Oxford Lane Capital Corp.

Good morning and welcome to the Oxford Lane Capital Corp third fiscal earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question, please press star one on your telephone keypad. If you change your mind at any time, please press star two. And for operator assistance at any point, it's star zero. Thank you. Let me turn the call over to Jonathan Cohen, CEO, to begin. So, Jonathan, you may begin.

Thanks very much. Good morning, everyone, and welcome to the Oxford Lane Capital Corp. third 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 open the call with a disclosure regarding forward-looking statements? Sure, Jonathan. Today's conference call is being recorded. An audio replay of the call will be available for 30 days. Replay information is included in our press release that was issued earlier this morning. Please note that this call is the property of Oxford Lane 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 company's current views with respect to, among other things, future events and financial performance. We ask that you refer to our most recent filing 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 photo looking statements unless required to do so by law. During this call, we will use terms defined in the earnings release and also refer to non-GAAP measures. For definitions and reconciliations to GAAP, please refer to our earnings release posted on our website at www.OxfordLaneCapital.com. With that, I'll turn the presentation back over to Jonathan. Thank you, Bruce. On December 31, 2022, our net asset value per share stood at $4.63, compared to a net asset value per share of $4.93 as of September 30th. For the quarter ended December 31st, we recorded GAAP total investment income of approximately $67.6 million, representing an increase of approximately $2.9 million from the prior quarter. The quarter's GAAP total investment income from our portfolio consisted of approximately $64.3 million from our CLO equity and CLO warehouse investments, and approximately $3.3 million from our CLO debt investments and from other income. Oxford Lane recorded GAAP net investment income of approximately $41.4 million, or 26 cents per share, for the quarter ended December 31st, compared to approximately $36 million, or 23 cents per share, for the quarter ended September 30th. Our core net investment income was approximately $50.1 million, or 31 cents per share, for the quarter ended December 31st, compared with approximately $51.1 million, or $0.33 per share, for the quarter ended September 30th. For the quarter ended December 31st, we recorded net realized losses of approximately $1.5 million and that unrealized depreciation on investments of approximately $54.7 million, or $0.35 per share in total. We had a net decrease in net assets resulting from operations of approximately $14.8 million, or $0.09 per share, for the third fiscal quarter. As of December 31st, the following metrics applied. We note that none of these metrics represented a total return to shareholders. The weighted average yield of our CLO debt investments at current cost was 16.6%, up from 15.1% as of September 30th. The weighted average effective yield of our CLO equity investments at current cost was 15.7%, down from 16.1% as of September 30th. The weighted average cash distribution yield of our CLO equity investments at current costs was 18.6%, down from 22.1% as of September 30th. We note that the cash distribution yields calculated at our CLO equity investments are based on the cash distributions we received or which we were entitled to receive at each respective period end. During the quarter ended December 31st, we issued a total of approximately 7.2 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $37.2 million. During the quarter ended December 31st, we made additional CLO investments of approximately $82.8 million, and we received approximately $49.5 million from sales and repayments. On January 26th, our Board of Directors declared monthly common stock distributions of 7.5 cents per share for each of the months ending April, May, and June of 2023. And with that, I'd like to turn the call over to our managing director, Joe Kupka. Joe? Thanks, Jonathan.

During the quarter ended December 31st, 2022, the U.S. loan market was volatile. U.S. loan prices, as defined by the Morningstar LSPA U.S. Leverage Loan Index, increased from 91.92% of par as of September 30th to 93.06% of par as of November 16th, before dropping to 92.44% of par as of December 30th. During the quarter, there was significant pricing dispersion related to credit quality, with double B-rated loan prices increasing 195 basis points, single B-rated loan prices increasing 94 basis points, and triple C-rated loan prices decreasing 603 basis points on average. The 12-month trailing default rate for the loan to DEX decreased to 72 basis points by print solvable amount at the end of the quarter from 90 basis points at the end of September 2022. Additionally, the distress ratio defined as the percentage of loans with a price below 80% of par ended the quarter at 7.4% compared to approximately 6% at the end of September 2022. The increase in U.S. loan prices led to an approximate 7% increase in median U.S. CLO equity net asset values. Median junior over-collateralization cushions remained flat at approximately 4.7%. Additionally, we observed loan pools within CLO portfolios modestly increase their weighted average spreads to 354 basis points compared to 351 basis points last quarter. Oxford Lane continued to be active in the secondary market during the quarter. While most of our activity took place in the secondary market, we added two new issue CLO equity investments during the quarter. Our investment strategy during the quarter was to engage in relative value trading and lengthen the weighted average reinvestment period of Oxford Lane's CLO equity portfolio. In the current market environment, we intend to continue to utilize an opportunistic and unconstrained CLO investment strategy across U.S. CLO equity, debt, and warehouses as we continue to look to maximize our long-term total return. And as a permanent capital vehicle, we've historically been able to take a longer-term view towards our investment strategy. With that, I'll turn the call back over to Jonathan.