Eagle Point Credit (ECC) Earnings Transcript

Core Insights - The company faced challenging market conditions in 2025, with a GAAP return on common equity of negative 14.6%, slightly better than the market average of negative 15% [5][2] - The company's NAV decreased from $7.00 per share on September 30 to $5.70 per share by year-end [5] - The company actively managed its CLO equity portfolio, completing 34 resets and 27 refinancings throughout 2025, which helped mitigate some of the negative impacts from market conditions [7][10] Financial Performance - The company recorded a net investment income (NII) of $0.23 per share, offset by realized losses of $0.49 per share, resulting in a total NII less realized losses of negative $0.26 per share for 2025 [17] - Total cash distributions amounted to $1.68 per common share during 2025, with a new monthly distribution rate set at $0.06 per share for 2026 [6][15] - The company reported a comprehensive loss attributable to common stock of $110 million, or $0.84 per share, for the fourth quarter [18] CLO Market Dynamics - The loan market saw strong demand, with total loan repayments reaching $294 billion, representing approximately 19% of the market in 2025 [22] - The trailing twelve-month default rate decreased from 1.5% in September to 1.2% by year-end, remaining below the long-term average of 2.6% [23] - CLO new issuance volumes rose to $209 billion for 2025, surpassing the previous year's record [24] Portfolio Management - The company selectively increased its exposure to credit assets beyond CLO equity, with non-CLO investments making up approximately 26% of the total investment portfolio by year-end [8][10] - The company achieved an average of 42 basis points in CLO debt cost savings across its portfolio due to its active reset and refinancing activities [7] - The weighted average remaining reinvestment period (WARP) of the portfolio remained stable at 3.3 years, reflecting the company's strategic investment decisions [7] Strategic Initiatives - The company launched a joint venture focused on regulatory capital relief transactions and invested over $40 million in its U.S. CLO collateral management platform [11][12] - The company plans to continue optimizing its capital structure, including the redemption of high-cost preferred stock and the issuance of lower-cost perpetual preferred stock [13][14] - The board is supportive of gradually increasing the allocation away from CLO equity as attractive opportunities arise in other credit asset classes [39][40]