Oxford Lane Capital (OXLC) Q1 2022 Earnings Call Transcript

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Oxford Lane Capital (OXLC 0.41%)
Q1 2022 Earnings Call
Jul 30, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Oxford Lane Capital Corp. first fiscal quarter earnings conference call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr.

Jonathan Cohen, CEO. Please go ahead, sir.

Jonathan Cohen -- Chief Executive Officer

Thanks very much. Good morning everyone, and welcome to the Oxford Lane Capital Corp. first fiscal quarter 2022 earnings conference call. I'm joined today by Saul Rosenthal, our president; Bruce Rubin, our chief financial officer; and Deep Maji, our senior managing director and portfolio manager.

Bruce, could you open the call please, with the disclosure regarding forward-looking statements?

Bruce Rubin -- Chief Financial Officer

Sure, Jonathan. Today's conference call is being recorded. An 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 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 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. 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.

With that, I'll turn the presentation back over to Jonathan.

Jonathan Cohen -- Chief Executive Officer

Thanks, Bruce. On June 30, 2021, our net asset value per share stood at $6.56, compared to a net asset value per share of $5.94 as of March 31, 2021. For the quarter ended June 30, we reported GAAP total investment income of approximately $41.7 million, representing an increase of approximately $5.6 million from the prior quarter. The quarter's GAAP total investment income from our portfolio consisted of $40 million from our CLO equity investments and $1.7 million from our CLO debt investments and from other income.

Oxford Lane also recorded GAAP net investment income of approximately $25.3 million or $0.25 per share for the quarter ended June 30 compared to approximately $21.6 million or $0.23 per share for the quarter ended March 31. Our core net investment income was approximately $42.4 million or $0.41 per share for the quarter ended June 30, compared with approximately $44.9 million or $0.47 per share for the quarter ended March 31. During the quarter ended June 30, we issued a total of approximately 7.6 million shares of our common stock pursuant to an aftermarket offering, resulting in net proceeds of approximately $53.8 million. For the quarter ended June 30, we recorded net realized losses of approximately $4.3 million or $0.04 per share.

We recorded net unrealized appreciation of approximately $59.2 million or $0.58 per share. We had a net increase in net assets resulting from operations of approximately $80.2 million or $0.78 per share for the first fiscal quarter. As of June 30, the following metrics applied. We note that none of these metrics represented a total return to shareholders.

The weighted average yield of our CLO debt investments at current cost was 13.6%, up from 11.2% as of March 31. The weighted average GAAP effective yield of our CLO investments at current cost was 16.3%, up from 15.7% as of March 31. The weighted average cash distribution yield of our CLO equity investments at current cost was 27.7%, up from 23.8% as of March 31. 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 30, we made additional CLO investments of approximately $244.3 million, and we received approximately $187.2 million from sales and from repayments. On April 15, 2021, the company redeemed all of its outstanding Series 2023 Term Preferred Stock for approximately $57.2 million. On July 29, our board of directors declared monthly common stock distributions of $0.0675 per share for each of the months of October, November, and December of 2021. With that, I'll turn the call over to our portfolio manager, Deep Maji.

Debdeep Maji -- Senior Managing Director, Portfolio Manager

Thank you, Jonathan. During the quarter ended June 30, 2021, the US loan market strengthened versus the quarter ended March 31. The US loan prices, as defined by the S&P/LSTA Leveraged Loan Index increased from 97.55% of par as of March 31, to 98.37% of par as of June 30. According to LCD, during the quarter, pricing compression related to credit quality continued with BB-rated loan prices increasing 0.1%.

B-rated loan prices increasing 0.42%, and CCC-rated loan prices increasing 1.4% on average. The 12-month trailing default rate for the S&P/LSTA Leveraged Loan Index decreased to 1.25% by principal amount at the end of the quarter after starting the quarter at 3.15%. That rate has since decreased to 0.58% as of July 23. Additionally, the distress ratio, defined as a percentage of loans with a price below 80% of par, ended the quarter at approximately 1%, the lowest level since November 2014 and well below levels seen in March 2020.

During the quarter, the increase in US loan prices led to an increase in US CLO equity net asset values. According to Wells Fargo, the median US CLO equity net asset value improved from 50.1% of par to 59.4% of par, while the median over-collateralization cushion increased from 294 basis points to 354 basis points. Additionally, the median Moody's CCC assets decreased from 6.5% to 5.2%, while the median S&P BBB assets decreased from 7.2% to 6%. The issuance in the CLO primary market continues at a record saving pace.

Year-to-date through June 30, approximately $82 billion of new issue and approximately $136 billion of refinancings and resets are priced in the primary market. We have been able to take advantage of the new issue market and have made five new primary CLO equity investments during the past quarter. During the past quarter, four of the CLOs in which we held equity to refinance their liabilities and two CLOs reset their entire capital structures, where the deal's reinvestment periods were extended in conjunction with the refinancing of the CLO liabilities. Given the strength in loan prices, five CLOs where we held equity were actually redeemed during the quarter when the refinancing or reset were not viewed to be accretive.

In the current market environment, we intend to continue to utilize an opportunistic and unconstrained CLO investment strategy across US CLO equity, CLO debt and CLO 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 toward our investment strategy. With that, I will turn the call back over to Jonathan.

Jonathan Cohen -- Chief Executive Officer

Thanks very much, Steve. With that, operator, we're happy to open the call for any questions.

Questions & Answers:

Operator

[Operator Instructions] At this time, I'm not showing any questions. And this will conclude our question-and-answer session. I would like to turn the conference back over to Jonathan Cohen for any closing remarks. Please go ahead, sir.

Jonathan Cohen -- Chief Executive Officer

Thank you very much, operator. We note that additional information about Oxford Lane's first fiscal quarter performance has been uploaded to our website at www.oxfordlanecapital.com. We'd like to thank everyone listening on the call today and on the replay, and we thank everyone for their interest. Thanks very much.

Operator

[Operator signoff]

Duration: 10 minutes

Call participants:

Jonathan Cohen -- Chief Executive Officer

Bruce Rubin -- Chief Financial Officer

Debdeep Maji -- Senior Managing Director, Portfolio Manager

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