OXSQ - Earnings call transcript Q2 2018 | Oxford Square Capital Corp.

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Operator

Good morning and welcome to the Oxford Square Capital Corp's Second Quarter 2018 Earnings Release and Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jonathan Cohen, CEO. ahead. go Please

Jonathan Cohen

Good Square much. welcome to everyone Thanks Corp. morning Oxford Capital the very and

Second Conference our XXXX today our Bruce, Quarter Earnings you with President; Saul today could forward-looking and Rosenthal, the by discussion Bruce statements? the Rubin, open Chief regarding Officer. Call. Financial call I'm joined

Bruce Rubin

in is your Corp. the would morning. property Any in recorded. customary this unauthorized released Sure, of available call form regarding Replay days. our Oxford for to attention Square being replay rebroadcast Capital of note our is release the in this any to was release An disclosure Please I included prohibited. strictly that press Jonathan. the this call Today's also like press call conference call this morning of earlier XX information audio is call be that is will that statements forward-looking projections, for our recent includes filings and at refer We to these and projections. we factors not With cause information. call SEC to Today's that the Jonathan. you forward-looking visit required differ materially website most could by conference www.oxfordsquarecapital.com. the from do so filings, actual will results I copies forward-looking statements ask To to latest our our undertake obtain to to law. please of at unless presentation our do back return that, update SEC important

Jonathan Cohen

of a June distribution. $X.XX That reflected as of March our shareholders from of share as for return X.X% during per share at in much, very $X.XX effect return value the quarter a We end as Bruce. of second total Thanks of the well $X.XX net XXXX, per XXXX. the positive generated the XX, asset decrease

million, per second ended $X of approximately million approximately net XXXX, per for investment we the income $X.XX million. the quarter to in $XXX,XXX assets ended or share. net $X.X of of quarter $X.X GAAP recorded per appreciation on we of net share $X.XX XXXX. the XX, investments increase In recorded approximately losses in XX, we realized compared $X.X had share $X.XX XXXX, quarter March of million a June or or increase approximately and net In operations a net from For total,

net core today million was $X.X June for net $X.XX for $X.XX the per of per approximately to or million quarter with the compared investment XX, for ended share income. reconciliation investment release or see earnings Please net core prior Our issued we income $X.X investment income share the quarter.

XXXX, XXXX. net asset credit subsidiary our per Oxford that XX, of purpose produced is Pursuant is the agreement per that we has to XXXX, X.XX% has stock through of as value results Citibank. entered February of facility ended million. LLC, program vehicle announced we XXX special credit have mature will months $XX.X wholly-owned approximately governing LIBOR into million company's XX, the price million. a Board company's the authorized June Pricing XXXX, quarter year, June a quarter, in for of facility Directors common plus the Since XX, the Through the with stock for three $X.XX our approximately The per the $X.XX the September Board Funding payable million. $X.XX per Following repurchase XX, XX, the terms on On under approximately $XX at accretion company the facility, shareholders June of inception XXXX, on of declared share. the borrowed of program share XXXX. our to repurchase the XX, a share of we a of Directors share a distribution an X.X X, shares second program On totaling based average points. June Square basis record weighted share, facility September repurchased of per of $XX.X stock approximately

a modestly represented strength to from LSTA remained in XXXX in loan June of corporate XXXX, loan we approximately At the index XXXX From period the quarter which corporate March low rates decreased XX, at of default second levels. markets of time, same XX, XX.X% participate. continued The XX.X% the PAR. to

first spreads XXXX, of tighter XX. During investments. of leverage on in half we assets the spreads generally the of status average the June have our no reduced credit investments loan non-accrual CLO note that We loan as to weighted continue

We maximizing return the risk total continue shareholders. pursue adjusted our our mandate of to to

on time to to certain focus frame. as return, have historically a take designed maximize such, total as able term capital over currently permanent have portfolio market view been a a of view the available managements our particular us We to longer investments. generating towards vehicle, to opportunity and we As continued and as a our to opposed level strategies income strong we

information quarter about we're that, with Operator, Oxford at any Capital Additional Corps' open has our performance posted call the to Square for up second And www.oxfordsquarecapital.com. questions. been website to happy

Operator

session. Schleien the begin first Mickey ahead. question-and-answer question Ladenburg. go now from comes of Please Instructions] The will [Operator We

Mickey Schleien

Yes. Good morning, Jonathan.

Jonathan Cohen

morning, Mickey. Good

Mickey Schleien

Hey, Jonathan, seems at versus it at cycle number the of the slope terms the where look to curve. me of week's in how when we're unclear yield GDP are economic you you? still least at last

cycle I to than since assuming folks closer has end are been think so the most beginning the we're the obviously long.

the performed what economy sense future CLOs to ask previous have give the downturns of you to hold. might us some like I'd in So during how

Jonathan Cohen

you. Thank Mickey. Sure,

environment. an and that to that beginning closer positioned there's the vintages to beginning equity is of broadly certain profiles equity well-positioned during to during a certain equity periods in the than CLO sure focus we're that you of end spread the but end substantially as long are widening continuing the cost at the dislocation economic profile view CLO and outperform that in end perform low longer an asset the or are certainly an are virtue end perform to on economic believe dislocation to issue agree the environment. fund by that reinvestment leverage of I'm facilities, a spread and we their class leverage class we beginning, that are relatively of not CLO credit we order we cycle. closer there that We well-positioned reasonably the the with certainly and are or they an economic a a during are have dislocation or investments, in where with term mind, to market to asset that of to Our way is their widening

So yes, we agree.

Mickey Schleien

the I might takes specific the And don't hold? structure managers markets Jonathan, accounting. outweigh recession CLOs, use downside themselves provide they given of in opportunities loan as volatility to Could that the CLO near-term market-to-market some leverage believe

Jonathan Cohen

and yes and we've a our this view certainly good the cycles. Yes, I Mickey. play and is in very perceptive That's answer in different seen out think question

If terms in able That very asset during take a was loan cycle though last investment you end which wasn't full cycle CLO it some saw a some but look we to gave compelling broadly. which advantage CLO but fairly syndicated certainly interesting pricing and an dislocation correction at much much broader XXXX that of in of into certainly of of the valuations. the in of moderate XXXX-XXXX. our similarly were equity opportunities XXXX, us corporate towards opportunities We across platform more was the value cycle, meaningful you pricing, early some mini cycle, saw credit sort

agree would we with yes, that. So

Mickey Schleien

really That's helpful.

average if more, The couple spread decline. may. portfolio the CLO a Just weighted I seen equity has

down X about mentioned it's been basis remarks, quarter. you going your in think a I points prepared

refinance spread managers for liabilities, do their opportunity in downside average the remaining the much CLO you at reset your portfolio? more Looking to or see how weighted of

Jonathan Cohen

Our is a not view, Mickey, great deal.

to or for few than four months bottom over think refinancing focus of a some is spread reset as the tightening the We longer course selected well are widening on reasonably a given have do and I well-positioned. last of we're opportunities, top. moderate we much seen terms the periods on had reinvestment which the closer And think spread our in we that again profile middle portfolio a focus profiles.

Mickey Schleien

give a is My core could at break increase what give would question you change I could you to from us June. helpful. for level you the know se, NII. but per calculate drove be now us some Okay. what That the of share the if quarter-to-quarter high it $X.XX sense adjustment last to per don't in March caused very out if

Jonathan Cohen

as tranches P&L in you. that second flowed our quarter. Thank you primarily equity and through earlier, the refinancings Mickey. have on resets mentioned CLO It's Sure,

Mickey Schleien

and Is that was higher? So NII slower the the the of in refis pace second therefore correct was core resets interpretation? calendar and quarter

Jonathan Cohen

yes. respect of resets It's full quarter. Mickey, and to in quarter Sure, with principally, the quarter, refinancings the second where second those the activities received first benefit we

Mickey Schleien

for your Thanks it. morning. this time Appreciate you. Thank right. All

Jonathan Cohen

Thank much. you. very you Thank

Operator

The next ahead. Securities National question of Testa Corporation. Please from go Christopher comes

Christopher Testa

Jonathan. morning, Thanks my questions. Good taking Hey. for

Jonathan Cohen

Chris. Thanks,

Christopher Testa

the and resets the were the Following your little GAAP down a Mickey lower were CLO which walk saw is through bit refi and pulling us asking We obviously GAAP what borrowing nice through, was equity up were with about great things in but on Could holdings cash yield some a jump when positively the recalibrated you down. yields costs? in yields you your why yields.

Jonathan Cohen

you Absolutely. what was Sure, of Generally Chris. saw a spread tightening in environment. quarter a just the speaking manifestation second

been, those we until generally and but through, of and see we timing things the are that So refinancings unless have which the spreads at by flow tightened, linear. not level equity CLO perfectly is we resets affected to start

Christopher Testa

Got it.

potentially into costs and the refis for think having do Or that? that taxable offset What should And be against distributions from and XXXX the I'm and sense. know in? shake most will dealing you in the the more flow more roughly coming do cost makes should the income high you coming core million reset $X.X getting higher that through the NII third now inaugural probably cash higher this refi I with opting How distributions that quarter? quarter. estimated at the is, inaugural potentially of Okay, for have upfront you third balance out

Jonathan Cohen

to to difficult our facility, this rotate taken have book to through It's several weren't Citibank we in benefit we've of Chris, that we being in now last again, leverage the the a that CLO way quarters. able able say, the because

were sell redeploy assets we secondary BDC above in and in new primary long we ability limit rules, the assets, to statutory ability take didn't capital those the have in the the either had as or we market from the it purchases So but under certainly the to XX% the sold market.

again have taking million the under we Citibank that dropped $XX to the the in the portfolio. ability of XX% virtue tax facility, the have now Now by we below rotate statutory

distributions time, whether refis certain upfront not see opportunities So I'm now. those that's ability of we or through difficult having economic spread initial and widening refi advantage to period reinvestment we are longer to inaugural will periods benefits. only take benefits engaging the initial resets a of those virtue of right over longer say from activities. point, distributions accrue time by Certainly, and or offset and to meaningful cost positive over won't your where Whether the reset in

Christopher Testa

on capacity me. the what's And the Citi fair. facility? that's Okay, Excuse

Jonathan Cohen

is million have is capacity we $XX down. essentially taken what the which

Christopher Testa

Got the to the BDCs? have you coverage to thought asset it. And given using available reduced

Jonathan Cohen

have motion, statutory sheet thought board of our No. to took November, or last that and that to believe we given actually new haven't balance our action, taken advantage We but directors we of put serious any I in steps changing take had to limit.

Christopher Testa

Okay.

Just if last one me may. I for

You into from at and these and balance later more obviously not kind like the enter more maybe could first have are lien. something you again balance loan consider the or that. lightly ROE but syndicated even or seems It lien so broadly more and into from sheet more more or or as obviously higher get moved as second on potentially potentially that leverage leverage joint guys would we away get decide to Jonathan, cycle? in that use loans the just side you better-risk syndicated that's similar do venture, use predominantly a economic one deals you far higher broadly a second where sheet lien of adjusted shift using club syndicated

Jonathan Cohen

exactly Chris, question. Yes, that's right the

our capital the beneficiaries of against of lower capital. to we're has more capital risk, spread of under that but is the cost debt, positive benefit take the benefits the if higher move ability on to now facility first-lien of think of the One do stack lower paper Citi have lower it's that we we that lower the cost a debt, in up the arbitrage appropriate

So the answer is yes.

Christopher Testa

for me. questions. taking all Thanks that's Okay, for my

Jonathan Cohen

And Chris, one thing. last

Christopher Testa

Sure.

Jonathan Cohen

several that board last release It put was the a out that action. the and time press more recently within the we than last November, took was at months

Christopher Testa

it. Got

you. thank Okay,

Jonathan Cohen

you. Thank

Operator

This I concludes to conference for would to closing the over back our Cohen any Jonathan like turn remarks. session. question-and-answer

Jonathan Cohen

listening of on their to to interest for quarter Great. I'd like look everyone participation. who's the forward thank and and their We call. replay call you speaking at to quarter's during the certainly to the next and many

much. very all thanks So

Operator

now today's presentation. for has Thank conference concluded. attending The you

disconnect. You may now

Oxford Square Capital (OXSQ) 31 Jul 182018 Q2 Earnings call transcript