Oxford Lane Capital Corp. (NASDAQ:OXLC) Q3 2018 Earnings Conference Call - Final Transcript
Feb 11, 2019 • 09:00 am ET
ETFs. According to Leveraged Commentary & Data also known as LCD, a service provided by S&P Global from the middle of November to the end of 2018, US loan mutual funds and ETFs experienced approximately $16 billion of outflows. We believe that fundamentals across the US loan market continue to be stable. The US loans default rate remains low. According to LCD, the default rate on the S&P/LSTA Leveraged Loan Index is 1.42% by principal amount. This is the lowest the default rate has been over the past 17 months and remains below its historical average of 2.96% according to LCD.
Additionally, the loan maturity wall continues to be termed out and there are limited near-term maturities as a percentage of the overall S&P/LSTA Leveraged Loan Index. According to LCD, there are $33 billion of loans coming due before year 2020. In 2021, there are approximately $70 billion of loans scheduled to be repaid. This aggregate amount represents less than 10% of the overall size of the S&P Leveraged Loan Index according to LCD.
Third, corporate interest coverage ratios continue to be strong. According to LCD, interest coverage on a weighted average basis across the constituents of S&P/LSTA Leveraged Loan Index was 4.6 times in the third quarter of 2018. According to analysis by Nomura Securities, a 100 basis point rise in three-month LIBOR would cut interest coverage for typical uninsurer (ph) by approximately 0.5 turn, all else healthy pool.
Lastly, the current corporate loan market continues to be stable. The share of performing loans in the S&P/LSTA Leveraged Loan Index priced below $0.80 on the dollar was 2.68% in December 2018 according to LCD. And to January 2019, the trigger has decreased to 2.48% with the increase in US loan prices. This remains well below the post crisis high of 12.05% in February of 2016.
We believe that this is an attractive environment for CLO equity. At the present time according to LCD, only approximately 1% of S&P/LSTA Leveraged Loan Index trades at a price of par or above. This environment may allow CLO managers to buy performing loans in secondary markets at prices at discounts to par, which may build CLO asset value and spread over time, ultimately accruing to the benefit of CLO equity holders.
In general, we seek to position our CLO portfolio with longer reinvestment period equity positions to allow our CLO managers to take advantage of market environments like we have today.
With that, I will turn the call back over to Jonathan Cohen.
Jonathan H. Cohen
Thanks very much, Deep. Additional information about Oxford Lane's third fiscal quarter performance has been posted to our website at www.oxfordlanecapital.com.
And with that, operator, we're happy to open the call for any questions.