Oxford Square Capital Corp.

Thank you for standing by. My name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Oxford Square Capital Corp. 4th Quarter 2025 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, simply press star 1 on your telephone keypad. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to CEO Jonathan Cohen. Please go ahead.

Good morning, everyone. Welcome to the Oxford Square Capital Corp fourth quarter 2025 earnings conference call. I'm joined today by Saul Rosenthal, our president, Bruce Rubin, our CFO, and Kevin Yonan, managing director and portfolio manager. Bruce, could you open the call with a disclosure regarding forward-looking statements?

Of course, Jonathan. Today's conference call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was issued this morning. Please note that this call is the property of Oxford Square 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 most recent filings 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 forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website at www.sec.gov. With that, I'll turn the presentation back to Jonathan.

Thanks, Bruce. For the quarter ended December, Oxford Square's net investment income was approximately $5.4 million, or 7 cents per share, compared with approximately $5.6 million, or 7 cents per share in the prior quarter. Our net asset value per share stood at $1.69. compared to a net asset value per share of $1.95 for the prior quarter. During the quarter, we distributed 10.5 cents per share to our common stock shareholders. For the fourth quarter, we recorded total investment income of approximately $10.4 million as compared to approximately $10.2 million in the prior quarter. In the fourth quarter, we recorded combined net unrealized and realized losses on investments of approximately $18.3 million, or 22 cents per share, compared to combined net unrealized and realized losses on investments of approximately $7.5 million, or 9 cents per share in the prior quarter. During the fourth quarter, our investment activity consisted of purchases of approximately $18 million, or and repayments of approximately $7.4 million. During the quarter ended December, we issued a total of approximately 4.3 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $7.9 million. On February 26, 2026, our Board of Directors declared monthly distributions of 3.5 cents per share for each of the months ending April, May, and June of 2026. We note that additional details regarding record and payment date information can be found in our press release that was issued this morning. With that, I'll turn the call over to our Portfolio Manager, Kevin Yonan.

Thank you, Jonathan. During the quarter ended December 31st, U.S. loan market performance declined versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA U.S. Leverage Loan Index, decreased slightly from 97.06% of PAR as of September 30th to 96.64% of PAR as of December 31st. According to LCD, during the quarter, there was some pricing dispersion, with BB rated loan prices decreasing 8 basis points, B rated loan prices increasing 18 basis points, and CCC rated loan prices decreasing 265 basis points on average. According to PitchBook LCD, the 12-month trailing default rate for the loan index decreased to 1.23% by principal amount at the end of the quarter from 1.47% at the end of September. Additionally, the default rate, including various forms of liability management exercises, which are not captured in the cited default rate, remained at an elevated level of 3.35%. The distress ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 4.34%, compared to 2.88% at the end of September. During the quarter ended December 31st, 2025, U.S. leverage on primary market issuance, excluding amendments and repricing transactions, was $70.7 billion, representing a 27% decrease versus the quarter ended December 31st, 2024. This was driven by lower refinancing and LBO activity, partly offset by higher M&A and dividend activity versus the prior year comparable quarter. At the same time, U.S. loan fund outflows, as measured by LIPR, were approximately $3.2 billion for the quarter ended December 31st. We continue to focus on portfolio management strategies designed to maximize our long-term total return. As a permanent capital vehicle, we historically have been able to take a longer-term view towards our investment strategy. With that, I will turn the call back over to Jonathan.

Thank you, Kevin. Additional information about Oxford Square's fourth quarter performance has been posted to our website, at www.OxfordSquareCapital.com. And with that, operator, we're happy to open the call up for any questions.

As a reminder, to ask a question, simply press star 1 on your telephone keypad. And our first question is from the line of Eric Zwick with Lucid Capital Markets. Please go ahead.

Thanks. Good morning, all. I wanted to start with a question. You mentioned the $18 million of new investment purchases during the quarter. I'm curious if you could just add a little maybe detail into what you bought and what you're currently finding attractive in the market. Sure.

So, broadly, the investments were focused on personally loans, generally B2B loans. Going forward into this quarter, I mean, obviously, the primary market has certainly slowed down just given the volatility associated with certain things, but I think we're definitely seeing opportunities in the primary and the secondary, just given the way the markets are trading.

Got it. Thanks. And maybe kind of at the back end of that question, if I dig in a little bit deeper, you mentioned there in the prepared comment, the distressed ratio up to, I don't have the exact decimal, four point something percent up from two point something. So a market increase there. Wondering if, from your perspective, is that reflective of some of the volatility we've seen and concerns in the software market? If not, what else is driving that? And two, is this creating some of the opportunity for you to, you know, maybe find some good investment opportunities at lower prices today?

The answer, I think, Eric, is yes to both questions. Certainly, the state of the software market right now, the software private credit market and the syndicated loan markets in that sector are reflecting Real concern, no question about it. There's also, I think, a more general pushback against the growth in the private credit asset class that we've been seeing for the past several years. All of that is manifesting in somewhat, more recently, wider U.S. syndicated corporate loan spreads and lower pricing for the LSTA index. So the answer certainly, from our perspective anyways, is yes.

Thanks. That's helpful. And last one for me. I wondered if you could just describe a little bit the unrealized appreciation in the quarter. What was the primary driver there?

Eric, yeah, that was a good portion of that was the CLO equity portion of the book. As you know, I had a very challenging year and quarter, and that was mainly a markdown of the CLO equity portion of the book.

Principally unrealized.

Yeah, yeah, that makes sense. Thanks, guys. That's all I had today. I appreciate it.

Thank you, Eric, very much.

And with no further questions in queue, I will now hand the call back over to CEO Jonathan Cohen.

Thank you very much. I'd like to thank everyone on the call now listening to this call and also everyone listening to the replay for their interest in Oxford Square. We look forward to speaking to you again soon. Thanks very much.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.