Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oxford Lane Capital Corp (OXLC, Financial) reported an increase in GAAP total investment income to approximately $89.8 million, up by $7.1 million from the previous quarter.
- The company recorded a core net investment income of approximately $107.2 million or $0.41 per share, showing a significant increase from $79.9 million or $0.35 per share in the prior quarter.
- The weighted average cash distribution yield of CLO equity investments increased to 26.9%, up from 23.5% in the previous quarter.
- Oxford Lane Capital Corp (OXLC) successfully issued approximately 45.9 million shares through an at-the-market offering, resulting in net proceeds of approximately $242.1 million.
- The company declared monthly common stock distributions of $0.09 per share for October, November, and December 2024, indicating a commitment to shareholder returns.
Negative Points
- Oxford Lane Capital Corp (OXLC) recorded net unrealized depreciation on investments of approximately $14.4 million for the quarter.
- The weighted average effective yield of CLO equity investments slightly decreased to 16.8% from 16.9% in the previous quarter.
- The distress ratio, defined as the percentage of loans with a price below 80% of par, increased to 4.4% from 3.5% at the end of March.
- The company faced a decrease in median US CLO equity net asset values due to a decline in US loan prices.
- There was an increase in expenses, attributed to the larger size of the fund and significant capital raised in recent quarters.
Q & A Highlights
Q: What caused the increase in CLO cash yields this quarter despite the decline in average spread in the CLO equity portfolio?
A: Joseph Kupka, Managing Director: The increase was due to a lag in numbers, with managers building spread up until this quarter. Additionally, first-time payments bolstered the cash yield number for this quarter.
Q: What are your expectations for refinancing or resetting liabilities in the CLO equity portfolio to defend yields against loan spread compression?
A: Jonathan Cohen, CEO: We do not make public projections about forward-looking activities, but the CLO liability market appears generally constructive.
Q: How are portfolio managers dealing with the trend of a high downgrade-to-upgrade ratio affecting CCC buckets?
A: Joseph Kupka, Managing Director: Managers are proactively cleaning up CCC baskets in anticipation of resets, and while CCC baskets are declining, managers maintain healthy OC cushions.
Q: What is your appetite for issuing additional debt or preferred shares to lower the weighted average cost of capital?
A: Jonathan Cohen, CEO: Our appetite is based on pricing. We would consider additional debt if there is a robust arbitrage available, but only at compelling pricing.
Q: Are there any areas of stress or weakness in the US economy that you are observing through your portfolio?
A: Jonathan Cohen, CEO: There is concern about consumer behavior and certain parts of the economy, but nothing outside of the mainstream perception is apparent from our perspective.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
