ECC - Earnings call transcript Q1 2024 | Eagle Point Credit Company Inc.

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Operator

Greetings, and welcome to the Eagle Point Credit Company First Quarter 2024 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Garrett Edson of ICR. Thank you, sir.

You may begin.

Garrett Edson

Thank you, and good morning. on and have was the on our materially call, begin such released may be should investor announcement and our company's the everyone actual eaglepointcreditcompany.com.As also which include to differ at presentation, this prior found formal now, remarks, access before earnings to financial forward-looking financial in or and projected projected which a By reminder, website cause matters we our to that that involve statements may those discussed from forward-looking projected information risks call statements, and information. uncertainties this results

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

Thomas Majewski

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

If website, download start invite already, done portfolio. the you from presentation to our provides you solid which information had our so XXXX. about to haven't a company and I additional The our investor company

quarters. is of of cash many each the NAV a of within bonds, modest of we drag the distributions of March underlying prior CLOs. since share $X.XX basis, is or believe first remains the for generated Our and you ups recurring With cash offering. loan per quarter received from preferred million, semiannual excess This quarter, some to interest of and typically and bonds a paid of higher flows nonrecurring forward.Let first from expenses received cash has company on flows shareholders. share. expect from were well, flows net quarter was We me $X.XX, flows improved which in We now downs company previously during that well during bit We continued the noted to gains on $X.XX quarter. of remember to share, cash led of flows we cash roughly of $XX.X portfolio XX that XXXX, do related performing through $X.XX a the April, common million CLO's pay cash cash the our and some the income the we quarter-to-quarter. fourth upside $XX.X sheet The excluding in positioned in by the balance first investment moving quarter X.X% we invested share our recurring the of investment in realized capital stock impacted take per portfolio per in our recurring received X portfolio well quarter. highlights our normalized.Indeed, in a first decrease in per year-end.During prepayments recurring as month

of our We investments deploying increase $XXX that earnings active during believe we million capital power new are portfolio. will quarter, into the in portfolio in very managing our net over the

a rotating held prices issued to have some coming of program This CLO of CLO continue opportunistically year increased capital portfolio NAV the we some for generate We that approximately our $X.XX As realized million plan helped our CLO BBs into months.Along last raise per premium, of X.X in at-the-market we purchased overall of during performance, BBs began over we equity with accretion shares and the our our back common over the quarter, we portfolio or gains. through our positions at share. the generating the continue X. some to selling

were issued the a of in quarter Series through of stock an through new raise to preferred a We also modest due additional also will of term issuance net preferred the in be which proceeds We amount pleased million the XXXX. stock, ATM. F $XX

of the our As on yield of the during the we've purchased CLO yield March new at XX, equity quarter bolster a effective XX.X%, portfolio's XX.X% compares to had average XXXX, should the CLO weighted yield average end effective which weighted XX.XX% effective and weighted year.The first the was help average equity this portfolio of prospectively.

weighted of end portfolio at equity average CLO yield based expected on XX%. at market stood quarter Additionally, our approximately value the

AB with financing have accretive company, estimate the our rate, remains after prior We between end to to longtime successfully of this net April September our of we declared per will Additionally, like had our time. number the per now subsequent monthly going of offering. highlight. and be started has as a $X.XX monthly maturities be to this AA share for April XXXX. significantly with we ECC additional far no fixed X% $X.XX This new Series our that for events aggregate our of non-traded of the proceeds and strategy common distribution convertible to Consistent supplemental to perpetual share. we an all over meaningful it XXXX.Earlier operating and all company Series company, that an the NAV distribution we of generate way month, financing $X.XX stock share, end quarter and distribution $X.XX month so preferred Along $X.XX share, launched variable per regular through for per of believe I'd

In fact, financing to majority primary the the stock the with perpetual first tightened during our we as spreads set no quarter. deploy continue capital investments efforts amount secondary maturity of of market did focus preferred a on well attractive quarter, some is dates.While investment debt during the our we as few into even

via a And first we our indeed, secondary and up picked CLO tightening, on reset this basis X effect We X-year also These in and during reinvestment completed of and resets points. advantage weighted reset in refinancing and refinancing, markets.Further, the environment X reinvestment the the or debt investing the of for improving quarter. with lowering continue period, period, about CLOs cost to longer extending spreads refinancing of reinvestment equity WARRP, reinvestment to volumes XX took of the periods the remaining CLO by average had new with quarter. periods during the focus debt the

of year-end of result of stood consistently CLO reinvestment a our where average management the portfolio XX, equity is remaining years. stood X weighted our at months. March it as passage XXXX of period, This despite ahead portfolio's proactive at WARRP, As X.X or

of X.X best invests believe of keeping week. in to where the tackle. volatility. long that and WARRP our portfolio's one possible and junior CLO I'm defenses market CLO Award primarily it Creditflux last against share Best Public debt, as future won Closed-End Industry EIC market pleased is of for Fund resets years.We and WARRP expect re-financings active CLOs a attractive our as the in above We have pipeline Our completing is average to remain full XX% to

share.EIC to markets.I'll net strong For raised call and the performed generating state EIC's highest more. the to $X.XX remarks, first in to income the at that Ken's and quarter, realized history. call, nonrecurring income. EIC EIC the investor Ken. monthly continue generated today investment we turn company's a.m. well $X.XX its distribution over is common rate of I'll company's to join through excluding gains, per And the which the you the beginning by of of take CLO years, to of net investment learn visit positioned After eaglepointincome.com, current last per over well and loan share, now couple year the has very this and corporate We expenses XX:XX the after XX% believe to call you at website, invite remains

Kenneth Onorio

and joining for call. Tom everyone our thanks Thanks,

$X.XX net company company compares income offset share. When at were net per total stock For or GAAP million, investment on the of per Series related excluding The comprised share. $XX.X and XXXX. liabilities F unrealized due quarter, per recorded XXXX appreciation income $X.XX million, and quarter certain compares income income the first to realized GAAP first realized of $XX net all $XX preferred NII Series gains the nonrecurring the and per distributions of $X.XX realized fair and in income million XXXX.When realized by fourth capital realized This unrealized net recorded investments of quarter which of D were share. million on appreciation of share issuance quarter $X.XX term stock This held the income appreciation was share XXXX, million, expenses of XXXX, to is $X.X company's the of per expenses per GAAP and of gains million $X.XX in on $X.XX million. investment partially gains and unrealized for approximately fourth X% per of the of net preferred share $X.X the of $X.XX investment of value of net of the company's of portfolio gains the net quarter less to $X.X or $XX.X million quarter, first of in quarter included first NII first net in income of of $X.X losses approximately the share GAAP and

$X.X and were recorded Investment and are company measures statutory March XXX%, ratios Company another Act comfortably above calculated million comprehensive XXX% preferred XX requirements. of debt quarter.The requirements the coverage the for at These stock respectively. Additionally, asset for pursuant loss company's to

with XX% normal assets generally debt between our the conditions. we under Last outstanding less at in leverage line approximately quarter range third company's current preferred recent assets, target line week, of securities end totaled company the liabilities. In of quarter of XX% market to Our distributions with declared and with the operating XX% for our distributions. total total

cash back April variable supplemental hand million.I $XX.X of continue flows investment Tom. recurring recurring distribution basis.Moving will our now on the the cash $XX.X activity to quarter a on company in portfolio to above first portfolio call We million, quarterly its will to flows Through our the on our over received second quarter. XX, comfortably of review

Thomas Majewski

XX.During April return I'll Thanks, The trajectory we Suisse X.XX% loan generated Ken. the first a for as continued from with and Loan now up the updates on XXXX quarter. loan X.XX% that strong Credit total for momentum index The Leveraged only being X Index year defaults. loans and the of CLO the markets. leveraged saw of quarter, share some continued first now

As which end, of XX-month average trailing of X.XX%, quarter historic is the well the rate to declined default X.X%. below

the is annualized points, which about March progresses, the rate offset also this which were our the of helps rates.ECC's and believe impact default at are default XX% at many the XX-month as may underlying as CLOs XX portfolios While of significantly we or level increase growth, par. the default exposure the revenue to X% basis loans borrowers first Also, research near-term quarter, from continue trailing desks higher and have well default during stood as EBITDA risk approximately year the below overestimating rate. repaid of leveraged loan to of see continued XX

of within recent X.XX% quarter, CLO's increase debt opportunistic maturities.On weeks, Still, now we've their basis, push issuers our was some spread above compares been of proactive portfolio.CCCs end many have at refinance was XX the on stood at most a tackling within the of that loan effort years debt of issued X.XX% the unchanged, in end. their were spread our in re-pricing tighten XX, of CLOs X par, reset remain loan CLOs portfolios loan this has of as last out near-term CLOs our tranches as X.X% and an remain points our beneficial X around in over even spreads the Meanwhile, XX quarter average potential average locked we and now of X.X% weighted at trading in a seen look-through activity to to in basis there as weighted our to March years. percentage with further end loans underlying about ago on the or by very the below While frankly, CLOs loans the and average the last year. about on and trading maturities

future gives of portfolio's junior Our withstand we was weighted downgrades room XX, believe potential which to cushion X.XX% or losses average us CLOs. OC as ample March within

portfolio's of fair average junior a OC remains X.XX%. than Our higher market cushion bit the

on $XX the debt billion we last markets. investors returned is same In fastest the CLO quarter, issue higher in have approximately year.As issue equity the than first period third-party This issuance, have of new XX% for like pace ourselves of issuance new tightened, to terms saw CLO spreads the record.

debt average portfolio Secondary the we the of CLO significant and in new also remaining company. and of also resets increase continues new sourced attractive, focus spreads the substantial purchases, longer-dated equity and for period continues activity.Our weighted tightening be CLO of a remain via rise on primary in CLO a new refinancing both to quite markets investments and with in drove to issuance, secondary investments reinvestment the existing improving Along reset our secondary holdings. issue number

up CLO broader they have long past. ultimately CLO We done the structures the well set in markets continue as to debt to medium over are equity and in the particular, outperform term believe and

our strategy, investment nonrecurring suited expenses, such, and up environment.To portfolio overall and believe, quarter realized related of excluding $X.XX deal per of the income gains, we remains management we preferred sum for common today's the principally capital ECC, for As our market proactive generated to quarter net stock share. some investment for well

above a million significant weighted by new this reinvestment and receive to that remaining the portfolio both levels. during to solid has we've recent $XXX our which of considerably amount markets, second period, portfolio. were aided average, quarter is our with attractive investments average flows and quarter.Our longer flows We the and the of continue and We recurring continues than yields, capital we well primary on maintain in the during cash a invested put market cash been sourced net XXXX quarter investments secondary new first portfolio quarter, the

through the supplemental regular $X.XX NAV declared ATM of share. all monthly We and September per common existing through have strengthened our now variable the distributions distributions and Our our issuance, way position generating been common significantly XXXX. common extended liquidity accretion

the be completed convertible also over believe earlier.During generate preferred issuance, significantly We new preferred We're launched about offering. the second the stock, we which F started has will Series proceeds and quarter, about ECC which accretive company, time. stock this to X% for non-traded we term perpetual very we excited talked our to

provides CLO proactive flows. believe multiple well of we locks mix financing as increases WARF, in capital the with to company's opportunities maturities of we continues with prior both protection cushions portfolios to overall Overall, well cash Importantly, recurring to maintain cost our any continue attractive XXX% investments secondary to XXXX. financing enhance This as for existing an from fixed rate into future given to above come.We we for and no years and and to see us portfolio further us portfolio equity pipeline and primary refinancing rates, OC that be continue quality reset strong a strong the positioned of have. investment portfolio our management in its consistently and positions average,

investment now call manage with thank Ken as a Eagle mindset.We remain and ahead, and to we Operator. Point. the proactive Moving in portfolio time open your our you we long-term for your I and interest will questions. opportunistic

Operator

Our [Operator comes from question with Ladenburg Mickey line Instructions] Schleien of Thalmann. the first

Mickey Schleien

Tom, markets? secondary between of a the and give and how CLO you current primary couple sense of a compare the questions. they equity Could economics us

Thomas Majewski

good of we news and period. and pricing news The is question. Sure, reinvestment good efficiently the valuing market's think kind really the reasonably bad things

yield, reinvestment trend of equity â€“ market to the the is you're out reinvestment we as is trades are your Unfortunately, shorter heard too last the see it pick much Broadly, even starting the that CLO One reinvestment up. the or at wider very, a long many we've the in the to maybe is, times the the period. remaining in out in of very is and think decade of remaining say you're period remaining a over that period, what people you've things us valuable. we amortization a you're the period said extent

in good a are RP, opportunity get as a let's post X reinvestment blah, maybe some But years of same say looking years on While and be be we'll with generalization. general then blah, some minute, you it be there or opportunity we're but is blah, in might talk paper constant, reinvest to you're afterwards, general, may RP higher, period, at is same about more same mid-XXs, seeing in X yields The ability yield else of secondary some what is all to going RP. a manager, assuming the holding that collateral NVOCC. portfolio, lower,

those shorter is.Finally, lower the lower reinvestment typically see the what equity going the seeing the which we're we're the line to period, to really that new has term yields, there, going curve cases second and many with -- issue, period the be in lowest in remaining X-year of at opposite but market. kind trade are is the to yields, reinvestment seeing a getting You're secondary in

opportunity So CLO think about issue a is equity of XX% a today, return kind That's new return. I attractive sense. makes pretty which of generically,

If would question I year have would you XX a that to told have you me asked ago, XX.

the a getting sometimes kind you but it's a to predication reinvestment investment of all risk return a a If our up much or RP obviously, yield.So being greatest it's to overall. greatest certainly and out and the hurts have it could shorter at as gotten risk, up answer, your then yield of of new reinvestment less and then the RP CLO lot of on XX%, opportunity. had you interesting. XX% goes go work versus you're on help goes down work post sometimes sudden go little you actually prices looking to you opinion, oftentimes issue going up. ton. less better, probably number help if the equity, And short way if may it's they equity you, up if bit equity, new at worse, on that it. or so prices and a loan a post end therefore, generically RP, a you the of a -- market throw that post RP, lot So way in But curve period, as And a have little But down of in the and kind a you're term bit, and period up your down of point

answer does question? So your that

Mickey Schleien

be see the my of I spot. question. It follow-up a sweet would where does. you I that's sort hard guess know

Thomas Majewski

we No, general, that's or easy. the way like through RP today. issue actually In secondary, very kind longer of X.X-year select all new

you One if assets that bunch issue of or makes new things of proverbially yesterday attractive is bought the really your a them.

on things resume higher. again, And too in a saying in market, it but haven't while, I'll high One the price say trading number loans are the now. it, of I sometimes of the the the going fair a par in loans area, I'll of said is right darn this even

orderly, there's a is case trading amount kind like opportunities, the around of still obviously -- nontrivial that's too area.We there's better, While amount, not loans is distressed. best a loans, wrong, frankly, frothy, XX is of XX%, like too don't our the par trade that in but good lower when the me means meaningful discounted loans not market get are

seeing bunch their kind we're up. of So of a way loans inch

have the to into of I your than said, today. a a bought loans a deal we yesterday buy proverbially of if is a $XXX attractive. different that facilities.We'll tighten, tickets boom, if the with deal maybe bunch million facility news having got And is wrong. have plenty but to together financing side, ago, look say, that's other the of ramped look bought If loan good have $XX AAAs our new want go might part those punched accumulation $XX to CLO, accumulation print that fully of strategy got goes it loan think CLOs when already loans important collateral months is par, down, in with or to ramped what up part we -- long-term And at we of accumulation bought see a -- you number better new assets we assets going stuff flip we a closer a and regret your assets coming So such we we long-term we're place of to discounted in seek lot price.The don't purchases, -- multiyear I'll but million, facility. when financing. an could go million, managers X for obviously, of That loan we of bought can in the put a price building you've making even

to and place. got timing. your the with your to all plumbing of ability you such favorite you've kind queue already of managers But equally in have So to when want that be pick the kind importantly, you collateral are the papers go, in

Mickey Schleien

debt Right, by in AAA there's varies that around know collateral lower. CLO if XXX sense and is of right. me going Tom, my points. spreads, correct terms basis wrong, -- somewhere I I'm manager, but

that's -- So

Thomas Majewski

though. correct a number That's

Mickey Schleien

So reset? with of refinance and that in opportunity portfolio wave in sort and the to was a portfolio. in there reset your big refinance mind, know what's the I remaining of

not on I was fund's flows if that XXXX, and through impact as cash what the be think mistaken. NAV, you would the progress And it I'm process?

Thomas Majewski

there, is well, listening, generally so said it I -- would someone good. but only be I almost know would say I that. It certainly didn't

on this is -- investor XX deck. our notice Page You'll of

is average weighted in the Our of portfolio. across all myriad the that's XXX of spread -- CLOs AAA

at Now CLOs XXX, today looks it saw the top-tier getting just I are a printed headline like new like.

the non-call. ideally, mean only workable. is have at in we've on then on average That ones non-call, above so of years a on we And of at published well, is And is is a you X.X I lot average, the period said, the over left what stuff us our So left-hand -- column, because are remaining looking the that average? types what the what right market. non-call start the

number dates, the performed, reset this then focusing is CLOs on do we to refinanced either and sense. them, what on reset A what So debt highest them at the have those non-call depending the combination year. of have or CLOs or looking a looking our refinance costs.And how portfolio in been of makes looking the with through already

coming figure from You for done seeking CLOs more ticks in, if publish yield that them.We're always trade value certainly creates per deals markup. our complete we our see it -- a ones And watching to another more continually reset Bloomberg basis as debt News, our does, and like that it it's reset, out equity looking nearly a which with making time look of read every as What in can the you of well.Sometimes the that you that se. powerful. and point, the publications the of makes at But CLO improves extent it CLO spreads kind don't can CLOs to possible. many CLO invariably we've it and on you as increases

to Then answer. that if have would There's to So talk deals, look manager, of undertake the we're the folks These doing resetting it's to right on or them. ones, one old at both. potent. also going no the not necessarily these be still some ideally would And ones their one to NAV accretive pipeline. what's new there's things runway you typically want or NII only of -- be the collateral are we any if to these most

have good always the is when in so the So market. it's news we many do something our a negotiation to there's with market favor. CLOs The conscious is

Mickey Schleien

Right.

given this those could costs resetting there resets with that chance refinancing, about said is year? income, and re-financings and associated So taxable fall a you below everything the just your your distributions with

Thomas Majewski

that's good very Well, a question.

notes. very take You good

even you So your when a expenses. for tax is conduct a deduction unamortized refi what a call, you or or reset get happens issuance a

that, blend of million, say you people -- and methodologies. X you cost complicated you cost the expected the over life new or but tax reset cost that -- deduction that time. the it over a some transaction, for a have you probably you take say, years do life million it But deal, cost tax that amortize it's issue just $X to let's more So let's than $X the ago

can off was If our ratio, maybe basically there had -- everything had debt, it where which you year then XXXX, the what from extinguish we was reset mania, we reset significant the in pay lots off write and mania, a was you last when activity, terminate your else, lots debt then Ken. tax shelter X

Kenneth Onorio

'XX and 'XX.

Thomas Majewski

'XX. 'XX and

this out for years, best One treated those at of the a that of capital -- cut my great. is are you said, that we tax don't best tax. really one a on -- in of was theory, pay the of a around return it distribution had the with are you time the opinion.So this distribution cost Obviously, time, of the way, as distributions issuing the Most is now low down. those CLO in our resets, gone can have to has

that we're at the time -- kind to of of batches those CLOs, those looking XXXX way that So from in kind of and deal issuance down. post mania, costs reset were And over the the immediately immediately gone a COVID lot proverbially pre XXXX XXXX have CLOs.

general. CLO So unamortized cost issuance in unfortunately, we or fortunately, per less have

those effect there certainly CLOs. time at a it kind Ken got it's sold those we're immediate met CLOs, hair, reset or even CLOs. to many every it of out refinanced X predict we in always about CLO.So good kind would ways. in is for The pulling taxable bad get it our gets for equal when activity of of we income in So We variables, because Ken the loans bad resets have bit don't X which him But than those we We last think tax on lot through CLO.So extent because darn creates likely which I income that resets this, are time always a an the are low. his being The doesn't any is X earlier to related could the anyone's part as things out out yin kind balancing has to at again, we loans think that tax is of flow tax create or that X it too taxable taxable day and of a this here. That And if are gains trapped is refi have additional we before sold, as part be did of hair We loss to in likely would get mindful, gains but X good. are the loans and of of and taxable cash it activity trapped though know our don't things, shelter income. yang. more The price us, which would reduce, things. and difficult going us, the write-off, lamented -- from I we've all don't that taxable out got be income less don't year lot and -- lowering of I the are gets were while generically. only the else and going is most those loans we the increase, and it's We been start big the is amount definitive time, little a X have some same view, -- powerful. very flashing the to got bad gains. a we of for wish cash believe loans CLOs. create income.The which predict said, that to were those offset high, purchased discounts would at

price going is this the in they're able are more as of that we're other, the doing each because other, probably be just probably they the up XXXX are and we're big more my the factors. to will those maybe but loans that is going One versus of X the than in won't strong. powerful correlated reset market's be but at time activity probably is expectation to time. them the big offset But that unamortized It take the lot a tax things write-offs lower the be costs this because

Operator

floor would to Majeski, this comments. I over to have appears Mr. the further questions [Operator Instructions] at for like we closing time. no it back you turn

Thomas Majewski

all around Company. Eagle to participating Credit I the today. Both feel Thank to today for extent be your questions, Great. very day in folks much, free you reach Ken interest in call other appreciate out. everyone, have the Point and We'll

Point invite which the we Dan I you and Ko, at Umnova Income In Lena XX:XX to which will Company hosting. morning, be will be call, this join addition, Eagle

forward So you we thank soon. interest, you speaking time to for with again and your look and

Operator

this gentlemen, today's teleconference. does and Ladies conclude

have your may day. time. you at You and participation, lines this your for Thank disconnect a wonderful

Eagle Point Credit (ECC) 21 May 242024 Q1 Earnings call transcript