Oxford Square Capital (US:OXSQ)2020-04-28 15:07Financial Data and Key Metrics Changes - For Q1 2020, the company's net investment income was $0.13 per share, down from $0.18 per share in the prior quarter [7] - The net asset value per share decreased to $3.32 from $5.12 in the previous quarter [7] - Total investment income for Q1 2020 was approximately $10.8 million, compared to $13.4 million in the prior quarter [8] - Unrealized depreciation on investments was approximately $85.4 million, or $1.74 per share, compared to $13.3 million or $0.28 per share in the prior quarter [8] - The net decrease in net assets from operations was approximately $79.4 million, or $1.62 per share, compared to a net decrease of $4.9 million, or $0.10 per share, in the prior quarter [10] Business Line Data and Key Metrics Changes - The company made a new investment of $7.4 million during the first quarter and had principal repayments and sales totaling $23 million [11] Market Data and Key Metrics Changes - The U.S. loan market experienced heightened volatility, with loan prices initially increasing but then declining significantly due to COVID-19 [14][15] - The S&P/LSTA leveraged loan index dropped to a low of 76.23% on March 23rd and ended March at 82.85% [15] - Pricing dispersion related to credit quality showed BB-rated loans declining by 11.1%, B-rated loans by 15.1%, and CCC-rated loans by 22.4% on average [16] - The 12-month trailing default rate for the S&P/LSTA leveraged loan index increased to 1.84% by principal amount by the end of the quarter [16] - The distress ratio peaked at 57% on March 23rd and ended the quarter at 24% compared to 3.9% at the end of 2019 [17] Company Strategy and Development Direction - The company continues to focus on portfolio management strategies designed to maximize long-term total return, taking a longer-term view towards investment strategy [17] - The Board of Directors declared monthly common stock distributions through June 30th, 2020, but indicated a likelihood of reducing or suspending distributions for July, August, and September due to current economic conditions [18][19] Management's Comments on Operating Environment and Future Outlook - Management emphasized the uncertainty in the current environment due to COVID-19 and the need for caution regarding future distributions [19][34] - The company is actively looking for investment opportunities in the syndicated corporate loan market and CLO asset class, despite the current economic dislocation [32] Other Important Information - The company held two debt investments on non-accrual status with a combined fair value of $5.2 million as of March 31st [10] - Preferred equity investments in one portfolio company were also on non-accrual status with an aggregate fair value of $400,000 [10] Q&A Session Summary Question: Breakdown of senior secured notes and CLO equity portfolio's reference LIBOR rate - Management indicated a historical split of approximately 60-40 between one month and three months LIBOR, with exact splits to be provided later [25] Question: Cash flow diversion from CLO equity investments - Two positions diverted cash flows during the first quarter, but the magnitude was minimal [26] Question: Expectations for CLO equity GAAP and cash yields - No projections were published for the remainder of the year regarding CLO equity yields [30] Question: Comparison of current environment to previous cycles - Management refrained from direct comparisons, citing too many unknowns in the current environment [31] Question: Concerns regarding potential suspension of dividends - The decision to defer setting a distribution for July, August, and September was deemed reasonable given the current environment [34] Question: Timing for announcement of July dividend - The timing for the announcement is at the Board's discretion, potentially in May or June [37]