OXLCO Oxford Lane Capital Corporation

 Filed pursuant to Rule 424(b)(3)
File No. 333-236574

 

PROSPECTUS SUPPLEMENT (To Prospectus dated June 1, 2020, as supplemented by the Prospectus Supplement dated June 4, 2020, the Prospectus Supplement dated August 7, 2020, the Prospectus Supplement dated November 6, 2020, the Prospectus Supplement dated February 5, 2021, and the Prospectus Supplement dated August 11, 2021)

November 4, 2021

  

Oxford Lane Capital Corp.

$500,000,000
Common Stock

 

This prospectus supplement contains information which amends, supplements and modifies certain information contained in the prospectus dated June 1, 2020 (the “Base Prospectus”) as supplemented by the prospectus supplement dated June 4, 2020 (the “June 2020 Prospectus Supplement”), the prospectus supplement dated August 7, 2020 (the “August 2020 Prospectus Supplement”), the prospectus supplement dated November 6, 2020 (the “November 2020 Prospectus Supplement”), the prospectus supplement dated February 5, 2021 (the “February 2021 Prospectus Supplement”) and the prospectus supplement dated August 11, 2021 (the “August 2021 Prospectus Supplement” and, together with the June 2020 Prospectus Supplement, the August 2020 Prospectus Supplement, the November 2020 Prospectus Supplement, the February 2021 Prospectus Supplement, this prospectus supplement and the Base Prospectus, the “Prospectus”), which relate to the sale of shares of common stock of Oxford Lane Capital Corp. in an “at-the-market” offering pursuant to an equity distribution agreement dated June 4, 2020, with Ladenburg Thalmann & Co. Inc. Oxford Lane Capital Corp.’s (the “Company”) investment adviser, Oxford Lane Management, LLC (the “Adviser”), has agreed to pay to Ladenburg Thalmann & Co. Inc., if necessary, a supplemental payment per share that will reflect the difference between the public offering price per share and the net proceeds per share received by the Company in this offering such that the net proceeds per share received by the Company (before expenses) are not below the Company’s then current net asset value per share.

 

You should carefully read the entire Prospectus before investing in our common stock. You should also review the information set forth under the “Risk Factors” section beginning on page 22 of the Base Prospectus and under the “Supplementary Risk Factors” sections in certain prospectus supplements thereto, as well as in our subsequent filings with the Securities and Exchange Commission (the “SEC”) that are incorporated by reference into the Prospectus, before investing.

 

The terms “Oxford Lane,” the “Company,” “we,” “us” and “our” generally refer to Oxford Lane Capital Corp.

 

PRIOR SALES PURSUANT TO THE “AT THE MARKET” OFFERING

 

From June 4, 2020 to November 3, 2021, we sold a total of 35,454,245 shares of common stock pursuant to the “at-the-market” offering. The total amount of capital raised as a result of these sales of common stock was approximately $221.1 million and net proceeds were approximately $218.1 million, after deducting the sales agent’s commissions and offering expenses.

 

 

OCTOBER 2021 FINANCIAL UPDATE

 

On November 3, 2021, we announced the following net asset value (“NAV”) estimate as of October 31, 2021.

 

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Management’s unaudited estimate of the range of the NAV per share of our common stock as of October 31, 2021 is between $7.11 and $7.21. This estimate is not a comprehensive statement of our financial condition or results for the month ended October 31, 2021. This estimate did not undergo the Company’s typical quarter-end financial closing procedures and was not approved by the Company’s board of directors. We advise you that our NAV per share for the quarter ending December 31, 2021 may differ materially from this estimate, which is given only as of October 31, 2021.

 

·

As of October 31, 2021, the Company had approximately 117.9 million shares of common stock issued and outstanding.

 

The fair value of the Company’s portfolio investments may be materially impacted after October 31, 2021 by circumstances and events that are not yet known. To the extent the Company’s portfolio investments are impacted by the effects of the COVID-19 pandemic, or by other factors, the Company may experience a material impact on its future net investment income, the fair value of its portfolio investments, its financial condition and the financial condition of its portfolio investments.

 

The preliminary financial data included in this prospectus supplement has been prepared by, and is the responsibility of, Oxford Lane Capital Corp.'s management.  PricewaterhouseCoopers LLP has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to the preliminary financial data.  Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.

 

SECOND QUARTER FINANCIAL HIGHLIGHTS

 

·

On October 28, 2021, our Board of Directors declared the following distributions on our common stock, representing an increase of 11% from our previous monthly distribution rate of $0.0675 per share:

 

Month Ending	Record Date	Payment Date	Amount Per Share
January 31, 2022	January 17, 2022	January 31, 2022	$0.075
February 28, 2022	February 14, 2022	February 28, 2022	$0.075
March 31, 2022	March 17, 2022	March 31, 2022	$0.075

  

·

NAV per share as of September 30, 2021 stood at $6.97, compared with a NAV per share on June 30, 2021 of $6.56.

 

·

Net investment income (“NII”), calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), was approximately $26.8 million, or $0.24 per share, for the quarter ended September 30, 2021.

 

·

Our core net investment income (“Core NII”) was approximately $41.0 million, or $0.36 per share, for the quarter ended September 30, 2021.

 

o

Core NII represents NII adjusted for additional applicable cash distributions received, or entitled to be received (if any, in either case), on our collateralized loan obligation (“CLO”) equity investments. See additional information under “Supplemental Information Regarding Core Net Investment Income” below.

 

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We emphasize that our taxable income may materially differ from our GAAP NII and/or our Core NII, and that neither GAAP NII nor Core NII should be relied upon as indicators of our taxable income.

 

·

Total investment income for the quarter ended September 30, 2021 amounted to approximately $45.2 million, which represented an increase of approximately $3.5 million from the quarter ended June 30, 2021.

 

 

o

For the quarter ended September 30, 2021 we recorded investment income from our portfolio as follows:

 

§

$43.6 million from our CLO equity investments, and

 

§

$1.6 million from our CLO debt investments and other income.

 

·

Our total expenses for the quarter ended September 30, 2021 were approximately $18.4 million, compared with total expenses of approximately $16.4 million for the quarter ended June 30, 2021.

 

·

As of September 30, 2021, the following metrics applied (note that none of these metrics represented a total return to shareholders):

 

o

The weighted average yield of our CLO debt investments at current cost was 13.3%, compared with 13.6% as of June 30, 2021.

 

o

The weighted average effective yield of our CLO equity investments at current cost was 16.3%, unchanged from 16.3% as of June 30, 2021.

 

o

The weighted average cash distribution yield of our CLO equity investments at current cost was 27.7%, unchanged from 27.7% as of June 30, 2021.

 

·

For the quarter ended September 30, 2021, we recorded a net increase in net assets resulting from operations of approximately $65.3 million, or $0.58 per share, comprised of:

 

o

NII of approximately $26.8 million;

 

o

Net realized gains of approximately $5.8 million; and

 

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Net unrealized appreciation of approximately $32.7 million.

 

·

During the quarter ended September 30, 2021, we made additional investments of approximately $322.8 million, and received approximately $89.7 million from sales and repayments of our CLO investments.

 

·

For the quarter ended September 30, 2021, we issued a total of approximately 8.7 million shares of common stock pursuant to an “at-the-market” offering. After deducting the sales agent’s commissions and offering expenses, this resulted in net proceeds of approximately $62.0 million. As of September 30, 2021, we had approximately 117.6 million shares of common stock outstanding.

 

·

On August 17, 2021, we completed an underwritten public offering of 2,400,000 shares of our newly designated 6.00% Series 2029 Term Preferred Stock at a public offering price of $25 per share, raising approximately $58.1 million in net proceeds. On August 24, 2021, an additional 286,900 shares were issued pursuant to an exercise of the over-allotment option granted to the underwriters, resulting in additional net proceeds of approximately $6.9 million.

 

 

·

On October 28, 2021, our Board of Directors declared the required monthly dividends on our 6.75% Series 2024 Term Preferred Shares (“Series 2024 Term Preferred Shares”), 6.25% Series 2027 Term Preferred Shares (“Series 2027 Term Preferred Shares”), and 6.00% Series 2029 Term Preferred Shares (“Series 2029 Term Preferred Shares”) (each, a “Share”) as follows:

 

Preferred Shares Type		Per Share Dividend Amount Declared				Record Dates		Payment Dates
Series 2024		$	0.14062500			December 17, 2021, January 17, 2022,  February 14, 2022		December 31, 2021, January 31, 2022, February 28, 2022
Series 2027		$	0.13020833			December 17, 2021, January 17, 2022,  February 14, 2022		December 31, 2021, January 31, 2022, February 28, 2022
Series 2029		$	0.12500000			December 17, 2021, January 17, 2022,  February 14, 2022		December 31, 2021, January 31, 2022, February 28, 2022

  

In accordance with their terms, each of the Series 2024 Term Preferred Shares, Series 2027 Term Preferred Shares and Series 2029 Term Preferred Shares will pay a monthly dividend at a fixed rate of 6.75%, 6.25% and 6.00%, respectively, of the $25.00 per share liquidation preference, or $1.6875, $1.5625 and $1.5000 per share per year, respectively. This fixed annual dividend rate is subject to adjustment under certain circumstances, but will not, in any case, be lower than 6.75%, 6.25% and 6.00% per year, respectively, for each of the Series 2024 Term Preferred Shares, Series 2027 Term Preferred Shares and Series 2029 Term Preferred Shares.

 

Supplemental Information Regarding Core Net Investment Income 

 

We provide information relating to Core NII (a non-GAAP measure) on a supplemental basis. This measure is not provided as a substitute for GAAP NII, but in addition to it. Our non-GAAP measures may differ from similar measures by other companies, even in the event of similar terms being utilized to identify such measures. Core NII represents GAAP NII adjusted for additional applicable cash distributions received, or entitled to be received (if any, in either case), on our CLO equity investments. The Company’s management uses this information in its internal analysis of results and believes that this information may be informative in gauging the quality of the Company’s financial performance, identifying trends in its results and providing meaningful period-to-period comparisons.

 

Income from investments in the “equity” class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method; this is based on an effective yield to the expected redemption utilizing estimated cash flows, at current cost, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The result is an effective yield for the investment in which the respective investment’s cost basis is adjusted quarterly based on the difference between the actual cash received, or distributions entitled to be received, and the effective yield calculation. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by the Company during the period (referred to below as “CLO equity adjustments”). 

 

Furthermore, in order for the Company to continue qualifying as a regulated investment company for tax purposes, we are required, among other things, to distribute at least 90% of our investment company taxable income annually. Therefore, Core NII may provide a better indication of our estimated taxable income for a reporting period than GAAP NII; we can offer no assurance that will be the case, however, as the ultimate tax character of our earnings cannot be determined until after tax returns are prepared at the close of a fiscal year. We note that this non-GAAP measure may not serve as a useful indicator of taxable earnings, particularly during periods of market disruption and volatility, and, as such, our taxable income may differ materially from our Core NII.

 

 

The following table provides a reconciliation of GAAP NII to Core NII for the three months ended September 30, 2021:

  

		Three Months Ended
		September 30, 2021
						Per Share
			Amount			Amount
GAAP Net investment income		$	26,792,827			$	0.236
CLO equity adjustments		$	14,241,804			$	0.126
Core Net investment income		$	41,034,631			$	0.362

 

INCORPORATION BY REFERENCE

 

We incorporate by reference into this prospectus supplement our semi-annual report on Form N-CSR for the six months ended September 30, 2021 (filed with the SEC on October 29, 2021). Any statement contained in such semi-annual report on Form N-CSR shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement modifies or supersedes such statement in such semi-annual report on Form N-CSR.