Oxford Square Capital ((OXSQ)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call from Oxford Square Capital presented a balanced perspective, highlighting both positive and negative aspects of the company’s financial performance. While there were notable improvements in the U.S. loan market performance and loan issuance, these were counterbalanced by declines in net investment income, net asset value per share, and an increase in default rates.
Improved U.S. Loan Market Performance
The earnings call revealed an improvement in the U.S. loan market performance, with loan prices increasing from 96.71% of par as of September 30 to 97.33% of par as of December 31. This uptick indicates a healthier loan market environment, which could bode well for future investment opportunities.
Significant Increase in U.S. Leveraged Loan Issuance
A key highlight was the significant increase in U.S. Leveraged Loan primary market issuance, which reached $96.7 billion. This represents a substantial 75% increase compared to the previous year, reflecting robust market activity and investor confidence in leveraged loans.
Reduced Distressed Ratio
The distressed ratio showed a positive trend, ending the quarter at 3.02%, down from 3.43% at the end of the third quarter. This reduction suggests an improvement in the credit quality of the loan portfolio.
Decline in Net Investment Income
Despite some positive trends, the company experienced a decline in net investment income, which was reported at $6 million or $0.09 per share, down from $6.2 million or $0.10 per share in the prior quarter. This decrease highlights challenges in generating income from investments.
Decreased Net Asset Value Per Share
The net asset value per share also saw a decline, dropping to $2.3 from $2.35 in the previous quarter. This decrease reflects the impact of market conditions on the company’s asset valuations.
Net Unrealized and Realized Losses on Investments
The company reported combined net unrealized and realized losses on investments of $2.7 million or $0.04 per share. Although this is an improvement from $7.1 million or $0.11 per share in the prior quarter, it still indicates ongoing challenges in managing investment losses.
Increased Default Rate
The 12-month trailing default rate for the loan index increased to 0.91% from 0.8% in the previous quarter. This rise in default rate is a concern, suggesting potential risks in the credit environment.
Forward-Looking Guidance
Looking ahead, Oxford Square Capital Corp. provided guidance for the fourth quarter of 2024, reporting a net investment income of approximately $6 million, equating to $0.09 per share. The net asset value per share decreased to $2.3, and the company distributed $0.105 per share to common stock shareholders. Total investment income was reported at $10.2 million, with combined net unrealized and realized losses on investments of $2.7 million. The company also announced monthly distributions of $0.035 per share for April, May, and June 2025, indicating a steady approach to shareholder returns.
In summary, the earnings call from Oxford Square Capital highlighted a mixed financial performance, with improvements in the U.S. loan market and increased loan issuance being offset by declines in net investment income and net asset value per share. The company’s forward-looking guidance suggests a cautious yet steady approach to navigating the current financial landscape.