Oxford Square Capital (US:OXSQ)2022-04-28 21:15Financial Data and Key Metrics Changes - For Q1 2022, the company's net investment income was approximately $4.3 million or $0.09 per share, a slight decrease from $4.5 million or $0.09 per share in the prior quarter [6] - The net asset value per share decreased to $4.65 from $4.92 in the previous quarter [6] - Total investment income for Q1 2022 was approximately $9.9 million, down from $10.2 million in the prior quarter [7] - The company recorded net unrealized depreciation on investments of approximately $13.5 million or $0.27 per share, compared to $700,000 or $0.01 per share in the prior quarter [7] - Realized gains on investments were approximately $1 million or $0.02 per share, a recovery from realized losses of $3.7 million or $0.08 per share in the previous quarter [8] Business Line Data and Key Metrics Changes - Investment activity included purchases of approximately $47.4 million, sales of approximately $3.4 million, and repayments of approximately $38.6 million during the quarter [8] Market Data and Key Metrics Changes - The US loan market showed weakness, with loan prices decreasing from 98.64% of par at the end of Q4 2021 to 97.66% at the end of Q1 2022 [11] - The 12-month trailing default rate for the S&P/LSTA Leveraged Loan Index remained at a 10-year low of 0.19% by principal amount [13] - Primary market issuance was approximately $113.5 billion, representing a 39% decline compared to Q1 2021 [14] - US loan fund inflows were approximately $15.5 billion for the quarter [15] Company Strategy and Development Direction - The company is focusing on portfolio management strategies to maximize long-term total return and is taking a longer-term view towards its investment strategy [15] - The management is adjusting portfolio allocations based on market dynamics and is mindful of companies that may benefit or be harmed by inflation [25] Management's Comments on Operating Environment and Future Outlook - Management has not yet seen significant impacts from rising interest rates on borrowers in the portfolio, indicating that the situation is still developing [20] - Revenue trends among portfolio companies have been generally flat to improving, but margin pressures are expected due to inflation [21] - The company is observing opportunities in both primary and selective secondary markets for CLO investments [26] Other Important Information - As of March 31, the company held cash and cash equivalents of approximately $15.1 million [9] - Monthly distributions of $0.035 per share were declared for July, August, and September 2022 [9] Q&A Session Summary Question: Impact of rising loan spreads on borrowers - Management has not yet seen significant effects on borrowers' appetite for capital or their ability to service debt due to recent trends [20] Question: Trends in revenues and inflation impact - Revenues among portfolio companies have been flat to improving, but margin pressures are anticipated due to inflation-related costs [21] Question: Portfolio allocation adjustments - The company is considering market dynamics in its investment decisions, focusing on industries that may benefit from inflation [25] Question: Opportunities in CLO market - There are opportunities in both primary and secondary markets for CLO investments, especially as asset prices widen [26][27] Question: Current LIBOR and SOFR floors - The average LIBOR floor in the syndicated corporate loan portfolio is approximately 40 basis points, while the CLO portfolio is around 50 to 60 basis points [29]