Eagle Point Credit Co Inc. Q2 FY2024 earnings call

• Deployed over $135 million in net capital into new investments, with new CLO equity purchases having a weighted average effective yield of 19.4%. • Completed four resets and two refinancings. • Launched new Series AA and Series AB non-traded convertible preferred perpetual stock offering, generating ~$9 million in proceeds with a total program size expected to be $100 million. • Issued approximately 12 million common shares through the ATM program at a premium to NAV, generating NAV accretion of $0.11 per share. • Started selling CLO BBs purchased at discounts and rotating proceeds back into CLO equity. • Eagle Point Income Company (EIC) generated net investment income and realized gains excluding non-recurring expenses of $0.54 per share in Q2. • Portfolio's weighted average remaining reinvestment period (WARRP) stood at 2.7 years as of June 30, 0.2 years longer than March 31, and 59% above the market average of 1.7 years.

Recurring cash flows from the portfolio increased to $71.4 million or $0.79 per share in the second quarter, up from $56.2 million or $0.70 per share in the first quarter. The company generated net investment income less realized capital losses of $0.16 per share, with net investment income of $0.28 per share and realized losses of $0.12 per share. Excluding reclassifications, net investment income and realized gains would have been $0.31 per common share. NAV per share as of June 30 was $8.75.

• Expect portfolio cash flows to move higher in the fourth quarter. • Existing regular monthly common distributions and variable supplemental distributions declared through the end of 2024. • Continued opportunities in primary and secondary CLO equity and a robust pipeline of refinancing and reset opportunities to enhance portfolio value.

• Quarter-to-quarter fluctuations in cash flows due to semi-annual interest payments and market conditions. • Market volatility that could impact CLO equity prices. • Dealer research desks' pessimistic default forecasts and potential pressure on CCC buckets. • Lender-on-lender violence in loan markets that could affect CLO performance.

Q: Mickey Schleien asked about the opportunity to refinance or reset liabilities in the CLO equity portfolio given loan spread tightening.

A: Thomas Majewski said there's a dispersion in loan spreads, about half the portfolio is above the average, they were proactive with four resets and two refis in Q2, and have an active pipeline.

Q: Mickey Schleien then asked about how portfolio managers deal with the downgrade to upgrade ratio and CCC buckets.

A: Thomas Majewski mentioned CLOs have ample cushion, weighted average CCCs at 6.37% (slightly better than market), 4.2% junior OC cushion, and good CLO managers maintain OC tests.

Q: Mitchel Penn followed up on default forecasts and distressed exchanges.

A: Thomas Majewski said their default number is for D-rated or fail-to-pay loans, different dealers include different things, and distressed exchanges vary.

Q: Matthew Howlett asked about economic earnings power and capital structure.

A: Thomas Majewski explained CLOs generate robust cash flows, cash pays dividends, capital structure has perpetual and preferred financing with no maturities until 2028, and the new perpetual preferred offering is beneficial.

Q: Paul Johnson asked about new investments and cost of equity.

A: Thomas Majewski said they look at blended cost of capital, not just raw equity cost, and the portfolio has attractive debt financing.

Q: Steven Bavaria asked about principal payments in CLOs and difference between NII and distributions.

A: Thomas Majewski explained principal payments are trapped in the principal account during reinvestment period, and there's a provision for losses in effective yield accounting leading to difference between NII and distributions.