Oxford Square Capital's Q4 2024: Contradictions in Loan Market Performance, Investment Activity, and NAV

These are the key contradictions discussed in Oxford Square Capital's latest 2024Q4 earnings call, specifically including: U.S. loan market performance and increased issuance, investment activity, net investment income, net asset value per share, and U.S. loan market performance:



Net Investment and Net Asset Value Decline:
- Oxford Square's net investment was approximately $6 million or $0.09 per share compared with $6.2 million or $0.10 per share for the prior quarter. The net asset value per share also decreased to $2.30 from $2.35.
- The decline in net investment and net asset value per share is attributed to total investment income decreasing to approximately $10 million from $10.3 million and combined unrealized and realized losses on investments being approximately $2.10 million.

Loan Market Performance and Price Dispersion:
- The U.S. loan prices increased from 96.71% to 97.33% at par, but pricing dispersion was noted with BB-rated loan prices increasing by 48 basis points, fee-rated loan prices increasing by 74 basis points, and CCC-rated loan prices decreasing by 373 basis points.
- The loan market performance was influenced by some pricing dispersion in different ratings and the increase in the distress ratio to 3.02%, indicating that some loans were below 80% of par.

Primary Market Issuance and Inflows:
- US Leveraged loan primary market issuance, excluding amendments and repricing transactions, was $96.7 million, representing a 75% increase versus the quarter ended December 31, 2023.
- The increase in issuance is driven by higher non-refinancing issuance, including M&A and LBO activity, and opportunistic activity such as refinancings and funding of dividends.

Default Rates and Distress Ratio:
- The 12-month trailing default rate for the loan index increased to 0.91% by principal amount, but distress ratio was reduced to 3.02% compared to 3.3% at the end of the third quarter.
- The increase in default rates is partially offset by a reduction in distress ratio, indicating an improvement in the overall loan market health.