Beware of Oxford Square's 24% Yield: NAV Collapse and Unsustainable Distribution

Oxford Square Capital Corp.'s (OXSQ) 24% annualized yield is unsustainable due to a 26% NAV collapse from $2.30 to $1.69 per share in 2025. The fund relies on return of capital to bridge the gap between payouts and earnings, and its leverage is locked at 7.75% fixed-rate debt that compresses spreads as floating-rate income declines following Fed rate cuts. CLO equity markdowns drove Q4 losses of $18.3 million, primarily due to software sector distress.