OFS Credit Company, Inc. (Nasdaq: OCCI) (“OFS Credit,” the “Company,” “we,” “us,” or “our”), an investment firm specializing in collateralized loan obligation (“CLO”) equity and debt securities, has released its financial results for the fiscal quarter ending January 31, 2025. The report outlines the Company’s performance over the past quarter, highlighting key financial metrics, operational activities, and strategic initiatives that shaped its results.
First Quarter 2025 Financial Highlights
- Net Investment Income (NII): OFS Credit recorded a net investment income of $5.2 million, translating to $0.23 per common share for the quarter ended January 31, 2025. This represents an increase from $4.5 million in NII reported in the previous quarter ending October 31, 2024. However, NII per common share showed a slight decrease of $0.01, attributed primarily to a reduction in the Company’s net interest spread.
- Core Net Investment Income (Core NII): Core NII for the first fiscal quarter stood at $7.5 million, or $0.34 per common share, a decline from the prior quarter’s Core NII of $10.7 million, or $0.57 per common share. The reduction in Core NII is mainly due to a drop in recurring waterfall payments from CLO equity investments, which fell to $10.9 million from $13.0 million in the preceding quarter. This decline was driven by fewer CLO issuers making their first post-closing payments.
- Net Asset Value (NAV): The NAV per common share as of January 31, 2025, was reported at $7.00, reflecting a $0.18 decrease from the NAV of $7.18 recorded on October 31, 2024. This drop was primarily due to the distributions of $0.345 per common share paid during the quarter, which exceeded the reported NII per share of $0.23.
- Investment Portfolio Yield: The interest income yield on the investment portfolio, calculated based on average amortized cost, stood at 14.68% for the fiscal quarter ended January 31, 2025.
- At-the-Market Offering: During the quarter, OFS Credit issued 2,591,668 shares of common stock through its At-the-Market (“ATM”) offering, generating net proceeds of $18.3 million after accounting for commissions, fees, and offering costs.
Recent Developments and Strategic Moves
- Cash Distributions: On January 16, 2025, the Company’s Board of Directors approved monthly cash distributions of $0.115 per common share for each of the three months ending April 30, 2025. This equates to an annualized distribution rate of approximately 19.3% based on the closing market price of $7.14 per common share on January 31, 2025.
Management Commentary
Bilal Rashid, Chief Executive Officer of OFS Credit, commented on the Company’s performance, stating, “We remain committed to deploying capital efficiently and expanding our investment portfolio with high-quality CLO opportunities. During the first quarter, we strategically allocated $48.8 million in new CLO investments that we believe will generate attractive yields for our shareholders. Additionally, we successfully raised $18.3 million through our At-the-Market offering, further strengthening our position and extending our portfolio’s weighted-average remaining reinvestment period to 3.3 years.”
Detailed Financial Performance
Interest Income
For the fiscal quarter ended January 31, 2025, interest income increased by $1.5 million, reaching $10.1 million, compared to $8.6 million in the prior quarter. The rise in interest income was largely driven by net investment deployment of $26.2 million, consisting of new purchases offset by sales and repayments. Additionally, non-recurring income from a loan accumulation facility and CLO debt investment repayments contributed to this increase.
Expense Analysis
Total expenses for the quarter climbed by $0.8 million to $4.9 million. The increase in expenses was primarily due to a $0.4 million rise in interest expense related to a full quarter of interest payments on the Company’s 7.875% Series F Term Preferred Stock. Additionally, base management and incentive fees saw an aggregate net increase of $0.2 million.
Investment Activity & Market Outlook
During the first quarter, OFS Credit actively pursued opportunities to enhance its investment portfolio. The Company deployed approximately $48.8 million into new CLO investments, which are expected to contribute to long-term earnings stability and attractive risk-adjusted returns.
Despite some fluctuations in the CLO market, OFS Credit remains optimistic about its investment strategy, focusing on opportunities that align with its risk appetite and return objectives. The management team continues to monitor market conditions, emphasizing disciplined capital allocation and portfolio diversification to navigate potential economic challenges and interest rate fluctuations.
Shareholder Value & Capital Management
OFS Credit remains committed to delivering value to its shareholders through disciplined capital management and a robust dividend policy. The Company’s decision to issue common stock through its ATM offering underscores its proactive approach to funding new investment opportunities while maintaining financial stability.
The announced monthly distributions reflect the Company’s confidence in its earnings power and ability to generate consistent income for investors. By maintaining a strong capital position and strategically deploying resources, OFS Credit aims to enhance shareholder returns over the long term.
