Oxford Lane Capital (OXLC) 16 May 232023 Q4 Earnings call transcript

Good morning, everyone. Welcome to the Oxford Lane Capital Corp. Fourth Fiscal Quarter 2023 Earnings Conference Call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our Chief Financial Officer; and Joe Kupka, our Managing Director. Bruce, could you please open our call with a disclosure regarding forward-looking statements?

Jonathan. Sure, is call recorded. being conference Today's the The XX be for will replay of days. available call is press Replay issued in included information our morning. earlier release this was that Please of the call note Capital Lane Corp. property that this Oxford is rebroadcast prohibited. unauthorized is of any in Any form call strictly this please attention to point, this disclosure the information. your regarding release press forward-looking direct this customary in At morning's other conference performance. views with current call the reflect company's financial includes Today's and to, forward-looking things, among that events statements and projections future respect

most our results recent with We from ask update to that statements required that We actual refer for our SEC cause those projections. unless factors to to to filings important not these you the materially undertake do do forward-looking law. indicated so could in differ by

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

to posted release For please definitions on www.oxfordlanecapital.com. and at our reconciliations our refer to earnings GAAP, website

to With presentation that, Jonathan. back the turn I'll

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

investments March, GAAP quarter from portfolio investment million approximately a our from consisted CLO investments from the million For approximately and $X.X warehouse income. and income debt The of ended other $XX.X income and million, $X.X the GAAP representing recorded of our decrease quarter. prior million $XX.X from total approximately we investment quarter's approximately total of our CLO CLO equity from

quarter $X.XX per for Oxford $XX.X or to quarter for compared approximately million the ended approximately recorded $XX.X or $X.XX Lane net the ended per share investment GAAP of income million December. share March,

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

net increase net for We of share from recorded a the fourth assets approximately or operations net of net quarter. depreciation in unrealized $X.X million we $X.X quarter, in or approximately had per fiscal in share on of realized total. per investments approximately losses $XX million March million the For $X.XX resulting $X.XX

XX, March applied. of As metrics the following

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

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

sales and we for we of XXXX. common from declared May months ending of of Directors repayments. of approximately additional from August $XXX.X approximately March, each investments ended July, and the million. quarter share $XX.X per Board And the During September distributions On received our $X.XX made XX, million stock CLO monthly

And with that, call I'll Joe turn over to the Kupka.

you, Jonathan. Thank

prior XXX par XX.XX% from points of quarter, quality XXXX, December B-rated by increased and Index prices XX, of US Leveraged was the dispersion During quarter. basis XXX XX there performance defined increasing loan XX.XX% as related on increasing LSTA points, LTV loan loan basis of to March average. par of Morningstar U.S. loan According XX. the credit pricing ended of to X, prices quarter XX prices points the March to par BB-rated before dropping as basis the with as increasing market February CCC-rated to prices as some loan U.S. during improved XX.XX% versus of Loan

end month at principal end for quarter XX the by strong from the The default rate XXXX. of the the to of increased December index X.XX% at amount loan X.XX%

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

an junior The prices U.S. in in over-collateralization values. to net Median cushions loan median X.X%. U.S. increase declined increase to asset led approximate equity CLO X.X% XX% approximately

pools increased spreads loan their to observed average basis modestly we quarter. basis weighted within compared Additionally, portfolios points to XXX last CLO XXX points

the active the market in Oxford secondary quarter. Lane be to during continued

our new in of the issued added most during CLO quarter. the we market, equity secondary investments place investment and one new activity While two took CLO issued debt

quarter during value reinvestment to trading equity strategy lengthen average the and Oxford relative Lane’s in to the investment CLO Our was of period engage portfolio. weighted

we towards environment, to unconstrained and In and And look our return. total CLO maximize an strategy opportunistic permanent view vehicle, CLO to our historically U.S. the to capital current a as utilize been investment strategy. market as take we equity, debt we intend to a continue long-term longer-term have across warehouses investment able

Jonathan. With turn call that, the I’ll back over to

to about Thanks, www.oxfordlanecapital.com. fourth has open website quarter information our that uploaded been note Oxford the any with we’re call Joe. at that, performance questions. Lane’s happy And to for We additional operator

open. our Schleien line is first And from Please Instructions] ahead. comes question Mickey [Operator today Ladenburg. Mickey, from go your you. Thank

banks questions this how everyone. seen the months you few morning, few its overall problems debt impacted for regional morning. demand the last the Good Jonathan Yes. and start well. wanted that to asking pricing as we’ve CLO at A by

exist correlations and I’m been evidence broadly. I’m U.S. CLO regional not market an none but If have banks that what us. there seen sure some at interrelations, it’s there are had impact, the haven’t Mickey, situation we to might between the it. sure

equity generally, difficult. period about spreads third That’s portfolios liabilities quite it refinancing to with Okay. beyond The its and reset is opportunity are CLO still seeing And hear. reinvestment investment good looks like of and you’re your that a wide.

cash equity you do unwind? your see develop on how these So portfolios investments yields CLO as

Sure, Mickey.

liability extend and with optionality. reinvest challenge a reset and for note limited definitely the wider to prices managers is ability and liability one the refi even that’s – after just these The reinvestment period. I would positive yes, So

continue So low so an see environment. that’s to definitely reinvestment, current the to prepayment strong rates, we offset

continue with we deals. strong see cash and even cash on post-reinvestment profiles returns to attractive So

much of trading Mickey, But that I to point, secondary mean, essentially very market market primary we as on late. more is the your on market the focused the been and reason secondary have than

of to sort market, of Yes. estimated the Jonathan. about after that period? what on are the reinvestment what push I payments I actually equity, deal lot the offered equity to did flow CLO market. were ask you secondary wanted deal a April From there And the How your into out on yields CLO was understand current secondary getting impact made ability flow? you

mean, to think I a Mickey, us. matter, your activity, is as a greater Sure. market point, liquid more general secondary beneficial to volume we a and of

portfolio managers as are, active We this know, you class. this within turn time done over We portfolio asset have and historically.

more liquidity, in again, ability period. more our our more be of to reinvestment out volume, terms conducive Joe? push can So

Yes.

attractive volume. Now of like to of paper. you take lot able out. to up some said, were given we pick just come were definitely saw advantage We think we We the payments activity that a able post

see In attractive that, terms really get market profiles of but in I into risk-adjusted expectations, future very don’t, think, right secondary the we now.

which would several as April interest in rates expected even was spread Okay. the the help been Core CLO and of market that I between quarters. had three-month the terms one-month compressed, problem NII quarter-to-quarter, a for to have distribution. down

NII So caused decline what can just walk core a through to quarter-to-quarter? at you us high level

the One liabilities major being was widest two Sure. There basis that components. January really for were were its had one-month, October three-month in set. when the point

remember, payments. quarter composed at So the of looking are the we’re mainly January

we curves. on Oxford specifically Since first-time definitely an large that three-month which the And is and to based expect payment distribution, of quarter. tightened, really So outsized this inaugural number portfolio, payments the it’s the to continue was which available blunt the of going previous then, payers, publicly took make normalize that unusually again, the see had within that forward forward, we just one-month, an basis. Lane’s

say. that looking delta, So you for can when comparison, core that that quarter-over-quarter explains you’re

So you the better you payments meaningfully January a payments correctly, April on saying are if than the relative I’m understanding that were basis?

Yes, that’s okay.

Yes. Correct.

core the for current the rationale this quarter? raising is you that above And the reported Okay. for dividend NII

Mickey, into declaration, of larger factors. a really dividend set account The is taking

looking cash flow. We’re at

NII. core at looking We’re

We’re NAV. looking at

our looking at own We’re internal projections.

of distribution. All the these setting things in are by considered the Board being

for it me you. appreciate this That’s morning. your Okay. time. Thank I

very you Thank much.

The next question go comes your B. Riley. Matthew from from Matthew Please line Howlett open. is ahead.

my taken for thanks Yes, question.

change this meaningful on agencies. Have downgrades since started? bank any you in of seen first upgrades, Just sort rating turmoil

Yes.

continue to still in see and I and see the getting CCC we definitely X.X% appropriate. where to bucket, we risk downgrades, there’s terms buckets. closer but that to of that So, continue room, outpaced managers increasing They’re through see think still some flows CLO upgrades they reduce how

on. steadily. see something we But but eye right yes, downgrades we’re So it’s definitely keeping now, slowly, picking an up still

just then hear level normalization. And Have curious this loan bit. look mean so a anything I seen expectation high today. refinance? are a when what you love idiosyncratic low, sort I coming maturity the that you. defaults picked Just you little at to high to up leveraged I your seeing I’d market far, just you still defaults mean Got obviously of a at are able – people is on you’re in so from mean, level, up a

rates the what kind we're everyone for the radically Joe else said, not idiosyncratic events certain at of preparing, certainly of I’m account certain outliers default anything you that I model to pools. with Matt, seeing is overall, seeing. that respect same collateral higher take Sure. and time, sure referenced. we’re as not from wild But that, We're seeing profiles think especially different our

LSTA potentially the the that against there's said is powerful pull-to-par. with So the XX sitting handle, and is that a fact

to modeling cash and seek we for things, total our in these projected returns. flows of all So account out

next been leader that leader you you question, the CLO When – at are Lane, leads in the have into guys years And the Oxford market. look Jonathan. the

and a position how of historically market potentially Fed, what’s cycle. the rates? easing – from be year how do interest projecting, what And the for or how now to likely you us believe – lower you Oxford [ph] the you investors, some about it can think you or sort you not, benefit this year on in rate and point does Lane at Lane change Ford tell next going hold them whether the If Oxford

Sure.

as try, that said, lengthen We you as Jonathan forward period into mentioned, taken the account curves. reinvestment to try possible. to as As much we've

affect Which – able represents mitigant sorry, risk that really the structurally but Matt, we're Joe. best to

Yes.

the margin investing trading. participating combination in mid-length up from the these lengthen tiering, manager value our and relative we in reinvestment leaders who managers or some lender see with data increase we'll deals in be able do moving good an groups, selectors who some the safety these also able be and So be be shorter period, to we where just in If have basis credit to absolute these will proven future. situations getting or think to difficult workouts to which see we themselves

is the the important day, the going we're performance structures. importance important end a total arbitrage the to and But particular vitally obviously, of on we're at Right, collateral and with in we're that presented of – the to structure. these receive receive sometimes equal based of pool equally return the is project that or deal

cases, itself the overall. in are, indenture based to and plus able to some the compensate for on structure combination entry price our some for either risk collateral of virtue we arbitrage of CLO by So pool that capital or the of cost seek the

are thinking So that things of about the we're all these all time.

mean are some begin generally I exactly but that, point up locked-in rates to you more was does look change? in money, you of those that balance know my I thought unsecured are weighing at the about could sheet, increase are all your thinking going that, cycle I opposed does going – settled down arbitrage if debt you and low-cost have exploring down. rate things And and as to the Yes.

in of things – the I mean, we're are capital with. time provides our to that with use of proceeds stack of with at overall very the at real all looking state looking the capital the now. change our that and seeking the the on cost that structure. the we're at us to and liabilities us of we're we're market deploy the right these overall extent time liability not our able happy market to based But presents but We're Matt, moment,

that. Appreciate

done really You've and positioning company this through. managing terrific the for job a

look I stage of next to the So Thanks, Jon. cycle. forward the

Thanks. Matt, you much. Thank very

This concludes today's Q&A session.

back over call some So hand I for remarks. the Cohen now CEO, Jonathan to concluding

Thanks to much, look Thank I'd again very forward today the call operator. you much. who speaking and thank listened We replay. to like very listens who on the to you call everybody soon. to the to