Oxford Lane Capital Corp. (NASDAQ: OXLC) has announced its financial results for the third fiscal quarter ended December 31, 2025. The Fund, a closed-end management investment company specializing in the debt and equity tranches of collateralized loan obligations (CLOs), reported a decline in net asset value (NAV) and investment income as portfolio valuation pressures persisted.
Quarterly Financial Performance and Valuation Trends
The Fund’s net asset value per share decreased to $15.51 as of December 31, 2025, a 19.2% reduction from the $19.19 reported at the end of the previous quarter. This decline was primarily driven by GAAP unrealized depreciation of $3.14 per share, a significant increase from the $0.71 per share depreciation recorded in the second fiscal quarter.
Key financial metrics for the quarter include:
- Core Net Investment Income: $1.12 per share, compared to $1.24 in the preceding quarter.
- GAAP Net Investment Income: $0.74 per share, down from $0.84 in the prior three-month period.
- Distributions Paid: $1.20 per share, a decrease from the $1.35 per share maintained in each of the four preceding quarters.
- Total Fair Value of Investments: $2.26 billion at quarter-end, a reduction from $2.60 billion as of September 30, 2025.
- GAAP Realized Losses: $0.07 per share, an improvement from the $0.19 per share loss reported in the second fiscal quarter.
All per-share figures reflect a 1-for-5 reverse stock split executed on September 5, 2025, which has been applied retroactively to all reported data.
Investment Portfolio Composition
As of December 31, 2025, Oxford Lane held 294 portfolio investments. The portfolio remains heavily concentrated in CLO equity, which comprised 99% of total fair value at quarter-end, with CLO debt accounting for the remaining 1%.
Investment activity moderated compared to previous periods:
- New Investments: $97.2 million, down from $145.2 million in the second quarter.
- Sales and Repayments: $85.5 million.
- Net Investment Activity: $11.7 million, following a net decrease of $28.3 million in the prior quarter.
The Fund’s capital structure remained stable, with total preferred stock and debt outstanding at $719 million, consistent with the previous two quarters.
Distribution Schedule and Cash Flow Analysis
The Fund continues to manage the timing of initial distributions from its CLO equity holdings. As of December 31, 2025, the original cost of CLO equity that had already made its initial distribution reached approximately $3.19 billion. An additional $263.1 million in CLO equity (at original cost) had not yet made an initial distribution.
For newly issued CLOs, the Fund noted it generally takes up to three quarters from issuance to receive initial payments. Management expects a significant portion of these non-distributing investments to begin making payments according to the following schedule:
- Expected by March 31, 2026: $177.8 million (at original cost).
- Expected by June 30, 2026: $48.2 million (at original cost).
- Expected by September 30, 2026: $37.1 million (at original cost).
Additionally, the Fund reported a decrease in cash flow diversions. Total cash diverted due to failures in overcollateralization (OC) or interest diversion tests reached $1.3 million for the quarter. This reflects an improvement from the $1.8 million and $2.5 million diverted in the second and first fiscal quarters of 2026, respectively.
Strategic and Sector Context
Oxford Lane utilizes Core Net Investment Income as a non-GAAP financial measure to identify performance trends and provide meaningful period-over-period comparisons. This metric includes adjustments for CLO equity intended to gauge the underlying quality of the Fund’s financial performance.
The Fund’s results are influenced by the broader CLO market, including the operating results of portfolio companies and the value of assets at the time of disposition. Oxford Lane noted that its future performance remains subject to various economic conditions and market risks, which may impact whether unrealized gains or losses are eventually realized. As of December 31, 2025, the Fund also held $31.6 million in warehouse investments at original cost. Distributions for these investments are typically paid at the time the warehouse investment is repaid.
