Oxford Square Capital Q4 Earnings Call Highlights

Oxford Square Capital (NASDAQ:OXSQ) reported fourth-quarter 2025 net investment income (NII) of approximately $5.4 million, or $0.07 per share, compared with about $5.6 million, or $0.07 per share, in the prior quarter. Total investment income rose slightly to approximately $10.4 million from $10.2 million in the prior quarter, according to prepared remarks on the company’s earnings call.

Net asset value (NAV) per share fell to $1.69 at quarter-end from $1.95 in the prior quarter. Management attributed a significant portion of the quarter’s valuation pressure to marks in the CLO equity portion of the portfolio.

Quarterly results and portfolio marks

Oxford Square said it recorded combined net unrealized and realized losses on investments of approximately $18.3 million, or $0.22 per share, for the fourth quarter. That compares with combined net unrealized and realized losses of approximately $7.5 million, or $0.09 per share, in the prior quarter.

In the Q&A portion of the call, management said the quarter’s unrealized depreciation was “mainly a markdown of the CLO equity portion of the book,” describing the period as challenging for that segment and emphasizing that the impact was “principally unrealized.”

Distributions and capital activity

During the quarter, Oxford Square distributed $0.105 per share to common stock shareholders. The company also announced that on Feb. 26, 2026, its board declared monthly distributions of $0.035 per share for each of the months ending April, May, and June 2026. Management noted that record and payment date details were included in the morning’s press release.

Oxford Square also raised equity capital during the quarter through an at-the-market program. The company issued approximately 4.3 million common shares, generating net proceeds of approximately $7.9 million.

Investment activity and market environment

Oxford Square reported investment purchases of approximately $18 million during the quarter, alongside repayments of approximately $7.4 million.

Portfolio Manager Kevin Yonan said U.S. loan market performance declined versus the prior quarter. He cited a modest decrease in the Morningstar LSTA US Leveraged Loan Index price level, which moved from 97.06% of par as of Sept. 30 to 96.64% of par as of Dec. 31. Yonan also pointed to dispersion by rating category during the period, with PitchBook LCD data showing:

• Double-B-rated loan prices decreasing 8 basis points
• B-rated loan prices increasing 18 basis points
• Triple-C-rated loan prices decreasing 265 basis points on average

On credit conditions, Yonan said 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, based on PitchBook LCD. However, he added that the default rate including various forms of liability management exercises “remained at an elevated level of 3.35%.”

Yonan also highlighted an increase in the distress ratio, defined as the share of loans priced below 80% of par, to 4.34% at quarter-end from 2.88% at the end of September.

In the primary market, Yonan said U.S. leveraged loan issuance (excluding amendments and repricings) totaled $70.7 billion in the quarter ended Dec. 31, 2025, which he said represented a 27% decrease versus the comparable quarter ended Dec. 31, 2024. He attributed the decline to lower refinancing and LBO activity, partly offset by higher M&A and dividend activity. He also noted U.S. loan fund outflows of approximately $3.2 billion during the quarter, as measured by Lipper.

Management commentary on opportunities

Asked by Lucid Capital Markets’ Erik Zwick about what the company bought and what it finds attractive, management said the firm is broadly focused on first-lien loans, generally “B2B loans.” Management added that while the primary market has slowed amid volatility, the company is seeing opportunities in both primary and secondary markets given current trading levels.

In response to a follow-up question on whether a higher distress ratio reflects volatility and concerns in software and whether it is creating opportunity, management said “yes to both.” Executives said the “state of the software market” in both private credit and syndicated loan markets is reflecting “real concern,” and also referenced a broader “pushback against the growth in the private credit asset class.” Management said these dynamics have contributed to wider corporate loan spreads and lower index pricing, and that the environment is creating opportunity from the firm’s perspective.

Management said it continues to focus on portfolio management strategies designed to maximize long-term total return, noting that as a permanent capital vehicle it has historically been able to take a longer-term view toward its investment strategy.

About Oxford Square Capital (NASDAQ:OXSQ)

Oxford Square Capital Corp. (NASDAQ:OXSQ) is a publicly traded business development company that provides flexible financing solutions to U.S. middle-market companies. Chartered as a closed-end management investment company, Oxford Square Capital seeks to generate current income and capital appreciation by investing primarily in secured loans, mezzanine debt and equity co-investments. The firm targets businesses with established cash flows, offering tailored capital structures designed to support growth, recapitalizations and acquisitions.

The company’s investment strategy focuses on senior secured first-lien and second-lien loans, subordinated debt and preferred and common equity stakes.