Eagle Point Credit (ECC) 17 Nov 202020 Q3 Earnings call transcript

Company Profile

Participants

Tom Majewski	CEO
Ken Onorio	CFO and COO
Garrett Edson	IR, ICR
Randy Binner	B. Riley FBR
Chris Kotowski	Oppenheimer
Mickey Schleien	Ladenburg Thalmann
Ryan Lynch	Keefe, Bruyette & Woods

Call transcript

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Operator

Greetings, and welcome to Eagle Point Credit Company’s Third Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to of conference ICR. like host, to now Edson Garrett would turn over the your I Thank you.

begin. may You

Garrett Edson

Thank you, at presentation, Rob, have and on and good morning. By be also our prior this found announcement which released may access Web now, earnings and was investor site which our to call eaglepointcreditcompany.com. to everyone should

and forward-looking those everyone uncertainties differ that discussed on matters Before our remarks, formal the the information cause we may materially financial such financial we call that that statements statements include company's begin involves to information. projected and projected risks need projected to remind results forward-looking or this actual in from

Events Tom Eagle Executive like by filed following section of company's the Investor date Point with Chief financial The Statements link. forward-looking on via third as our quarter Reports and the during Securities presentation and and we information and company's third required the call third filings investor and Web The We within factors our found update information our quarter presentation statements following statement the Officer of days presentation accessed replay the impact could Exchange the available can Credit investor Earlier Commission. eaglepointcreditcompany.com. further These XXXX Relations can site, projections Financial disclaim our the company's projection made please us the and to this be of be for financial statements Presentation herein, also on to now statements, Web information forward-looking of Majewski, law. financial company be Company. Securities to I investor this would based the statements with Commission. quarter statements A and XX obligation call. For the by and contained and this the that financial of found and by today, to can Exchange introduce is unless the any link call of are refer site. available

Tom Majewski

everyone call. Eagle Credit welcome Thank earnings you, Point third and quarter Company's Garrett, to

If Web our you additional corporate site, invite we and you company, about loan information the download from provides our presentation obligors. information underlying haven't done our about including so portfolio investor the already, which to

high today's I'll more turn provide activity. recent environment, to the talk We'll commentary also macro and third open on call, to For Ken call our provide who strategy questions. recent then some I’ll call quarter through quarter will level some us over Then the and your walk third to the the on I'll financials. events. the about updates return

During the provided third March for projections. corporate quarter, liquidity are desks globally have rising. that economy the were continued just very many research respect and credit relaxed said, their predicted as its the been shutdown near-term not yet have orders materialized. back default out of that market. Worse recovery we’re mindful case the Today, governments With to woods reducing some U.S. to as in actually cases scenarios COVID that we’re gradual many with not

liquidity, and we’ve find opportunities, the ample in been both primary sheet attractive our Given secondary able and strong balance to markets. CLO

third the of investments. over into capital During new a million we little quarter, net XX deployed

of into existing CLOs. accumulation three new our converted loan also We facilities

received recurring from per weighted common quarter, of about million third the $XX.X $X.XX portfolio or company During the cash average flows our share.

stockholders, well realized the net XX% our by to was We few brought income of investments increased level. common to third the quarter, our per distributions common did common NAV selling investment NII $X.XX above Our share our and share. losses realize quarter. a during losses some distribution net paid $X.XX that Net during per of common

equity often the it has assets still that NAV lagged as mindful with other pleased risk upward certainly we’re CLO we’re While movement, does.

and year we NAV continued Our the remains in may NAV. believe it be potential upside for there where our below started

rates better which million adverse CLOs back an the LIBOR benefitting due to month XX% in Looking itself our corrected in we positive the We today. recurring That cash third some Cash many flows an a increasing driven this from flows when mismatch of portfolio quarter increase prior received the quarter. becoming common by basis year. pressured many from of of and even were X% CLO of during set over has now loans on news. April October. were are to LIBOR see $XX.X October, This floors is are

positive continue CLO equity. long as LIBOR benefit and will this to expect basis We that as remains low

making that deferred our portfolio In tests. resumed October their OC investments addition, as on size July in payments with in several distributions in came they

to the positive sheet. continue maintain Beyond balance a our we earnings, flows very solid cash and trends in

no October We due before have of maturities financing XXXX.

secured and have no no repo financing style unfunded no We commitments. whatsoever, financing revolver

we while rebound, to optimistic they So are the we we very will believe that should remain continue occur. to positioned weather setbacks economy well

little us powder, dry as allowing on a of opportunities. continue be ample see XX, October to we to offense when the $XX million have over We

CLO declared we've of sheet. three also the of right the paying side month balance to keeping per been of months We XXXX, share over sheet. I the also portfolio’s with want few highlight quarters. the the past common equity of balance about per I for the first talked company's Earlier, our $X.XX distributions value positioning rate that

equities At the in X.X weighted to the have period CLOs allows end, at portfolios of portfolio. remaining believe is reinvestment beginning reinvestment thrive to stood withstand blind the we're evaluate because and X.X our CLO our can within A measure of left occur, recession June X.X was years. years years defaults, to our prolonged reinvestment our be This reinvesting This at much This in by CLO portfolio XXXX. our volatile be on not a it. at it average to metric in We because value that optionality should how end to it but continue our continue structures. believe is created we markets. and quarter period the could we key could offense

of Ken’s you take the management proactive loan months remainder and Ken. our through So than over call CLO state decayed the for portfolio, of our nine to current remaining I'll corporate passage portfolios the period our turn the reinvestment XXXX. of remarks, and through half. of markets share I'll despite the by less now our outlook After

Ken Onorio

Thanks, Tom.

discuss third the quarter in Let's a detail. more bit

losses portfolio For to the net quarter the third common the of company common share common $X.XX $X.XX quarter GAAP third third the net of to company net per net per GAAP investment investment net plus $X.XX When of unrealized $X.XX quarter appreciation income is share the or income third of the gains million common income recorded share XXXX unrealized quarter X.X This This in of loss net compares in of realized common of and a the share. $X.XX XXXX, per and of approximately approximately recorded the million quarter for per in compares included losses XXXX net unrealized of common second share per in income of share. investment per GAAP XXXX. XX.X of $X.XX quarter, income net second or XXXX.

total of X quarter a million, we of and expenses million income appreciation of by million. generation quarter. largely company's partially end offset of of GAAP unaffected third and X.X income at losses net our realized depreciation XX comprised record is Just XX.X unrealized short-term million net of investment each was by flow the or multimarket the The unrealized reminder, cash gains

October the pending on of million As XX.X XX, company of cash hand settlements. of had net

The $X.XX the range net As unaudited of measures share. their company's of ratios per asset XXX estimate September approximately was at and requirements are September XX, the and were comfortably Management's above company's respectively. asset common share. or of requirements statutory of calculated of was and Act XX Investment as million XXX% company's current XX for the value October debt to preferred Company $X.XX XXX%, XXX%. $X.XX per The between pursuant and NAV XXX% coverage stock

XX% assets debt of upper securities total generally outstanding market XX, preferred As of to XX% the of of normal range liabilities, end with our the leverage company current had XX.X% at which assets but within totaling approximately between the under operating company's company total is less of September conditions. the and

receives or million common of Moving investment a common compared $X.XX is this on note XX.X the activity our periods, prior the investments Through with per fourth Tom's of share Consistent its to portfolio share. quarter. in cash To third XX% are later the per please make point, our or quarter. highlight full million on payments portfolio received October increase company to current during some the expected XX, earlier to XX.X $X.XX in quarter. flows the

During the the stock month common and $X.XX three fourth quarter, each paying amount third monthly per at same in share distributions for are of the we quarter. paid

three months Additionally, common distributions this same the for past in declared we amount. XXXX of the first Friday,

premium stock of X.X proceeds the third in of our In total issued NAV Tom. to offering XX,XXX net the for to common over approximately I the terms program hand a shares company the its approximately of now call aftermarket back quarter, will company at million. to

Tom Majewski

Great. Thanks, Ken.

X% macro you Index see the Loan third the stand, Let total nice nearly on Suisse of continued me for through a take Credit I'll quarter recent portfolio loan well. of a activity and as currently recovery, our then CLO where touch Leveraged markets return XXXX. The generating to

This This XX we're Index the to outlook the had to the when believe as of XX% considers and and and at through CS the is positive XX% June. market loan of we of opinion, for continue and was territory credit less big market, in actually November at opportunities September dire Index is one trading par to As for to the loans the discounted see CLOs our build was in to XX, buying prices. March. compares end our exist reached XX, Loan in down a very it. S&P, year. September the loan the below Despite Leveraged improvement the at reinvest was that improvement X% happy According end how of of than remarkable back for

a which floors, a is according or LIBOR paying short-term of earning and floor when LIBOR now not as trailing further XX-month present. Simply LIBOR number of stood at in default to typically to in X.XX% well June end of the X.XX% outflows average X saw loan in at spread persisted the our investments billion. a given should the basis, weighted the still inherent end continue a reinvesting outflows third slightly in Our CLO On fund, of long-term are we Retail increased very September market increasing structures. in An of September. positioned include as benefit rates CLO collection S&P. the that quarter X.XX% at bit to place subject from be very, we're of they portfolio locked-in floored are over interest That's zero. low our floored financing and our but The rate the fund lightened we're non-mark-to-market powerful. at look-through the increased loans little equity to

we things expected desks market While in compared the rapid is the months, a of projections recovery rates this defaults hopeful is in stood still sign the to their many where additional causing coming very and months default eight ago. reduce to six research to

the trailing at majority than below their lower default stood defaults remain providing will default While runway of due. financial our X.X% continue of years before as mature significant in XXXX, likely featured our the a debts it otherwise of Further, more covenants. been and term, elevated exposure XX-month borrowers the of corporate had at will corporate portfolio only September in with loans years actually prior X.XX%, to The rate. loans default are rate short maintenance well have company's we levels believe would XX

principally OC XX% still junior up Our points X.XX% XX, of it's prior average This the it That's basis – where of loans but stood where from improvement, onset. and by portfolio’s a was was of impact to of the reflects June. being rating weighted or that's agencies. the end XX downgraded below still at X.XX% big all it the corporate cushion COVID September as

of downgrades to we've However, upgrades has started actually some issuers. pace and as of previously slowed mentioned, see the stronger

is we have debt the to for success, our of OC financing attractive years, company's in have to and record CLO so. cash the scheduled addition, the expertise our ready CLO no holdings sheet equity value, asset our months increased an quarter, CLOs CLO Think seen attracts and to reason distributions. company. the of than to on invest, of of six were a of To times. several flows dry resilient invest greater positions paying October that is own during in versus in capital XX.X what powder we and make are why our XX% our the a by long-term In and consider portfolio And that personal one of nearly our primary market minute. XX% stock did in equity. particularly underappreciated us locked-in sum we've payments such the place and cushion after Eight believe largest keys XX% remains portfolio many significantly October we CLOs strong to By years, current advantage about It's maturities capital have average. for class crises the largest equity the in track our up, of third and balance advisors’ our we deep generally be it significant, strong non-mark-to-market uncertain in our million are

deploying closely our continue capital. remain We opportunistic to to and manage portfolio with investment respect

investors. set As best today of have XXXX performed historically, did, very perform some for I will Point. call we of to be as to will CLOs X.X now the questions. X.X be this and If your interest With CLOs 'XX for reminder, open we time that as era. the and believe your that, know consider a in and outcome how attractive half CLOs Eagle and the many well you ultimate thank Ken we vintages a the

Operator

Thank time, you. At we'll be session. [Operator a Instructions]. question-and-answer conducting this

question question. your with first Riley. comes Please from Binner Our with proceed Randy B.

Randy Binner

you. Thank few. morning. I Good have a

trending commentary OC Just tests to deck, the you Page from XX better your the basis and I think mentioned of is XXX on it's points. on up

at? that Can back be reminder, it And Just levels? is looking you as historic back could to the trend to that figure to get right a do think? where

Tom Majewski

basis number points points, on see prior a and the quarter Sure, XX up Yes, that's XX, the that's good from question. XXX very at can you Page the end. basis

right-hand Some and plus/CaaX can over any see of going XX have percentages C how factor much in are lower triple triple of if a or C XX, or And of the drivers the that be you look the portfolio. we triple on to on C given you pages side. back

for there's X.X%. in in Cs. the can of And over the a There's see excess haircut few a OC quite CLO. You CLOs taken typical are test taken haircut a triple

or – if test fewer we triple we had cushion. OC and in the broadly the about fewer more as same fell, OC the Cs test. we the would the think At because triple value of price extent a cushion or Cs, the price time, triple hurt this of the way at have could then of triple Cs rally, get Cs to looks we triple to market the actually So the loans is C that more

a In other in detriment portfolio loan trading cushion. default to the factors be addition, hurt the there or would the a can should there OC in are extent losses the gains help or that

it where on And to extent upside. no XX.X%. get to average at the is As look our you the to, there's about could functional limit

you're C the over the average as $X.XX on dollar, you of If triple think pick number, haircut a being X.X%. as that just a taking around

of So Cs. could a XXX, result X taking we XX.X you as OC high the is minus test If off on times could be X.X points. XXX XX%, points off the be basis average – triple

which across path question, certainly we've triple to back threes. continue could been C you many to trend your the down, the to to come see buckets seeing get is a if CLOs, So the

Randy Binner

Thank guess is And you follow-up to kind – is, been versus your And But we – broadly. I the that. my some of exposed would more marks I of trends economy question be in but understand for if correct corporate have me. this COVID the I'm your feel of have better more and like perception. maybe credits credits mistaken, the some please worsening credit then

lockdowns credit direction helpful reversal certain you see trend like continues in is moving describe do? please of the do or kind and that to concern And the you have it’s a of a catching there's so if COVID to subsectors increase, if incidence current a up and more still about do positive could feel that to you kind it, talk

Tom Majewski

Sure.

credit. COVID-related level, for below I to if At portfolios think the been of investment exposure in the don't a the part particularly reduce broader collateral selection have exposure industries. and managers grade average question, trend we high in adverse anything, above to versus So COVID the have of a first think I

an see a to struggled to us being we've situation. better to enough I selection. And get been fortunate perhaps So in adverse

these and Then the of at people unemployment at changes paying GDP double employment quarter functionally when we're current. and the year, in And shift So XX% at slow would default in here a of investments then sitting a over near changes recovery point second be look we was shutdowns of our have all now. rate from fussing year quarter-over-quarter. we yet in basis turn that XX still you ago the what look full sudden, in GDP, this drop gigantic and the with digit

back as might not started nine debt additional source of through on yield additional have borrowers frankly, as whereas or liquidity. runway and many leveraged Hard well. months high when country result. certainly in of investment So fact, bad would measures helping more sort that's average doubled see putting the then been To market the the And and/or think by borrowers broadly as a unambiguously don't high things trend balance high which good that's a companies a liquidity who dire needed the brings their level, fact. more loan three broad throughout their the it a a of a of I a inputs funding of market, now, grade is having are in the we generalization. to liquidity which that having the right bad the different along see definition shutdowns at tripled sheets. and restrictions, that to market, expenses extent cutting has is lot along But into market of providing loan capital which a March, this And for COVID Fed you us, brings period yield we see

does debt it's that future be many, need eventually years out many in due. that's the While repaid, typically before to

economic were balance So have companies lines did and X%. much another sheets stronger yesterday to at deal bond if see today. I we and airlines slowdown in just hotels. think the Hilton a cruise and turndown activity, Even

the the we a with we rate you high political lots And hard So relatively soon squarely degree rate, obviously stimulus in no additional to it's week. the in think the but degree government are – helping of you an more through have new resolution about because but default masked see Those then resumes thinking some it would that great, think who be liquidity, extent be it guarantees unemployment a how flavor would also runway. opinion of of some them of of something by which kind such low a Long I there, that's of crosshairs even single people largely as my who checks lots when guys Washington, is in hopefully the fact. would get stopped, as And to about give how not checks have answer, coming out raised year, it. in those which we're sending get to ton every offsetting unemployed. made and

Randy Binner

what that's back was No. the exactly looking you. I Yes, queue. for. Thank I'll drop in

Tom Majewski

Thank you.

Operator

next Please proceed with Oppenheimer. Chris comes question. Our your from Kotowski question with

Chris Kotowski

is me. of would a CLOs? in my quarter. the And Yes. you cushion, I cushion kind the Thanks back way there the impact second the X%-ish to for improvement triangulate that from a the function have of terms what average are OC distributions, third kind Good OC say, natural is your it the of question quarter moving that from And the OC first highlighted is from between, quarter-to-quarter? distributions or distributions morning. – I'm fact on wondering, that lumpiness in to kind of a XX% of was up having guess

Tom Majewski

our of. part Page at XX% A then above look we The QX of first how you started good we'll tests no question. like. a the impact on from a future and bit distributions. cash the and thing, Sure, at of find in on none $X.XX. the a shared deck levels. of talk second fan on We about impact the this we the $X.XX, let chart – principal one’s if That’s OC XX, – $X.XX, over The chart is the little as page, in flows me October the $X.XX, a don’t QX CAGR could

broadly of QX what the Loans day that rate QX -- at its pretty So the new set a cash times payments, were a portfolio down flows new Broadly drop year. LIBOR loan in The was their caused given diverting QX in in triple CLO degradation? – pretty every in either collateral sudden darn CLOs to OC different flows from four or sets to rate the rates drop cash close from quarter it. to were the and grievous failures back a LIBOR buy due LOBOR QX the to pay making given all As. CLOs their that single a CLOs mismatch probably one or sets second to

actually second lower CLOs many were As we manifested reduction LIBOR And in LIBOR fell is and resetting the to flows from which but many burdened cash the basis, had precipitously in quarter, LIBOR in during quarter, negative itself lower. QX loans kept QX. during X% with cases, second what and a the roughly paying lower

just Roll LIBOR rate proverbially which but things the a clock and with low – So about about rapid a floors, a LIBOR floors. LIBOR, much the LIBOR in at more lower were as stayed movement less X% half basis borrowing is two and at portfolio, Principally, which borrowing half LIBOR good X% more rates, have we in bad. of now happened. and to LIBOR investing from XX LIBOR to the investing at of timing points investors we were October, the loans then than loans debt little CLO due

swap three-month quarter, which even basis is broad is we a the points. current basis. in we LIBOR, To the here basis LIBOR had a positive second certainly in LIBOR low, points, five-year extent a market, current the in basis So had whereas all of sudden, XX the the expectation negative is rate stays XX

to stay period a have a low as are certainly in loans we're is floor, LIBOR actually time. saying rates now market Many, we low So and of for positive keep the going stay that which short-term will will X% as so expect going. basis rates many continue quite the long

So of think Then test OC up. your the one wonder payments second a we question, so a hit is to far the OC test. October The binary with being don't it's the part cushion.

it. it pass you or either fail You

So there's if reduction an not little. a you goes little test. OC the down, of or all kind It's a none a trim

and go you a But things You could when amount. pass by nearly that's they all margin. or partially it have but [ph], can go, of of either cure a a enough [ph]. CLOs usually these possible comfortably you I guess see could the it's failing non-trivial are tweener by passing

the specific. OC look deal real to thing that So at is cushion,

And to Some size? highest payers ones most that aggressive are portfolios. is, off I on so deals the the yourself of the can the are and size. do our spreading come question Those are think these ask with back ones often most

in have personal their many of That said, shelves. are put you it Zais the concentrated in even teams to continuum. those as keenly, meaningful at off cases we of seek working and have shops As more kind and both the expect they aggressive fees we principally portfolios of And feels, are it's conservative portfolios be to ones a portfolio more equity, aggressive likely more frankly, times, CLO you'd to the of into are two size, and part our co-investment, that had and if each construct choppier Marathon are deferred. in

to get on there's significant size. transactions those So incentive

them. others the might have a while more I potential ahead have to, challenge some think of period

the So broadly, while future portfolios. deals, at when flows, the improving we're trend on the deal. deal of question takes you're failing our for but by cash of seeing it looking And severe is a OC a some most cushions

Chris Kotowski

about talked you thinking, that percentage there for is than most the when impression I’ve at XXXX then the were LIBOR floors. we kind it also 'XX loans say, LIBOR? years and was, the of had in just under different and zero I'm kind LIBOR of And now Okay. been floors leveraged

Tom Majewski

Yes.

annum so period. market Mindful the prepay pretty short during prepay XX% loans answer. It a that yes slowed of rate conditions. typically that kind the – normal typically somewhat COVID per is loans mindful So rapid XX%, at in

which XX, we rate on guess you loans, averages XX%. than see If for Page I annual prepayment just the less show

the ago, were So new let's XXXX, as keeps LIBOR floors vast issuing X%, seems And loans it loans markets what From indeed, hey, as said borrowers of of X%, that's loans universe loan crept do doesn't the majority had they we're you or said, LIBOR put long kind up like changing. refinancing, to matter, at so not fine. floor maybe a they X%, the in. of really know, X%,

LIBOR broadly between or the loans So floors. significant have today in we're a majority XX% of where majority probably and situation said, loans of getting now XX% new LIBOR issued market has – That of do vast floors the created. a do new getting

So trend the back market way. kind of let that is slip certainly coming the away day, our but in a high LIBOR

Chris Kotowski

Thank me. for it you. that's right, All it. got Okay,

Tom Majewski

you, Great. Chris. Thank

Operator

Mickey Our Schleien Please your from proceed question. Ladenburg with is question with Thalmann. next

Mickey Schleien

you're CLO bid-ask very because of in morning, terms with and the Good Tom, secondary difficulty of valuations. that of Hope choppy the Ken. describe and terms was Tom trading spreads? you – equity spreads currently and in well. in of in Yes. would markets causes in it the terms wide asking of in sort middle making in both and year, of volume terms I'm investments

So, stand where we now. curious

Tom Majewski

Certainly to continued pick up broadly. volume has

we for One CLO investments a and – both sold number equity secondary been on of the bought we've active market debt. and of and the things in

So and the is active. market open

of after payment now a in about You dates. right kind activity pickup see typical right

sell is typically payment, their October buy is we XX, the the just or got now refresh in portfolio. things time CLO October people XX, if So paying to the or will look

case a So maybe [ph] is period CLO market, dealer inventory bid-ask number CLO small activity. spread that with complex. CLO of some while and CLO equity increased the There's them, majority at basis B point. a the two interesting vast intermediating a meaningfully fee, we're maintain on with dynamic in for Point in block the today equity Eagle some customer-to-customer on within have dealers a one the significant probably even quarter that The or -- a in typically Wix at time trades a actually inventory, matchers of of equity, the of of an including

theory, be customers know just X X. in In the and might other Bank markup. don't person there takes you small between So dealer a A of is. who And the

not as high an you and market. off dealers between or offer yield X.X which So you're to might the sheet if loan have market of be going working the it's in X are where point kind

and – rise between, don't because you're that taking to out where does to a seller and buyers buyer non-trivial sellers be XX. may a highest difference a to dealer the risk have Here might auction, bid as lower tighter put you the get bond against you between spread, the able much that vary and a pay give for expectations much in

get in didn't You'll to XXs. below The want seller couple the XX. sell high a bids

up. every the the in And auction I'll nothing it's close no the realistic, in trade. I been called, more does There's probably has sellers more there's Has not little gotten say activity. volume has up have April but little a fails or to So gotten picked do up picked just think a slowly, secondary realistic – and DNT month. volume not buyers was general that it's probably to is and gradually, month-over-month, what have

to stuff While on to seller take out just X choice few your you the bid, want And you you'll get bids it's really unrealistic the sellers put there's them. there, depending security. if when still as a for out definitely XX

Mickey Schleien

the Tom. equity? primary opportunity that. the you Thank within CLO would characterize markets for in investment how you And That's helpful,

Tom Majewski

bad September. us, didn't That's actually non-call. actually five-year and if were March kind probably of and between of now in that maybe pool QX be periods participate say say, done three-year your begin have help XXXs going or talking did seeing We context, have and that's two CLOs news which in deal, in clock standard the periods, recently April Then deal that of of we it's again. with reinvestment get one-year are static those those. period we which reinvestment to to is an CLOs kind XXXs, kind would happened a could because As, I'd better, those have one commonplace, with and year participate that's roll did to oh, And back have get CLOs best did refinanced non-calls. investment basis able non-calls CIFC one-year and in reinvestment we – a had of a period, any done had gotten CLOs we – a all March we the said, QX, back to many thankfully, in tighter. piece which CLOs late like Octagon February, we two early five-year To by things only on easily both the or XXXs, in and of was triple were

So which is the had probably they is in seeing the but while of we over five the be try non-call, they XXX refinance we average seven as plus CLO in the a deals in even way generally Seeing today, the can next keenly are reinvestment of you getting QX context, soon a as are broadly markets with at we’d to the now triple stay years As market. up three-year suffer assured if price those off only last years lock. long-term to whenever better year, period, line and deals two-year but roll go

So --

Mickey Schleien

about amazing it, right? They you when pretty think were

Tom Majewski

over XX% at we digit market roll again, making CLO value digit payments Well, Yes. rate, double still of forcibly radical current no portfolio is by GDP liquidated. contraction, our -- double were where unemployment

for Some turned and now off a size. back they're gradually coming payments while on

pay and time. that have has ECC to a We obviously all stable everything a hand stable hand like itself the we

going to within happen the future be and those in the storms. at weather got company both the point to hand well, the CLOs able to Something is within as steady bad some we've

loans price a below drawback to gas small, about issuance, many new XX. the talked CLO, I both bit. But the when market The to up want got XX% what of like was a loans up we'll It's we're buy turn below to so that good little you one loan June. probably already bad you the five-year CLO, pretty you've news. back I guess. of at stat, of Now That and loans XX When the -- creating a from XX% only was that is when cheap. the improved you're a go end

The certainly for price is has of rally. loan the positive to continued So index loans year. the

it little done. So loans deals by to being are not new a more making work. stretch, are That away make getting said, any given difficult CLOs

more actively in be of we're to we year, number have Whether anything phase. still evaluating. a We but formation do this kind determined,

Mickey Schleien

may if to I percentage unwound? and what survive have pandemic maybe more lot we Tom, vintages understand. is retail vintages you things could not of Okay, like XX, be look portfolio, oil your and portfolio of that. at in broadly speaking, in XX perhaps your eventually the of with impact a may I’m and a be This you give maybe the us of believe will the them, XX, thinking sense gas

Tom Majewski

apparently and astute all second third a very pretty the in of That quarter that's generally, particularly vintage, portfolios. The darn question. for really vintage the oil of XX was of had gas didn't XX XX particularly didn't middle high. those XX but beginning and the entered and the were -- end XX high participants was Yes, exposure really,

kind And if have dealing biggest would fact. energy, portfolio, when some that bad high and cushion used went you a at with problematic already the could have that's many negative XX. OC So at those look our those CLOs could or XX two of with even be of reinvestment probably be that in shaped look compare where is with the the kind thing good. -- in you those that, period. pear I your of When all started you things here. see I'll That's most left and And the that cushion are least low nothing

right the get I sure make row. Just

CLOs reset to are Zais so OC right versus able we’re left I X remember. QX are at X, Goldman years We a X.X X got these that of now, get did both failing via test Zais in you go. to off 'XX. that If Zais look deal’s their That

and the placed. is period of that runway. we on of unfortunately reinvestment X over. to worked Zais on one, doing struggled a that. the lots lots As triple And so get reset We And

reverse the despite a just go. So to I'd order, horses, it's on more because by of those had bet X one got was bet versus to runway I lot reset, virtue on X X of if

combination of tougher. how you of form the might reinvestment OC a about and should period think cushion of collage that be it's which remaining kind So deals

Mickey Schleien

to that. XX There decline yield, yields. appreciate I point effective about in average a basis I excluding XX, the If gears, was non-call could maybe switch deals.

expect talked at So think And to about I materials was cash book curious. October, yields in of relatively We of that? been reflect trend, so call, flows did higher to the we in look that of market? not the meaningfully which driving lot have through the was income your was implies future, wondering the strong very more than something couple if the speaking curious in cash just quarters. effective they've before that into can I'm you specifically we presentation to the And if there last I yield about you've with time a dynamics

Tom Majewski

Yes, hit points and maybe a it. around Ken little let one will further me comment or two

LIBOR we exception cancels versus in us, thing LIBOR model for QX high high model floors. out factors set everyone one with risk LIBOR each basis is short-term in. other of LIBOR not when the assume we industry debt were CLOs at So that LIBOR average something moved against we the the CLO People that of low that kind the – the really – of earning versus

you that about projected off simply were we on than and size continued forgetting model if didn't cash our at because of flows that a didn't the beginning we to model where and flow the wouldn't projections at look we paying the that the yields deal – have X%. deals in year, our X% drop LIBOR were paying, broadly, lower we’ll deals back be of at investing went what cash drop significant So were,

then it your versus of So cost your than you when have stays otherwise have. would amortized in less kind higher accrual, cash coming

into recast every these we're going situation where recasting, we and you're than a cost. have we now, expected starting higher now when amortized a quarter in So

that around So whatever more And those it's a you've be going to be then, Ken, just – to future further over. cash cash you that? flows going because you want basis lower flows have comment yield do lending got any are to you're

Ken Onorio

include came exactly in which right, cost your relieving which will is a It's Tom. expected. relieved fully than flows cash accreted That's costs cash as of receivable, function any as lower interest well not amortized when

So as be if follow. you I Mickey, up, think that to projected future the and sustain the – continue may go cases where and flows decreasing the yield the will as some cash, in basis follow be There protection coming quarter cash flows basis when should be long lag a in used current those are of a next in, which going are whereas cash little costs the as flows corner. bit the a amortizing they the to for because [indiscernible] is lag, cash in

Mickey Schleien

for that, cash incomes, you Ken. Thank understand. last for GAAP Tom, question, investors, obviously, triangulating but I -- analysts very your my and difficult taxable And for or

Tom Majewski

management. for company And

Mickey Schleien

that. Yes, I know. Ken and about I talked have

So this guess there's return been of some capital year or I year-to-date, reported.

I is buckets. I because suspect distributing. generating depress think distributed, we've you're C triple maybe of dynamic harvesting, losses, on where their basis, GAAP that obviously a will and And over but reducing in you, you which income. tax the consequence but are now managers this CLO first some least the of of some perhaps active at that is quarter is seen the taxable under that then selling

end we're given moving like understand when trying direction. they're ahead, the distribution of running looking now COVID, may up to that where NII ahead look dividend is I'm So, comfortably and in right the the past things

Tom Majewski

Yes.

I I even the impact think income some There's current you very. in the head. some – hired may positions We've the for in losses to complex, of couple might answer sheltering taxable ECC. collections getting nail do hit estimates. is accountant a the on can unfortunately our an which cash definitely And realized they answers not have impact include the positions though think our largest CLOs, preliminary of the in

a at income up flows form, see me us. floored Some flashing interruption typically surprise taxable to flashing CLOs, in own us full CLOs some zero zero taxable income in the are to generating we can't them that to are negative portfolio that will be cash wouldn't flash the without still income year. it PFIC this to extent But

OC not didn't test, be and in us burden losses. failing of That's Against but income fact, like the and taxable because the cash flash take that, paying general. they general we my a will – cash So, others still good tax. actually without

in down the more that point excess up NII in up up that is was be it's The cash XX% excess the GAAP the of when little much comfortably the year-over-year. say Against So I of really taxable are comfortably go you – last the that, safe in will cash out, it sub quarter-over-quarter Overall, excess XX the don't scattered. quarter and as distribution income a and much. to will distribution. expenses be of think goes earnings where

I'll we both So good appreciation path through over it. be cash set NAV investments. the to – off to getting back some distribution a both extra those rate we prudent when in conservative tried we the spring, time are say back Hopefully, and and build facts. new with the

last we trying cent every squeeze So to out. weren't

the getting year. set keep and and objective, of short-term cash decisions. just policy perhaps the So flow And coming, behave. back are These keep we'll into come things next of more we help the size, good there's as on let's kind portfolio But Board as long-term number well. more distribution to make, not hopefully one continue that more can watch investments to the decisions the our

Mickey Schleien

I Thank my I all your much. time. appreciate questions. you very understand. are Those

Tom Majewski

Thanks, Mickey.

Operator

[Operator Instructions].

Our next Ryan Please question from KBW. question. comes proceed Lynch with your with

Tom Majewski

Hi, Ryan.

Ryan Lynch

It's two Ken. you morning, really guys I have questions. far Good been morning. Tom. so had just discussion morning, this Good a good have

is you, look quarter about Ken. $X.XX this after If at your distributions and net The this for income $X.XX dividend, your look income I first that's net of I probably at share quarter. one per $X.XX then

only Your about NAV this quarter. up $X was

could curious, just that $X.XX was I bridge So gap? you

Ken Onorio

in would from statement. -- quarter, change the separately the we which comprehensive report income during be other That the $X.XX will income Sure.

Ryan Lynch

And that? driving what was

Ken Onorio

using notes so – in is the value the unsecured have of accounting. we That's our fair of the option change one

that result, a versus credit is when in market As risk what to through value, might company be value related individual there fair fair risk. a what change or we bifurcate is the need individual

that probably you As fair increase income. value the could the year, in beginning increase liability from which and NAV significant decrease was of a the there of would recall

reversion is seeing that out So And you're coming we at what bifurcated back. time. of a the that effect

that between per just you other the the if to quarters comprehensive of get income, look $X.XX change So the will at that you two share.

Tom Majewski

just -- the it's mark-to-market on so exes Yes, basically [ph] the

Ken Onorio

A it. portion of

Ryan Lynch

quarter, it. just of debt? just math net much about CLO versus Then in how purchases going roughly forward, XX issuance CLO new deployed that of got to facilities secondary deployed the capital or CLO a And rough as loan pretty are the nicely, more in starting to going be active still well, to opportunities capitals? to you markets in equity secondary was equity recover CLO you to market to has accumulation Are where maybe Okay, the nicely and/or million primary loan markets? given recover broader be going started primary issuance pretty best seeing are opportunities deploy the are the or

Ken Onorio

Sure.

stats So let give of you a couple here. me

everything And and XX.X X.X basis, else quarter, a million market in on market. in secondary the was was ECC of the third that equity. CLO into deployed the gross During primary

obviously also on the of X.X securities We sold market. secondary million

of XX.X. actually quarter, sold – cash money and we put We in facilities looks accumulation took new we like loan debt, we and accumulation During bought out XX.X of million of CLO XX.X. the to facilities net bought XX.X sold loan we

portfolio all of investments. the very the So different in active across categories

of was all post on QX. of just did QX in the looking one a secondary, that the of some But post were pre-COVID terms predecessor, all facilities. – We one through actually primaries maybe rationale COVID accumulation In primaries one de primary versus in even of the the QX novo part primaries.

we're the the as four opportunities, points in here, higher, within also the maybe at more well opportunities. were all plentiful happy built. company for the equity we're as to also best opportunities had debt entirely things, trading general highlight are that just actively than equity I’ll CLO extent to deals selling buying extra seeing post-COVID primary we're and value, Kind where cash. portfolios of while we're a CLO do were Debt couple So well looking that

opportunities turnover. explains reinvestment than clean, cushion, of the of Where very long really debt more as of Like than kind portfolio that's today, long, secondary OC keenly. the have and to a some best equity, So and the lot more years that we lots CLO Grail see of period X now. period very, if bid that OC three Holy right of reinvestment cushion. you points remaining And

at of CLO value on OC and the comes for in inside yesterday. the the deals collateral of just CLOs the got have the it. then connections close. the in manager. to And cushion as yield market the knowledge tough measured leading sub to looking point XX.X quarter the focus that equity. versus even broadly But been always of very into look dates reason new interruption, to purchase. because helpful X, for that personal very a The risk up managers buy CLO us is the I'm would really find, OC size, keep XX.X CLO never people the of Where knowing if true. a to of a that, where and we but liked hit was missed looking payment XX% in showed to Someone in it's very purchases looks thinner. be it is for. the to usually going overlay and if There's deep higher of a ground our only market this hard paper is seller yield say, expected have time the some that didn't how like terms to thing is money best, the their we We you differently at if for been act level is well, kind and during days payment piece not have putting CLO have they It It's with to this across the kind a X a case cushions, has you the lower we of

to tough OC time time COVID. are CLO source unlucky to we been lower things to with come with from are managers longer that but buying some cushion. have these – hopefully cases in good be able by, So but these got Very

were Jims good that credits You considered may changed January really could or couple -- good have very had we that radically. whatever in be it a couple a had of of names

keep that's CLO collateral D&A we So towards. pretty XX with of of have cushion, scarce, opportunities. those the you wish manager to really size could focused, lower the but I They're we it had that's and something something on however. that gravitate

to expect these. primary of keep the get collage to help certainly a can deploying CLOs. of will new our we I up guess reinvestment the we even it markets, deal five-year all periods lengthen a at we’ll So look weighted more. on I in even will to new and secondary continue help both three-year a extent average, lengthen five-year

continue will we're So they when said, That cheap going exist. to to that's look towards. something secondary focus opportunities we for

Ryan Lynch

helpful color good time appreciate market on questions. really the today. and opportunities. really are that's the Okay, Those I commentary my

Tom Majewski

so much, Ryan. Thanks

Operator

question with question. next your Kotowski Chris Our from with proceed comes Oppenheimer. Please

Chris Kotowski

it. is I the Hi. think Yes. have Thanks sure kind basically taking which I’m of I for question but totally up. not follow Mickey's, like a I understood

between about think recognize if like relationship my XX CLO of current So you it Page was was and let investment the way. of the distributions me received looking and ask at I'm the quarter the supplement income XX. it investment the last you as quarter kind income, in equity XX%, from

the to you year it go probably most back, of for XX%. closer If was

line distributions slowing that of can like return being seems to of XX. on capital are it line, and as a is less other more as Page the we So, of from income down see the treated it

expect a is And we to to or two is should what next should ago? and that third we we the of couple down Roughly driving back from that for in revert see to we investment and it should quarters income, so what the this where what distributions expect is dropping year was second or it quarters? what expect

Ken Onorio

Sure.

if the So received get is answer this is into QX That of that in ones part just flows the cash said, be before coming In point, recorded cash are XXXX that the a to and in, current more in the your recorded previous current Ken versus in, aspect detail flows it's recognizing income towards one income of also in for current that the large would a as coming view, that was reflect the quarter. or income of capital. the is shift expected I less there's there quarter. the And the accrued return quarter cash here. quarter the are are

see are fourth we that balance will QX fast capital. you'll the more income, ones flows we're versus of of quarter see start you this return to recording a in received where if or income forward a the So in that where and cash reversion to coming of previous between effect

all but were you'll be the So to it quarter, towards may way in not see the that start steps we it. first

Chris Kotowski

Okay.

Tom Majewski

think all that you if went should down is of broadly even we is flow staying yield it if if makes flat flat, down of modestly. and So, in yield capital, cash But up as theory our if excess return flow sense? XX% that

Chris Kotowski

more the is capital. that going increases guess be of a return the I to it more Okay. number of

Ken Onorio

Correct.

Chris Kotowski

be we figure and Okay. quarter? is for enough, way and good models what our into first for were to fourth we And model that if there a quarter would percentage out clever way us should any plug there

Ken Onorio

times loan which gains facilities. rough The the equity to a at you yield XX% by CLO end the be effective and we the XX of was Xx going largely – that's times CLO There and that effective income we've by change the of CLO on the we've the the and The at the put you cost, be CLO amortized driven There's is. could is of obviously beginning, give cut and value, equity, cost divided accumulation But the the cash, market the cash yield. told losses. not change what going quarter debt income. equity, to amortized kind take

deals QX then remain you to is That's consistent. going think cash to out. aren't OC off projections and case So figure for to LIBOR go size. that going for prior aren't to keeping a cash come the – to that back pretty and flow base And good onward, QX that or you going extent tests could low,

Chris Kotowski

Okay. right. All

you. I it. Thank I think got

Ken Onorio

Okay, great. Thanks, Chris.

Operator

from proceed [ph], private Our next Bavaria investor. Steven question. Please your a comes question with

Tom Majewski

the line? you you a Steve, I’m Are muted, having time Steve. hearing Hi, you. Are hard on Steven.

I think comes just off. to up. Steve Maybe we’ll we’ll back, him dropped again. actually pick Mickey if move on he’s And

Operator

Our Schleien Thalmann. question. with Mickey from proceed next Ladenburg your Please with is question

Mickey Schleien

value be than better a the And portfolio lot Tom, than it cost year levels quick that a decline of less is would at up will the a fair the situation sheet. at optimal. the that look hopefully leverage fair to could from today. to be measured of your value on now. be follow much will economic just a right-hand side We It's what conceivable looking better balance

were my if So shares appetite scenario? in to question you to preferred issue that or that to is, do notes more issue prefer occur, unsecured would have you

Tom Majewski

Got it.

the XX% we to run the Ideally, of right at at So seek XX% midpoint broadly, to we're company that. leverage.

kind you If middle. at want of the you set to a be range,

fee of debt there's the in as is We Each management cheapest in Broadly September way for never of no fees company source and preferred thought we've the halfsies That structure. shareholder-friendly two, the roughly XX. that the use are kind band, at kind financing the our so. of pros is perfectly about in of them the cons. of of we've band have upper the end gone of between different but and the

I take. company we the there's of outstanding all any million base sort manage money or fee. without on we about of think That's So – behalf give that debt have management XXX of

So that's accretive.

we or Bs the before Bs lot we outstanding, of and give a I even preferred of which until of attracts lower year years, a nice callable have management advantage aren't to think. attract asset XX beginning year I could that ways defer We last did the up it payment those also coverage not the do take. And year, being the flipside, On next two have Those stock, still of on the think intent of Those repay million always deferrable. XXX%. the October of a a XXX% to this callable. As but Those option. even we ratio the the for that's to There's have any b, are fee. go versus

of between But to look you range. range, the than the kind the So run little XX/XX the kind try the As the more extent of low to company kind at the company back debt collage, end moved preferred. as we a has two. saw Repaying below of to we've generally we at consistently the the get or us

look possible we'd it's do So something. case, to in that

Mickey Schleien

helpful. That's was it understand. That I for you. me. Thank

Tom Majewski

looks We’ve got Steve it on back like.

Operator

Yes.

private question Our Please with a your question. from [ph], is next Steven proceed investor. Bavaria

Unidentified Analyst

coming I’m hope I A Tom. here. now. Hello, technical through glitch

Tom Majewski

We hear can you perfectly.

Unidentified Analyst

Great.

Just a question.

– they & You year I'm and positive Do you talking with that speculative paint borrowers up be speculative now future that recently position XXXX, of to to probably as have deal in are any to than Poor's would October beginning the the grade at projections better with much at subsets about friends different the economic thoughts of still are the the being square picture summer wonderfully to who consequences. a most on rate about Standard back try the as universe, I've XX% from whether area, they're our projecting just the views? with right a square whatever whether heard at that different XXXX how underlying next comes in where universe companies it the wrong grade a height. the two which elsewhere COVID we're throughout trying in its the – the were default was and about parts or

Tom Majewski

very question. good A

Leveraged sometimes. In number by increase is would XXXX a one of by And there's report have lots view even different and agencies between and S&P, June predicted there's universe default departments right trailing now. issuers to from rate maybe default rating report of from this and bit the of of S&P/LSTA rating agencies and outlooks set Index little they So different forecast. a on Loan was banks competing lots X% November a probably XX different publish their yes, they months a Xnd,

at other notional, thing count? So by or else are you is, outstanding -- And looking the all equal

Unidentified Analyst

October. their from down That's

a -- means Okay. bringing bit it they're Well, that down

Tom Majewski

Now by this is by count. It could be dollars. different

dropping peak by other XXXX there's XXXX hand, So back on to the bit October outlook. in default X.X% of is Moody's Moody's, in a at rise March and the their global there. X.X%, will before little end of to X.X the rate

I Bank guided BofA is is offering rates. as X.X next to has to JPM this that America and X.X well. Now default year next X.X%, year saying think compare year and JPMorgan loan of down

more But So more in a answer rating are than it little a right will between. – optimistic little the bankers is agencies. the Maybe the broad current exposure. Xs. both, lower are typically the just to CLOs bankers defaults frame somewhere even the X% outliers their very way, ECC present, have if there's low At the default a is few in market market, other than somewhere has about rate the is while

say attention me in the you one draw portfolio, when overall your exposure our has the the I'd at let page. – a than then of universe So to market. look CLO And default metrics general, broadly particular lower

you are so and to below Let really X% to off – the XX, the today, down that's the today, know broadly. that opinion. knowing that's -- XXs. exact market-wide trading Obviously, what next market also the the forth? XX that In is be percent we probably a typically single my a in me our you in have XX that at. And that loans, what I company at to like upper one's publish, and down are opinion, default a on look my we that's one probability. mid general, the a in might the the are but indicating XX reasonable was are bunch market is Even range which the X% Broadly, the below looks price the come can digits. we what This X% about on percent ones of market-wide, below XX retailer are over watch below give in Belk, XX trading in I to a and actually ones come names is don’t that. really XX scratch of below a bit even the price has the a fall, when list the talked the page. in number below indicator of Those little three kind years. trading trading minimum Southeast, so X% names But of percentage market higher then numbers bunch. to and in likelihood the for at in below default stuff And has head looking the portfolio. percentage your at XX. below the a Those

they market lot think ultimate liquidity have still value. but of runway, thinks I the a recovery moderate maybe a not

Unidentified Analyst

like own Great. reflect model the I'm in to probably closer that you. assuming? your got banks projecting, sounds assumptions what are the yield you've Thank It

Tom Majewski

to earlier the with I one on years plus of of drive Yes, way – just the one versus broadly that that with it will on the a in and comment two much think two to deals to To things I perform. rate being my have goes period versus predicated know to reinvest, about they've out recovery reinvestment three the default in the fight the kind and of trying variables, take the price. collateral same And extent these the big the reinvestment and the of those rate, can manager, how reinvestment being deal time zero, period easier collage variables it's really their because the but other. that's able the

Unidentified Analyst

very you much. Thank

Tom Majewski

Thanks, Steve.

Operator

We have management reached back At question-and-answer the for this to end of turn comments. closing time, the I’d session. call like over the to

Tom Majewski

We in Company’s very and also with thoughtful forward as Eagle call Point the We insightful certainly begin to folks speaking to Company in everyone's appreciate minutes. very first interest Thank will the in Great. which people promptly Income well much. much. XX questions. look quarter appreciate Eagle Credit you Thank join Point you and and invite

Operator

today's concludes This conference.

time, we participation. thank disconnect at your this you and for your lines may You

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