Oxford Square Capital 2026 Q2 Earnings Call

Good morning, everyone. Welcome to the Oxford Square Capital Corp second quarter 2026 earnings conference call. I am 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 the disclosure regarding forward-looking statements?

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.

To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com. With that, I will turn the call back to Jonathan.

Thanks, Bruce. For the quarter ended June 30th, 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 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.

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. On July 29th, 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 Yonon.

Kevin? 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. Leveraged Loan Index, increased from 94.63% of par as of March 31st to 94.96% of par as of June 30th. 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 six 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.

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. 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 June 30th, 2026, U.S. leverage loan primary market issuance, excluding amendments and repricing transactions, was $101.8 billion, representing a 33% increase versus the quarter ended June 30th, 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, U.S. loan fund inflows, as measured by Lipper, 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, 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.

Thanks very much, Kevin. Additional information about Oxford Square's second quarter performance has been posted to our website at oxfordsquarecapital.com. With that, operator, we're happy to open the call up for any questions.