Financial Data and Key Metrics Changes - The company generated a GAAP return on common equity of negative 14.6% during 2025, which is slightly better than the market-wide assessment by Nomura Research, which estimated a median CLO equity return of negative 15% for the same period [6][17] - As of December 31, the company's NAV was $5.70 per share, down from $7 per share on September 30 [7] - The fourth quarter of 2025 saw a net investment income (NII) less realized losses of -$0.26 per share, compared to -$0.16 per share in the third quarter [16] Business Line Data and Key Metrics Changes - The company completed 10 resets and 3 refinancings of its CLOs in the fourth quarter alone, participating in 34 resets and 27 refinancings throughout 2025 [8] - Recurring cash flows from the portfolio increased to $80 million, or $0.61 per share, up from $77 million or $0.59 per share in the prior quarter [7] - The non-CLO portion of the investment portfolio was approximately 26% at year-end, reflecting a strategic shift towards credit assets beyond CLO equity [9] Market Data and Key Metrics Changes - The trailing twelve-month default rate decreased from 1.5% in September to 1.2% as of December 31, significantly below the long-term average of 2.6% [22] - The S&P UBS Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the full year 2025 [21] - CLO new issuance volumes rose slightly to $55 billion in the fourth quarter, bringing the total for 2025 to $209 billion, surpassing the previous year's record [22] Company Strategy and Development Direction - The company is focusing on increasing exposure to credit assets beyond CLO equity, reflecting a strategic decision to maximize total return for shareholders [10] - A new joint venture was launched to invest in regulatory capital relief transactions, with plans to add more JVs over time [12] - The company aims to retain more capital for investments with attractive risk-adjusted returns, supporting sustained cash flow and long-term total return [15] Management's Comments on Operating Environment and Future Outlook - Management noted that while defaults remain below long-term averages, spread compression in the loan market and negative sentiment towards credit have impacted financial performance [4] - The outlook for 2026 suggests continued opportunities for capital deployment in both CLO equity and other credit asset classes, with expectations of a stable or growing NAV over time [15][25] - Management anticipates that the loan market fundamentals will remain stable, despite potential volatility due to external factors [21] Other Important Information - The company announced a $100 million common stock repurchase program to buy stock in the open market if it trades at a material discount to NAV [14] - The company redeemed its 8% Series F Term Preferred Stock, which was the highest cost of financing, and proactively repurchased $9 million of other securities at discounts [12][13] Q&A Session Summary Question: Impact of captive CLO equity funds on fee structures - Management acknowledged that CLOs without internal management fees could outperform those with fees, but noted that spread compression affects all funds [30][32] Question: Outlook for resets and refinancings in 2026 - Management indicated that predicting the exact number of resets and refinancings is challenging, as it depends on market conditions, particularly AAA spreads [61] Question: Strategy for stock repurchase program - Management stated that decisions on stock repurchases will consider share price, leverage ratios, and investment opportunities, balancing between repurchases and capital deployment [50][52] Question: Trends in credit quality and expenses - Management expects credit quality trends to mirror those of the previous year, with no significant uptick in credit expenses anticipated [45][46]

Financial Data and Key Metrics Changes - The company generated net investment income less realized losses from investments of $0.16 per share, consisting of $0.23 of net investment income offset by $0.07 of realized losses from investments [5][14] - The NAV as of June 30 was $7.31 per share, up 1.1% from $7.23 as of March 31 [6] - The company recorded GAAP net income of $58 million or $0.47 per share for the second quarter, compared to GAAP net losses of $0.84 per share in the previous year [16] Business Line Data and Key Metrics Changes - Recurring cash flows for the second quarter were $85 million or $0.69 per share, exceeding quarterly aggregate common distributions and total expenses by $0.08 per share [6][12] - The company deployed $86 million into new investments during the quarter, taking advantage of market dislocation to acquire CLO equity positions at attractive levels [7][19] Market Data and Key Metrics Changes - The S&P UBS Leveraged Loan Index experienced a total return of 2.3% for the second quarter, recovering from a decline in April [20] - The trailing twelve-month default rate for loans stood at 1.1% as of June 30, well below the long-term average of 2.6% [21] Company Strategy and Development Direction - The company is focused on refinancing and reset activities to reduce CLO financing costs and enhance net investment income [9][25] - A second strategic CLO collateral manager partnership was established, which is expected to enhance shareholder returns over time [11][62] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for the portfolio, citing strong recurring cash flows and a robust pipeline of refinancing opportunities [26] - The company believes that the market dislocation presents opportunities for CLO equity investors with the right positioning and patience [25] Other Important Information - The company issued $41 million of common stock at a premium to NAV, resulting in an accretion of NAV by $0.02 per share during the quarter [10] - The company's asset coverage ratios for preferred stock and debt were 243% and 525%, respectively, exceeding statutory requirements [17] Q&A Session Summary Question: What drove the realized losses this quarter? - Realized losses included $0.02 from trading losses and $0.05 from the reclassification of three CLO equity positions that were past their reinvestment period [35][36] Question: Can you shed light on the significant sell-off in CLO equity recently? - The sell-off was primarily driven by more sellers than buyers, with concerns about tariff-related increases in defaults contributing to market sentiment [82][83] Question: How sensitive are repayments to lower rates? - Repayments are driven by bullish or bearish sentiment on spreads rather than interest rates, with higher repayments typically occurring in strong debt markets [68][70]

Financial Data and Key Metrics Changes - The company generated net investment income and realized capital gains of $0.33 per share for Q1 2025, consisting of $0.28 of net investment income and $0.05 of realized capital gains [7] - The NAV as of March 31 was $7.23 per share, a 13.7% decrease from $8.38 per share at year-end [8] - The company's first quarter GAAP net loss was $97.5 million, with total investment income of $52.3 million and realized capital gains of $5.3 million [16] Business Line Data and Key Metrics Changes - The company priced three new CLO equity investments and reset nine positions in its portfolio, lengthening reinvestment periods to five years [5] - During Q1, sales and paydowns of CLO debt in the portfolio totaled $48.5 million, generating $0.05 per share of realized gains [10] - Approximately 18% of the CLO equity portfolio based on fair value are new investments or recently reset CLOs, scheduled to make initial payments in subsequent quarters [12] Market Data and Key Metrics Changes - The S&P UBS Leveraged Loan Index generated a total return of 0.6% during Q1, with a trailing twelve-month default rate of 82 basis points, well below the long-term average of 2.6% [20][21] - The weighted average spread of the CLO's underlying loan portfolios stood at 3.36% as of March 31, down from 3.49% at year-end [22] - The percentage of loans trading below 80 within the CLOs stood at 2.9%, more favorable than the market average of 4.6% [26] Company Strategy and Development Direction - The company has completed its planned portfolio rotation from CLO debt into CLO equity and other investments prior to the recent market volatility [10] - The focus remains on enhancing net investment income and cash flow through proactive investment strategies, particularly in resetting and refinancing CLOs [29] - The company maintains 100% fixed-rate financing with no maturities prior to 2028, providing protection from future interest rate rises [27] Management's Comments on Operating Environment and Future Outlook - Management views the recent market price fluctuations as short-term and not indicative of concerns specific to the portfolio [9] - The company believes that current discounted loan opportunities will benefit it in the medium term, similar to past periods of volatility [10] - Management remains optimistic about the stability of cash flows and the potential for increased CLO refinancing and reset activity as markets stabilize [28] Other Important Information - The company utilized its at-the-market program to issue $66 million of common stock at a premium to NAV, resulting in NAV accretion of $0.02 per share [13] - The company declared common regular monthly distributions for Q3 2025 of $0.14 per share [14] Q&A Session Summary Question: What will it take for the market to recognize the stability of CLO cash flows? - Management noted that cash flows have historically been stable and continue to come in despite market fluctuations [32][34] Question: Will the pace of resets and refinancings continue? - Management indicated that while the pace may slow, they expect single to double-digit resets per quarter under current market conditions [48][50] Question: What accounts for the difference between gross and net capital deployed? - The difference is due to significant rotation from CLO debt into CLO equity, which reduces the net capital figure [54] Question: Why was the pace of deployment slower in April? - Management explained that market volatility led to a slowdown in CLO equity trading, affecting deployment speed [60][62] Question: How does the company handle loan loss reserves compared to banks? - Management clarified that while they do not reserve for loan losses like banks, their effective yields account for future losses, and they focus on cash generation [90][92]