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]

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]