Oxford Lane Capital (NASDAQ:OXLC) reported a higher net asset value per share for its first fiscal quarter of 2027, while quarterly investment income and core net investment income declined from the preceding quarter.
Chief Executive Officer Jonathan Cohen said net asset value per share was $10.74 as of June 30, 2026, up from $10.56 at March 31. The company recorded a $76.3 million increase in net assets resulting from operations during the quarter, equal to $0.78 per share.
GAAP net investment income totaled approximately $50.2 million, or $0.51 per share, compared with $54.5 million, or $0.56 per share, in the quarter ended March 31. Core net investment income was $93.4 million, or $0.95 per share, down from $100.7 million, or $1.03 per share, in the prior quarter.
Portfolio activity and distributions
Cohen said Oxford Lane held approximately $66.2 million of newly issued or newly acquired CLO equity investments as of June 30 that had not yet made their initial distributions to the company.
For the quarter, the company reported net unrealized appreciation on investments of approximately $54.5 million and net realized losses of approximately $28.4 million. Oxford Lane made about $37.8 million of additional CLO investments and received approximately $50.7 million from sales and repayments.
The weighted average effective yield of CLO equity investments at current cost declined to 11.1% at June 30 from 11.7% at March 31. The weighted average cash distribution yield of CLO equity investments at current cost fell to 16.3% from 16.7%.
On July 23, the board declared monthly common-stock distributions of $0.20 per share for each of October, November and December 2026.
Loan market conditions improve
Managing Director and Portfolio Manager Joe Kupka said U.S. loan market performance improved during the quarter. The U.S. loan price index increased to 94.96% at June 30 from 94.63% at March 31, contributing to an approximate four-point increase in median U.S. CLO equity net asset values.
Median weighted average spreads across loan pools in CLO portfolios narrowed modestly to 302 basis points from 304 basis points in the previous quarter. The 12-month trailing default rate for the loan index declined to 0.97% by principal amount from 1.44% at the end of March.
Kupka noted that out-of-court restructurings, exchanges and subpar buybacks, which are not included in the cited default-rate measure, remained elevated.
U.S. CLO new issuance totaled approximately $33 billion in the quarter, down about $14 billion from the previous quarter. At the same time, the U.S. CLO market recorded roughly $94 billion in reset and refinancing activity, compared with approximately $56 billion in the prior quarter.
Resets and refinancings remain a focus
Oxford Lane traded more than $85 million in CLO equity during the quarter and participated in or led numerous resets and refinancings. Kupka said those transactions took advantage of tighter liability spreads to reduce funding costs and extend the weighted average reinvestment period of the company’s equity portfolio to November 2029 from October 2029.
During the question-and-answer session, Kupka said the company had completed about 25 resets or refinancings year to date. Looking ahead from the end of the June quarter, he said roughly 30% of the portfolio by market value could be in the money for a refinancing or reset through the end of 2026, with an additional 30% potentially eligible during 2027.
“Overall, over half of our book has potential short-term optionality embedded in it,” Kupka said.
Kupka also said secondary-market bid-ask spreads had improved compared with late March. He cited opportunities in CLO equity issued by managers perceived as lower tier in the primary and secondary CLO markets, saying such investments could offer attractive cash-on-cash and ultimate yields. Cohen clarified that the description referred to market perception rather than manager quality.
Regarding realized losses, Kupka said much of the activity reflected trading out of more sought-after managers and into less-regarded managers amid a widening valuation basis, as well as certain legacy positions whose indentures were discharged.
On the outlook for CLO equity cash distributions, Kupka said April payments had stabilized but July payments saw another decline amid continued spread compression. He said the pace of the decline had slowed year to date, but future payments would depend on loan-market conditions, refinancings and repricings.
Oxford Lane said it intends to continue using an opportunistic CLO investment strategy spanning U.S. CLO equity, debt and warehouse investments, with the objective of maximizing long-term total return.
About Oxford Lane Capital (NASDAQ:OXLC)
Oxford Lane Capital Corp is a closed-end, externally managed investment company that seeks to generate high current income and capital appreciation. The company invests primarily in debt and equity securities of private funds managed or advised by Oxford Finance LLC, targeting U.S. middle-market companies. Its portfolio spans senior secured loans, mezzanine debt and private equity interests, providing diversification across credit instruments and industry sectors.
Established in 2009 and based in Greenwich, Connecticut, Oxford Lane Capital commenced operations in 2012.
