Oxford Square NAV Dips to $1.95 Amidst CLO Concentration, Regulatory Asset Breach

TL;DR

**OXSQG's NAV is sinking and they're failing a key regulatory asset test, signaling trouble ahead for this CLO-heavy portfolio.**

AI Summary

Oxford Square Capital Corp. (OXSQG) reported total assets of $314,739,807 as of September 30, 2025, an increase from $299,730,974 at December 31, 2024. Net assets, however, decreased to $158,955,146 from $160,665,480 over the same period, leading to a decline in Net Asset Value (NAV) per common share from $2.30 to $1.95. The company's investment portfolio is heavily weighted towards Senior Secured Notes ($142,013,431 fair value, 89.3% of net assets) and Collateralized Loan Obligation (CLO) Equity Investments ($113,185,062 fair value, 71.2% of net assets). A significant risk highlighted is that qualifying assets represented only 64.3% of total assets as of September 30, 2025, falling below the 70% threshold required by Section 55(a) of the 1940 Act for acquiring additional non-qualifying assets. The company also holds substantial unrealized depreciation of $144,704,693 on its investments for U.S. federal income tax purposes. New debt issuances include 7.75% Unsecured Notes with a fair value of $71,984,170, while 6.25% Unsecured Notes were retired.

Why It Matters

This 10-Q reveals Oxford Square Capital Corp.'s declining NAV per share, a critical metric for investors, dropping from $2.30 to $1.95. The company's significant exposure to CLO equity investments, representing 71.2% of net assets, coupled with a breach of the 70% qualifying asset threshold under the 1940 Act, signals heightened risk and potential limitations on future investment strategies. This could impact OXSQG's ability to compete effectively by restricting its investment universe, potentially affecting future returns and dividend sustainability for investors. Employees and customers might see indirect impacts through reduced capital flexibility for the company.

Risk Assessment

Risk Level: high — The risk level is high due to two specific factors: a significant decline in Net Asset Value (NAV) per common share from $2.30 to $1.95, and the company's qualifying assets representing only 64.3% of total assets as of September 30, 2025, which is below the 70% threshold mandated by Section 55(a) of the 1940 Act. This regulatory non-compliance restricts the acquisition of additional non-qualifying assets, limiting future investment flexibility.

Analyst Insight

Investors should exercise extreme caution and consider reducing exposure to OXSQG. The declining NAV and the breach of the 1940 Act's qualifying asset threshold indicate fundamental challenges and potential regulatory hurdles that could further depress share value and limit growth opportunities.

Financial Highlights

total Assets

$314.7M

total Debt

$151.4M

cash Position

$50.8M

Key Numbers

• $314.7M — Total Assets (Increased from $299.7M at Dec 31, 2024)
• $158.9M — Total Net Assets (Decreased from $160.7M at Dec 31, 2024)
• $1.95 — NAV per Common Share (Decreased from $2.30 at Dec 31, 2024)
• 64.3% — Qualifying Assets Percentage (Below the 70% threshold required by the 1940 Act)
• $144.7M — Net Unrealized Depreciation (For U.S. federal income tax purposes on investments)
• 89.3% — Senior Secured Notes as % of Net Assets (Primary investment category)
• 71.2% — CLO Equity Investments as % of Net Assets (Significant investment category)
• 81,669,408 — Common Shares Outstanding (As of November 5, 2025)
• $71.9M — 7.75% Unsecured Notes (New debt issuance)
• $44.4M — 6.25% Unsecured Notes (Retired debt)

Key Players & Entities

• Oxford Square Capital Corp. (company) — registrant
• NASDAQ Global Select Market LLC (regulator) — exchange where securities are registered
• Securities and Exchange Commission (regulator) — filing oversight
• $314,739,807 (dollar_amount) — total assets as of September 30, 2025
• $158,955,146 (dollar_amount) — total net assets as of September 30, 2025
• $1.95 (dollar_amount) — Net asset value per common share as of September 30, 2025
• $144,704,693 (dollar_amount) — net unrealized depreciation for U.S. federal income tax purposes
• 81,669,408 (dollar_amount) — shares of common stock outstanding as of November 5, 2025
• Section 55(a) of the Investment Company Act of 1940 (regulator) — regulatory threshold for qualifying assets
• Dodge Data & Analytics, LLC (company) — investment in senior secured notes

FAQ

Risk Factors

• Failure to Meet 1940 Act Qualifying Asset Threshold [high — regulatory]: As of September 30, 2025, qualifying assets represented only 64.3% of total assets, falling below the 70% threshold required by Section 55(a) of the 1940 Act. This limits the company's ability to acquire additional non-qualifying assets and could impact future investment strategies and growth.
• Significant Unrealized Depreciation [high — financial]: The company holds substantial unrealized depreciation of $144,704,693 on its investments for U.S. federal income tax purposes. This indicates a significant decline in the market value of its holdings relative to their tax basis, potentially impacting future tax liabilities and realized gains.
• Declining Net Asset Value and NAV Per Share [high — financial]: Net assets decreased to $158,955,146 from $160,665,480 between December 31, 2024, and September 30, 2025. Concurrently, NAV per common share declined from $2.30 to $1.95, reflecting a reduction in shareholder value.
• Concentrated Investment Portfolio [medium — financial]: The investment portfolio is heavily concentrated in Senior Secured Notes (89.3% of net assets) and CLO Equity Investments (71.2% of net assets). This concentration exposes the company to significant risk if these specific asset classes experience adverse market movements.
• Increased Debt Load [medium — financial]: The company issued new 7.75% Unsecured Notes totaling $71,984,170, increasing its overall debt obligations. While 6.25% Unsecured Notes were retired, the net effect is a higher interest burden and leverage.

Industry Context

Oxford Square Capital Corp. operates within the specialized finance sector, focusing on credit-related investments. The industry is characterized by complex financial instruments like CLOs and secured notes, often requiring deep expertise. Companies in this space are sensitive to interest rate fluctuations, credit market conditions, and regulatory changes, particularly the Investment Company Act of 1940.

Regulatory Implications

OXSQG's current asset composition poses a regulatory risk due to falling below the 70% qualifying asset threshold under the 1940 Act. Failure to rectify this could restrict its ability to acquire new assets and may attract further scrutiny from regulators, potentially impacting its business model.

What Investors Should Do

1. Monitor the company's progress in increasing its 'qualifying assets' percentage to meet the 1940 Act threshold, as failure to do so limits future investment flexibility.
2. Analyze the impact of the significant unrealized depreciation ($144.7M) on future tax liabilities and potential realized losses.
3. Evaluate the risk associated with the concentrated portfolio, particularly the heavy weighting in Senior Secured Notes and CLO Equity, given the recent decline in NAV per share.
4. Assess the sustainability of the company's dividend policy in light of declining net assets and NAV per share.

Key Dates

• 2025-09-30: Quarterly Financial Reporting — Reported total assets of $314.7M, net assets of $158.9M, and NAV per share of $1.95. Highlighted qualifying assets at 64.3% of total assets, below the 70% 1940 Act threshold.
• 2025-12-31: Previous Year-End Reporting — Reported total assets of $299.7M, net assets of $160.7M, and NAV per share of $2.30.

Glossary

Senior Secured Notes

Debt instruments that are backed by specific collateral, giving the noteholders a priority claim on those assets in case of default. (Represents the largest portion (89.3%) of OXSQG's net assets, making its performance critical to the company's financial health.)

CLO Equity Investments

Investments in the equity tranche of Collateralized Loan Obligations, which are typically the most subordinate and therefore riskiest part of a CLO structure, offering potentially higher returns. (A significant investment category (71.2% of net assets) for OXSQG, contributing to its concentrated risk profile.)

1940 Act

The Investment Company Act of 1940, a U.S. federal law that regulates the organization of companies, including mutual funds, that engage in investing, reinvesting, and trading in securities, and whose primary purpose is to provide investors with a defined set of regulatory protections. (OXSQG's compliance with Section 55(a) of the Act, specifically the 70% qualifying asset threshold, is crucial for its operational flexibility and regulatory standing.)

NAV per Common Share

Net Asset Value per share, calculated by dividing the total net assets of a company by the number of outstanding common shares. It represents the theoretical value of each share. (A key metric for investors to assess the value of their investment. OXSQG's NAV per share has declined from $2.30 to $1.95.)

Unrealized Depreciation

The decrease in the market value of an asset that has not yet been sold. It represents a paper loss until the asset is sold. (OXSQG has significant unrealized depreciation ($144.7M) for tax purposes, indicating potential future tax implications upon sale of these assets.)

Year-Over-Year Comparison

Compared to the filing dated December 31, 2024, Oxford Square Capital Corp. has seen a notable increase in total assets, rising from $299.7M to $314.7M as of September 30, 2025. However, this growth is overshadowed by a decrease in net assets from $160.7M to $158.9M and a significant drop in NAV per common share from $2.30 to $1.95. A key new risk identified is the company's failure to meet the 70% qualifying asset threshold under the 1940 Act, a concern not present in the prior filing.

Key Financial Figures

• $0.01 — ich registered Common stock, par value $0.01 per share OXSQ NASDAQ Global Select
• $35.6 million — 5, the portfolio includes approximately $35.6 million of principal amount of debt investments
• $3,314,007 — for U.S. federal income tax purposes is $3,314,007; aggregate gross unrealized depreciatio
• $148,018,700 — for U.S. federal income tax purposes is $148,018,700. Net unrealized depreciation is $144,70
• $144,704,693 b — 018,700. Net unrealized depreciation is $144,704,693 based upon an estimated tax cost basis of
• $405,175,278 — sed upon an estimated tax cost basis of $405,175,278 as of September 30, 2025. (9) Cost re
• $4.9 million — of these investments was approximately $4.9 million. (18) The CLO subordinated notes and
• $4,887,500 — or secured notes. The Company exchanged $4,887,500 of principal in the former first lien s
• $1,098,901 — senior secured notes for approximately $1,098,901 principal of the first lien first out s
• $3,055,474 — senior secured notes and approximately $3,055,474 principal of the first lien second out
• $15,000,000 — or secured notes. The Company exchanged $15,000,000 of principal in the former second lien
• $5,239,634 — ich the Company exchanged approximately $5,239,634 of principal in the first lien senior s
• $934,808 — senior secured notes for approximately $934,808 of principal in new first lien senior s
• $12,000,000 — ization, by which the Company exchanged $12,000,000 of principal in the second lien senior
• $68,000 — Company estimates will be approximately $68,000. This amount is included in "Other asse

Filing Documents

• ea0262531-01_10q.htm (10-Q) — 8559KB
• ea0262531-01_ex311.htm (EX-31.1) — 17KB
• ea0262531-01_ex312.htm (EX-31.2) — 17KB
• ea0262531-01_ex321.htm (EX-32.1) — 9KB
• ea0262531-01_ex322.htm (EX-32.2) — 9KB
• 0001213900-25-107316.txt ( ) — 21987KB
• oxsq-20250930.xsd (EX-101.SCH) — 66KB
• oxsq-20250930_cal.xml (EX-101.CAL) — 37KB
• oxsq-20250930_def.xml (EX-101.DEF) — 273KB
• oxsq-20250930_lab.xml (EX-101.LAB) — 492KB
• oxsq-20250930_pre.xml (EX-101.PRE) — 283KB
• ea0262531-01_10q_htm.xml (XML) — 5129KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 1 Item 1.

Financial Statements

Financial Statements 1 1 Schedule of Investments as of September 30, 2025 (Unaudited) 2 Schedule of Investments as of December 31, 2024 9 17 18 19

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) 20 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 46 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 63 Item 4.

Controls and Procedures

Controls and Procedures 63

OTHER INFORMATION

PART II. OTHER INFORMATION 65 Item 1.

Legal Proceedings

Legal Proceedings 65 Item 1A.

Risk Factors

Risk Factors 65 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 65 Item 3. Defaults Upon Senior Securities 65 Item 4. Mine Safety Disclosures 65 Item 5. Other Information 65 Item 6. Exhibits 66

SIGNATURES

SIGNATURES 67 i Table of Contents

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS OXFORD SQUARE CAPITAL CORP. September 30, 2025 December 31, 2024 (Unaudited) ASSETS Non-affiliated/non-control investments (cost: $ 383,122,574 and $ 358,356,496 , respectively) $ 260,470,585 $ 256,238,759 Affiliated investments (cost: $ - and $ 16,836,822 , respectively) — 4,614,100 Cash equivalents 50,264,000 34,433,088 Cash 524,037 493,380 Interest and distributions receivable 2,228,680 2,724,049 Other assets 1,252,505 1,227,598 Total assets $ 314,739,807 $ 299,730,974 LIABILITIES Notes payable – 5.50% Unsecured Notes, net of deferred issuance costs of $ 1,093,253 and $ 1,381,619 , respectively 79,406,747 79,118,381 Notes payable – 7.75% Unsecured Notes, net of deferred issuance costs of $ 2,765,830 and $ 0 , respectively 71,984,170 — Notes payable – 6.25% Unsecured Notes, net of deferred issuance costs of $ 0 and $ 309,812 , respectively — 44,480,938 Accrued expenses 1,652,328 1,018,261 Accrued interest payable 1,606,886 1,204,487 Base Fee and Net Investment Income Incentive Fee payable to affiliate 1,053,566 1,215,964 Distributions payable 80,964 — Securities purchased, not settled — 12,027,463 Total liabilities 155,784,661 139,065,494 COMMITMENTS AND CONTINGENCIES (Note 13) NET ASSETS Common stock, $ 0.01 par value, 100,000,000 shares authorized; 81,669,408 and 69,758,938 shares issued and outstanding, respectively 816,694 697,590 Capital in excess of par value 515,339,576 487,943,476 Total distributable earnings/(accumulated losses) ( 357,201,124 ) ( 327,975,586 ) Total net assets 158,955,146 160,665,480 Total liabilities and net assets $ 314,739,807 $ 299,730,974 Net asset value per common share $ 1.95 $ 2.30 The accompanying notes are an integral part of these financial statements. 1 Table of Contents OXFORD SQUARE CAPITAL CORP. SCHEDULE OF INVESTMENTS

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