Oxford Square Capital Corp (OXSQ) 2019 Q3 法說會逐字稿

Good day, and welcome to the Oxford Square Capital Corp.'s Third Quarter 2019 Earnings Release and Conference Call.

(Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Mr. Jonathan Cohen, Chief Executive Officer. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Oxford Square Capital Corp. Third Quarter 2019 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 please open the call this morning with a disclosure regarding forward-looking statements?

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 earlier 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 can 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 return the call back to Jonathan.

Thank you, Bruce. Oxford Square's net investment income, or NII, was $0.19 per share for the quarter ended September 30, and our net asset value per share stood at $5.42 compared to a net asset value per share of $6.31 as of June 30. Our total return during the quarter ended September 30 was negative 10.9%.

That total return reflected the change in net asset value per share for the period as well as the impact of the monthly $0.067 distributions.

For the third quarter, we recorded GAAP NII of approximately $8.9 million or $0.19 per share compared to $12.8 million or $0.27 per share for the quarter ended June 30. That decrease was primarily due to the onetime recognition of approximately $5.7 million of payment-in-kind cumulative dividends associated with our preferred equity position in the prior quarter.

In the third quarter of 2019, we recorded net realized losses and unrealized depreciation on investments of approximately $42 million or $0.88 per share. In total, we had a net decrease in net assets from operations of approximately $33.1 million or $0.69 per share compared to a net decrease of $7.5 million or $0.16 per share for the prior quarter. We note that as of September 30, we held a single investment on nonaccrual status with a fair value of $2.4 million.

During the third quarter of 2019, we made no new investments and we had principal repayments and sales at $5.2 million. On October 18, 2019, we entered into a $10 million repurchase transaction facility with Nomura Securities, which the company may use for working capital purposes. On October 25, 2019, our Board of Directors declared monthly distributions of $0.067 per share in the months ending January, February and March of 2020.

Additional details regarding record and payment date information can be found in our press release that was issued earlier this morning.

With that, I'll turn the call over to our Portfolio Manager, Kevin Yonon.

Thank you, Jonathan. During the quarter ended September 30, the loan market exhibited price declines across certain segments of the market. As of September 30, the S&P/LSTA Leveraged Loan Index decreased to 96.34 from 96.79 as of June 30. This decline continued into the fourth quarter, with the LSTA Index declining further to 95.54 as of October 25. We believe this pricing pressure has been principally driven by continued U.S. loan mutual fund and ETF outflows and accelerated downgrades from credit rating agencies that may have led to technical selling by CLOs to maintain compliance with certain tests within certain CLO ventures.

In the secondary loan market, CCC rated loans have exhibited greater price deterioration compared to BB and single B rated loans. The percentage of U.S. loans trading at prices at par or higher increased to approximately 34% at the end of September from approximately 8% at the end of June. However, the percentage of loans trading at prices of 80% of par or below has increased to approximately 4.1% at the end of September from approximately 2.5% at the end of June.

Additionally, bifurcation in the primary loan market demand was -- has resulted in the spread differential between higher and lower quality loans increasing to its widest level since 2017. In this environment, 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.

Thanks very much, Kevin. We note that additional information about Oxford Square Capital Corp.'s third 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.

(Operator Instructions) Seems that there are no questions in the queue. I'll turn the call back over to Mr. Cohen for closing remarks.

Great. Thanks very much. I'd like to thank everybody on the call and listening to the replay for their interest in Oxford Square, and we look forward to speaking to you soon. Thanks very much.

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