Business Context and Reporting Period
This Form 8-K was filed by Oxford Square Capital Corp. on June 22, 2018, reporting events that occurred on June 21, 2018. The filing details the entry into a material definitive agreement involving the Company's wholly-owned special purpose vehicle, Oxford Square Funding 2018, LLC ("OXSQ Funding").
Key Financial Metrics and Transaction Details
- Facility Amount: OXSQ Funding borrowed approximately $95,200,000 under a credit facility with Citibank, N.A.
- Interest Rate: Pricing is based on the London interbank offered rate (LIBOR) for a three-month interest period plus a spread of 2.25% per annum.
- Maturity Date: The facility matures on June 21, 2020.
- Collateral: The facility is secured by a pool of loans sold and contributed by Oxford Square Capital Corp. to OXSQ Funding.
- Use of Proceeds: Net proceeds were used to pay transaction fees and expenses and to pay the purchase price for the loans acquired from the Company.
- Roles: The Company acts as the collateral manager and retains a residual interest through its ownership of OXSQ Funding. The Bank of New York Mellon Trust Company serves as the collateral administrator.
Material Changes and Operational Impact
The primary material change is the creation of a direct financial obligation for OXSQ Funding. The Company sold and contributed a portfolio of loans to OXSQ Funding via a sale, contribution, and master participation agreement. No additional borrowings are permitted under this specific facility. The facility is subject to periodic repayment prior to maturity from collections on loan assets and mandatory payment requirements.
Outlook, Risks, and Contingencies
- Prepayment Terms: OXSQ Funding may elect to reduce the facility amount in whole or part at any time, subject to a prepayment fee and funding breakage fees if prepayments occur before the expiration of the relevant interest period.
- Covenants and Defaults: The facility includes customary covenants, reporting requirements, and events of default typical for credit facilities of this nature.
- Management Commentary: The filing does not provide forward-looking guidance or management commentary beyond the transaction mechanics.
Key Facts for Investor Verification
- Verify the specific composition and quality of the loan portfolio sold to OXSQ Funding as collateral.
- Confirm the impact of the 2.25% spread over LIBOR on the Company's overall cost of capital.
- Review the attached exhibits (10.1, 10.2, 10.3) for detailed covenants and default triggers.
- Assess the Company's retained residual interest in OXSQ Funding and its implications for earnings volatility.