Oxford Lane Capital Corp.

Hello everyone and welcome to the Oxford Lane Capital Corporation first fiscal quarter 2024 earnings call. My name is Emily and I'll be coordinating your call today. After the prepared remarks, there will be the opportunity for any questions which you can ask by pressing start followed by the number one on your telephone keypads. I'll now turn you over to our host, Jonathan Cohen, CEO of Oxford Lane Capital. Please go ahead, Jonathan.

Thanks very much. Good morning, everyone. Welcome to the Oxford Lane Capital Corp First Fiscal Quarter 2024 Earnings Conference Call. I'm joined today by Sol Rosenthal, our President, Bruce Rubin, our CFO, and Joe Kopka, 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. 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 of this morning's press release regarding full-looking information. Today's conference call includes full-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 findings with the SEC for important factors that could cause actual results to differ materially from those indicated in these projections. We do not undertake to update our forward-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. or turn the presentation back over to Jonathan. Thanks, Bruce. On June 30th, 2023, our net asset value per share stood at $4.34 compared to the net asset value per share of $4.61 as of March 31st, 2023. For the quarter ended June, we recorded GAAP total investment income of approximately $70.5 million representing an increase of approximately $4 million from the prior quarter. The quarter's GAAP total investment income from our portfolio consisted of approximately $66.2 million from our CLO equity and CLO warehouse investments, and approximately $4.3 million from our CLO debt investments and from other incomes. Oxford Lane recorded GAAP net investment income of approximately $42 million, or 24 cents per share, for the quarter ended June, compared to approximately $37.4 million, or 22 cents per share, for the quarter ended March. Our core net investment income was approximately $75 million, or 43 cents per share, for the quarter ended June, compared with approximately $37.5 million, or 22 cents per share for the quarter ended March 31st. For the quarter ended June 30th, we recorded net realized losses of approximately $1.3 million and net unrealized depreciation on investments of approximately $55.5 million or 32 cents per share. We had a net decrease in net assets resulting from operations of approximately $14.8 million or 8 cents per share for the first fiscal quarter. As of June 30th, the following metrics applied. We noted none of these metrics represented a total return to shareholders. The weighted average yield of our CLO debt investments at current cost was 18.1%, up from 18% as of March 31st. The weighted average effective yield of our CLO equity investments at current cost was 16%, up from 15.8% as of March 31st. The weighted average cash distribution yield of our CLO equity investments at current cost was 24.6%, up from 16.5% as of March. We note that the cash distribution yields calculated on 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 June 30th, we issued a total of approximately 12.1 million shares of our common stock pursuant to an aftermarket offering, resulting in net proceeds of approximately $60.2 million. During the quarter ended June 30th, we made additional CLO investments of approximately $111.9 million, and we received approximately $69.7 million from sales and from repayments. On July 27th, our board of directors declared monthly common stock distributions of $0.08 per share for each of the months ending October, November, and December of 2023. And with that, I'll turn the call over to our managing director, Joe Kupcha. Joe? Thank you, Jonathan. During the quarter ended June 30th, 2023, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSPA U.S. Leverage Loan Index, increased from 93.38% of par as of March 31st to 94.24% of par as of June 30th. According to LCB, during the quarter, there was some pricing dispersion, with double B-rated loan prices increasing 69 basis points, single B-rated loan prices increasing 134 basis points, and triple C-rated loan prices increasing 212 basis points on average. The 12-month trailing default rate to the loan index increased to 1.71% by principal's loan amount at the end of the quarter from 1.35% at the end of March. We note that the percentage of defaults within U.S. CLOs, which are actively managed, remains lower than the index. The increase in U.S. loan prices led to an approximate 9-point increase in median U.S. CLO net equity values. Median junior overcollateralization cushion declined 0.3% to approximately 4.2%. Additionally, we observed loan pools within CLO portfolios modestly increase their weighted average spread to 359 basis points compared to 357 basis points last quarter. With the primary market arbitrage remaining challenging, Oxford Lane continued to be active in the secondary market during the quarter. We added 12 new CLO equity investments and two new CLO debt investments during the quarter. Our investment strategy during the quarter was to engage in relative value trading and to lengthen the weighted average reinvestment period of Oxford Lane 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 look to maximize our long-term total return. And as a permanent capital vehicle, we have historically been able to take a longer-term view towards our investment strategy. With that, I'll turn the call back over to Jonathan. Thanks, Joe. You note that additional information about Oxford Lane's first quarter performance has been uploaded to our website at www.OxfordLaneCapital.com. And with that, operator, we're happy now to pull for any questions.

Thank you. If you would like to ask a question today, please do so now by pressing start, followed by the number one on your telephone keypads. If you change your mind and would like to be removed from the queue, Please press star and then two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. The first question today comes from the line of Mickey Schling with Leidenberg. Mickey, please go ahead. Your line is now open.