focus CLO equities, with longer reinvesting periods that will have additional time to built par and invest in wider credit spreads compared to today's corporate loan market, we continue to evaluate a variety of different CLO equity and debt profiles that we believe may provide us with attractive [risks of deducted] return.

Thanks very much. Lastly, I would like to mention the total net assets for Oxford Lane at the end of the June quarter stood at approximately $165 million, while gross assets were approximately $285.6 million.

And with that, I would like to turn the call over to see if we have any questions.

(Operator instructions)

This concludes our question-and-answer session. I would like to turn the conference back over to Jonathan Cohen for any closing remarks.

All right, thanks very much. As always, we appreciate your interest in Oxford Lane Capital Corp.

We look forward to speaking to some of you, hopefully, during the remainder of this quarter, the September quarter, and to speaking to the broader group when we announce our September quarter results. Thank you all very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.