8-K
Oxford Square Capital Corp. (OXSQ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 27, 2020
OXFORD SQUARE CAPITAL CORP.
(Exact name of registrant as specified in its charter)
| Maryland | 000-50398 | 20-0188736 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
8 Sound Shore Drive, Suite 255
Greenwich, CT 06830
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (203) 983-5275
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities<br>Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange<br>Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b)<br>under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c)<br>under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, par value $0.01 per share | OXSQ | NASDAQ Global Select Market LLC |
| 6.50% Notes due 2024 | OXSQL | NASDAQ Global Select Market LLC |
| 6.25% Notes due 2026 | OXSQZ | NASDAQ Global Select Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition |
|---|
On October 27, 2020, Oxford Square Capital Corp. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2020. The text of the press release is included as Exhibit 99.1 to this Form 8-K.
The information set forth under this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information set forth under this Item 2.02, including Exhibit 99.1, shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.
| Item 7.01. | Regulation FD Disclosure |
|---|
On October 27, 2020, the Company made available on its website, www.oxfordsquarecapital.com, supplemental investor information with respect to the aforementioned earnings press release.
The information disclosed under this Item 7.01 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information provided herein shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (a) | Not applicable. |
| --- | --- |
| (b) | Not applicable. |
| --- | --- |
| (c) | Not applicable. |
| --- | --- |
| (d) | Exhibits. |
| --- | --- |
| Exhibit No. | Description |
| --- | --- |
| 99.1 | Press release dated October 27, 2020 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: October 27, 2020 | OXFORD SQUARE CAPITAL CORP. |
|---|---|
| By: | /s/ Saul B. Rosenthal |
| --- | --- |
| Saul<br> B. Rosenthal | |
| President |
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Exhibit 99.1
Oxford Square Capital Corp. AnnouncesNet Asset Value and Selected Financial Results for the Quarter Ended September 30, 2020 and Declaration of Distributions of CommonStock for the Months Ending January 31, February 28, and March 31, 2021.
GREENWICH, CT – 10/27/2020 –Oxford Square Capital Corp. (NasdaqGS: OXSQ) (NasdaqGS: OXSQL) (NasdaqGS: OXSQZ) (the “Company,” “we,” “us” or “our”) announced today its financial results and related information for the quarter ended September 30, 2020.
| ● | As of September 30, 2020, net asset value (“NAV”) per<br>share was $3.85, compared with the NAV per share of $3.54 at the prior quarter end. | |||
|---|---|---|---|---|
| o | For the quarter ended September 30, 2020 we recorded GAAP net investment income of approximately $4.3 million, or $0.09 per<br>share, which was approximately equal to the net investment income earned during the second quarter of 2020. | |||
| --- | --- | |||
| o | We recorded net unrealized appreciation of approximately $20.9 million and net realized losses on investments of approximately<br>$4.4 million for the quarter ended September 30, 2020, compared to net unrealized appreciation of approximately $19.0 million and<br>net realized losses on investments of approximately $2.8 million for the quarter ended June 30, 2020. | |||
| --- | --- | |||
| o | In total, we had a net increase in net assets from operations of approximately $20.8 million, or $0.42 per share, for the quarter<br>ended September 30, 2020, compared with a net increase in net assets from operations of approximately $20.6 million, or $0.41 per<br>share, for the quarter ended June 30, 2020. | |||
| --- | --- | |||
| ● | Total investment income for the quarter<br>ended September 30, 2020 amounted to approximately $8.2 million, compared with approximately $8.3 million for the quarter ended<br>June 30, 2020. For the quarter ended September 30, 2020 the components of investment income were as follows: | |||
| --- | --- | |||
| ● | $4.5 million from our debt investments, | |||
| --- | --- | |||
| ● | $3.6 million from our CLO equity investments,<br>and | |||
| --- | --- | |||
| ● | $0.2 million from all other sources. | |||
| --- | --- | |||
| ● | Our total expenses for the quarter ended<br>September 30, 2020 were approximately $4.0 million, compared with total expenses of approximately $3.9 million for the second quarter<br>of 2020. | |||
| --- | --- | |||
| ● | During the third quarter of 2020, we made investments of approximately $18.3 million and received<br>proceeds of approximately $8.3 million from sales of investments, and $0.6 million from repayments and amortization payments on<br>our debt investments. | |||
| --- | --- | |||
| ● | As of September 30, 2020, the following metrics applied (note that none of these values represents<br>a total return to shareholders): | |||
| --- | --- | |||
| o | The weighted average yield of our debt investments was 8.3% at current cost, compared with 8.1%<br>as of June 30, 2020. | |||
| --- | --- | |||
| o | The weighted average effective yield of our CLO equity investments at current cost was 7.7%, compared<br>with 7.1% as of June 30, 2020. | |||
| --- | --- | |||
| o | The weighted average cash distribution yield of our cash income producing CLO equity investments<br>at current cost was 11.7%, compared with 11.6% as of June 30, 2020. | |||
| --- | --- | |||
| ● | Our weighted average credit rating was<br>2.3 based on total fair value and 2.5 based on total principal value as of September 30, 2020, which is unchanged compared to June<br>30, 2020. | |||
| --- | --- | |||
| ● | As of September 30, 2020, we had two debt investments on non-accrual status, with a combined fair<br>value of $5.7 million. Also, as of September 30, 2020, our preferred equity investments in one of our portfolio companies were<br>on non-accrual status, which had zero fair value. | |||
| --- | --- | |||
| ● | On October 22, 2020, our Board of Directors declared the following<br>distributions on our common stock: | |||
| --- | --- | |||
| Month Ending | Record Date | Payment Date | Amount Per Share | |
| --- | --- | --- | --- | --- |
| January 3l, 2021 | January 15, 2021 | January 29, 2021 | $ | 0.035 |
| February 28, 2021 | February 12, 2021 | February 26, 2021 | $ | 0.035 |
| March 31, 2021 | March 17, 2021 | March 31, 2021 | $ | 0.035 |
In light of current economic and market conditions, including as a result of the global crisis caused by the spread of the COVID-19 virus, we believe that no reliance should be placed on these distributions representing the prospect for any particular level of common stock distributions for any periods in the future.
We will host a conference call to discuss our third quarter results today, Tuesday, October 27, 2020 at 9:00 AM ET. Please call 1-888-339-0740 to participate. A recording of the conference call will be available to replay for approximately 30 days following the call. The replay number is 1-877-344-7529, and the replay passcode is 10149450.
A presentation containing further detail regarding our quarterly results of operations has been posted under the Investor Relations section of our website at www.oxfordsquarecapital.com.
OXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS ANDLIABILITIES
| December 31,<br><br>2019 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Non-affiliated/non-control investments (cost: 443,810,054 and 467,828,907, respectively) | 295,267,639 | $ | 361,985,203 | ||
| Affiliated investments (cost: 16,836,822 and 16,836,822, respectively) | — | 2,816,790 | |||
| Cash equivalents | 2,220,960 | 14,410,486 | |||
| Restricted cash | — | 2,050,452 | |||
| Interest and distributions receivable | 1,539,157 | 3,480,036 | |||
| Other assets | 690,468 | 523,626 | |||
| Total assets | 299,718,224 | $ | 385,266,593 | ||
| LIABILITIES | |||||
| Notes payable – 6.50% Unsecured Notes (net of deferred issuance costs of 1,136,908 and 1,380,658, respectively) | 63,233,317 | $ | 62,989,567 | ||
| Notes payable – 6.25% Unsecured Notes (net of deferred issuance costs of 1,301,850 and 1,476,878, respectively) | 43,488,900 | 43,313,872 | |||
| Notes payable – Credit Facility (net of deferred issuance costs of 0 and 10,051) | — | 28,080,550 | |||
| Base management fee and net investment income incentive fee payable to affiliate | 1,123,449 | 1,480,653 | |||
| Accrued interest payable | 481,261 | 632,235 | |||
| Accrued expenses | 422,828 | 771,174 | |||
| Total liabilities | 108,749,755 | 137,268,051 | |||
| COMMITMENTS AND CONTINGENCIES (Note 13) | |||||
| NET ASSETS | |||||
| Common stock, 0.01 par value, 100,000,000 shares authorized; 49,589,607 and 48,448,987 shares issued and outstanding, respectively | 495,895 | 484,489 | |||
| Capital in excess of par value | 457,810,322 | 451,839,302 | |||
| Total distributable earnings/(accumulated losses) | (267,337,748 | ) | (204,325,249 | ) | |
| Total net assets | 190,968,469 | 247,998,542 | |||
| Total liabilities and net assets | 299,718,224 | $ | 385,266,593 | ||
| Net asset value per common share | 3.85 | $ | 5.12 |
All values are in US Dollars.
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OXFORD SQUARE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)
| Three Months<br><br>Ended<br><br>September 30,<br><br>2020 | Three Months<br><br>Ended<br><br>September 30,<br><br>2019 | Nine Months<br><br>Ended<br><br>September 30,<br><br>2020 | NineMonthsEndedSeptember 30,2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| INVESTMENT INCOME | ||||||||||||
| From non-affiliated/non-control investments: | ||||||||||||
| Interest income – debt investments | $ | 4,492,647 | $ | 7,114,678 | $ | 15,020,284 | $ | 21,695,535 | ||||
| Income from securitization vehicles and investments | 3,568,516 | 6,131,870 | 11,545,539 | 19,628,276 | ||||||||
| Other income | 163,976 | 162,796 | 738,625 | 887,662 | ||||||||
| Total investment income from non-affiliated/non-control investments | 8,225,139 | 13,409,344 | 27,304,448 | 42,211,473 | ||||||||
| From affiliated investments: | ||||||||||||
| Dividend income – non-cash | — | 673,706 | — | 7,009,592 | ||||||||
| Total investment income from affiliated investments | — | 673,706 | — | 7,009,592 | ||||||||
| Total investment income | 8,225,139 | 14,083,050 | 27,304,448 | 49,221,065 | ||||||||
| EXPENSES | ||||||||||||
| Interest expense | 1,908,206 | 2,522,451 | 5,988,116 | 7,478,451 | ||||||||
| Base management fees | 1,123,450 | 1,729,152 | 3,365,332 | 5,223,813 | ||||||||
| Professional fees | 321,059 | 349,564 | 1,228,794 | 1,071,633 | ||||||||
| Compensation expense | 185,659 | 195,034 | 554,288 | 622,937 | ||||||||
| General and administrative | 416,486 | 349,662 | 1,195,166 | 1,232,254 | ||||||||
| Total expenses before incentive fees | 3,954,860 | 5,145,863 | 12,331,696 | 15,629,088 | ||||||||
| Net investment income incentive fees | — | — | — | 3,511,493 | ||||||||
| Total expenses | 3,954,860 | 5,145,863 | 12,331,696 | 19,140,581 | ||||||||
| Net investment income | 4,270,279 | 8,937,187 | 14,972,752 | 30,080,484 | ||||||||
| Net change in unrealized appreciation/(depreciation) on investments: | ||||||||||||
| Non-affiliated/non-control investments | 21,580,813 | (34,478,523 | ) | (42,698,711 | ) | (42,201,632 | ) | |||||
| Affiliated investments | (634,089 | ) | (7,131,376 | ) | (2,816,790 | ) | (14,009,646 | ) | ||||
| Total net change in unrealized appreciation/(depreciation) <br> on investments | 20,946,724 | (41,609,899 | ) | (45,515,501 | ) | (56,211,278 | ) | |||||
| Net realized gains/(losses): | ||||||||||||
| Non-affiliated/non-control investments | (4,368,235 | ) | (432,246 | ) | (7,405,716 | ) | (1,709,816 | ) | ||||
| Extinguishment of debt | — | (5,506 | ) | (5,211 | ) | (56,592 | ) | |||||
| Total net realized losses | (4,368,235 | ) | (437,752 | ) | (7,410,927 | ) | (1,766,408 | ) | ||||
| Net increase/(decrease) in net assets resulting from operations | $ | 20,848,768 | $ | (33,110,464 | ) | $ | (37,953,676 | ) | $ | (27,897,202 | ) | |
| Net increase in net assets resulting from net investment income per common share (Basic and Diluted) | $ | 0.09 | $ | 0.19 | $ | 0.30 | $ | 0.63 | ||||
| Net increase/(decrease) in net assets resulting from operations per common share (Basic and Diluted) | $ | 0.42 | $ | (0.69 | ) | $ | (0.77 | ) | $ | (0.59 | ) | |
| Weighted average shares of common stock outstanding (Basic and Diluted) | 49,589,607 | 47,740,799 | 49,439,478 | 47,681,235 | ||||||||
| Distributions per share | $ | 0.105 | $ | 0.201 | $ | 0.507 | $ | 0.602 |
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FINANCIAL HIGHLIGHTS – (unaudited)
Financial highlights for the three and nine months ended September 30, 2020 and 2019, respectively, are as follows:
| ****<br><br>Per Share Data | Three Months<br><br>Ended <br><br>September 30,<br><br>2020 | Three Months<br><br>Ended <br><br>September 30,<br><br>2019 | Nine Months<br><br>Ended<br><br>September 30,<br><br>2020 | Nine Months<br><br>Ended<br><br>September 30,<br><br>2019 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net asset value as of beginning of period | $ | 3.54 | $ | 6.31 | $ | 5.12 | $ | 6.60 | ||||
| Net investment income^(1)^ | 0.09 | 0.19 | 0.30 | 0.63 | ||||||||
| Net<br> realized and unrealized gains/(losses)^(2)^ | 0.33 | (0.88 | ) | (1.06 | ) | (1.21 | ) | |||||
| Net increase/(decrease) in net asset value from operations | 0.42 | (0.69 | ) | (0.76 | ) | (0.58 | ) | |||||
| Distributions per share from net investment income | (0.09 | ) | (0.17 | ) | (0.42 | ) | (0.51 | ) | ||||
| Tax return of capital distributions^(3)^ | (0.02 | ) | (0.03 | ) | (0.09 | ) | (0.09 | ) | ||||
| Total distributions | (0.11 | ) | (0.20 | ) | (0.51 | ) | (0.60 | ) | ||||
| Effect of shares issued/repurchased, gross | — | — | — | — | ||||||||
| Net asset value at end of period | $ | 3.85 | $ | 5.42 | $ | 3.85 | $ | 5.42 | ||||
| Per share market value at beginning of period | $ | 2.80 | $ | 6.40 | $ | 5.44 | $ | 6.47 | ||||
| Per share market value at end of period | $ | 2.47 | $ | 6.23 | $ | 2.47 | $ | 6.23 | ||||
| Total return based on Market Value^(4)^ | (8.22 | )% | 0.46 | % | (46.71 | )% | 5.69 | % | ||||
| Total return based on Net Asset Value^(5)^ | 11.72 | % | (10.92 | )% | (14.90 | )% | (8.76 | )% | ||||
| Shares outstanding at end of period | 49,589,607 | 47,790,071 | 49,589,607 | 47,790,071 | ||||||||
| Ratios/Supplemental Data^(8)^ | ||||||||||||
| Net assets at end of period (000’s) | $ | 190,968 | $ | 258,960 | $ | 190,968 | $ | 258,960 | ||||
| Average net assets (000’s) | 183,148 | 279,978 | 186,744 | 301,766 | ||||||||
| Ratio of operating expenses to average net assets^(6)^ | 8.64 | % | 7.35 | % | 8.80 | % | 8.46 | % | ||||
| Ratio of net investment income to average net assets^(6)^ | 9.33 | % | 12.77 | % | 10.69 | % | 13.29 | % | ||||
| Portfolio turnover rate^(7)^ | 3.22 | % | 1.18 | % | 15.71 | % | 9.07 | % | ||||
| ____________ | ||||||||||||
| --- | ||||||||||||
| (1) | Represents per share net investment income for the period,<br>based upon weighted average shares outstanding. | |||||||||||
| --- | --- | |||||||||||
| (2) | Net realized and unrealized gains/(losses) include rounding<br>adjustments to reconcile change in net asset value per share. | |||||||||||
| --- | --- | |||||||||||
| (3) | Management monitors available taxable earnings, including<br>net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent<br>the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a<br>portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The ultimate tax character<br>of the Company’s earnings cannot be determined until tax returns are prepared after the end of the fiscal year. The amounts<br>and sources of distributions reported are only estimates (based on an average of the reported tax character historically) and<br>are not being provided for U.S. tax reporting purposes. | |||||||||||
| --- | --- | |||||||||||
| (4) | Total return based on market value equals the increase<br>or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming<br>distribution reinvestment prices obtained under the Company’s distribution reinvestment plan, excluding any discounts. Total<br>return is not annualized. | |||||||||||
| --- | --- | |||||||||||
| (5) | Total return based on net asset value equals the increase<br>or decrease of ending net asset value over beginning net asset value, plus distributions, divided by the beginning net asset value.<br>Total return is not annualized. | |||||||||||
| --- | --- | |||||||||||
| (6) | Annualized. | |||||||||||
| --- | --- | |||||||||||
| (7) | Portfolio turnover rate is calculated using the lesser<br>of the year-to-date cash investment sales and debt repayments or year-to-date cash investment purchases over the average of the<br>total investments at fair value. | |||||||||||
| --- | --- | |||||||||||
| (8) | The following table provides supplemental performance ratios<br>(annualized) measured for the three and nine months ended September 30, 2020 and 2019: | |||||||||||
| --- | --- |
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| Three Months<br><br>Ended<br><br>September 30,<br><br>2020 | Three Months<br><br>Ended<br><br>September 30,<br><br>2019 | Nine Months<br><br>Ended<br><br>September 30,<br><br>2020 | Nine Months<br><br>Ended<br><br>September 30,<br><br>2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ratio of operating expenses to average net assets: | ||||||||||||
| Operating expenses before incentive fees | 8.64 | % | 7.35 | % | 8.80 | % | 6.91 | % | ||||
| Net investment income incentive fees | — | % | — | % | — | % | 1.55 | % | ||||
| Ratio of expenses, excluding interest expense | 4.47 | % | 3.75 | % | 4.53 | % | 5.15 | % |
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**About Oxford Square Capital Corp.**Oxford Square Capital Corp. is a publicly-traded business development company principally investing in syndicated bank loans and debt and equity tranches of collateralized loan obligation (“CLO”) vehicles. CLO investments may also include warehouse facilities, which are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle.
Forward-Looking StatementsThis press release contains forward-looking statements subject to the inherent uncertainties in predicting future results and conditions. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions) should also be considered to be forward-looking statements. These statements are not guarantees of future performance, conditions or results and involve a number of risks and uncertainties, including the impact of COVID-19 and related changes in base interest rates and significant market volatility on our business, our portfolio companies, our industry and the global economy. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements. These factors are identified from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to update such statements to reflect subsequent events, except as may be required by law.
Contact:
Bruce Rubin
203-983-5280
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