Oxford Lane Capital Adjusts Strategy Amid Portfolio Valuation Decline

Oxford Lane Capital has reported a significant quarterly decrease in its net asset value (NAV) per share. Concurrently, the business development company announced a reduction in its monthly distribution for the upcoming quarter, a move aimed at preserving capital to pursue opportunities in the current collateralized loan obligation (CLO) market.

For the quarter ending December 31, Oxford Lane's NAV per share declined to $15.51, down from $19.19 in the preceding period. This decrease was primarily driven by net unrealized depreciation on investments totaling approximately $305.4 million, reflecting a challenging environment for its CLO portfolio.

Total investment income also faced headwinds, coming in at $117.8 million. This figure represents a decrease of roughly $10.5 million compared to the prior quarter.

The company reported a GAAP net investment income of about $71.8 million, or $0.74 per share. Additionally, it disclosed a non-GAAP "Core Net Investment Income" of approximately $108.9 million, equivalent to $1.12 per share.

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Strategic Pivot and Distribution Cut

In response to these conditions, Oxford Lane's board has set the new monthly distribution on its common stock at $0.20 per share for April, May, and June. Management stated the adjustment is intended to retain capital for strategic deployment.

The firm is shifting its strategic focus toward the secondary market for CLOs, where it identifies potential to capitalize on supply-demand imbalances and acquire assets at a discount. Despite noting an expected softening in the U.S. CLO reset and refinancing market toward the end of 2025, Oxford Lane remained active, participating in more than ten such transactions during the quarter.

Investors can anticipate the next earnings report around May 18, which may provide early indications of how this intensified secondary market focus is impacting financial results.