Oxford Lane Capital (OXLC) 2 Aug 222023 Q1 Earnings call transcript

Hello, everyone, and welcome to the Oxford Lane Capital Corporation First Fiscal Quarter 2023 Call. My name is Victoria, and I will be coordinating your call today. [Operator Instructions]. I'll now pass over to Jonathan Cohen, CEO, to begin. Please go ahead.

much. very Thanks everyone. Good morning, the Oxford to Capital Lane Welcome Corp.

Managing Call. Fiscal Bruce by today open XXXX the our Rubin, could a Manager. Conference statements. Quarter Earnings I'm Senior Maji, Saul Deep regarding Chief call Officer; joined and you Financial Portfolio Bruce, First our and Director disclosure Rosenthal, forward-looking with our President;

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

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

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

June asset per value XX, our March Thanks, net of $X.XX at share per compared Bruce. XX, share $X.XX XXXX. value to of a asset as stood net On XXXX,

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

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

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

for the we ended approximately a net of resulting depreciation quarter realized million per net investments of first had of decrease on assets million. We or recorded or the share approximately unrealized $X.XX quarter. from $XXX.X million per For share. losses $X.X $X.XX net $XXX.X operations June, We in net fiscal reported approximately

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

$XXX.X quarter On and XX, Directors made sales of ended approximately distributions And ending million, stock that, to the and from manager, June During Maji. XX, $X.XXX we share of million for June the common of turn the approximately I'll our per additional December and of our Board of investments portfolio each repayments. Deep declared received we CLO November monthly October, over XXXX. months with $XXX.X call

Jonathan. you, Thank

to loan default U.S. points decreasing quarter prices, During the loan for quarter, there March XX prices CCC-rated to quality loan quarter of decreased ended principal June the The amount points XXX loan related XXXX. rate of LCD, XX.X% pricing basis to at the from dispersion of Loan defined XX. as basis Index from March of XXXX, March basis B-rated increased June Index, end single by prices points the with According XXXX. X.XX%, versus as and the XXX XX, of by Loan decreasing loan XXX points Leveraged U.S. ended decreasing to XX XX, basis par trailing end quarter points or market S&P/LSTA or prices BB-rated or X.XX% was S&P/LSTA average. XX.XX% XX of par at weakness X.XX% the Leveraged the as on during the XX-month exhibited the credit basis

X.XX% U.S. in end percentage par, of at drop the distress a price XX% below to loans The X.XX% in decrease ended March to with net U.S. values. of asset of ratio, loan prices defined the the XXXX. led at Additionally, compared CLO approximately quarter as a the

approximately of from During the quarter, NAV syndicated median par loan approximately observed U.S. broadly XX% par. we the declined to of X% equity CLO

rose over-collateralizations compared to quarter. approximately X.XX% However, median cushions last X.XX% to junior

over approximately basis same to continues portfolios spreads average AAAs past existing pools basis to XXX CLO compared widen CLO loan basis the billion reached by need last billion within compared increased points. primary price, warehouses $XX CLO U.S. year. still observed to new out $XX points Driven to SOFR XXX plus XXX last period continuing issuance their approximately to The we to weighted with quarter. challenged points modestly be Additionally, market

However, full U.S. in year's to and $XXX now year and approximately in second notional issuance well to year below new issuance widening for are challenging last the liabilities given issue over down this junior is of the during Lane Oxford quarter, expected slow estimates of during continued a arbitrage, half to issuance expected trading secondary active CLO equity the be $XXX of come million billion. market CLO debt. and

new primary during X We also debt active equity issued in investments new adding are X the CLO and quarter. the investments CLO issued market,

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

And fiscal discussion uploaded about note to like that our at with we're much, questions. the www.oxfordlanecapital.com. Deep. that, first for open Lane's Oxford information I'd to performance been operator, happy quarter any Thanks to has additional website very

Instructions]. [Operator

comes question at Mickey Ladenburg. first Our Schleien from

during of next would trading asking Jonathan, today quarter that into now the describe how and well secondary bid-ask terms spreads and and I'd equity we're they you the in and like volumes the to start CLO by how look perhaps quarter?

Mickey. Deep will take question. Sure, that

to with end said, last the rebound liquidity trading Sure. volumes LSTA towards quarter. as That XX.XX% the we've CLO weaker improve, being of at distributions. yesterday, especially the after July trading June little definitely of volumes were improve, from of XX.XX% definitely the end a in seen the

the in XXX I the basis right? primary And you heard Is say you mentioned points. market above AAAs I that that -- think are

correct. That's

work So AAAs question? the who's market, buying I at Does arbitrage are that that stable? guess, given my at level, spreads does the even in primary level, the that -- relatively with is

Spreads prices but or between clearly XX% depressed stable, of -- loan the around of being last kind so. and handful more months XX% over are X relatively are the

buyers some banks, the we've more historic And including challenging. it's buyers, a I seen AAA buyers. think but range of are Japanese

Okay.

imbalance are yields those would can as for about between which that which, I there's remember I've the equity fair what CLO cost, cash mentioned, as at enormous been XX%. be high years as the that's flows value, to So all And you almost compared this high. following at portfolio's extremely Lane Oxford is

ratio market seem picking fair doesn't about that to So high values distress be market, process, I'm it the cycle argue someone going conservative. And now? implying the very the talking are either could a default is on in I'm just Or implying valuation that the too not and general. your seems that to just that we're see

likely? more how is positioning of outlook? Lane take to track So you you believe which do advantage -- are And that Oxford

Mickey. Sure,

what we face. you've we've historically that taken is an seen markets opportunistic that to think I the approach

covering we'll the So been time. see company fund for a you've very the -- long

primary ability in and parts those approach lends in seen we've itself, primary You've been those substantial different seen Similarly, investment active much to we've extremely And our think, between market. strategies. very to of secondary amounts capital been not we very, the the migrate in very We new active where work the you've periods trading market, to where an put our at market. feel we all in extended like issue done we've in philosophy strategies long warehouses, markets. we've where participated also periods in where of

So we'll continue to opportunistic. be

of our The value fair marks related other and... to question, think, part your I

saying, values going specifically, are yours right? low -- general, in the either too Not come down, are the Jonathan. I'm cash they one look or the flows to or fair other, just

a We'll We issue. that on position have see. defined don't

to around range equity. the your that How X.X the to Jonathan, Okay. current sort in leverage market level, does debt measure of is target environment? you your level when by compare fund's comfort

at end right the probably range the Mickey. It's higher now, of

leverage see intermediate our additional to So unlikely us increase term, equity raising you're absent first. the in

XXXX, a above running last distribution. the my at quarter of this In Okay. is were return NII core about distributions the a capital. And of looking year, way the But funds' question.

sense where to manage the that special give So liability? any can you for us stands and of UTI distributions potential

Sure, Mickey.

Just XXXX was, a capital correction, the was on that that as of basis, you tax I think, a one return small was tax... mentioned,

Yes, about I'm talking tax.

foreign in to no, that give investment reporting passive any respect Yes. really guidance tax Those we PFIC our year. to statements, company distribution. statements not we're the calendar of able received manifested tax with subsequent forward character the really are the in And

on tax is concerned -- the that our far recent most so all character up So information would information as be our website. is

Howlett Our comes Matthew next from Riley. question at B.

looking spread OC the improvement level. at and junior the and Just the

good feel doing going and for -- you in given I continue the of the And loan are investments shift to a good about forward, leverage there's mean, taking building know downgrades discounted you market. where I the some OC do I mean, prices beginning, do Your portfolio job still ability your advantage level? are, been

think I participate the as But a of to deal But happens we what macroeconomic markets feel a distilled these at loan we market, how this general constructive, on you we ticketed are that corporate thought, the note, I to Matt. what obviously, all constructive are fundamentals of rates generally forward, feel default moment. kind going depends in as happens great in. like

market. look build Yes. you over the managers par definitely if and any points Matt, quarter-over-quarter sort able to one trading thing months, have loan CLO X kind last and of of of assessment I kind prepayment month-over-month because -- been basis would of depressed and also the X, of make many just take is, add hundreds relative at

So again, we constructive on are it.

can CLOs getting Yes. advantage mild we And to recession, deep of be do could on take that environment right. time. a meanwhile, I that's get lot, have of the these going up if you this it's amount, it's discounts. don't And question diverting now but jumped Goldilocks flow, and really -- where it's a sort a be of and sequentially, you I small sort portfolio going had X. to any That's number cash take the I'm that is core that guess a the noticed

the core number? the in what pickup First, explained big

Sure.

on come I lot driver had quarter-over-quarter a was of that of biggest first-time think board. payers the we

we quarter, had ground put ending distributions or quarter fourth So in the those made investments some into April. quarter first of calendar XX/XX, those in the that the the

there's sure of that's still And are their in space, a right? kind continue, going you few to right? mean, I ramp been

Yes.

the are should those the diversion to positions, expected Absent flow sales yes, cash of continue. -- or

and I the tremendous just basis. on Look, portfolio. a that into covering GAAP want in ask you basis spare you're the a Yes, Xx well to the on dividend dividend puts questions. even position -- a you're I'll core

think that. I you covered

You the around guys longest have been in space. the

you at look you mean asset want like class mover You to you being When acquisitions mean secondary you've of Recession. were that entering feel Do could it's Great about mean, -- buyer top-tier, how at whether said in value a of during into defensive all the look conditions? value it pricing. most this look to that could feel just getting elsewhere, deeper -- deals the secondary failing OCs what the be sort this always softer could want paper? going economic today, come you first you Would do you do do be I back? space I at defensive forward, could be to in sort I

broadly. Sure, Matt. value We very look at

deals with answer is left at We day deals reinvestment them the top-tier manager collateral managers that third of have are their stack. look every But both. structured are outside period. and have their would period reinvestment by that in So at your even very are to we question direct collateral respect pools may continue of the second managed look to same and plenty or time, tightly that very, challenged we more tier liability look at to

the other, For that reflection the us, to flows. the for can we're we're flows the of pay of forced that the value receive expect fairly better a those and between comfortable one price versus doing generally position, we And the extent the risk-adjusted that cash at that. cash take continuum relationship is we end to to ultimate

equity, look sort CLO Includes at? everything CLO debt, you that of

that, much on yes. Very

that goal shorter pushing mean, window reinvestment the so or Or mean continue And I reinvestment kind job I do the then you is deeper you keep that -- to just sacrifice on mean, would of period. great out? I critical last you still just expect at extending question open. it's -- think value? -- I you would the that look

Sure. This Matt. is Deep,

now is happy Clearly equity, being to said, average it to we secondary it. mentioned, difficult our the try was reinvestment into and been at being a secondary equity But majority creation always even of than think XX market primary right reinvestment can, advantage Jonathan price. And adding value extend positions the that period. we're we're course, months, to view. as past take But to X challenged if to more market. past in we the market, longer-dated quarter of look bit period little the shorter-dated the of I primary goal especially with the go going in becomes the weighted a there's more have from that and there, at point

with Exactly value we right, Matt. Deep as I and mean duration be place optionality including some on there said, high embedded everything, a price duration. for said, cases. that the in a to duration that That very tends

forward this how NAV up, capture my model? because do the flows really Absolutely. have cash be cash but been went disconnect probably is a really very you and sort are, that to your And the flows investors to that environment and CLO you great like I you a NAV doesn't investor core guess, down top explain issues, in mark-to-market comment of number went last disconnect the have which of

the drop. are loan reflected at end And derivative substantial the which Matt, an by of fell at mean, least syndicated a basis day, during in LSTA quarter, on XXX corporate a we points syndicated I about fairly basis Index, investor corporate market. as loans, the the is the

quarter, of is ways, day, change the the to of generally market. in loan of Now in of reflecting end the which about points our in at end relating the NAV, investor in move that they've community since about the regained it basis mostly, positive drop XXX development. the many really and But terms to the the a is that this

Right.

flow other dividends term just you is I that longer make these could cash think with up the -- cash on and Just flow. end, the

investors, able the So for be it's given CLO? that to sometimes analysts of just convey to tough and for it's to market really complexity the

Matt. NAV. Absolutely, announcing should And Sure. July from few we'll our a end now. month days in be It be

update market. to the be able we'll So

with little bit a The check syndicate better XX-something? is [indiscernible] more

XX of of XX.XX% night, as from spot June XX. up X-X as last

to your are back questions. now final Cohen so like time, you I for no for pass over questions. At Thank much there Jonathan would remarks. to this further any

call Capital in Thank you Oxford speaking very again to I'd replay for everybody the forward thank to listening Corp., to Lane on and interest like and Thank soon. we you to the you. much. look their

call. Thank you, everyone, for joining today's conference

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