Good morning, and welcome to the Oxford Square Capital Corp. Third Quarter 2020 Earnings Release and Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jonathan Cohen, CEO. Please go ahead.

Good morning, everyone, and welcome to the Oxford Square Capital Corp. Third Quarter 2020 Earnings Conference Call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our Chief Financial Officer; Kevin Yonon, our Managing Director and Portfolio Manager. Bruce, could you open the call today with the disclosure regarding forward-looking statements?

Sure, Jonathan. Today's conference call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was issued earlier this morning. Please note that this call is the property of Oxford Square Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited. At this point, please direct your attention to the customary disclosure in this morning's press release regarding forward-looking information. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future events and financial performance. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those included in these projections. We do not undertake to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com. With that, I'll turn the presentation back to Jonathan.

Thank you, Bruce. For the quarter ended September 30, Oxford Square's net investment income was $0.09 per share, and our net asset value per share stood at $3.85 compared to net investment income per share of $0.09 and net asset value per share of $3.54 in the prior quarter. For the third quarter of 2020, we recorded total investment income of approximately $8.2 million as compared to approximately $8.3 million in the prior quarter. In the third quarter of 2020, we recorded net unrealized depreciation on investments of approximately $20.9 million or $0.42 per share compared to net unrealized depreciation on investments of approximately $19 million or $0.38 per share for the prior quarter. For the third quarter, we recognized realized losses on investments of approximately $4.4 million or $0.09 per share compared to realized losses of $2.8 million or $0.06 per share for the prior quarter. In total, for the third quarter, we had a net increase in net assets from operations of approximately $20.8 million or $0.42 per share compared to a net increase in net assets from operations of $20.6 million or $0.41 per share for the prior quarter. During the third quarter of 2020, our investment activity consisted of purchase -- purchases of approximately $18.3 million, sales of approximately $8.3 million and repayments of approximately $600,000. We note that as of September 30, we continue to hold 2 debt investment incomes on nonaccrual status. We also hold preferred equity investments in one of our portfolio companies on nonaccrual status. On October 22, 2020, our Board of Directors has declared month distributions of $0.035 per share for the months ended January, February and March of 2021. Additional details regarding record and payment date information can be found in our press release that was issued earlier this morning. 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. And with that, I'll turn the call over to our Portfolio Manager, Kevin Yonon. Kevin?

Thank you, Jonathan. During the quarter ended September 30, 2020, U.S. loan market strengthened versus the quarter ended June 30, 2020. U.S. loan prices, as defined by the S&P/LSTA Leveraged Loan Index, increased from 89.88% of par as of June 30 to a quarterly high of 93.96% on September 16 before declining to 93.18% on September 30. According to LCD, during the quarter, pricing dispersion related to credit quality continued with BB-rated loan prices increasing 2.2%, B-rated loan prices increasing 3.5%, and CCC-rated loan prices increasing 8.6% on average. The 12-month trailing default rate for the S&P/LSTA Leveraged Loan Index increased to 4.17% by principal amount at the end of the quarter after starting the quarter at 3.23% by principal amount. Additionally, the distress ratio, defined as the percentage of loans with a price below 80% of par, ended the quarter at approximately 5% compared to 8% on June 30 after peaking at 57% on March 23. September 30 year-to-date primary market issuance of approximately $203 billion was 15.8% below issuance during the comparable period in 2019. Moreover, U.S. loan fund outflows, as measured by LIBOR, have moderated with $2.9 billion of outflows for the quarter ended September 30 versus approximately $4 billion of outflows for the quarter ended June 30. In this environment, we continue to focus on portfolio management strategies designed to maximize our long-term total return. And as a permanent capital vehicle, we historically have been able to take a longer-term view towards our investment strategy.

Kevin, thank you very much. Additional information about Oxford Square's third quarter performance has been posted to our website at www.oxfordsquarecapital.com. And with that, operator, we're happy to open the discussion for any questions.

[Operator Instructions] Our first question today comes from Mickey Schleien with Ladenburg.

Question for Kevin. This year, the Fed's financing facilities, which were introduced after the pandemic began, have boosted the high-yield market, and that's allowed borrowers to refinance at least some of their loans with bonds. How is that dynamic affecting the loan market's supply and demand equilibrium? And what is your outlook for it in terms of its technical and fundamental factors?

Sure, Mickey. I mean we've seen the dynamic that you've just described. In terms of available supply for our investment strategy, we feel as if there is sufficient supply both in the primary and in the secondary market for us to continue to execute. In terms of how things may play out in the future in terms of the interplay between those various elements, it's extraordinarily difficult to say. And we frankly wouldn't speculate.

Jonathan, if you look at the price of the leveraged loan market, it's implying defaults of 6%, 7%. Is that sort of your operating assumption as you make investments? Or are you more pessimistic, more optimistic? Generally, how do you feel about credit going into next year?

I think, Mickey, we would apply a higher level of specificity than to say that the overall market will likely return a set level of default rate over a certain period of time. I think we're going to see a continuation of what we've seen thus far, which is a tremendous level of bifurcation and deviation between and amongst different industries and between and amongst different companies, depending on their individual prospects. The current state of the world, as you well know, is fairly uncertain. But there has been, and I think there will continue to be, a realignment in terms of market risk and sector risk and corporate risk, depending on how these various industries and companies are positioned and where they're operating.

And Jonathan, is that bifurcation providing Oxford opportunities and, let's call them, "distressed deals" that you think ultimately are good money? And are you taking advantage of that?

We're looking, and we have always looked at individual opportunities, Mickey, that would be characterized as distressed opportunities. But as you know, we haven't historically participated in a meaningful way in the distressed markets.

Okay. And just a couple of balance sheet questions, Jonathan. What is the outlook for Oxford Square to put back and to play some sort of credit facility since that could reduce the cost of your debt capital, which could -- and increase your leverage and ultimately improve your NII yield, everything else remaining equal?

Sure, Mickey. Without wanting to be very specific about that, that's something that we look at fairly regularly. So as you know, we have issued baby bonds. Those are the only significant liabilities on our balance sheet at this moment. But as you say, different aspects or different parts of the credit markets may provide us the ability to lower our cost of capital. And we certainly continue to look at those kinds of things.

And do you think that the terms available to you on those other facilities are -- would be accretive at this point in time to Oxford's earnings?

Were there to arise an opportunity for us to issue accretive debt or take on accretive indebtedness, we would certainly look very seriously at doing so.

Okay. And my last question, Jonathan, big picture, is there any impediment besides the necessary approvals for you to consider merging Oxford Square and Oxford Lane, which could have certain benefits, such as reducing relative operating expenses for the 2 companies?

Interesting question, Mickey, not one that I'm really able to address.

Seeing no further questions, I'd like to turn the call back over to Jonathan Cohen for any closing remarks.

All right, operator. Well, thank you very much. We appreciate everyone's time and interest in Oxford Square Capital Corp., and we look forward to speaking to you again very soon. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.