Group 1 - Credit investments are gaining popularity as they provide a hedge against the volatility of traditional equities, focusing on income rather than price growth [1] - The investment strategy includes a mix of classic dividend growth stocks, Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds like the S&P [1]

Eagle Point Credit Company (ECC) Q1 2025 Earnings Call May 28, 2025 10:00 AM ET Company Participants Darren Daugherty - Managing DirectorThomas Majewski - Founder, Managing Partner, CEO & DirectorKenneth Onorio - CFO & COOMickey Schleien - MD - Equity ResearchRandy Binner - Managing DirectorErik Zwick - Managing Director, Equity ResearchSteven Bavaria - Editor/Publisher Operator Greetings, and welcome to Eagle Point Credit Company Incorporated First Quarter twenty twenty five Financial Results Conference Ca ...

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, compared to $0.12 per share in Q4 2024 [6][15] - The company's NAV as of March 31 was $7.23 per share, a 13.7% decrease from $8.38 per share at year-end [6][7] - The 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 [15] 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 [4][5] - Sales and paydowns of CLO debt in the portfolio totaled $48.5 million during the first quarter, generating $0.05 per share of realized gains [9] - Approximately 18% of the CLO equity portfolio based on fair value are new investments or recently reset CLOs, scheduled to make their initial payments in subsequent quarters [11] Market Data and Key Metrics Changes - The S&P UBS Leveraged Loan Index generated a total return of 0.6% during Q1 2025, with a trailing twelve-month default rate of 82 basis points, well below the long-term average of 2.6% [18][19] - 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 [20] - The total issuance volume for CLOs reached $153 billion during Q1 2025, significantly above the $88 billion from Q1 2024 [23] 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 [9] - The focus remains on enhancing net investment income and cash flow through proactive investment strategies, including resetting and refinancing CLOs [28] - The company maintains a 100% fixed-rate financing structure with no maturities prior to 2028, providing protection against future interest rate rises [25] Management's Comments on Operating Environment and Future Outlook - Management views the recent market price fluctuations as short-term and not indicative of fundamental issues within the portfolio [7][28] - The company believes that current discounted reinvestment opportunities will translate into good returns in the medium term, similar to past periods of volatility [9][28] - Management remains optimistic about the stability of cash flows from CLO equity, despite recent market challenges [32][41] 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 [12] - The company declared common regular monthly distributions for Q3 2025 of $0.14 per share [13] 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 from CLO equity have historically been stable, even during market downturns, and emphasized the importance of cash generation [31][32] Question: Will the pace of resets and refinancings continue? - Management indicated that while the pace may slow compared to Q1, they expect single to double-digit resets per quarter under current market conditions [45][46] Question: What accounts for the difference between gross and net capital deployed? - The difference is attributed to the significant rotation of CLO debt into CLO equity, which reduces the overall net capital figure [50][51] 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 rates, but they expect activity to pick up as the market stabilizes [56][58] Question: How does the company handle loan loss reserves compared to banks? - Management clarified that while they do not create reserves like banks, their effective yields account for future losses, and they focus on cash generation for distributions [86][88]

Company Overview - Pearl Diver Credit Company Inc. is an externally managed, non-diversified, closed-end management investment company focused on maximizing total return and generating high current income through investments primarily in equity and junior debt tranches of CLOs [4] - As of March 31, 2025, the company has approximately $2.8 billion in assets under management, backed by institutional investors including public pension plans and university endowments [6] Upcoming Financial Results - The company will release its first quarter 2025 financial results before market open on April 29, 2025, and will host a conference call at 11:00 a.m. Eastern Time to discuss these results [1][2] Conference Call Details - Investors and analysts can participate in the conference call by dialing the provided numbers approximately 10 minutes prior to the start [2] - A live audio webcast of the conference call will be available on the company's website [2] Company Management and Strategy - Pearl Diver Capital LLP, founded in 2008, specializes in CLO investing and employs advanced analytics to identify opportunities in the CLO market [5] - The firm has established relationships with over 80 CLO managers, providing access to critical credit information while avoiding conflicts of interest [6]