Core Insights - SoundPoint Meridian Capital reported a net investment income (NII) of $9 million or 44¢ per share for the third fiscal quarter ended December 31, 2025, alongside a net realized loss of 5¢ per share on exited investments [1][10] - The company paid distributions of 75¢ per share during the quarter, but the NII shortfall relative to distributions was attributed to loan spread compression, elevated CLO liability costs, and reduced excess credit available to equity investors [5][8] - The net asset value (NAV) per share decreased to $14.02 from $16.91 as of September 30, 2025, primarily due to mark-to-market pressure in CLO equity valuations [5][10] Financial Performance - Total expenses for the quarter were $9 million, with a GAAP net loss of $43.9 million or a loss of $2.14 per share [10] - The fair value of the investment portfolio was $473.5 million, and available liquidity was approximately $525,000 at the end of the quarter [11] - The company had outstanding debt that totaled 39% of total assets as of December 31, 2025 [11] Investment Activities - During the quarter, the company deployed approximately $6.8 million in two warehouse investments and purchased three new issue equity positions with an amortized cost of $11.29 million and a weighted average cap yield of 9.31% [6] - The CLO equity portfolio's weighted average gap yield was 11%, down from 12% in the prior quarter, reflecting a seven basis points loss in underlying portfolio spreads [7] Market Environment - The US leveraged loan market was highly active in 2025, with primary broadly syndicated loan activity exceeding $1 trillion, although supply levels were constrained by below-average LBO and M&A activity [13][14] - Loan spread compression was significant, with the de-weighted average spread of the Morningstar leveraged loan index dropping to SOFR plus 3.2%, the lowest level since 2012 [14] - Despite tight spreads, US managers priced $55 billion in new issue CLOs in the fourth quarter, setting a new annual issuance record [15] Future Outlook - The company anticipates a transition in the loan market towards modest growth in new money issuance in 2026, supported by lower borrowing costs and improved policy visibility [16] - A period of stability in liability spreads is expected to allow refinancing and reset activity to proceed on an accretive basis, potentially improving equity arbitrage [17][18] - The company remains committed to maintaining balance sheet flexibility and supporting net asset value over time while evaluating distribution levels as market conditions evolve [8][11]