Q2 2026 Oxford Square Capital Corp Earnings Call
Speaker #1: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oxford Square Capital Corp. Q2 2026 Earnings Call.
Speaker #1: Second quarter 2026 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.
Speaker #1: To ask a question, press star 1 on your telephone keypad. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Jonathan Cohen, CEO.
Operator: It is now my pleasure to turn the call over to Jonathan Cohen, CEO. Please go ahead.
Speaker #1: Please go ahead.
Speaker #2: Thank you. Good morning, everyone. Welcome to the Oxford Square Capital Corp. second quarter 2026 earnings conference call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our Chief Financial Officer; and Kevin Yonon, Managing Director and Portfolio Manager.
Jonathan H. Cohen: Thank you. Good morning, everyone. Welcome to the Oxford Square Capital Corp Second Quarter 2026 Earnings Conference Call. I'm joined today by Sol Rosenthal, our president, Bruce Rubin, our chief financial officer, and Kevin Yonan, managing director and portfolio manager. Bruce, could you open the call with a disclosure regarding forward-looking statements?
Speaker #2: Bruce, could you open the call with a disclosure regarding forward-looking statements?
Speaker #3: 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, as issued this morning.
Bruce L. Rubin: 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 as issued 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 current company's 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.
Speaker #3: Please note that this call is the property of Oxford Square Capital Corp.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: 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.
Bruce L. Rubin: To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com. With that, I'll turn the call back to Jonathan.
Speaker #2: With that, I'll turn the call back to Jonathan.
Speaker #3: Thanks, Bruce. For the quarter ended June 30, Oxford Square's net investment income was approximately $5.1 million, or $0.05 per share, compared with approximately $4.1 million in the prior quarter.
Jonathan H. Cohen: Thanks, Bruce. For the quarter ended 30 June, Oxford Square's net investment income was approximately $5.1 million, or $0.05 per share, compared with approximately $4.1 million in the prior quarter. Our net asset value per share stood at $1.29, compared to a net asset value per share of $1.32 for the prior quarter. During the quarter, we distributed $0.105 per share to our common stock shareholders. For Q2, we recorded total investment income of approximately $9.4 million, compared to approximately $8.9 million in the prior quarter. In Q2, we recorded combined net unrealized and realized losses on investments of approximately $1.1 million, or $0.01 per share, compared to combined net unrealized and unrealized losses on investments of approximately $29.7 million, or $0.34 per share, for the prior quarter.
Speaker #3: Our net asset value per share stood at $1.29, compared to a net asset value per share of $1.32 for the prior quarter. During the quarter, we distributed $10.5 per share to our common stock shareholders.
Speaker #3: For the second quarter, we recorded total investment income of approximately $9.4 million compared to approximately $8.9 million in the prior quarter. In the second quarter, we recorded combined net unrealized and realized losses on investments of approximately $1.1 million or $0.01 per share, compared to combined net unrealized and unrealized losses on investments of approximately $29.7 million or $0.34 per share for the prior quarter.
Speaker #3: During the second quarter, our investment activity consisted of purchases of approximately $19.9 million and repayments of approximately $500,000. During the quarter ended June, we issued a total of approximately 11.3 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $17.8 million.
Jonathan H. Cohen: During Q2, our investment activity consisted of purchases of approximately $19.9 million and repayments of approximately $500,000. During the quarter ended June, we issued a total of approximately 11.3 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $17.8 million. On 29 July, our board of directors declared monthly distributions of $0.035 per share for each of the months ending October, November, and December of 2026. We note that additional details regarding record and payment date information can be found in our press release that was issued this morning. With that, I'll turn the call over to our portfolio manager, Kevin Yonan. Kevin?
Speaker #3: On July 29th, our board of directors declared monthly distributions of $3.50 per share for each of the months ending October/November/December of 2026. We note that additional details regarding record and payment date information can be found in our press release that was issued this morning.
Speaker #3: With that, I'll turn the call over to our Portfolio Manager, Kevin Yonon. Kevin?
Speaker #4: Thank you, Jonathan. During the quarter ended June 30th, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA U.S.
Kevin P. Yonon: Thank you, Jonathan. During the quarter ended 30 June, US loan market performance improved versus the prior quarter. US loan prices, as defined by the Morningstar LSTA US Leveraged Loan Index, increased from 94.63% of par as of 31 March to 94.96% of par as of 30 June. According to LCD, during the quarter, there was some pricing dispersion, with BB-rated loan prices increasing 32 basis points, B-rated loan prices increasing 42 basis points, and CCC-rated loan prices increasing 6 basis points on average. According to PitchBook LCD, the 12-month trailing default rate for the loan index decreased to 0.97% by principal amount at the end of the quarter from 1.44% at the end of March.
Speaker #4: Leverage Loan Index, increased from 94.63% par as of March 31st to 94.96% of par as of June 30th. According to LCD, during the quarter, there were some pricing dispersion.
Speaker #4: With BB-rated loan prices increasing 32 basis points, B-rated loan prices increasing 42 basis points, and CCC-rated loan prices increasing 6 basis points on average.
Speaker #4: According to PitchBook LCD, the 12-month trailing default rate for the loan index decreased to 0.97% by principal amount at the end of the quarter, from 1.44% at the end of March.
Speaker #4: Additionally, the default rate, including various forms of liability management exercises, which are not captured in the aforementioned default rate, remained at an elevated level of 2.77%, but declined from 3.48% as of March 31st.
Kevin P. Yonon: Additionally, the default rate, including various forms of liability management exercises, which are not captured in the aforementioned default rate, remained at an elevated level of 2.77%, but declined from 3.48% as of 31 March. The distress ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 6.87%, compared to 7.23% at the end of March. During the quarter ended 30 June 2026, US leverage loan primary market issuance, excluding amendments and repricing transactions, was $101.8 billion, representing a 33% increase versus the quarter ended 30 June 2025. This was driven by higher refinancing and M&A activity, partly offset by lower LBO and dividend activity versus the prior year comparable quarter. At the same time, US loan fund inflows, as measured by Lipper, were approximately $1 billion for the quarter ended 30 June.
Speaker #4: The distress ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 6.87%, compared to 7.23% at the end of March.
Speaker #4: During the quarter ended June 30, 2026, U.S. leveraged loan primary market issuance, excluding amendments and repricing transactions, was $101.8 billion, representing a 33% increase versus the quarter ended June 30, 2025.
Speaker #4: This was driven by higher refinancing and M&A activity, partly offset by lower LBO and dividend activity versus the prior-year comparable quarter. At the same time, U.S.
Speaker #4: loan fund inflows as measured by LIPR were approximately $1 billion for the quarter ended June 30th. 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.
Kevin P. Yonon: We continue to focus on portfolio management strategies designed to maximize our long-term total return. As a permanent capital vehicle, we historically have been able to take a longer-term view towards our investment strategy. With that, I will turn the call back over to Jonathan.
Speaker #4: With that, I will turn the call back over to Jonathan.
Speaker #3: Thanks very much, Kevin. Additional information about Oxford Square's second quarter performance has been posted to our website at oxfordsquarecapital.com. And with that, operator, we're happy to open the call up for any questions.
Jonathan H. Cohen: Thanks very much, Kevin. Additional information about Oxford Square's Q2 performance has been posted to our website at oxfordsquarecapital.com. With that, operator, we're happy to open the call up for any questions.
Speaker #1: Once again, to ask a question, press star 1 on your telephone keypad. Our first question comes from the line of Eric Zwick with Lucid Capital Markets.
Operator: Once again, to ask a question, press star one on your telephone keypad. Our first question comes from the line of Eric Zwick with Lucid Capital Markets. Please go ahead.
Speaker #1: Please go ahead.
Speaker #5: Thank you. Good morning. I wanted to start just with the hey, Jonathan, with the 19.9 million of purchases you referenced in the quarter. Trace, if you could provide any characteristics on those investments in terms of security type, yield or spread, types of industries, and anything additional there would be great.
Eric Zwick: Thank you. Good morning.
Jonathan H. Cohen: Morning, Eric.
Eric Zwick: Hey, John. With the $19.9 million of purchases you referenced in the quarter. Trace, if you could provide any characteristics on those investments in terms of security type, yield or spread, types of industries, anything additional there would be great.
Speaker #3: Sure. Hey, Eric. That was actually all CLO equity for this quarter, so the cash-on-cash was probably in the low 20s. The forward effective yield is also in that range. But yeah, that was all CLO equity for this quarter.
Jonathan H. Cohen: Sure.
Kevin P. Yonon: Hey, Eric. That was actually all CLO equity for this quarter. The cash on cash was probably low twenties. The forward effective yield is also in that range. Yeah, that was all CLO equity for this quarter.
Speaker #3: And that's consistent, Eric, with our current thesis. COO equity tranche investments representing what we believe is a fairly compelling cash on cash opportunity. Particularly for purchases made in the secondary market.
Jonathan H. Cohen: That is consistent, Eric, with our current thesis of CLO equity tranche investments representing what we believe is a fairly compelling cash-on-cash opportunity, particularly for purchases made in the secondary market. I believe that all of those purchases, yes, all of those purchases, Eric, were made in the secondary market.
Speaker #3: And I believe that all of those purchases, yes, all of those purchases, Eric, were made in the secondary market.
Speaker #5: Excellent. Thanks for the color there. And then in terms of the unrealized gains that were recorded in the quarter, were those primarily a rebound from last quarter's marks, or were there some other factors that contributed to the appreciation in value in the quarter?
Eric Zwick: Excellent. Thanks for the color there. Then in terms of the unrealized gains that were recorded in the quarter, was this primarily a rebound from last quarter's marks, or were there some other factors that contributed to the appreciation in value in the quarter?
Speaker #3: No, it was principally that. Just coming off of those levels.
Jonathan H. Cohen: No, it was principally that, just coming off of those levels.
Speaker #5: Okay. And then, just looking at the makeup of the non-accruals—the one debt position that, I guess, was on there last quarter but is now gone—I think the press release mentioned you did not make any sales. So, was that resolved, or is that obviously back to non-accrual now, or how should I interpret that?
Eric Zwick: Okay. Then just looking at the makeup of the non-accruals or the one debt position that I guess was on there last quarter but now gone. I think the press release mentioned you did not make any sales. Was that resolved, or that is obviously back to non-accrual now, or how should I interpret that? What kind of transpired there?
Speaker #5: What kind of transpired there?
Speaker #3: Sure. This is Kevin Yonon. So that one position went through a restructuring transaction, which closed during the quarter. There's now a new manageable capital structure, of which we hold the new first lien term loan, as well as some common equity.
Kevin P. Yonon: Sure. This is Kevin Yonan. That one position went through a restructuring transaction which closed during the quarter. There is now a new manageable capital structure of which we hold the new first lien term loan as well as some common equity. That new first lien term loan is on accrual.
Speaker #3: And that new first lien term loan is on accrual.
Speaker #5: Okay. And did you record any additional losses or gains as a result of that restructuring, or were you had it marked last quarter that ended up being pretty accurate?
Eric Zwick: Okay. Did you record any additional losses or gains as a result of that restructuring, or where you had it marked last quarter, did that end up being pretty accurate?
Speaker #3: Marked was consistent with the prior quarter.
Jonathan H. Cohen: Mark was consistent with the prior quarter.
Speaker #5: Excellent. Thanks. And then it was good to see total investment income up quarter over quarter. Yet the NII per share still below the dividend level.
Eric Zwick: Excellent, thanks. It was good to see total investment income up quarter-over-quarter. Yet the NII per share is still below the dividend level. Just curious to know how you are looking at the portfolio. What levers do you have at your disposal to drive that NII higher? Over what timeframe would you expect it to take to get that earnings power back to a full dividend coverage again?
Speaker #5: So just curious how you're looking at the portfolio. What levers do you have at your disposal to drive that NII higher and over what time frame would you expect it to take to get that earnings power back to a full dividend coverage again?
Speaker #3: Sure. We don't, as you know, Eric, make forward projections, or forward-looking performance. Estimates but we are I think broadly optimistic about the capital that we're deploying presently, including the capital that we just deployed in this last quarter.
Jonathan H. Cohen: Sure. We don't, as you know, Eric, make forward projections or forward-looking performance estimates. We are, I think, broadly optimistic about the capital that we're deploying presently, including the capital that we just deployed in this last quarter. We'll certainly keep you updated.
Speaker #3: And we'll certainly keep you updated.
Speaker #5: That was good. Thanks for taking my questions this morning, guys.
Eric Zwick: No, it was good. Thanks for taking my questions this morning, guys.
Speaker #3: Thank you, Eric. Thank you.
Jonathan H. Cohen: Thank you, Eric. Thank you.
Speaker #1: Again, to ask a question, press star 1 on your telephone keypad. And with that, with no further questions in the queue, I will now turn the call back to Jonathan Cohen, CEO.
Operator: Again, to ask a question, press star one on your telephone keypad. With that, with no further questions in the queue, I will now turn the call back to Jonathan Cohen, CEO.
Speaker #3: Thank you very much, operator. We'd like to thank everybody on this call and everybody listening to the replay, for their continued interest in Oxford Square.
Jonathan H. Cohen: Thank you very much, operator. We'd like to thank everybody on this call and everybody listening to the replay for their continued interest in Oxford Square, and we look forward to speaking to you again soon. Thanks very much.
Speaker #3: And we look forward to speaking to you again soon. Thanks very much.
Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.
