Oxford Square Capital (NASDAQ:OXSQ) reported higher net investment income and total investment income in the second quarter of 2026, while its net asset value per share declined modestly from the prior quarter. The company also expanded its CLO equity investments through secondary-market purchases and raised capital through its at-the-market equity program.
For the quarter ended June 30, Oxford Square posted net investment income of approximately $5.1 million, or $0.05 per share, compared with approximately $4.1 million in the first quarter. Total investment income increased to approximately $9.4 million from approximately $8.9 million in the preceding quarter.
Investment Losses Narrowed From Prior Quarter
Oxford Square recorded combined net unrealized and realized losses on investments of approximately $1.1 million, or $0.01 per share, during the second quarter. That compared with approximately $29.7 million, or $0.34 per share, of combined losses in the prior quarter.
Chief Executive Officer Jonathan H. Cohen said the quarter’s unrealized gains were principally a rebound from the valuation levels recorded in the first quarter.
The company’s investment activity included approximately $19.9 million of purchases and roughly $500,000 of repayments. Cohen told analysts that all of the quarter’s purchases were CLO equity investments, with cash-on-cash returns in the low 20% range and forward effective yields also in that range.
Chief Financial Officer Bruce L. Rubin said the investments were all purchased in the secondary market. He said the activity was consistent with Oxford Square’s view that CLO equity tranches present a “fairly compelling cash-on-cash opportunity,” particularly in secondary-market transactions.
Equity Issuance and Distributions
Oxford Square issued approximately 11.3 million common shares through its at-the-market offering during the quarter, generating net proceeds of approximately $17.8 million.
On July 29, the board declared monthly distributions of $0.035 per share for each of October, November and December 2026.
During the question-and-answer session, an analyst noted that net investment income per share remained below the distribution level despite the quarter-over-quarter increase in total investment income. Cohen declined to provide a timetable for achieving full distribution coverage, citing the company’s practice of not making forward projections. He said management was broadly optimistic about the capital being deployed, including the investments made during the second quarter.
Restructured Position Returned to Accrual
Managing Director and Portfolio Manager Kevin Yonon addressed a debt investment that had appeared as a non-accrual position in the prior quarter but was no longer listed that way. Yonon said the investment completed a restructuring transaction during the quarter.
The restructuring resulted in what Yonon described as a new, manageable capital structure. Oxford Square now holds a new first-lien term loan and some common equity in the company, and the new first-lien loan is on accrual status. Yonon said the valuation recorded for the position was consistent with the prior quarter and that the restructuring did not result in an additional gain or loss relative to that prior mark.
Loan Market Conditions Improved
Yonon said U.S. loan market performance improved during the second quarter. The Morningstar LSTA U.S. Leveraged Loan Index rose to 94.96% of par as of June 30 from 94.63% at March 31.
- BB-rated loan prices increased by an average of 32 basis points during the quarter.
- B-rated loan prices increased by 42 basis points.
- CCC-rated loan prices increased by 6 basis points.
- The 12-month trailing default rate declined to 0.97% by principal amount from 1.44% at the end of March, according to PitchBook LCD.
- The default rate including liability management exercises declined to 2.77% from 3.48%, though Yonon said it remained elevated.
- The share of loans priced below 80% of par, known as the distress ratio, declined to 6.87% from 7.23%.
U.S. leveraged-loan primary-market issuance, excluding amendments and repricings, totaled $101.8 billion during the quarter, a 33% increase from the comparable 2025 period. Yonon attributed the increase to higher refinancing and merger-and-acquisition activity, partly offset by lower leveraged-buyout and dividend activity. U.S. loan funds recorded approximately $1 billion in inflows during the quarter, according to Lipper.
Yonon said Oxford Square continues to emphasize portfolio-management strategies intended to maximize long-term total return, noting that the company’s permanent-capital structure allows it to take a longer-term approach to investment decisions.
About Oxford Square Capital (NASDAQ:OXSQ)
Oxford Square Capital Corp. (NASDAQ:OXSQ) is a publicly traded business development company that provides flexible financing solutions to U.S. middle-market companies. Chartered as a closed-end management investment company, Oxford Square Capital seeks to generate current income and capital appreciation by investing primarily in secured loans, mezzanine debt and equity co-investments. The firm targets businesses with established cash flows, offering tailored capital structures designed to support growth, recapitalizations and acquisitions.
The company’s investment strategy focuses on senior secured first-lien and second-lien loans, subordinated debt and preferred and common equity stakes.
