ECC - Earnings call transcript Q2 2024 | Eagle Point Credit Company Inc.

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Operator

Greetings. Welcome to the Eagle Point Credit Company Inc.

Second Quarter 2024 Financial Results Call. [Operator Instructions] I will now turn the conference over to your host, Garrett Edson of ICR.

You may begin.

Garrett Edson

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

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

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

Thomas Majewski

losses. balance realized. losses realized cost sheet positions investment It's in had net bonds, $X.XX now value portfolios quarter. which of which a cash already of reflected share typically our share, X and invite share. you absolute up per the and the interest $X.XX Call. of comprised per our as our you of website, Quarter capital from received in share million part realized provides The on flows an CLOs Thank about Point $X.XX cash Eagle with the or This losses. common the of to to and investment million by that on CLO's included equity Credit Second some in from less portfolio. Recurring Company's exceeded increased portfolio been amortized noting share. pay flows CLO results aggregate in our like you, $XX.X Garrett, write-down a our share the as our quarter NAV certain assets We'd The basis from $XX.X per in $X.XX and invested second to worth company investor and associated and presentation of higher flows of our welcome, quarterly fluctuations our quarter $X.XX of legacy $X.XX cash to are is income total we Earnings company net which to information to was our during fair losses underlying in generated quarter income basis, of from semiannual per both from quarter. The payments per and our from or realized X% on recurring everyone, roughly expect related $X.XX basically to additional well reclassification the unrealized due which do first in distributions per as interest to This were the unrealized to portfolio growth semiannual download expenses

appreciated selling Excluding during debt this, we positions from CLO gains, principally the realized $X.XX per share quarter. of

you quarter new some deployed highlights in equity million of $X.XX. Ken Excluding share. you second common through of XX.X%. and NAV made XX net average per over the like a share during to that new income quarter. We The was financial net through would the as capital more per June realized gains $X.XX been walk shortly, first, I'd will investments. from $XXX we purchases additional take reclassifications, have results our but yield weighted CLO into had investment of the effective

new $X.XX our and be non-traded issued at Series stock offering. a accretive per $XXX premium were time, we're we significantly it. We shares million very non-traded and issue The common approximately believe $X During total through convertible to program, size approximately million. These We be our able AB the and preferred proceeds perpetual offering excited the Also, or for we X accretion NAV completed at-the-market the The so were is NAV quarter, of about program refinancings. X Series of resets to company has it million. program shares generated share. launched perpetual over ATM. AA generated ECC to far and XX will to expected

of issued a under smaller amount the preferred ATM. We stock also

previous started equity. selling at opportunistically quarter, which into back rotate the gains discounts, quarters, we this sales proceeds we harvesting those Over to had CLO purchased BBs from the and CLO beginning

equity. invest CLO months continue to We BB CLO coming this rotation sales expect to into proceeds higher-yielding and expect the those over of the

is of second our no per distribution share XXXX. per monthly financing with distribution per and regular for financing an prior have we monthly our $X.XX share. Consistent of fixed common additional quarter, our the During maturities $X.XX of $X.XX the April rate, all long-term monthly operating supplemental aggregate variable to strategy paid for along with we of distribution financing share, an company,

perpetual addition, set our with no date. some preferred maturity financing of In stock is

today's X in against CLOs to performance, cost a we has completed rotating refinancings in X attractive we the our BBs We equity, reinvestment past, CLO basis manage this and period believe, approximately remains CLO CLO CLOs actions back our points. we've during X in drives refinanced tightening years reset the stated the consistently prolonged Similarly, XX and have reinvestment market. In also period, having and resets towards quarter. market the environment As returned. remaining the portfolio of and volatility. guards future we believe, reset highly of into this actively by lowered debt portfolio extended of the and These market debt the spreads, refinancing long

reset We opportunities under have of a robust pipeline negotiation. and additional refinancing

it As which passage remaining X.X of March is than June average equity on of years and stood time. this WARRP, stood longer XX, is despite portfolio's weighted period, at our CLO the reinvestment where months' years, XX, X or X.X

XX% of is average the Our years. market portfolio's X.X WARRP above

Exchange best keeping would also trades volatility. I highlight possible to future our Income the invests symbol to We New market York which EIC in Company, continue take believe defense as against our as the WARRP principally EIC. moment ticker like to a long CLO Point under Stock debt. on is Eagle

call gains, of For strong of we CLO and well $X.XX call a.m. at you remarks, markets. this company's continues today I'll I'll EIC per turn nonrecurring and continue to the join loan website, and EIC's remains the NII. more. After current you after second the believe, and, Income, XX:XX expenses, to We investment quarter, call take share. to well EIC over Eagle realized state excluding income generating invite investor generated the net perform learn to positioned to through the Point now Ken's Ken. to visit

Kenneth Onorio

joining call. for everyone, thanks, and Tom, our you, Thank

$X.XX income or of approximately company and the less net quarter the NII per second less recorded million, realized to per $XX losses share in the per compares gains share. NII investment realized net For losses and quarter capital of of in XXXX XXXX. the $X.XX realized second first $X.XX quarter, This of of share

$X.XX these X fair date. year effect the no was write-down to no had for longer of investments unrealized in of been effective losses period the loss. as a value reflected X investments. from NAV, and their a previously generating the of the impact of cost include to due Second the NAV The quarter at end X realized was per cash to flow, are results were a Since company's yield of loss already an equity share least investments result CLO realized past amortized There write-down. fair X legacy have reinvestment reclassification the value

compares the the of is share. When portfolio Excluding GAAP $X would company recorded net of was expenses held approximately a and $X.X our and net GAAP and offset have million income unrealized write-down, been XXXX GAAP GAAP quarter for net of the of per on of gains capital share net investment stock million $X.XX depreciation quarter of unrealized million. of losses convertible and to or investments quarter, loss comprised fair second NII certain the loss company's liabilities realized appreciation unrealized income share. This on in second by total XXXX. of second included $X.XX of distributions stock of realized million, net income $X.X quarter million, $X.XX Series on per the million, on preferred first distributions of D per value $XX.X quarter $X.XX of net of at second $XX.X depreciation in preferred million, per share $XX.X the The million, $X.X the $XX.X

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

of recent assets is total conditions. Last end per the outstanding distribution. range target comprised per fourth of monthly the distribution line our totaled total and market of between supplemental $X.XX with a our regular aggregate liabilities, operating company debt of midpoint quarter share $X.XX The Our under of normal and monthly less the preferred at with for distributions declared assets securities share XX% the to quarter per current XX% common $X.XX approximately distribution leverage week, share below XX% generally we in company's distributions.

to a review supplemental variable quarterly continue will our basis. distribution on We

our activity. to on Moving portfolio

paying over company yet flows our bonds made his its the call investments quarter. portfolio to and cash So in Tom $XX.X lower cash driven do the recurring fourth flows compared to current cash and will their quarter back now second approximately We expect market of XX, figure $XX equity in million. flow received far updates. quarter in have for the underlying off-cycle which portfolio recurring new first by third higher the CLO compression, investment payment, in some is The July not the semiannual to quarter and million spread insights portfolios. through hand move on loans the I

Thomas Majewski

for update on CLO we're loan the quarter, July continued performance, XX. second quarter to July total I'll X.XX% with XXXX. return the first seeing the with in Thanks, Leveraged trajectory Index Loan of The off X.XX% Suisse markets. its half loan index and a through of in Credit in Ken. Starting the continued X.XX% the trends up the generating for and well now loans everyone perform

significantly are XXXX risk on research as see average desks' that desks overall have research We forecast default environment. Dealer growth we for continue X%. current EBITDA rate revenue are elevated dealer to to overstating loan corporate despite borrowers believe typically continued X% the between and now the see underlying default and

the the prior However, as second saw during the was quarter. loans only which number quarter, X actually same we default,

quarter end, XX As and historic farther was of well XX-month below default forecasts. remaining even basis points, of X.XX% the below the dealer trailing average rate

stood to XX% As repaid approximately XX par. loans, loans of defaulted roughly leveraged second annualized, June or quarter, the points. Also, of XX, basis X% during ECC's portfolio's all exposure were at at

some their end debt of loans portfolios remain very end these XX% the par, their X.XX% at underlying our of tackling the been Meanwhile, CLOs' were by loan they proactive within our potential in of and at early from the as next. debt that at year issuers periods the While maturities or of X.XX% opportunistic and spreads many to near-term the there nearly years repricing and issued loan through to has above down X activity remain effort on trading off the later the spread tighten maturities. that's sign prior the an further resiliency. quarter, push ago this tranches non-call locked CLOs quarter. have significantly unchanged look-through in was in refinancings We On basis, their a view market's another of this out average weighted and loan as repayments roll

to has line been the some The the date. broader the with Over loan few movement we've been has days, the softness market volatility. in past in price seen modest loan market, relatively there in market

CLO first terms for $XXX volume fastest issuance, saw on of pace billion approximately CLO This issue and XX% record the of the the in XXXX. half and new than the of quarter higher XXXX XXXX. of second $XX we first In all billion is of half the for new

As including CLO debt issue tightened, equity spreads to have the returned us, CLO market. investors, third-party new have

of well as market both within XX at percentage CLOs into and June quarter, XX, secondary CLO equity trading During X.X%. within capital attractive below in investments. Market-wide, of we stood as significant concentrations other the amounts the CLOs primary second invested as was about loans and of X.X% CCC the

average weighted which higher downgrades of room than gives potential of losses. this, remains well XX, withstand OC cushion portfolio's OC portfolio's as Our June future was To the ample X.X%. X.X% our junior cushion average market or compare us to

continue at markets sum regular ultimately CLO structures, discounts generated equity volatility capital ECC, set We medium loans for outperform up a net the on Recurring our over investments, we investing the particular, basis and of and the the buy to flows gains, corporate of sourced number in new $X.XX the write-down as net distributions were income the cash have the We they to expenses. solid and comfortably quarter, reclassification well believe for and a $XXX excluding significant in quarter, common quarter CLO during realized debt capital million average investment during exceeding periods term, common weighted of past. To done quarter. up up the share. are in second second and totaling quarter-over-quarter both attractive per

Our quarter remained second the and the X.X years market increased than during longer average. portfolio's WARRP of significantly

as We further activity reset new WARRP investing and our increase our issue to continues. expect

balance perpetual common monthly issuances of distributions existing of convertible program. XXXX. strengthened We've Our well as as significantly our were regular through sheet preferred declared end our distributions NAV-accretive our through variable and X% also non-traded launch the ATM stock through supplemental the

with protection date XXX% from come. Further, increasing capital rise of of future obligated. an maturities XXXX, for our an maintain rates fixed locking in now to cost and any financing us We before perpetual, into financing continue providing no financing no with to preferred attractive years repayment rate amount is

opportunities see still portfolio. In encouraged of opportunities half enhance our robust and we first reset primary to further a of the under year. performance the of refinancing and an closing, and have consideration Importantly, abundance pipeline the secondary by of the value CLO in we're equity

believe in in Our average We I strong proactive recurring call appreciate time Eagle half second resulted We now and has cushions, portfolio your the well to greater-than-market is continued and our performance questions. investment the high and Point. WARRP, portfolio's Operator? will significantly the approach interest of open for strong flows. the OC positioned your through year. cash Ken

Operator

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

Mickey Schleien

driving leveraged been aware AAA I a loan average which your is Tom, the wave, portfolio's we're spreads. that there's been market all near spread weighted that's repricing see of, down loan average.

refinance opportunity much that your So equity reset CLO in how help of defend against to an compression? do you have the yields portfolio to or left your liabilities spread

Thomas Majewski

few line-by-line points, Excellent or presentation. don't there. couple detail XX But spreads Flip the There's question a side CLO you spread loan the exact about give are do of about Definitely, dispersion, market the I quarter-over-quarter. while defaults tightening above that, how side we tighter of things question. of of average. of I specific but tightening, number, probably is the in course, know your right basis number, a plus A very the in in and forget exact to sheet, minus, of them half manage tremendous the we our about the average, average balance investor world.

And the CLOs highest-cost of running this some later of start year. non-call off

we're to continue resets So and the proactive quarter, in an any very focused more on active I can we second at off quarter, But those run are focus dates the the looking Obviously, here ones the and most conditions AAA and think the third as particularly with and been be in on we X by ones sorting those. non-call less average the had of at they focus on, And X have change pipeline. of what time. those we on non-call. in refis would kind market have and highest I -- we active

Mickey Schleien

I appreciate that.

don't pressure decent soft would mentioned borrowers, obviously odds fairly lower You apprise can the so also seemed default downgrade remained amount I the conservative accept problem. landing. are is of also seemed pessimistic, agencies recognize buckets. a a pretty haven't to situation CCC capital what still forecasts to to they have and available upgrade And of that ratings to quality That seem ratio the and

trend? your are managers portfolio that how So dealing with

Thomas Majewski

many Yes. CCCs. there's triple too mean always I

investor As average tons our Against in me have CCC, many. our number the too there's up long We with overall the our there's the dispersion. of for across in at there's weighted that, our CLOs is looking as slightly guess let on, XX an is both the the of is one than me. Bear better general provide here, bucket, I X.XX% cushion. just Page pull deck average I here. Again, CCC the good market, this which CCCs, deck CCCs, CLOs. is, which presentation. average think, right

numbers, many of lower. have them and The in against typically some that. see You'll in higher are life, are amortizing later cases, others higher ones

of your X.X% start also that weighted very, general, or before give a CLO in But actually lower probably is it cuff junior interruption haircut have powerful stated CLO CCCs could that very a on you'd taking X.X%. a the a could you in given then we typical average number We equity over go have market And CCCs a average, CLO. in have OC X.X%, take, above on to on that payments. XX% need cushion you on basis. And face we or

the prices, which heavy there's at a they coming relatively imagine of very have matter right of high no all although would payment drawdown important. see frankly, matter few portfolio, a through if CLO little back non-CCC on loan crisis. -- managers missed would you'd a in tests market's through then clearly year. CCCs, the lately, there's the got suggest now, OC our amount COVID, loans in continued reinvesting investors never the And there while equity loans determination is, They help nontrivial quarterly financial that but a bit prices, par. Quite to downdraft. only close of we right These a in on Xs, Now hope going you'd to on priced the discounted minutes dates. help where and something are down build I to business was are the prices, what the a market of a now in current on XX% the the world call AAA X pretty a end the

managers, They folks CLO X work the and good those doing who and schedule. managers have to over knack well, years passing having with portfolio. they brings? target, we -- at be future these a collateral a of in relatively involved I known need these knack we that. Obviously, OC a management it's they here have a in good the when test, got pretty that a maintaining manageable have they as the But So with think knows just know what we've CLO year. Point real tests. good matter the a But better-than-average minutes tests, of are Eagle And really and beating been partner

Mickey Schleien

of over with, work in you Point years. the terms grown the Eagle has folks Tom, significantly

managers, still to top-tier tapping deploy pricing maybe tier is whether third can need second managers, have into on right be you a able assuming you So to curious focus or point capital? you the consider I'm just where to to grown and

Thomas Majewski

Yes.

equity period focused are that have returns. over on would we're in collateral collateral What deliver of the time, had we've tiers. CLO managers that at the ECC an DNA varying superior market extended to managers would I So rank say,

but think of you'd X They're some owners. In all the returns. collateral Tier investors equity CLO work the The opinion, holders. really -- our for to all think as the managers the important. collateral purportedly deliver companies not managers the superior are residual CLO want On surface, owners, equity nice equity

trillion in be than Eagle itself still we have numerals. same worked or when XX, at ECC while market. and The the $X managers about is the what's I'm our like grown, that process thing a we've overall and way their bunch, we've to while of grown, XX, one you XX, you greater in just to outstanding, So focused the equity XX, collateral creditors, on XIV, our the so is portfolio, old to which percentage XX, a are a Octagon with all holdings, they just investment we've our just Page take, the CLO manager respecting in CLO got B, things is on looking is U.S. And investment Octagon the so we can class look of give our have original is ECC, A. who Octagon, which on CLO remain market XX, -- nice through back Point's, certainly XX, believe Roman DNA and what see single-digit outperform on on, for up far the when XX, CLO honing equity Then and so has used

news in good so kitchen, the the like, is one always there's the always and speak, So coming. another we chefs to are

we're, new, struggled size So buy market access that that cases, to sometimes equity better on relevant frankly, investor. our to. helped condition. what's in net in buy wanted we've sometimes used, find continued to And the not most depending many we But managers their us we and in scale we've collateral has the

Mickey Schleien

That's very Tom. helpful,

Operator

comes of Penn Our with & question Mitchel line Co. next Oppenheimer the from

Mitchel Penn

-- during points. Quick total that that question loans The is on and up the impact quarter, are it just -- it to portfolio? that XX over compression were that is the Mickey's basis taking you repriced taking Is that amount the around spreading was the was spread just or to said repriced you question. follow

Thomas Majewski

of points, spread quarter into loan all CLOs I the quarter, repricing, the portfolio. be to the was bought loan a well. average spread weighted of weighted That's changes number if number the doesn't CLOs, we during in basis had matter changes account the whatever, of CLOs it used loans XX our a exact XX was was that sold the just The taking different It new said portfolio, the weighted in bought, prior and just spread and quarter, is as this as average I if sold, approximately. clear. earlier. the average the in

Mitchel Penn

number new higher then on heard and assume but whatever a it repriced, higher a just number, had or that's deals we we... mentioned, deals the was Because it. Got I

Thomas Majewski

basis I'm sure tighter. some repriced loans XX, XXX points

Mitchel Penn

makes Got more it. That sense.

Thomas Majewski

repriced maturity. if were they kicking may wider Others have out their

did overall in that's aggregate. our portfolio So just what

Mitchel Penn

said the you thought forecast, guys it And X% to you X% Street's are and -- like like was the lower. research default guys

tell correct? exchanges wrong, exchanges. Is you're distressed and are distressed now. that over think, just you're Because I running X% I'm looking defaults, including me at if not right

Thomas Majewski

Correct.

So do the what cite rating, number rating, don't. we D and Facts D distressed some circumstances triggers a trigger exchanges a and others vary.

is or believe, number Our to pay, which failed I rated be that's would D anything, immediately rated D.

Mitchel Penn

But that...

Thomas Majewski

Sometimes below us. distressed happen exchanges

Sometimes they happen loan the do at as level well.

Mitchel Penn

that be exchanges? Street's But distressed it. why those would because the they're probably number probably estimating a Got higher including

Thomas Majewski

me Different dealers like impaired. know. par include measures most long your different things I not mean to their as important thing. don't the in I that as is seems

And don't. in but exchanges, do you less back many some you take par distressed

Operator

Our Instructions] Howlett with [Operator B.Riley Matt comes of from question next Securities. line the

Matthew Howlett

number been I'll I dead just years. for mean forecasts a analyst wrong they've mean fresh of do a on rates? follow-up. start default how you at these I much of look

you stuff, your just of So curious when at [indiscernible]? that you portfolio like bps look would say XX a is

Thomas Majewski

We care other it's difference us. doesn't I -- see. but any about don't for really doesn't one fascinating for XXXX. really XXXX, I investment one bank to in mean XX% interesting I the mean yes, or just mean it's it. it way predicted defaults make leading

paying, that's keep our as long loans relevant measure. the As

Matthew Howlett

ever report tax what are NII. covering incredible now. way above Yes. that's for cash phenomenon dividend, flow reoccurring know of I and since this that dovetail here. you going into cash kind for I some really GAAP kind have mean GAAP the And my been and I've of I company, above years want the on this all you at I flows why to several that you converge. way and been have has mean point, I mean question

us the economic can What Like raise power? going reoccurring to And forever. have not you'd time. I'm we tell otherwise, what to look believe earnings cash is assuming dividend really lot Just we dividend what you about at? -- a you we're that this metric? what just above huge flows Should over get should the

Every it's walk Just how [indiscernible] seen through think been the mean about since it covered me to great. because phenomenon. you've company, I've this I

Thomas Majewski

loans let's cash position you the the gobs default general have defaults. defaulting, generate a to CLO when something and powerful say important of CLOs in even and is XX a And are Yes, as that's remember -- rule. really basis a it point

Now recovery. let's a total a wipeout, say just it's X

most position basis, a here. you you the ultimately but conservative to principal now If ongoing from all CLO. is on that bit X the an happens, get little when interest less Let's years your loss redeem take X

income than we CLO all the many of interest in at the we principal invested beginning. the have principal far are positive -- frankly than on the not the at -- cases, many in CLO from the many our Frankly, the flows equity the so And of important but IRR more greater cases, because income. cases, in principal got CLO of even in cash flows would investments, cash never is a basis $X we end IRR outweigh the an ongoing if

recoveries have loans of is recoveries, price the a on -- bunch a those to us along if down as you're day X now that's as certainly predicting long recoveries, having of way, the to of bunch nearly that be if what opportunity reinvest. the we're not those. again, reinvestment are gives we So you're managers And very CLO where the bad going X the period, collateral in gives defaults

measurement somewhere XX% period, performance obviously, XX-month ACR never you a the ECC grew date. time XX% of our December So that or XXXX, frame. end of distributions we so like period, on NAV NAV grew, through anything that the between and look January from failed that throughout and during the if a XXXX like X, paying at continued

the an so of April crisis, loan CFO RP that today?" But stuff basis want XXXX, No So In pay it M&A, CLOs equity debt don't robustly. When of market off generates said, previously why I down paid happening. haywire, the cash approximately month, long was things the off at to continue par. T-Mobile announced as that financial optionally you pretty have reinvesting. keeps go walked just loan a what is in paid and COVID, ongoing remember, we very in our X% you like on it flow nice Ken "Hey, think

manager, you're opening mail, money If the when $X.XX. getting $X.XX you're a are at for just CLO sale loans on

in advantage to of able that. you're you're the If RP, take

formula and is this fair of prices years is being that But hasn't changed of the year. that. CLO coming. value, keeps just it the So in the that's continue of nice move seen opinion. equity, makes A cash than XX flows this public thing And in drawback flow around very very work. October greater we've The lot far the the what my cash have be happened things robust. We'll the of

Matthew Howlett

So better that it's don't know -- number. opinion, you know. in I my GAAP the more I opinion, I important give... my look, in a than is mean number

Thomas Majewski

pays We're the don't GAAP out send we distribution dividends. cash send bills. We out dividends, Cash a company.

Matthew Howlett

I've value and I But and inside almost focused that's focus a just funds. ECC. the they'd certainly, speaks only think, all FAD give ignore remarkable we and They the a REITs that's quarter. covered GAAP. closed-end number really, to given CAD -- number, or that's only I've in really a on the

here evolving up. The mature it question, capital structure congrats and as you next keep really and on I is grow. So that, your mean hopefully, you

exchangeable feel Do the more as convertible capital non-traded perpetual the you new this about preferred targeted that and differently evolves? -- I mean you do think leverage? with Just structure and note, with how about

Thomas Majewski

back. pay you financing have best to the financing Obviously, don't is

are So -- that's from common perspective, a those great. equity

I channel, until time, We issued through perpetual the April D, any point. activity which preferred ATM. From AA little there's which at bit the really a and the there. maturities, via is have issuing non-traded this have AB, we're of Series traded of really, think, XXXX nice. The don't We time to a

than thought don't XX%. Our that's is unchanged been something. gut proud the On say, markets is of there's scientific my and no the get half wiggle experience a I've between that, bit purely so let's the avoid target XX% it half judgment. Obviously, rule one In COVID, around let and we we we back have measurement of during perpetuals. why kind we a little fail leverage had, this those. tried in roughly we securitization the flexibility worrying this be repaying I've going pandemic always of to on -- I've we always theory, to certainly still -- what's the based in this never sized when roughly But we passed. And we've say, And that's the mind. equity. didn't goal limits, It's more think but sized to It's kind have a honestly benchmark kind things fail you this of very through about something always able how happen. And is but for be never with really I other although ugly, fast, -- have me any market debt, to we and before, moved -- to our date, years it, that's no really I'm the to without when ACRs know XX room. statutory in been of in within want -- that of this, ACR. feel more way, of, general, little perpetuals, put

would how we governor equal that's an on leverage to the company. add much So

pushing So I above XX% maturity, don't above normal that? -- love about I well, the away taking us certainly in But see going how market conditions. band XX% out, that

Matthew Howlett

Yes. are you the -- period to because terms? someone what you a you On the I -- term force dividend series. cash, know of or rate million use new can over $XXX time? for your certain price that, on convert a that stream trades a call it the Can on exchangeable theory, Can what's when on of the stock note the -- on conversion discount in lower that it. do could up on

Thomas Majewski

start a details, to I'm Ken maybe going exact closer then here and this one. been He's will finish. little the So to

have common as of the market -- can equal of give any the So preferred, X cash of conversion company. stock it's a or like the their we call -- the that the value perpetual and that's conversion "I'd or to them X [ and people And either can rid ], par years, always security say, -- choices so We them to the us to has equal of after and owner nice. ECC amount time get the liked security." $XX. stock If option, my they equal up pay

that can a we'd recall shares preferred. exchange a have for what X.X share, after it Ken. So date. for don't new date if is -- to $XX shares them I stock of that in also the $XX We give is, exchange call in certain that call Five?

Kenneth Onorio

Five years.

Thomas Majewski

or scenario Yes. I to But nice but struggle in see And have that, if or perpetual, got if would X option. or that, we where where X ] a the wanted to we the X and that. first on obviously, we if to want current exercise we years, like prior after there's that investors convert we a at X -- can obviously, happily like X% mandatorily over conditions penalty, something it's years. redeem years. X repay to [ we'd it X And have things X ACR offsides

It investment-grade piece great to rated people investors who want it's par. for hold at accounts. Typically, a because just it -- it's So sits it. might paper it's non-traded. of It's carry for in people's

of grade-rated, ton of I of coupon you, balance itself, It's frankly, monthly beneath the piece underlying. it's keep a very the capital really get X%, I'm company You a stable for assets sheet. tool great paper And good think investment a unto things a one nice a sorry? -- to but of

Matthew Howlett

perpetual, did Is say? you

Thomas Majewski

on around, any paying volatility. really have but a It X% stock if you not things NAV that don't monthly option. basis is pay path out X move cash perpetual, our don't years that of lot want, or after a at you But have a

So it's at -- an very interesting usually par. people interesting, carry

invests stable if security it the a of cash who one piece feels X-plus win-win, it's So great the years, for a for it's their really can like and person feels someone financing. company that -- for win in and because kind invest those win like of of

Matthew Howlett

Been conversion higher, or feature, a dividend's that much lot elect of XX% dividend -- is something. the the

Thomas Majewski

People they're -- welcome we're are -- do do to [indiscernible] somebody that. to welcome When that. welcome

X%, you're that. just you're probably I think buying if the seeking

your price the X.XX to if had years, on stable statement, more on I focused people You're guess, in do. but like see we'll

Kenneth Onorio

Matt, Ken here.

clarify actually option, to X the it's call years. Just

Thomas Majewski

apologize. better. Oh, sorry, -- are yes. there X I years, even Yes, because these are other Great,

Matthew Howlett

the years? opportunity, in X years. congrats be or the at You trade. can here. the a last could I X% exactly. something on to that. mean obviously at X Yes, is great reissuing par question, opportunity the Look, those BB sell what And you at in been Look, call it stuff same premiums? It's

Just what any quantify to left could way sold? be and what's

Thomas Majewski

Yes. everything term. of accounting we shall XXs. the certainly most use We an portfolio still bought when for that -- in XXs were available We BBs sale, say, in the is BB to have and

at are looking Just portfolio at... the we here,

Kenneth Onorio

About XX%.

Thomas Majewski

We're bought last correct. bit, days softness about to the XX% as still. June been little things a We'll was has We'll July par, end. month -- stuff of to thinking we probably brought it but close at discounts down couple would of through the that -- -- Theory continue this par. has get market back

everything. we'll of I reduce gone, now think had gains certainly team, that realized is it. quarter to don't And of we that. sales when ask largely Hopefully, last and our continue from but the we convexity convexity to rid get we it in We quarter. reducing we're the $X.XX continuing get the goal increased I mentioned please was nice of -- think there is some everything, rid

Matthew Howlett

our appreciate bake Well, into Really it's accretion model. to certainly it.

Operator

Our comes KBW. with the Paul Johnson next of line question from

Paul Johnson

of new yield targeted the quarter the been close cost on is XX%... some there's on between on to interplay effective around here Obviously, wondering cost on and investments. broadly you to XX% your just what's yield investments of new the thoughts and I'm realized and effective increasing, of ECC -- over yield on has how equity was get equity investments. yield getting kind this the But think high cash of kind the for

Thomas Majewski

Paul. at we it look on XX%, stuff which is for good a bogeys just you coupons as we putting Overlay, our is on a very old But expenses picture. the the cost includes XX%, balance serves. a and look obviously the success. cost say No, well. blended work? we're formula -- just those, the math our to meet, we're look basis. full blended at just sheet, right that And equity at just rate, not that memory that's looking side When Ds question, the distribution if of perpetuals, of the trying a has are does costs not We if the investing Xs, there's raw I'm the the How in capital number at even X.XX%, at

in got X/X have roughly other financed the X% less is coupons, stack. probably the than a the We the little highest Xs. across we've so of portfolio But

opinion, have of would actual be attractive common, we attractive at our cost and distribution is distribution need So of cost average the our lower, the the debt, top on rate Without to that debt preferred. in debt and an the the the yield frankly, the stack.

Paul Johnson

of Got position a curious, market, just mean level? that to within dealt curiosity, because assume downgrades where I investment be fruition comes just management dealt the just some I'm manager just mean you at it. situation CLO. is would of in it's or to never And that minority you're exited liability with, just situations. lender-on-lender How leveraged was then probably Or obviously, one last a a I how those would with? whatever. that out basically was that an with workout due in loan of CLO guess, the exercises I in some development violence

Thomas Majewski

A very Yes. question. good

is the was versus bit calmed $XXX good in typical points violence $X past, is of if terms position a A. big judgmentally of some of these of million, of million. news, market's little million basis X lender-on-lender CLO, where dollars, down certainly one, $XXX the million, CLO XX so proverbial but that, it's certainly to -- loan. ago. that's them me B, as So million than X is might of collateral The a Against a it you that managers like that. it X given size a billions $XXX of so violence think And been not $XXX lender-on-lender or It's manage something, in less years feels any it's kind a CLO, tens own to while

X/X own of take roughly loan, So and managers market. I is of CLOs directionally, in little percentage collateral are loans. there's think with of of And That the little a we is some largest good But the part that bad they bad a work accurate. is bit. to number up good while. wanted loan The would many if part that moves that The down exit that. and them investors the the

buy pipsqueak loan might at So aggregate holder, at in years it's it given all the last and of distressed part, the it's would bad issued but with, our win. loan is have getting a the a come say here. And to that many XX, XX them, see the the you're work buy Other quite when given over still funds, new -- it nice and market, something relevant one this any little a in is it at you is -- CLOs -- worked out down be would going bad XX of -- guys any XX.X, happens CLO -- one though, managers of we really while out there, things purported if -- we trades to you XX. they're for is a in it's this collateral I

us, XX%. recovery just lost roughly of XX stinks, or XX For a kind we at

better with a you getting different these intimidated outcome by same loss people starting or at can to bullied a and people. loan win a problem, be funds sometimes as So used the points, be. get That things divergent that distressed perhaps the much of as the is for one not I said, cause being does market think

lender-on-lender will market's the the gets turning the does like it violence the continue be a community has in these to collateral for while get distressed some CLO So of outsmarted by CLO little -- in while where degree CLO there some situations now. feels manager a been favor tide guys, community

Paul Johnson

Tom. interesting, Very

Operator

line question from Inside Bavaria with Steven Income Factory. next of the comes Our the

Steven Bavaria

of at of loan, principal that your your percentage that at new the loans To principal cause particular building when old loan any that loans kind up. was I $X.XX ultimate ones thing? cash extent estimate principal has the at of syndicated CLO, doing end of partially least time that them, within at when then -- over is buying a balloon maturity, that, of did been of amortized typical consists would Since $X.XX, the of over what's through the term unamortized of portfolio follow the with sort that, they trading, mature resets, that erosion your at of offset recurring payments? And the the what then of the car, distributions, estimate how much principal payment

Thomas Majewski

estimate, It's X. an easy

Steven Bavaria

Thomas Majewski

With right. yes. asterisk, Right, X X,

in, goes us account. to to So When Fargo the and that trustee equity after or within reinvestment And Citibank holders as the get I loan asterisk. CLOs. on a interest and amortization a accounts. a comes the comes or the out in, for into a When is, All comes recoveries the the in as used period, debt CLO, comes they will trustee, during in Wells There's account the explain AAAs gets money sale anything there's it CLO, reinvesting principal money entirely paid. account, to defaults the loans. is or whatever for the or Bank principal money all in principal paid makes the The the serves new interest an put us what from X which that is purely account. interest proceeds the

the payment many you're than of the the to and bad, sounds In loans quarterly and get that a system randomly first That and is equity. date amortization buy a CLO, it. that used special collateral this CLOs, amortizing, X% makes hand, it's the and price, be equity. There money But pretty payment, when that's to reclassified they time one is second over it, going receiver situation I XX.X, manager XX.XX, some did So distributions trapped if principal bought targeted on in of a trapped account to the is as them exception out which that like mention And at point flush. all payment is occurs. of seventh would income any principal date, buying interest that the the and cheaper current be savings, the say at them account the or called in the let's out the loan even but if can they on of to loans good. one distribution principal was a in are asterisk, actually onetime the on if the that not pay is to be modeled the only left able paid something in X.XX if we into don't two

the cheaper have at we the latter or system. of special frankly. to principal So buy of Other early, or the balance the or of one the away, can all kind X, within go some stays the your extent question trading gains parts than that beginning, distribution loans X

Steven Bavaria

then a and capital the is big [indiscernible] for difference answer NII of So much larger plus there to accounts your the distributions? your then question between gains the recurring what simple

Thomas Majewski

Yes.

we happen. banker a in there's made loss when days. were calculate an loan you basically, there, Loan CLO, loss or a old-fashioned effective yield provision actually bankers a into whether reserves, losses the loans when on baked for So losses so back not -- those

XX.X% So might we that greater far cash the new quarter. getting be -- we're purchases was accruing, think if this I was

average, investments income is to the on to on be going those So divided by those. is going XX.X% X in Ken quarter third book the

little cash end. To get those end. the than occur, a get at don't the more more get extent losses way. To are less losses greater, the to at expect along the a the we're for a that reserve little extent taking we losses We we the might but

Steven Bavaria

get pay, income your assume XX%? which you for don't from tax And reserve, taken pretax I when to whatever, later you're actually as the So on other -- purposes part your losses take not reserve that until supposed of you... that's in words,

Thomas Majewski

Yes, incurred. they're yes. Until

tax, would So put GAAP for accrual cash simple it. guess, for pretty I way to and be accounting it's accounting basically a

Steven Bavaria

have, to mean Perfect. lot That's now don't. going won't. think maybe people I -- that question I of that's helped lot. really a I a a that and

Thomas Majewski

and aggregate a not over profit a profit nondeductible equaled sadly absent period. of and CLO, will quarter. in but of any GAAP the tax GAAP, given -- cash profit, slightly cash, never They've equal given items, But tax. handful few There's life in a in any

Steven Bavaria

an out about explanation X that ago put was... so years You of that or

Thomas Majewski

it I was think years X ago.

August 'XX. XXXX was I think it or

Steven Bavaria

it'd Exactly, be great... And yes.

Thomas Majewski

downloaded website. thing our The on most

Steven Bavaria

or point after rate question quick of that's that loss even X.X% would many recession, X% so. which default even know or investors talking how probably a only a Big difference. in don't you rate, real I never that's you're other a your so One though -- or look. a take XX% achieve recoveries, is, go being about realize except I'll

Thomas Majewski

And would of year, every that I It's market on par. the In also corporate Steve, what's say, X% loan defaulting then that if is not well, direction. day? probably loans price the of

Steven Bavaria

Anyway... Yes.

Thomas Majewski

off outcome. doesn't default binary par, at pays that Everyone

Operator

for Instructions] closing session. back remarks. the Tom [Operator it And the the reached looks like have we over will end of I now to question-and-answer call turn Majewski

Thomas Majewski

Thank Ken I Great. your for much you Credit and Eagle appreciate Company. interest Point and in time very joining.

interested me, those Eagle Income Dan you to XX:XX this and For we Point very much. join you Company, invite Lena, at in Thank morning.

Operator

you time. and this Thank And your today's for participation. conference, this your disconnect concludes at may you lines

Eagle Point Credit (ECC) 6 Aug 242024 Q2 Earnings call transcript