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Section 1: 8-K (CURRENT REPORT)

 

 

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): July 26, 2019

 

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 Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(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 July 30, 2019, Oxford Square Capital Corp. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2019. The text of the press release is included as Exhibit 99.1 to this Form 8-K. Additionally, on July 30, 2019, the Company made available on its website, www.oxfordsquarecapital.com, supplemental investor information with respect to the earnings release.

 

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 5.07. Submission of Matters to a Vote of Security Holders

 

On July 26, 2019, the Company held its Annual Meeting of Stockholders (the “Meeting”). Set forth below are the proposals voted upon at the Meeting, as set forth in the Company’s Definitive Proxy Statement on Schedule 14A, filed with the U.S. Securities and Exchange Commission on June 11, 2019, and the final voting tabulation reported by the Company’s inspector of elections.

 

The Company’s Board of Directors fixed the close of business on May 31, 2019 as the record date for identifying those stockholders entitled to notice of, and to vote at, the Meeting.  A total of 47,650,959 shares of the Company’s common stock were entitled to vote at the Meeting. A quorum of the stockholders was present at the Meeting. The final voting results for each of the proposals were as follows:

 

Proposal 1. Stockholders elected one nominee for director, who will serve for a three-year term to expire at the 2022 Annual Meeting of Stockholders based on the following votes:

 

Name  For   Withheld   Broker Non-
Votes
 
Richard W. Neu   12,229,247.32    4,360,542.66    27,974,995 

 

Proposal 2. Stockholders ratified the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019 based on the following votes: 

 

For   Against   Abstain   Broker
Non-Votes
 
 43,270,747.32    779,183.66    514,854     

 

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 July 30, 2019

 

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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: July 30, 2019 OXFORD SQUARE CAPITAL CORP.
     
  By: /s/ Saul B. Rosenthal
    Saul B. Rosenthal
    President

 

 

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Section 2: EX-99.1 (PRESS RELEASE DATED JULY 30, 2019)

Exhibit 99.1

 

Oxford Square Capital Corp. Announces Net Asset Value and Selected Financial Results for the Quarter Ended June 30, 2019

 

Declares Common Stock Distributions for the Months Ending October 31, November 30, and December 31, 2019

 

GREENWICH, CT – 07/30/2019 –Oxford Square Capital Corp. (NasdaqGS: OXSQ) (NasdaqGS: OXSQL) (NasdaqGS: OXSQZ) (“OXSQ,” the “Company,” “we,” “us” or “our”) announced today its financial results and related information for the quarter ended June 30, 2019.

 

As of June 30, 2019 net asset value (“NAV”) per share was $6.31, compared with the NAV per share of $6.67 at the prior quarter end.

 

For the quarter ended June 30, 2019 we recorded GAAP net investment income of approximately $12.8 million, or $0.27 per share, compared to $8.4 million, or $0.18 per share for the quarter ended March 31, 2019. We recorded net realized losses of approximately $36 thousand and net unrealized depreciation of approximately $20.3 million for the quarter ended June 30, 2019. In total, we had a net decrease in net assets resulting from operations of approximately $7.5 million, or $0.16 per share, for the quarter ended June 30, 2019, compared with a net increase in net assets resulting from operations of $12.7 million, or $0.27 per share, for the quarter ended March 31, 2019.

 

Total investment income for the second quarter of 2019 amounted to approximately $20.9 million, which represents an increase of approximately $6.7 million from the first quarter of 2019.

 

oFor the quarter ended June 30, 2019 we recorded investment income from our portfolio as follows:

 

$7.4 million from our debt investments,

 

$6.6 million from our collateralized loan obligation (“CLO”) equity investments

 

$6.3 million of dividend income – PIK from affiliated investments, and

 

$0.5 million from all other sources.

 

Our total expenses for the quarter ended June 30, 2019 were approximately $8.1 million, which represents an increase of approximately $2.3 million from the first quarter of 2019.

 

During the second quarter of 2019:

 

oWe made investments of approximately $20.6 million in senior secured loans and approximately $25.8 million in CLO equity investments.

 

oWe received, or were entitled to receive, proceeds of approximately $2.5 million from sales of senior secured loans, in addition to $4.9 million from sales of CLO equity investments, and $23.5 million from repayments and amortization payments on our debt investments.

 

As of June 30, 2019 the following metrics applied (note that none of these values represent a total return to shareholders):

 

oThe weighted average yield of our debt investments was 10.0% at current cost, compared with 9.8% as of March 31, 2019.

 

oThe weighted average effective yield of our CLO equity investments at current cost was 13.1%, compared with 14.6% as of March 31, 2019.

 

oThe weighted average cash distribution yield of our CLO equity investments at current cost was 19.9%, compared with 18.4% as of March 31, 2019.

 

Our weighted average credit rating on a fair value basis was 2.2 at the end of the first quarter of 2019 (compared to 2.1 at the end of the first quarter of 2019).

 

As of June 30, 2019 we had no investments on non-accrual status.

 

On April 3, 2019, we completed an underwritten public offering of $42.5 million in aggregate principal amount of our 6.25% Unsecured Notes due 2026 (the “6.25% Notes”). On April 9, 2019, we issued an additional approximately $2.3 million in aggregate principal amount of the 6.25% Notes pursuant to the underwriters’ partial exercise of their overallotment option. The 6.25% Notes bear interest at a rate of 6.25% and will mature on April 30, 2026, and may be redeemed in whole or in part at any time at our option on or after April 30, 2022. The 6.25% Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQZ.”

 

 

 

 

On July 25, 2019 our Board of Directors declared the following distributions on our common stock:

  

Period Ending  Record Date  Payment Date  Amount Per Share 
October 31, 2019  October 21, 2019  October 31, 2019   $0.067 
November 30, 2019  November 15, 2019  November 29, 2019   $0.067 
December 31, 2019  December 18, 2019  December 31, 2019   $0.067 

  

We will host a conference call to discuss our second quarter results today, Tuesday, July 30, 2019 at 09:00 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 10133936.

 

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.

 

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OXFORD SQUARE CAPITAL CORP.

 

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

  

   June 30,
2019
   December 31,
2018
 
   (unaudited)     
ASSETS          
Non-affiliated/non-control investments (cost: $497,304,443 and $486,232,755, respectively)  $433,845,212   $430,496,633 
Affiliated investments (cost: $15,461,904 and $9,126,017, respectively)   13,949,814    14,492,197 
Cash equivalents   10,336,577    13,905,059 
Restricted cash   2,267,372    3,175,805 
Interest and distributions receivable   4,486,790    4,682,735 
Other assets   421,172    392,784 
Total assets  $465,306,937   $467,145,213 
LIABILITIES          
Notes payable – 6.50% Unsecured Notes, net of deferred issuance costs  $62,825,881   $62,664,863 
Notes payable – Credit Facility, net of deferred issuance costs   52,811,859    85,522,569 
Notes payable – 6.25% Unsecured Notes, net of deferred issuance costs   43,201,242     
Base management fee and net investment income incentive fee payable to affiliate   4,223,566    3,227,456 
Accrued interest payable   972,028    488,608 
Accrued expenses   442,887    517,470 
Total liabilities   164,477,463    152,420,966 
COMMITMENTS AND CONTINGENCIES (Note 13)          
NET ASSETS          
Common stock, $0.01 par value, 100,000,000 shares authorized; 47,650,959 and 47,650,959 shares issued and outstanding, respectively   476,509    476,509 
Capital in excess of par value   456,970,560    456,970,560 
Total distributable earnings / (accumulated losses)   (156,617,595)   (142,722,822)
Total net assets   300,829,474    314,724,247 
Total liabilities and net assets  $465,306,937   $467,145,213 
Net asset value per common share  $6.31   $6.60 

 

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OXFORD SQUARE CAPITAL CORP.

 

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

   Three Months
Ended
June 30,
2019
   Three Months
Ended
June 30,
2018
   Six Months Ended
June 30,
2019
   Six Months Ended
June 30,
2018
 
INVESTMENT INCOME                
From non-affiliated investments:                
Interest income – debt investments  $7,432,376   $5,851,355   $14,580,857   $11,673,092 
Income from securitization vehicles and investments   6,649,481    6,100,764    13,496,406    12,903,628 
Other income   495,158    465,203    724,866    1,087,186 
Total investment income from non-affiliated investments   14,577,015    12,417,322    28,802,129    25,663,906 
                     
From affiliated investments:                    
Dividend Income – PIK   6,335,886        6,335,886     
Interest income – debt investments       101,400        201,616 
Total investment income from affiliated investments   6,335,886    101,400    6,335,886    201,616 
Total investment income   20,912,901    12,518,722    35,138,015    25,865,522 
                     
EXPENSES                    
Interest expense   2,806,159    1,250,694    4,956,000    2,376,774 
Base management fees   1,868,123    1,742,391    3,494,661    3,422,205 
Professional fees   354,818    348,159    722,069    505,077 
Compensation expense   194,975    216,133    427,903    476,222 
General and administrative   554,075    433,624    882,592    834,195 
Total expenses before incentive fees   5,778,150    3,991,001    10,483,225    7,614,473 
Net investment income incentive fees   2,355,442    839,710    3,511,493    1,839,942 
Total expenses   8,133,592    4,830,711    13,994,718    9,454,415 
Net investment income   12,779,309    7,688,011    21,143,297    16,411,107 
Net change in unrealized appreciation/(depreciation) on investments:                    
Non-Affiliated investments   (11,951,759)   (2,477,460)   (7,723,109)   874,142 
Affiliated investments   (8,328,556)   2,737,099    (6,878,270)   1,863,529 
Total net change in unrealized appreciation/(depreciation) on investments   (20,280,315)   259,639    (14,601,379)   2,737,671 
Net realized gains/(losses):                    
Non-Affiliated/non-control investments   1,296    (1,045,739)   (1,277,570)   (756,804)
Extinguishment of debt   (36,980)       (51,086)    
Total net realized gains/(losses)   (35,684)   (1,045,739)   (1,328,656)   (756,804)
Net increase/(decrease) in net assets resulting from operations  $(7,536,690)  $6,901,911   $5,213,262   $18,391,974 

 

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FINANCIAL HIGHLIGHTS – (unaudited)

 

Financial highlights for the three and six months ended June 30, 2019 and 2018, respectively, are as follows: 

 

Per Share Data  Three Months
Ended
June 30,
2019
   Three Months
Ended
June 30,
2018
   Six Months Ended
June 30,
2019
  

Six Months

Ended
June 30,
2018

 
Net asset value as of beginning of period  $6.67   $7.60   $6.60   $7.55 
Net investment income(1)   0.27    0.15    0.44    0.32 
Net realized and unrealized gains/(losses)(2)   (0.43)   (0.01)   (0.33)   0.04 
Net (decrease)/increase in net asset value from operations   (0.16)   0.14    0.11    0.36 
Distributions per share from net investment income   (0.17)   (0.20)   (0.34)   (0.40)
Tax return of capital distributions(3)   (0.03)       (0.06)    
Total distributions   (0.20)   (0.20)   (0.40)   (0.40)
Effect of shares repurchased, gross       0.02        0.05 
Net asset value at end of period  $6.31   $7.56   $6.31   $7.56 
Per share market value at beginning of period  $6.50   $6.11   $6.47   $5.74 
Per share market value at end of period  $6.40   $6.90   $6.40   $6.90 
Total return based on Market Value(4)   1.60%   16.20%   5.21%   27.74%
Total return based on Net Asset Value(5)   (2.38)%   2.11%   1.68%   5.43%
Shares outstanding at end of period   47,650,959    49,407,609    47,650,959    49,407,609 
                     
Ratios/Supplemental Data(8)                    
Net assets at end of period (000’s)  $300,829   $373,408   $300,829   $373,408 
Average net assets (000’s)   309,387    379,613    312,841    383,506 
Ratio of operating expenses to average net assets(6)   10.52%   5.09%   8.95%   4.93%
Ratio of net investment income to average net assets(6)   16.52%   8.10%   13.52%   8.56%
Portfolio turnover rate(7)   6.89%   10.73%   7.82%   15.22%

 

 

(1)Represents per share net investment income for the period, based upon average shares outstanding.
(2)Net realized and unrealized gains include rounding adjustments to reconcile change in net asset value per share.
(3)Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The ultimate tax character of the Company’s earnings cannot be determined until tax returns are prepared after the end of the fiscal year.
(4)Total return based on market value equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming distribution reinvestment prices obtained under the Company’s distribution reinvestment plan, excluding any discounts. Total return is not annualized.
(5)Total return based on net asset value equals the increase or decrease of ending net asset value over beginning net asset value, plus distributions, divided by the beginning net asset value. Total return is not annualized.
(6)Annualized.
(7)Portfolio turnover rate is calculated using the lesser of the year-to-date cash investment sales and debt repayments or year-to-date cash investment purchases over the average of the total investments at fair value.

  

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(8)The following table provides supplemental performance ratios (annualized) measured for the three and six months ended June 30, 2019 and 2018:

 

  

Three Months
Ended

June 30,
2019

  

Three Months
Ended

June 30,
2018

   Six Months Ended
June 30,
2019
  

Six Months Ended

June 30,
2018

 
Ratio of operating expenses to average net assets:                
Operating expenses before incentive fees   7.47%   4.21%   6.70%   3.97%
Net investment income incentive fees   3.05%   0.88%   2.24%   0.96%
Ratio of expenses, excluding interest expense   6.89%   3.77%   5.78%   3.69%

 

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 Statements

This 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. 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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