Oxford Lane Capital (OXLC) 28 Jan 222022 Q3 Earnings call transcript

Hello, everyone, and welcome to the Oxford Lane Capital Corp.

Third Fiscal Quarter 2022 Call. My name is Nadia, and I will be coordinating the call today. [Operator Instructions]. I will now hand over to your host, Jonathan Cohen, CEO of Oxford Lane Capital to begin. ahead. go please Jonathan,

our much, Director Lane morning, disclosure Quarter Capital I'm you Maji, call Saul Conference very Financial the our to and open Portfolio Officer; XXXX and forward-looking Manager. the regarding Call. Deep Rosenthal, by today Oxford Corp. Senior joined a Bruce Nadia. you statements. Rubin, everyone, Chief Managing Good our welcome Earnings President; and Thank with third could fiscal Bruce,

those cause We our for that SEC factors by materially these call conference is audio our conference replay available earlier so unless your morning's Today's is financial press performance. and respect refer things, and law. Capital that that call note will customary Any Oxford events Today's Replay call is required this results current statements filings of of attention do recorded. forward-looking An in this disclosure was Please the can this the projections future important recent in regarding unauthorized differ Jonathan. to Corp. be of from Sure, for not property information point, please being the call undertake is to, press update ask among prohibited. indicated information. to you issued strictly days. projections. XX with At morning. included any most company's actual the includes the to this to We to views direct in forward-looking with reflect other release to this that statements our forward-looking Lane form release rebroadcast call do in

in to also measures. During this non-GAAP defined the release earnings and we refer call, use will terms

over earnings on please Jonathan. www.oxfordlanecapital.com. For to refer website GAAP, back turn I'll to to at definitions the release presentation and posted our With that, our reconciliations

On as $X.XX our per September to XX. of per you, at $X.XX share Thank December of stood asset compared net net XX, XXXX, value share asset a value Bruce.

quarter. total GAAP our income $XX.X our and we increase CLO total equity other debt from December, investments, net XX. of million $XX.X representing $X.XX ended an $X.XX our per $XX.X approximately quarter and investment CLO or quarter's from recorded December $XX.X also of portfolio $XX million, prior approximately to investment income the for and from million CLO for For ended ended GAAP approximately investments million The the September million Oxford GAAP of approximately investment of from recorded consisted Lane warehouse the quarter income. share XX from income the quarter per share compared $X.X million or

net core quarter per $XX compared was million $XX million approximately ended quarter income XX $X.XX September $X.XX XX. approximately the Our share investment or share ended per the or for with for December

December, of stock ended approximately to resulting million. a at-the-market common we offering, net in -- total an ended million our quarter the of we During shares of XX.X issued proceeds pursuant $XX.X approximately

operations for quarter $XXX,XXX. had investments in from the of December million fiscal of per per XX, approximately net approximately net we of quarter. recorded ended the a $XX.X or gains share. For net assets on $X.XX depreciation We $X.XX million We or third increase recorded net unrealized $XX.X share realized resulting approximately

receive effective average As at current on Note September none equity was represented we to cash was XX.X%, that average on XX. distribution our CLO yield received note CLO debt metrics average cash to metrics weighted our XX.X% also The we a XX.X%, the XX.X% yields our respective at based of the cash that of yield investments equity these as which cost CLO The current XX. from of each investments distribution September total at from period calculated or of of applied. yield XX.X%, unchanged current XX, was at The XX. distributions cost December equity as of unchanged shareholders. investments our up of weighted following return cost CLO weighted We investments of were September end. are entitled the as

approximately made XXXX. the ended sales and June $XXX.X repayments. April, million, million During CLO of distributions common of XX, $XXX.X stock for our $X.XXX On per from of May months we of investments declared quarter received approximately December and we Board January each additional XX, monthly share of and Directors the of

January, over X% of are public aggregate $XXX to underwritten With In have to addition, proceeds. we our due offering Deep principal raising in Manager, Portfolio amount net approximately XXXX, our that, million Maji. turn the $XX.X unsecured completed an call of during notes pleased million of I'll

Thanks Jonathan.

basis of the versus Note ended the points the points. on BB-rated September starting XX November credit loan LCD, According decreasing with XX trailing XX. loan B-rated prices, to XX.XX% as quality to by rate S&P/LSTA The loan this points dispersion into par from the December the average. XX loan XX XX, as XX Leveraged points, prices XX-month at quarter this points quarter before CCC-rated lower default September low. by ended amount for basis of decreased rate quarter decreasing XX basis Loan -- to saw prices slightly we S&P/LSTA basis XX, the the U.S. XXX basis XX.XX% XXXX. of and Leveraged all-time XXXX, the to principal moved pricing end Index, as prices some of after the Loan at December that is defined the decreasing just stability During of of quarter above related loan rebounding par the Index basis is market exhibited end the quarter during U.S. points

of as XXXX. December ended December approximately compared to XX% loans distress with X% below of the defined of X.X% the the percentage par, X.X% price and in at in quarter a ratio, XXXX Additionally, of

prices asset XX% CLO to the of U.S. in net the We value to During U.S. equity approximately asset the modestly XX% improving approximately from quarter, increase par. equity observed modest led median par a modest loan CLO in values. increase U.S. net of

for take our -- very within priced a in steady, at market resetting and maintained year new advantage basis the calendar XXXX. quarter, XXXX of generally cost making investments, new to cheaper pools of deals. $XXX record issuance $XXX set CLO strength points compared spreads billion quarters the issued XXX to in financing XXXX record priced obtain be year was observed billion to Approximately equity XXXX. last prior and full refinancings the this $XXX record CLO in CLO primary weighted in of prior XXX billion deals set for Primary issued portfolios that to quarter. continued points of resets as refinancing and approximately compared Lane average $XXX of basis debt strong the able X Additionally, we X of the compared X Oxford to full billion deals to well, new year loan year

been well. we've in secondary the active the very primary in be very market While market as active we recently, continue to

both March function activity return. back intend market U.S. we over the And equity in December look historically that, to this were to an CLO a CLO strategy. utilize XXXX With as of overall of of we our take equity, total unconcerned Jonathan. opportunistic Oxford maximize As warehouses able longer-term and Lane's to XXXX. long-term been weighted portfolio period the have our CLO to towards markets investment to we I we environment, and lengthen In capital quarter, will current call debt to our to continue from reinvestment of average a able turn vehicle, view as across a permanent investment strategy the

website for to quarter the very our happy third has call Lane's much, Deep. We fiscal information questions. that performance been any additional Thanks that, With note at open uploaded operator, we're about Oxford www.oxfordlanecapital.com. to

And of question Instructions] Ladenburg. first our from Mickey comes [Operator Schleien

Jonathan, in unrealized collateral apart could main drivers prices. the the decline some us were you what insight give this from of quarter's depreciation into

Deep. modestly. Mickey, which the had We this driver. pricing That was is little of bit a just primary increased tails the dispersion,

volatility period, that So in bit maybe led asset market some to in a weakness net you little bids. throughout values had and the and a decline some modest of

How primary opportunity Oxford's transition to the guess, market impacting year? or, I SOFR the do the see and you investment this introduction

been of seen of deals in to top for managers. about time. we're them and market SOFR participants the already The have SOFR, it, of Sure. topical. very several being period A And has priced in tier now it of been most midst lot we've talking transition some

out print -- deals as market to the of ultimately, expected, I more kind back will ordinary essentially we And quickly. think few it be fairly figured So print have a we course. once

Deep, rising expecting CLO periods when have equity as this you at we're how cash look in history, year? interest behaved flows rates of

topical And Mickey. question, been great a again, it's recently. very It's Sure.

current of as unlevered As rates the the last over both decrease have rates our over well you weeks lose pass of rise on you you equity far kind so floors. cash a been lose of the months, portion creeping your LIBOR that you returns floors, because flows once which as will assets. will of benefit actually few up the floors, benefit cash-on-cash will the benefit get from and and rising and benefit But the as the

expectation effective So gotten I use the rising rates already of over the that that's increased. We for -- been steeper our show has that yields. do think couple -- curves, into the it's modeled do as that's forward something months which last have

So deals. seeing and again, yield yield we we these the the that, into look we're factored that at believe mostly that when is

at this average the what sort collaterals the Deep, And of is floor in point?

basis It's between points. XX XX and

Okay.

I couple correct? rises to a So it of am take would that, get past rate

Presumably, all this constant, of again, it very which But Mickey. does. stays else rarely everything assumes

of LIBOR spreads like rates. and we syndicated rapidity SOFR path of for the loan rates, and changes So pricing, now. and consider to corporate have that in direction The forward recovery direction default things loan

things is So class, CLO equation. a most there asset -- multivariable as with the it in

paper taken opportunity flows? for and liabilities Jonathan, your How repricing further -- of a large would tight would help cash AAA say or the resetting and remaining AAA in I portfolio while, been is you managers that remaining to say of the you tight, for understand. is have it's quite how actively. CLO support advantage pretty --

changes there think is time, and Mickey. you as very We real It's some quantify, to say. opportunity it in just probably there, difficult ongoing

Deep up pace assets cash steepening any are into than the which October? that insight liabilities. versus And January a shaping CLO yield may the given the give at curve, mentioned us different reset Can impact of the equity you flows payments how

actually cash modeled. Sure. in of slightly at have kind come what above actually was or flows January

to have portfolio impact. our So, you realize meaningful mitigate risks. that again, But we seen those to rotating actively haven't some we're of a

when risk-adjusted And return takes Right. surely broadly. capture management

a lower since to than than curve LIBOR and its I be risk-free understand. transition tends yield, you rate, And flatter How going be the valuation meaningful impacting be at SOFR and do the portfolio tends to it if it's estimated envision to to Jonathan, SOFR is all? LIBOR.

the last built But for state happy Mickey. the those of are of time, We're same this analytics, believe current And here, set the the at we're over -- decade. shifts a we portfolio. radical not robust and into looking what we've transition we're analytics fairly incorporated we've up with

Jonathan. just year. Okay. my I completely that philosophically, question, year that, sunset next of And -- looking sort LIBOR last appreciate next understanding will my is

So may and next? we CLOs assets, the SOFR dealing may be some general assets, have, LIBOR just you How I in mismatched. you mismatch going market do with into see situation guess, in with where a year some this liabilities be this

question. great Mickey,

deal So once underlying the all in invested will of and a years generally provisions for backup change But indices. the in happen opinion, that with several in documentation adequately, have indentures the CLOs all deal transition. that switch to percentage rates, our the have transition again, the we've and the their certain with language loans past this

that the or in, until assets let's Deep, the Or say, apply do locked to reset? you are liabilities LIBOR refi does liabilities? a a and And both

assets. liabilities based it's So the determined of it and the the on with deals composition

Terrific.

continue. questions Thank matching morning. will my the all for I your are So appreciate Those time. this you.

And Howlett Riley. question comes of next Matthew from B. our

EVO I Congratulations. reprice but are January, a the that level, interest forward. change, can the get wanted the costs happening the down. We X-year GAAP one mean look now? debt the I Just growth. quarter, bigger What's want portfolio and level? stack trend. your what new callable bit I then you balance X%. I on expect I in Is know when and to going strong see the the preferred just -- then at of get did you obviously in the are going -- had stable you to you the had just I and focus down NII NII, coming excited about talk yields and that debt expense you but do little that's bringing to rates feel sort you to now like a

have and cost of the should at all we issue obviously a of whether of opportunities X% to will of or between have certainly of the an use risk-adjusted having attractive we have capital future lower a are for Sure, issued capital for at Matt. a good our to we depends our but lot That's that attractive you where is, to refinance, difficult of proceeds. capital ability are question. in think to cost looking factors these liability say on pleased that our a cost believe capital the stack, predict, awful notes. liabilities of use great we arbitrage time refinance ability quite it. cost opportunities at to very Thank that the and at the We We're at capital. us, hard stack that It's

that, right? on is Is that X be -- -- there callable still called time? high I any is at that can am in preferred that's correct And that X%, that's there the

correct, Yes. Matt. are You

the and with leverage you I the that's I the Great. before go just the mean, was have look I space. why debt, that Obviously, at you the to leverage. the kicked ATM, I down. combination the in lowest baby think bond, want of

much there do guys up is to I appetite year? the going mean a forward during seeing leverage bit take little You are opportunities. how to

In a the basis philosophy consistent capital to other deal, increases Matt, Not have basis. maintaining a of equity on ratio. we probably, an great in those been, build to if reasonably continue leverage general percentage approximate we a the with step terms stay words, is

bringing our that class, asset strategy. is that appropriate cushion is mandate very intention. of that strategy, We limits it to our our having In leverage existing substantially, really think of terms this with of a and part substantial and not leverage statutory -- is a prudent taking ratio current and up investing the in having

it. a you the on Got nice dividend, bumped Last question, the increase. dividend, just

out like your high NII increase to it the to going on terms what's requirements yield. appetite and going, bit increase a expect what look is side. still the distribution to core have covered. it? special? talk looks to in Just a What have paying maybe it's where very where year, it are to at comfortably have NII you GAAP the You having little of a about this I is It --

as remainder into Sure, Matt. -- question. We this not in the year. the independent Board vis-a-vis each board year every conversation, meeting, of We Thank our Board quarter. place you do very of for are is you specific topic At plan, a completely -- a a or plan have is for dividend can the involved, next the members this imagine. Board involved, distribution full set the the

months we with per we GAAP was of next period. months at been these the X the core -- per numbers and in conversation, for to note, rate cash no investment $X.XXX made these net the that that as you current excess NII existing distributions, share are, regard X As which have of our the distribution of note, month. topic reflects are quarter change. the recorded a that's received for Those actual income, an you ongoing but any We've obviously $X.XX maintained our decisions over certainly forward $X.XX

Congratulations, and congratulations. the team. look, you Jonathan, to

All appreciate thank right, questions. We very Matt, your you much.

Thank you. Jonathan CEO, further I'll any no the over We have hand call currently closing questions. for to remarks. back Cohen,

hopefully and Corp., on speaking Well, Lane soon. much. thank everybody their very you interest I'd like ongoing to in very we right. Capital Oxford All to forward the call to for Thanks look again

Thank Ladies all for today's this and joining. concludes you. Thank gentlemen, call. you

You lines. disconnect your may now