Oxford Square Capital (US:OXSQ)2023-11-08 21:55Investment Portfolio - As of September 30, 2023, the fair value of the Company's investment portfolio was approximately $285.5 million[232]. - The total fair value of the investment portfolio decreased to approximately $285.5 million as of September 30, 2023, down from $314.7 million as of December 31, 2022, primarily due to $15.0 million in debt repayments, $15.8 million in sales of investments, and net realized losses of $16.8 million[250]. - As of September 30, 2023, the company had investments in debt securities of 19 portfolio companies valued at approximately $193.7 million, CLO equity investments of approximately $84.1 million, and other equity investments of approximately $7.7 million[256]. - The company acquired approximately $8.2 million in portfolio investments during the nine months ended September 30, 2023, including $3.5 million in existing portfolio companies and $4.7 million in new portfolio companies[253]. - The portfolio had a weighted average credit grade of 2.2 as of September 30, 2023, consistent with the grade as of December 31, 2022[264]. - Senior secured notes represented 67.8% of the total portfolio as of September 30, 2023, while CLO equity investments accounted for 29.5%[260]. Investment Income - Investment income for Q3 2023 was approximately $13.0 million, up from $11.4 million in Q3 2022, representing a 14.0% increase[269]. - For the nine months ended September 30, 2023, total investment income was approximately $39.5 million, compared to $31.2 million for the same period in 2022, reflecting a 26.5% increase[269]. - Net investment income for the three months ended September 30, 2023, was approximately $6.4 million, compared to $5.6 million for the same period in 2022[290]. - The total distributions for the third quarter of fiscal 2023 reached $0.225 per share, with a GAAP net investment income of $0.11 per share, resulting in a shortfall of $0.12[307]. - The company has declared a consistent distribution of $0.035 per share across multiple payment dates in fiscal 2023 and 2024[316]. Debt Investments - The weighted average annualized yield on debt investments was approximately 13.10% as of September 30, 2023[226]. - Debt investments had stated interest rates ranging from 9.18% to 17.00% with maturity dates between 0 and 77 months[226]. - The total principal value of income-producing debt investments decreased to approximately $260.2 million as of September 30, 2023, from $272.7 million as of September 30, 2022[270]. - The weighted average yield on debt investments increased to approximately 13.10% as of September 30, 2023, compared to approximately 10.41% as of September 30, 2022[270]. - As of September 30, 2023, the company has approximately $290.4 million in principal debt investments at variable interest rates, with all but three being income-producing[317]. Expenses and Fees - Total expenses for Q3 2023 were approximately $6.6 million, an increase from $5.8 million in Q3 2022, marking a 13.8% rise[273]. - Net investment income incentive fees for Q3 2023 were approximately $1.2 million, with no fees recorded in Q3 2022, indicating a significant increase due to exceeding performance requirements[276][282]. - Interest expense for Q3 2023 was approximately $2.5 million, down from $3.1 million in Q3 2022, reflecting a 19.4% decrease[277]. - The base management fee for Q3 2023 was approximately $1.2 million, down from $1.4 million in Q3 2022, indicating a 14.3% reduction[275]. Realized and Unrealized Gains/Losses - For the three months ended September 30, 2023, the company recognized net realized losses on investments of approximately $13.5 million, primarily due to the sale of multiple CLO equity investments[285]. - For the nine months ended September 30, 2023, the company recognized net realized losses on investments of approximately $16.8 million, reflecting the sale of multiple CLO equity investments and an extinguishment of one CLO equity investment[288]. - The company reported net unrealized appreciation on its investment portfolio of approximately $21.9 million for the nine months ended September 30, 2023[250]. - The net change in unrealized appreciation for the three months ended September 30, 2023, was approximately $13.9 million, consisting of $8.4 million in gross unrealized appreciation and $10.2 million in gross unrealized depreciation[286]. - The net change in unrealized appreciation for the nine months ended September 30, 2023, was approximately $21.9 million, composed of $20.5 million in gross unrealized appreciation and $17.8 million in gross unrealized depreciation[289]. Regulatory and Compliance - The Company operates as a closed-end management investment company and is regulated as a BDC under the Investment Company Act of 1940[223]. - The company is subject to a written policy regarding the allocation of investment opportunities among its related entities, which may affect investment strategies[311]. - The company has implemented policies to avoid conflicts of interest in related party transactions, ensuring compliance with regulatory standards[313]. - The company’s Code of Business Conduct and Ethics requires all employees and directors to disclose any potential conflicts of interest[314]. Interest Rate Sensitivity - Interest rate risk sensitivity indicates that a hypothetical increase of 300 basis points in SOFR could lead to a 15.0% increase in net investment income, while a decrease of 300 basis points could result in a 15.0% decrease[322]. - Changes in interest rates can significantly impact the company's net interest income, which is the difference between interest income earned and interest expense incurred[318]. - The company’s variable rate investments are subject to different re-pricing intervals, with bilateral investments generally resetting annually and non-bilateral investments resetting quarterly[317]. - The company may utilize hedging instruments such as futures, options, and forward contracts to mitigate interest rate fluctuations, although this may limit benefits from lower rates[319]. - The hypothetical calculations regarding interest rate changes are based on a model of the investments held as of September 30, 2023, and are indicative of existing interest rate sensitivity[320].