Oxford Square Capital Corp. (NASDAQ: OXSQH)

Oxford Square Capital Corp. is a closed end non diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. The company was founded in July 2003 and completed its initial public offering in November 2003. It has also elected to be treated for U. S. federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code beginning with its 2003 taxable year. Oxford Square Capital Corp. seeks to maximize the total return of its investment portfolio. Its primary focus is on corporate debt securities and to a lesser extent on collateralized loan obligation structured finance investments that hold corporate debt. The firm may also allocate capital to publicly traded debt and equity securities. As a business development company it must invest at least seventy percent of its total assets in qualifying assets which include loans to private companies for purposes such as organic growth acquisitions recapitalizations and working capital.

Revenue is principally derived from interest income on the debt securities held in the portfolio. The firm also receives dividend income from equity positions and from any equity stakes in collateralized loan obligation vehicles. Capital gains from the sale of investments contribute to earnings when positions are disposed of at a profit. Additional income may arise from structuring fees arrangement fees and consulting fees related to the origination and management of investments. The company’s net investment income is used to calculate both the base advisory fee and the incentive fee payable to its investment adviser. The adviser collects a base fee calculated as a percentage of gross assets and an incentive fee based on pre incentive net income.

Oxford Square Capital Corp. competes in the business development company sector alongside other BDCs private equity funds hedge funds and traditional banks that extend credit to middle market enterprises. The company’s competitive advantage stems from its team’s deep expertise in credit analysis and its long established network for sourcing investment opportunities. Senior professionals have decades of experience in evaluating middle market businesses and in assessing the structural features of collateralized loan obligations. This expertise allows the firm to identify investments with attractive risk adjusted returns while managing credit risk effectively. The firm also emphasizes a disciplined investment process that includes thorough due diligence and ongoing monitoring of portfolio companies.

The company supplies capital to privately held businesses that generate cash flow and have been operating for at least one year. These borrowers operate across a variety of industries including business services software telecommunications industrials healthcare and manufacturing. In addition to direct loans the firm invests in structured finance vehicles such as collateralized loan obligations that are backed by pools of corporate loans. The portfolio is diversified across many issuers with the goal of limiting any single exposure to less than five percent of the total portfolio. By maintaining a broad base of customers the firm seeks to reduce concentration risk and to capture opportunities across different sectors.