Oxford Square Capital (US:OXSQ)2022-07-26 16:58Financial Data and Key Metrics Changes - For the quarter ended June 30, net investment income was approximately $4.3 million or $0.09 per share, unchanged from the prior quarter [6] - Net asset value per share decreased to $3.67 from $4.65 in the prior quarter [6] - Total investment income for the second quarter was approximately $9.9 million, unchanged from the prior quarter [7] - Net unrealized depreciation on investments was approximately $46.2 million or $0.93 per share, compared to $13.5 million or $0.27 per share in the prior quarter [7] - Realized losses on investments were approximately $1.5 million or $0.03 per share, compared to realized gains of $1 million or $0.02 per share in the prior quarter [8] - Cash and cash equivalents as of June 30 were approximately $23.2 million [9] Business Line Data and Key Metrics Changes - The U.S. loan market exhibited weakness, with loan prices decreasing from 97.60% of par as of March 31 to 92.16% of par as of June 30 [10] - Pricing dispersion related to credit quality showed BB-rated loan prices decreased by 4.06%, B-rated by 6.08%, and CCC-rated by 8.37% on average [11] - The distress ratio, defined as the percentage of loans with a price below 80% of par, increased to approximately 3.65% from 1.55% at the end of March 2022 [12] - Primary market issuance was approximately $56 billion, representing a 48% decline versus the same quarter in the previous year [12] Market Data and Key Metrics Changes - U.S. loan fund outflows were approximately $2.9 billion for the quarter ended June 30 [13] Company Strategy and Development Direction - The company focuses on portfolio management strategies designed to maximize long-term total return, taking a longer-term view towards investment strategy [13] - The company is monitoring both the loan market and CLO equity for investment opportunities [25] Management's Comments on Operating Environment and Future Outlook - Management noted that borrowers reported stable earnings, but there has been weaker guidance for later in the year [20] - The company does not have a specific view on loan prices or default rates but acknowledges the market is trading at a discount to par [24] - Management expressed optimism about the potential for loans to repay at par, despite acknowledging the economic dislocation [30] Other Important Information - The Board of Directors declared monthly distributions of $0.035 per share for the months ending October, November, and December of 2022 [9] Q&A Session Summary Question: Trends in Borrowers and Collateral Obligors - Management indicated that earnings have been stable, but weaker guidance is expected for later this year [20][21] Question: Outlook for Loan and CLO Markets - Management does not have a stated target for loan prices or default rates but is assessing the market's discount relative to economic variables [23][24] Question: NAV Drop Explanation - Management agreed that economic dislocation can create opportunities for loan investors, and they expect the majority of loans to repay at par [29][30]