Eagle Point Credit Company Inc. 6.6875% NT 28 Q3 FY2024 earnings call

• Deployed over $171 million in net capital into new investments, with new CLO equity purchases having a weighted average effective yield of ~18.5%. - Completed 14 reset transactions, lengthening the portfolio's weighted average remaining reinvestment period to ~3 years (47% above market average). - Issued ~$10 million in net proceeds from Series AA and AB non-traded 7% convertible perpetual preferred stock offering, and ~7.5 million additional common shares via ATM program, generating NAV accretion of $0.08 per share. - Declared common regular monthly distributions for Q1 2025 of $0.14 per share and concluded variable supplemental distribution as of December 31, 2024. - Asset coverage ratios for preferred stock and debt were 326% and 735% respectively, above statutory requirements. Leverage was ~31% of total assets, within target range.

Recurring cash flows for the third quarter were $68.2 million ($0.66 per share), down from $71.4 million ($0.79 per share) in the previous quarter. The lower cash flows were due to loan spread compression and off-cycle semi-annual interest payments. Net investment income less realized losses was $0.23 per share, with $0.08 per share in realized losses from legacy CLO equity write-downs and $0.02 per share in gains from selling CLO debt. Excluding reclassifications, net investment income and realized gains were $0.31 per share. NAV as of September 30 was $8.44 per share, rising to $8.60 per share midpoint by October 31. Q4 cash flows so far totaled $73 million.

• Cash flows in Q4 so far totaled $73 million, outpacing prior quarters. - Expect portfolio's weighted average remaining reinvestment period to increase further with new issue investing and reset activity, laying groundwork for enhanced net investment income. - Existing regular $0.14 monthly common distribution declared through end of March 2025.

• Fluctuations in cash flows due to new investing activity and semi-annual payers in CLO portfolios. - Potential impact of loan spread compression and market volatility on CLO equity cash flows. - Uncertainty in interest rate movements and regulatory changes affecting the CLO market.

Q: How do out-of-court restructurings impact the CLO market and how are CLO managers contending with these deals?

A: Tom Majewski noted that while some companies are doing out-of-court restructurings, it's a small percentage of companies, and collateral managers with scale can influence lenders. It's not a dire situation but a factor to monitor.

Q: What are the expectations for NII trajectory going forward?

A: Tom Majewski discussed a multipronged strategy to increase NII, including keeping cash employed, selling CLO debt to rotate into equity, issuing preferred stock, and managing leverage. Headwinds like loan spread compression have abated, and they're pulling levers to boost NII.

Q: How long will the cash flow phenomenon continue?

A: Tom Majewski stated that CLO cash flows are consistent, with defaults having little impact on ongoing cash flows. The variable supplemental distribution concluded as taxable income projections don't foresee spillover into 2025.

Q: How can the share price be increased?

A: Tom Majewski said it's through continued cash flow to shareholders and increase in NAV, emphasizing the stable cash flows over time and educating investors about the company's performance during market challenges.

Q: What conditions could lead to NAV upside for CLO equity investments?

A: Tom Majewski mentioned that refis and resets can improve portfolio value, and buying securities at discounts that increase in price, along with proactive management of the portfolio, can contribute to NAV upside.