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. Second Quarter 2026 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, 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 Jonathan Cohen, CEO. Please go ahead.

Thank you. Good morning, everyone. Welcome to the Oxford Square Capital Corp. second quarter 2026 earnings conference call. I'm joined today by Saul Rosenthal, our president, Bruce Rubin, our chief financial officer, and Kevin Yonon, managing director and portfolio manager. 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 conference call will be available for 30 days. Replay information is included in our press release 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 of this morning's press release regarding forward-looking information. Today's conference call includes forward-looking statements and projections that reflect the current company's views with respect to, among other things, future events and financial performance. We ask that you refer to our 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.OxfordSquareCapital.com. With that, I'll turn the call back to Jonathan.

Thanks, Bruce. For the quarter ended June 30th, Oxford Square's net investment income was approximately $5.1 million, or 5 cents per share, compared with approximately $4.1 million in the prior quarter. Our net asset value per share stood at $1.29. Thank you for joining us. In the second quarter, we recorded combined net unrealized and realized losses on investments of approximately $1.1 million or one cent per share compared to combined net unrealized and unrealized losses on investments of approximately $29.7 million or 34 cents per share for the prior quarter. During the second quarter, our investment activity consisted of purchases of approximately $19.9 million and Repayments of approximately $500,000. During the quarter ended June, we issued a total of approximately 11.3 million shares of our common stock pursuant to an at-the-market offering resulting in net proceeds of approximately $17.8 million. On July 29th, our Board of Directors declared monthly distributions of 3.5 cents per share for each of the months ending October, November, and December of 2026. We note that additional details regarding record and payment data 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 Yonon. Kevin?

Thank you, Jonathan. During the quarter ended June 30th, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA U.S. Leverage Loan Index, increased from 94.63% of par as of March 31st to 94.96% of par as of June 30th. According to LCD, during the quarter there was some pricing dispersion, with BB rated loan prices increasing 32 basis points, B rated loan prices increasing 42 basis points, and CCC rated loan prices increasing 6 basis points on average. According to PitchBook LCD, The 12-month trailing default rate for the loan index decreased to 0.97% by principal amount at the end of the quarter from 1.44% at the end of March. Additionally, the default rate including various forms of liability management exercises, which are not captured in the aforementioned default rate, remained at an elevated level of 2.77%, but declined from 3.48% as of March 31st. The distress ratio defines the percentage of loans with prices below 80% of par and Joseph Kupka. At the same time, U.S. loan fund inflows, as measured by LIPR, were approximately $1 billion for the quarter ended June 30th. We continue to focus on portfolio management strategies designed to maximize our long-term total return, and 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.

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

Once again, to ask a question, press star 1 on your telephone keypad. Our first question comes from the line of Eric Zwick with Lucid Capital Markets. Please go ahead.

Thank you. Good morning. I wanted to start with the 19.9 million of purchases you referenced in the quarter. I'm curious if you could provide any characteristics on those investments in terms of security type, yield or spread, types of industries, anything additional there would be great.

Sure. Hey, Eric, that was actually all CLO equity for this quarter. So the cash on cash was probably low 20s. The forward effective yield is also in that range. But yeah, that was all CLO equity for this quarter.

And that's consistent, Eric, with our current thesis of CLO equity tranche investments representing what we believe is a fairly compelling cash-on-cash opportunity, particularly for purchases made in the secondary market. And I believe that all of those purchases, yes, all of those purchases, Eric, were made in the secondary market.

Excellent. Thanks for the color there. And then in terms of the unrealized gains that were recorded in the quarter, was this primarily a rebound from last quarter's marks, or were there some other factors that contributed to the appreciation in value in the quarter?

No, it was principally that, just coming off of those levels.

Okay. And then just looking at the makeup of the non-accruals, the one debt position that was was on there last quarter but now gone. The press release mentioned you did not make any sales. So was that resolved or that's obviously back to non-accrual now? Or how should I interpret that? What kind of transpired there?

Sure. This is Kevin Yonon. So that one position went through a restructuring transaction which closed during the quarter. There's now a new manageable capital structure of which we hold the new first lien term loan as well as some common equity. And that new first lien term loan is on accrual.

Okay, and did you record any additional, you know, losses or gains as a result of that restructuring or where you had it marked last quarter that ended up being pretty accurate?

Mark was consistent with the prior quarter.

Excellent, thanks. And then it was good to see total investment income up quarter over quarter. Yet the NII per share is still below the dividend level. So just curious, you know, how you're looking at the portfolio. What levers do you have at your disposal? to drive that NII high? And over what timeframe would you expect it to take to get that earnings power back to a full dividend coverage again?

Sure. We don't, as you know, Eric, make forward projections or forward-looking performance estimates, but we are, I think, broadly I'm optimistic about the capital that we're deploying presently, including the capital that we just deployed in this last quarter, and we'll certainly keep you updated.

That was good. Thanks for taking my questions this morning, guys.

Thank you, Eric. Thank you.

Again, to ask a question, press star 1 on your telephone keypad. And with that, with no further questions in the queue, I will now turn the call back to Jonathan Cohen, CEO.

Thank you very much, Operator. We'd like to thank everybody on this call and everybody listening to the replay for their continued interest in Oxford Square, and 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.