XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT)
Company Profile
| Cover | 12 Months Ended |
| Sep. 30, 2024 | |
| Document Information [Line Items] | |
| Entity Registrant Name | XAI Octagon Floating Rate & Alternative Income Trust |
| Document Type | N-CSR |
| Amendment Flag | false |
| Entity Central Index Key | 0001703079 |
| Document Period End Date | Sep. 30, 2024 |
| N-2 - USD ($) | 12 Months Ended | ||||||||
| Sep. 30, 2024 | Mar. 31, 2024 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | ||
| Cover [Abstract] | |||||||||
| Entity Central Index Key | 0001703079 | ||||||||
| Amendment Flag | false | ||||||||
| Document Type | N-CSR | ||||||||
| Entity Registrant Name | XAI Octagon Floating Rate & Alternative Income Trust | ||||||||
| Financial Highlights [Abstract] | |||||||||
| Senior Securities [Table Text Block] | Fiscal Period Ended Title of Security Total Principal Aggregate Liquidation Asset (a)(b) September 30, 2024 Borrowings $ 204,050,000 $ – $ – 3,248 — Preferred Shares 84,900,000 – – 200 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 — 6.95% Series 2029 Convertible Preferred Shares 15,000,000 25.00 — 6.95% Series II 2029 Convertible Preferred Shares 30,000,000 25.00 September 30, 2023 Borrowings 150,350,000 – – 2,984 — Preferred Shares 59,900,000 – – 147 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 — 6.00% Series 2029 Convertible Preferred Shares 20,000,000 25.00 September 30, 2022 Borrowings 113,150,000 – – 3,004 — Preferred Shares 49,900,000 – – 139 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 — 6.00% Series 2029 Convertible Preferred Shares 10,000,000 25.00 September 30, 2021 Borrowings 98,150,000 – – 3,227 Preferred Shares 39,900,000 – – 162 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 September 30, 2020 Borrowings 35,650,000 – – 3,384 September 30, 2019 Borrowings 38,965,000 – – 3,020 September 30, 2018 Borrowings 38,865,000 – – 3,041 (a) The asset coverage ratio for the Credit Facility is calculated by subtracting the Trust’s total liabilities and indebtedness not represented by senior securities from the Trust’s total assets, dividing the result by the aggregate amount of the Trust’s senior securities representing indebtedness then outstanding, and then multiplying by $1,000. (b) The asset coverage ratio for a class of senior securities representing stock is calculated as the Trust’s total assets, less all liabilities and indebtedness not represented by the Trust’s senior securities, divided by secured senior securities representing indebtedness plus the aggregate of the involuntary liquidation preference of secured senior securities which are stock. With respect to the Preferred Shares, the asset coverage per unit figure is expressed in terms of dollar amounts per share of outstanding Preferred Shares (based on a liquidation preference of $25). | ||||||||
| Senior Securities Amount | $ 204,050,000 | $ 150,350,000 | $ 113,150,000 | $ 98,150,000 | $ 35,650,000 | $ 38,965,000 | $ 38,865,000 | ||
| Senior Securities Coverage per Unit | [1],[2] | $ 3,248 | $ 2,984 | $ 3,004 | $ 3,227 | $ 3,384 | $ 3,020 | $ 3,041 | |
| Preferred Stock Liquidating Preference | |||||||||
| Senior Securities, Note [Text Block] | The following table sets forth information about the Trust’s outstanding senior securities as of the end of each fiscal year since its inception: Fiscal Period Ended Title of Security Total Principal Aggregate Liquidation Asset (a)(b) September 30, 2024 Borrowings $ 204,050,000 $ – $ – 3,248 — Preferred Shares 84,900,000 – – 200 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 — 6.95% Series 2029 Convertible Preferred Shares 15,000,000 25.00 — 6.95% Series II 2029 Convertible Preferred Shares 30,000,000 25.00 September 30, 2023 Borrowings 150,350,000 – – 2,984 — Preferred Shares 59,900,000 – – 147 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 — 6.00% Series 2029 Convertible Preferred Shares 20,000,000 25.00 September 30, 2022 Borrowings 113,150,000 – – 3,004 — Preferred Shares 49,900,000 – – 139 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 — 6.00% Series 2029 Convertible Preferred Shares 10,000,000 25.00 September 30, 2021 Borrowings 98,150,000 – – 3,227 Preferred Shares 39,900,000 – – 162 — 6.50% Series 2026 Term Preferred Shares 39,900,000 25.00 September 30, 2020 Borrowings 35,650,000 – – 3,384 September 30, 2019 Borrowings 38,965,000 – – 3,020 September 30, 2018 Borrowings 38,865,000 – – 3,041 (a) The asset coverage ratio for the Credit Facility is calculated by subtracting the Trust’s total liabilities and indebtedness not represented by senior securities from the Trust’s total assets, dividing the result by the aggregate amount of the Trust’s senior securities representing indebtedness then outstanding, and then multiplying by $1,000. (b) The asset coverage ratio for a class of senior securities representing stock is calculated as the Trust’s total assets, less all liabilities and indebtedness not represented by the Trust’s senior securities, divided by secured senior securities representing indebtedness plus the aggregate of the involuntary liquidation preference of secured senior securities which are stock. With respect to the Preferred Shares, the asset coverage per unit figure is expressed in terms of dollar amounts per share of outstanding Preferred Shares (based on a liquidation preference of $25). | ||||||||
| Senior Securities Averaging Method, Note [Text Block] | The asset coverage ratio for a class of senior securities representing stock is calculated as the Trust’s total assets, less all liabilities and indebtedness not represented by the Trust’s senior securities, divided by secured senior securities representing indebtedness plus the aggregate of the involuntary liquidation preference of secured senior securities which are stock. With respect to the Preferred Shares, the asset coverage per unit figure is expressed in terms of dollar amounts per share of outstanding Preferred Shares (based on a liquidation preference of $25). | ||||||||
| General Description of Registrant [Abstract] | |||||||||
| Investment Objectives and Practices [Text Block] | INVESTMENT OBJECTIVE The investment objective of the Trust is to seek attractive total return with an emphasis on income generation across multiple stages of the credit cycle. There can be no assurance that the Trust will achieve its investment objective. The investment objective of the Trust may be changed by the Board of Trustees on 60 days’ prior written notice to shareholders. | ||||||||
| Risk Factors [Table Text Block] | Risks and Other Considerations Investing involves risk, including the possible loss of principal and fluctuation in value. The views expressed in these Questions & Answers reflect those of the portfolio managers only through the report period as stated on the cover. These views are expressed for informational purposes only and are subject to change at any time, based on market and other conditions, and may not come to pass. These views should not be construed as research, investment advice or a recommendation of any kind regarding the Trust or any issuer or security, do not constitute a solicitation to buy or sell any security, and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific investor. The views expressed in this report may also include forward-looking statements that involve risk and uncertainty, and there is no guarantee that any predictions will come to pass. Actual results or events may differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to the other factors noted with such forward-looking statements, include general economic conditions such as inflation, recession, and interest rates. Neither XAI nor Octagon has any obligation to update or otherwise revise any forward-looking statements, including any revision to reflect changes in any circumstances arising after the date hereof relating to any assumptions or otherwise. There can be no assurance that the Trust will achieve its investment objective or that any investment strategies or techniques discussed herein will be effective. The value of the Trust will fluctuate with the value of the underlying securities. Historically, exchange-listed closed-end funds often trade at a discount to their NAV. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Risk Considerations Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Trust’s investment objective will be achieved. Exchange-listed closed-end fund shares may frequently trade at a discount or premium to their NAV. CLOs often involve risks that are different from or more acute than risks associated with other types of credit instruments and may be difficult to value or be illiquid. The value of CLOs may decrease if ratings agencies revise their ratings criteria and, as a result, lower the rating of a CLO in which the Trust has invested. Senior loans may not be fully secured by collateral, generally do not trade on exchanges, and are typically issued by unrated or below-investment grade companies, and therefore are subject to greater liquidity and credit risk. Lower credit quality debt securities may be more likely to fail to make timely interest or principal payments. Leverage increases return volatility and magnifies the Trust’s potential return and its risks; there is no guarantee a trust’s leverage strategy will be successful. The Trust’s shares are not guaranteed or endorsed by any bank or other insured depository institution and are not federally insured by the Federal Deposit Insurance Corporation. | ||||||||
| Effects of Leverage [Text Block] | The Trust uses leverage to seek to enhance total return and income. The Trust may use leverage through (i) the issuance of senior securities representing indebtedness, including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper (collectively, “Indebtedness”), (ii) the issuance of preferred shares and/or (iii) reverse repurchase agreements, securities lending, short sales or derivatives, such as swaps, futures or forward contracts, that have the effect of leverage (“portfolio leverage”). The Trust currently intends to use leverage through Indebtedness and may use Indebtedness to the maximum extent permitted under the 1940 Act. Under the 1940 Act, the Trust may utilize Indebtedness up to 33 1/3% of its Managed Assets (specifically, the Trust may not incur Indebtedness if, immediately after incurring such Indebtedness, the Trust would have asset coverage (as defined in the 1940 Act) of less than 300% and the preferred asset coverage shall not be less than 200%). | ||||||||
| NAV Per Share | $ 6.63 | ||||||||
| Capital Stock, Long-Term Debt, and Other Securities [Abstract] | |||||||||
| Capital Stock [Table Text Block] | NOTE 5 - CAPITAL TRANSACTIONS Pursuant to the Trust’s Agreement and Declaration of Trust, the Trust is authorized to issue an unlimited number of shares of beneficial interest, par value $0.01 per share. The tables below provide information of the Trust's outstanding common shares of beneficial interest, par value of $0.01 per share ("Common Shares"), the Trust’s 6.50% Series 2026 Term Preferred Shares, par value of $0.01 per share, the Trust’s 6.95% Series 2029 Convertible Preferred Shares, par value of $0.01 per share and the Trust’s 6.95% Series II 2029 Convertible Preferred Shares, par value of $0.01 per share. Year Ended September 30, 2024 Year Ended September 30, 2023 Common shares outstanding - beginning of year 44,743,182 35,468,532 Common Shares issued in connection with the at-the-market offering 14,671,183 7,247,128 Common Shares issued in connection with a registered direct placement 3,546,854 – Common Shares issued in connection with conversion from 6.00% Series 2029 Convertible 2,876,677 1,579,188 Common Shares issued in connection with conversion from 6.95% Series 2029 Convertible 2,172,264 – Common shares issued as reinvestment of dividends 859,743 448,334 Common shares outstanding - end of year 68,869,903 44,743,182 6.50% Series 2026 Term Preferred Shares Year Ended September 30, Year Ended September 30, Preferred Shares outstanding - beginning of year 1,596,000 1,596,000 Preferred Shares converted – – Preferred Shared issued in a privately negotiated direct purchase agreement – – Preferred Shares outstanding - end of year 1,596,000 1,596,000 6.00% Series 2029 Convertible Preferred 6.95% Series 2029 6.95% Series II 2029 Year Ended Year Ended Year Ended Year Ended Preferred Shares outstanding - beginning of year 800,000 400,000 – – Preferred Shares converted (800,000 ) (400,000 ) (600,000 ) – Preferred Shared issued in a privately negotiated direct purchase agreement – 800,000 1,200,000 1,200,000 Preferred Shares outstanding - end of year – 800,000 600,000 1,200,000 The Board of Trustees is authorized to classify and reclassify any unissued shares into other classes or series of shares and authorize the issuance of shares without obtaining stockholder approval. On February 10, 2022, the Trust entered into a Distribution Agreement with the Foreside Fund Services, LLC (the “Foreside Agreement”), which superseded all prior agreements and any amendments thereto. Under the Foreside Agreement, the Trust offered and sold 18,300,000 Common Shares through the Distributor, in transactions that were deemed to be “at-the- market” as defined in Rule 415 under the Securities Act of 1933. The Foreside Agreement expired on June 3, 2024. On June 4, 2024, the Trust entered into a Distribution Agreement with Paralel Distributors, LLC (the “Distributor”), pursuant to which the Trust may offer and sell up to 15,000,000 Common Shares, from time to time, through the Distributor, in transactions that are deemed to be “at-the-market” as defined in Rule 415 under the Securities Act of 1933. The minimum price on any day at which Common Shares may be sold will not be less than the then current net asset value per Common Share plus any commissions to be paid to the Distributor. The Trust’s at-the-market program, under the Foreside Agreement and the Distribution Agreement, resulted in shares issued and proceeds generated as follows: Year Ended Year Ended Common Shares Issued 14,671,183 7,247,128 Net Proceeds $ 102,639,781 $ 48,249,625 On November 6, 2023, the Trust entered into a direct purchase agreement between the Trust and the purchasers listed therein to sell in a privately negotiated transaction up to 1,200,000 6.95% Series 2029 Convertible Preferred Shares at a price $23.25 per share. On February 14, 2024, February 28, 2024 and April 4, 2024, the Trust issued and sold to the purchasers 400,000, 400,000 and 400,000 6.95% Series 2029 Convertible Preferred Shares, respectively, for total gross proceeds (before deduction of offering expenses) of $27,900,000. On February 1, 2024, the Trust entered into a direct purchase agreement between the Trust and purchasers listed therein to sell in a privately negotiated transaction, 3,546,854 common shares of the Trust at a price of $7.0485 per shares, for total gross proceeds of $25,000,000. On June 10, 2024, the Trust entered into a direct purchase agreement between the Trust and the purchasers listed therein to sell in a privately negotiated transaction up to 1,800,000 6.95% Series II 2029 Convertible Preferred Shares at a price of $23.25 per share. On June 13, 2024, July 31, 2024 and September 20, 2024, the Trust issued and sold to the purchasers 400,000, 400,000 and 400,000 6.95% Series II 2029 Convertible Preferred Shares, respectively, for total gross proceeds (before deduction of offering expenses) of $27,900,000. The Trust paid $296,201 in offering costs during the year ended September 30, 2024 relating to the at-the-market program, the direct purchase agreement and the direct placement agreement offering costs are charged to paid-in capital upon the issuance of shares. For the year ended September 30, 2024, the Trust deducted $1,799,077 of offering costs from paid-in capital. The Statement of Assets and Liabilities as of September 30, 2024 reflect $477,553 of deferred offering costs outstanding. | ||||||||
| Security Dividends [Text Block] | On February 10, 2022, the Trust entered into a Distribution Agreement with the Foreside Fund Services, LLC (the “Foreside Agreement”), which superseded all prior agreements and any amendments thereto. | ||||||||
| Risks and Other Considerations [Member] | |||||||||
| General Description of Registrant [Abstract] | |||||||||
| Risk [Text Block] | Risks and Other Considerations Investing involves risk, including the possible loss of principal and fluctuation in value. The views expressed in these Questions & Answers reflect those of the portfolio managers only through the report period as stated on the cover. These views are expressed for informational purposes only and are subject to change at any time, based on market and other conditions, and may not come to pass. These views should not be construed as research, investment advice or a recommendation of any kind regarding the Trust or any issuer or security, do not constitute a solicitation to buy or sell any security, and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific investor. The views expressed in this report may also include forward-looking statements that involve risk and uncertainty, and there is no guarantee that any predictions will come to pass. Actual results or events may differ materially from those projected, estimated, assumed, or anticipated in any such forward-looking statements. Important factors that could result in such differences, in addition to the other factors noted with such forward-looking statements, include general economic conditions such as inflation, recession, and interest rates. Neither XAI nor Octagon has any obligation to update or otherwise revise any forward-looking statements, including any revision to reflect changes in any circumstances arising after the date hereof relating to any assumptions or otherwise. There can be no assurance that the Trust will achieve its investment objective or that any investment strategies or techniques discussed herein will be effective. The value of the Trust will fluctuate with the value of the underlying securities. Historically, exchange-listed closed-end funds often trade at a discount to their NAV. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. | ||||||||
| Risk Considerations [Member] | |||||||||
| General Description of Registrant [Abstract] | |||||||||
| Risk [Text Block] | Risk Considerations Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Trust’s investment objective will be achieved. Exchange-listed closed-end fund shares may frequently trade at a discount or premium to their NAV. CLOs often involve risks that are different from or more acute than risks associated with other types of credit instruments and may be difficult to value or be illiquid. The value of CLOs may decrease if ratings agencies revise their ratings criteria and, as a result, lower the rating of a CLO in which the Trust has invested. Senior loans may not be fully secured by collateral, generally do not trade on exchanges, and are typically issued by unrated or below-investment grade companies, and therefore are subject to greater liquidity and credit risk. Lower credit quality debt securities may be more likely to fail to make timely interest or principal payments. Leverage increases return volatility and magnifies the Trust’s potential return and its risks; there is no guarantee a trust’s leverage strategy will be successful. The Trust’s shares are not guaranteed or endorsed by any bank or other insured depository institution and are not federally insured by the Federal Deposit Insurance Corporation. | ||||||||
| Preferred Shares [Member] | |||||||||
| Financial Highlights [Abstract] | |||||||||
| Senior Securities Amount | $ 84,900,000 | $ 59,900,000 | $ 49,900,000 | $ 39,900,000 | |||||
| Senior Securities Coverage per Unit | [1],[2] | $ 200 | $ 147 | $ 139 | $ 162 | ||||
| Preferred Stock Liquidating Preference | |||||||||
| Series 2026 Term Preferred Shares [Member] | |||||||||
| Financial Highlights [Abstract] | |||||||||
| Preferred Stock Liquidating Preference | 25 | 25 | 25 | $ 25 | |||||
| Series 2029 Convertible Preferred Shares [Member] | |||||||||
| Financial Highlights [Abstract] | |||||||||
| Preferred Stock Liquidating Preference | 25 | $ 25 | |||||||
| Series II 2029 Convertible Preferred Shares [Member] | |||||||||
| Financial Highlights [Abstract] | |||||||||
| Preferred Stock Liquidating Preference | $ 25 | ||||||||
| Series 2029 Convertible Preferred Share [Member] | |||||||||
| Financial Highlights [Abstract] | |||||||||
| Preferred Stock Liquidating Preference | $ 25 | ||||||||
| [1] The asset coverage ratio for a class of senior securities representing stock is calculated as the Trust’s total assets, less all liabilities and indebtedness not represented by the Trust’s senior securities, divided by secured senior securities representing indebtedness plus the aggregate of the involuntary liquidation preference of secured senior securities which are stock. With respect to the Preferred Shares, the asset coverage per unit figure is expressed in terms of dollar amounts per share of outstanding Preferred Shares (based on a liquidation preference of $25). The asset coverage ratio for the Credit Facility is calculated by subtracting the Trust’s total liabilities and indebtedness not represented by senior securities from the Trust’s total assets, dividing the result by the aggregate amount of the Trust’s senior securities representing indebtedness then outstanding, and then multiplying by $1,000. | |||||||||