Oxford Lane Capital Corp. Q4 FY2024 earnings call

• Net asset value per share stood at $4.90 on March 31, 2024, up from $4.82 at the previous quarter.
• GAAP total investment income for the quarter was ~$82.6 million, with ~$76.3 million from CLO equity and CLO warehouse investments and ~$6.3 million from CLO debt investments and other income.
• U.S. loan market performance improved: loan prices increased, median U.S. CLO equity net asset values rose, median weighted average spreads decreased, 12-month trailing default rate decreased, and distress ratio improved.
• CLO new issuance totaled ~$49 billion during the quarter, an increase from prior quarter. Oxford Lane was active in secondary and primary markets, adding three new issue CLO equity investments and lengthening the weighted average reinvestment period of its CLO equity portfolio from April 2026 to July 2026.
• Board declared a 12.5% increase in monthly common stock distributions to $0.09 per share for July, August, and September 2024.

For the quarter ended March 31, 2024, GAAP total investment income was approximately $82.6 million, an increase of ~$3.4 million from the prior quarter. GAAP net investment income was approximately $51 million or $0.22 per share, compared to ~$48.7 million or $0.23 per share in the prior quarter. Core net investment income was approximately $79.9 million or $0.35 per share, down from ~$82.7 million or $0.39 per share in the prior quarter. The weighted average yield of CLO debt investments at current cost was 17.1% (up from 16.6% previously), weighted average effective yield of CLO equity investments at current cost was 16.9% (up from 16.5% previously), and weighted average cash distribution yield of CLO equity investments at current cost was 23.5% (down from 24% previously). During the quarter, 18.6 million shares of common stock were issued, net proceeds ~$94.7 million, ~$225.2 million in additional CLO investments were made, and ~$19 million received from sales/repayments.

• Board of Directors declared a 12.5% increase in monthly common stock distributions to $0.09 per share for the months ending July, August, and September 2024.

Q: With the tightening of CLO liabilities, how do the economics look now in the primary market versus the secondary market and the opportunity for refinancing and resetting positions beyond the reinvestment period?

A: Brian Aleksa noted that there's a push and pull between tightening liabilities and rising asset prices in the primary market. Tightening liabilities make it easier to do deals, while rising asset prices make the primary market slightly more challenging. They have taken advantage of tightening liabilities to restructure and reset post-reinvestment deals.

Q: Looking at the deck from the last quarter with about a dozen positions still in reinvestment period where AAA spread was meaningfully above 150 basis points, how would you describe the potential impact on Oxford of refinancing or resetting those positions?

A: Bruce Rubin stated that they are actively monitoring all positions with majority holdings for refi and reset opportunities, carefully watching moneyness of those positions and engaging with CLO managers and dealers to reset and refinance where possible