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    OXSQ
    Earnings call· Jun 2026(Q2 FY26)

    Oxford Square Capital Q2 FY26 earnings call OXSQ

    Jul 31, 2026 Source

    Executive summary

    Oxford Square Capital Corp. Q2 FY26 — Increased Net Investment Income and CLO Equity Purchases

    Oxford Square Capital Corp. reported an increase in net investment income and total investment income for Q2 FY26, driven by strategic investments in CLO equity. While the U.S. loan market showed signs of improvement with decreasing default rates and increased primary issuance, the company's net asset value per share declined. Management continues to focus on portfolio management strategies, particularly in secondary CLO equity, to maximize long-term total return, acknowledging that NII per share remains below the current dividend level.

    Highlights

    5

    • Net investment income increased to $5.1 million ($0.05 per share) from $4.1 million in the prior quarter.

    • Total investment income increased to $9.4 million from $8.9 million in the prior quarter.

    • U.S. loan market performance improved, with the Morningstar LSTA U.S. Leveraged Loan Index increasing from 94.63% to 94.96% of par.

    • The 12-month trailing default rate for the loan index decreased to 0.97% from 1.44%.

    • U.S. leveraged loan primary market issuance increased 33% year-over-year to $101.8 billion, driven by refinancing and M&A activity.

    Concerns

    4

    • Net asset value per share decreased to $1.29 from $1.32 in the prior quarter.

    • Combined net unrealized and realized losses on investments totaled $1.1 million ($0.01 per share).

    • The default rate, including liability management exercises, remained elevated at 2.77%, despite declining from 3.48%.

    • Net investment income per share of $0.05 is still below the quarterly dividend level of $0.105.

    Guidance & targets

    1
    CategoryTargetConfidence
    Monthly distributions per share
    $0.035 per share
    medium materiality
    High

    Operational metrics

    22
    Net investment income
    $5.1Mup from $4.1M prior quarter
    Q2 FY26
    Net investment income per share
    $0.05up from $0.04 prior quarter
    Q2 FY26
    Net asset value per share
    $1.29down from $1.32 prior quarter
    Q2 FY26
    Distributions per share
    $0.105
    Q2 FY26

    Total distributions for the quarter.

    Total investment income
    $9.4Mup from $8.9M prior quarter
    Q2 FY26
    Combined net unrealized and realized losses on investments
    $1.1Mdown from $29.7M prior quarter
    Q2 FY26
    Combined net unrealized and realized losses on investments per share
    $0.01down from $0.34 prior quarter
    Q2 FY26
    Investment purchases
    $19.9M
    Q2 FY26
    Investment repayments
    $500,000
    Q2 FY26
    Shares issued (ATM offering)
    11.3M
    Q2 FY26
    Net proceeds (ATM offering)
    $17.8M
    Q2 FY26
    Morningstar LSTA U.S. Leveraged Loan Index price
    94.96%up from 94.63% of par as of March 31
    June 30
    BB-rated loan prices increase
    32
    Q2 FY26
    B-rated loan prices increase
    42
    Q2 FY26
    CCC-rated loan prices increase
    6
    Q2 FY26
    12-month trailing default rate (loan index)
    0.97%down from 1.44% at end of March
    end of Q2 FY26

    By principal amount.

    Default rate (incl. liability management)
    2.77%down from 3.48% as of March 31
    end of Q2 FY26

    Remained at an elevated level.

    Distress ratio (loans < 80% par)
    6.87%down from 7.23% at end of March
    end of Q2 FY26
    U.S. leveraged loan primary market issuance
    $101.8Bup 33% versus Q2 FY25
    Q2 FY26

    Excluding amendments and repricing transactions.

    U.S. loan fund inflows (Lipper)
    $1B
    Q2 FY26
    CLO equity cash-on-cash yield (new purchases)
    low 20s
    Q2 FY26

    For CLO equity purchases made in the secondary market.

    CLO equity forward effective yield (new purchases)
    low 20s
    Q2 FY26

    For CLO equity purchases made in the secondary market.

    Deals & partnerships

    1
    Not named (restructured entity)Restructuring of a nonaccrual debt position into a new first lien term loan and common equity.

    A previously nonaccrual debt position went through a restructuring transaction, which closed during the quarter. The company now holds a new first lien term loan as well as some common equity, and the new first lien term loan is on accrual.

    Risks & headwinds

    2
    Elevated default rates including liability management exercisesTrailing 12-month

    2.77% (declined from 3.48% as of March 31)

    Mitigation: Focus on portfolio management strategies designed to maximize long-term total return.

    Net investment income per share below dividend levelCurrent quarter

    NII per share of $0.05 vs. quarterly dividend of $0.105

    Mitigation: Optimistic about capital deployment, including recent CLO equity purchases, to improve earnings power.

    What to watch in Q3 FY26

    4

    Net Investment Income per share

    Next quarter
    Current$0.05
    TargetImprovement towards dividend coverage ($0.105)

    Why it matters

    NII per share is currently below the quarterly dividend, and management expressed optimism about improving it through capital deployment.

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

    Q&A highlights

    4

    What were the security types, yields, and industries for the $19.9 million in purchases during the quarter?

    The purchases were entirely CLO equity in the secondary market, with a cash-on-cash and forward effective yield in the low 20s, consistent with the company's investment thesis.

    “Sure. Erik, 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.”

    asked by Erik Zwick · answered by Kevin P. Yonon

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Financial Performance Overview

    Oxford Square Capital Corp. reported net investment income of $5.1 million, or $0.05 per share, an increase from $4.1 million in the prior quarter. Total investment income also rose to $9.4 million from $8.9 million. However, net asset value per share saw a slight decline to $1.29 from $1.32, and the company recorded combined net unrealized and realized losses of $1.1 million, or $0.01 per share.

    02

    Investment Activity and Strategy

    During the quarter, the company made $19.9 million in purchases, entirely consisting of CLO equity in the secondary market, with repayments of $500,000. Management emphasized that CLO equity tranche investments represent a compelling cash-on-cash opportunity, aligning with their long-term investment strategy as a permanent capital vehicle, with new purchases yielding in the low 20s.

    03

    Capital Raising

    Oxford Square issued approximately 11.3 million shares of common stock through an at-the-market offering, generating net proceeds of approximately $17.8 million. This capital was subsequently deployed into the CLO equity investments, supporting the company's investment strategy.

    04

    U.S. Loan Market Trends

    The U.S. loan market showed improved performance, with the Morningstar LSTA U.S. Leveraged Loan Index increasing to 94.96% of par. The 12-month trailing default rate decreased to 0.97%, though the rate including liability management exercises remained elevated at 2.77%. Primary market issuance increased significantly by 33% year-over-year to $101.8 billion, driven by refinancing and M&A activity.

    05

    Nonaccrual Resolution

    A previously nonaccrual debt position was resolved through a restructuring transaction during the quarter. The company now holds a new first lien term loan and some common equity, with the new term loan placed on accrual. The mark for this position was consistent with the prior quarter, indicating no additional losses or gains from the restructuring itself.

    06

    Dividend Declaration

    The Board of Directors declared monthly distributions of $0.035 per share for October, November, and December 2026, maintaining the current dividend level. Management acknowledged that current NII per share is below the dividend, expressing optimism that ongoing capital deployment will improve earnings power.

    AI-generated summary of the company’s earnings call. Not investment advice.