Core Insights - The company faced significant challenges in the CLO equity market during Q4 2025, with a median CLO equity return of negative 9% for the quarter and negative 14% for the full year, marking it as one of the most difficult quarters in recent memory [1][4][7] - Active portfolio management and a strategic shift towards CLO mezzanine debt tranches helped the company limit losses to approximately 9% of net asset value (NAV) and outperform peers [3][7] Financial Performance - The company reported a GAAP net loss of $0.56 per share for Q4, with an NAV of $5.19 and a total return of negative 9.1% for the quarter [6][10] - The weighted average CLO portfolio yield decreased to 13.7% from 15.5% in the previous quarter, reflecting lower asset yields and portfolio turnover [6][9] Portfolio Positioning - The company increased its allocation to CLO mezzanine debt tranches to approximately 70% of post-conversion purchases, viewing them as offering a favorable balance of yield and downside protection [11] - During Q4, the company executed 47 unique CLO trades and made $66 million in new purchases, with CLO equity representing 52% of total CLO holdings at quarter-end [12][13] Risk Management - The company significantly increased credit hedges to roughly $175 million, or about 90% of NAV, to protect against market volatility [15] - Despite the drag on results from hedges, the company utilized various hedging tools to manage risk effectively [16] Market Outlook - Looking ahead to 2026, the company anticipates continued pressure on CLO equity but plans to increase mezzanine buying and explore potential long-term unsecured debt issuance for liquidity [19] - The company noted that more than three-quarters of its purchases in early 2026 have been mezzanine debt, particularly focusing on deleveraging double-B tranches [19]

Financial Data and Key Metrics Changes - For the fourth calendar quarter, the company reported a GAAP net loss of $0.56 per share, with a net asset value (NAV) total return of negative 9.1% [12][16] - The NAV per share at year-end was $5.19, with cash and cash equivalents totaling $24.3 million [16][22] Business Line Data and Key Metrics Changes - Significant mark-to-market losses on CLO equity drove the net loss for the quarter, while CLO mezzanine debt performed better [12][14] - The weighted average GAAP yield for the CLO portfolio decreased to 13.7%, down from 15.5% in the prior quarter [13] - CLO equity represented 52% of total CLO holdings, remaining roughly unchanged from the prior quarter [14] Market Data and Key Metrics Changes - The CLO equity market faced challenges, with a median CLO equity return of negative 9% for the quarter and negative 14% for the full year [5][12] - In the U.S. leveraged loan market, lower-rated CCC loans faced significant pressure, while premium-priced loans continued to refinance at par [12][13] Company Strategy and Development Direction - The company has increased its allocation to CLO mezzanine debt tranches, which are believed to offer a compelling balance of yield and downside protection [7][19] - The company executed 218 CLO trades during the nine-month period following its conversion to a CLO closed-end fund, reflecting a disciplined and active approach to portfolio management [23][22] Management Comments on Operating Environment and Future Outlook - The management noted that the fourth quarter was challenging for CLOs, but disciplined portfolio management helped cushion the impact and position the company for future opportunities [11][21] - Looking ahead, the company aims to rebuild net investment income and NAV by deploying capital into what appears to be a distressed market, viewing it as fertile ground for trading opportunities [26][27] Other Important Information - The company increased its credit hedge portfolio to approximately $175 million, representing about 90% of its NAV, providing significant protection against market volatility [10][11] - The company is exploring the potential issuance of long-term unsecured debt to enhance its capital position [27] Q&A Session Summary Question: What is the company's stance on the software sector amid negative headlines? - The management emphasized the importance of diversification by sector and name, noting that while there are concerns in the software sector, there will be both winners and losers [30][34] Question: Can the company quantify the proportion of loans that are triple C rated or lower? - The management indicated that the typical CCC bucket in a CLO is around 7.5%, estimating that their exposure is not far off from the CLO market average of 4.4% [38][43] Question: What is the drag from credit hedges on the portfolio? - The management stated that the drag from credit hedges is estimated to be around 1%-2% of fund NAV per annum, which is considered reasonable for the protection provided [51][52] Question: How do redemptions affect the CLO market? - The management noted that redemptions can create opportunities for active trading, as flows move between different funds and portfolios [64][65] Question: What is the recovery timeline and structure for potential defaults in the CLO market? - The management explained that recoveries from leveraged loans historically have been above zero, with an average par burn rate of about 75 basis points annually [67][69]

Financial Data and Key Metrics Changes - For the fourth calendar quarter, the company reported a GAAP net loss of $0.56 per share, with a net asset value (NAV) per share of $5.19, reflecting a total return of negative 9.1% for the quarter [12][16]. - The weighted average GAAP yield for the quarter on the CLO portfolio was 13.7%, down from 15.5% in the prior quarter [13]. Business Line Data and Key Metrics Changes - The company limited fund losses to approximately 9% of NAV, outperforming the overall peer set, despite the challenging market environment for CLO equity [4][5]. - CLO equity represented 52% of total CLO holdings, roughly unchanged from the prior quarter, while CLO mezzanine debt tranches proved more resilient [14]. Market Data and Key Metrics Changes - The CLO equity market faced significant challenges, with the median CLO equity return for the quarter at negative 9% and negative 14% for the full year [5]. - In the U.S. leveraged loan market, lower-rated CCC loans experienced significant pressure, while premium-priced loans continued to refinance at par [12]. Company Strategy and Development Direction - The company has increased its allocation to CLO mezzanine debt tranches, which are believed to offer a compelling balance of yield and downside protection, with approximately 70% of CLO purchases during the nine-month period being mezzanine debt tranches [7]. - The company is focused on rebuilding net investment income and NAV as it deploys capital into what is perceived as a distressed market, viewing it as fertile ground for active trading and disciplined risk management [26][27]. Management's Comments on Operating Environment and Future Outlook - Management noted that while the fourth quarter was challenging for CLOs, disciplined and active portfolio management cushioned the impact and positioned the company for future opportunities [11]. - The company believes that a substantial portion of recent price declines are reversible, as they reflect yield spread widening rather than fundamental credit impairment [26]. Other Important Information - The company executed 218 CLO trades during the nine-month period following its conversion to a CLO closed-end fund, comprising $272 million of purchases and $63 million of sales [23]. - The company maintained a credit hedge portfolio equal to roughly 90% of its NAV as of December 31st [10][15]. Q&A Session Summary Question: What is the company's stance on the software sector and other sectors of interest? - Management indicated that while there has been damage in the software sector, they believe there will be winners and losers, and they maintain a diversified portfolio to manage risk effectively [30][34]. Question: Can you quantify the proportion of loans underlying the portfolio that are triple C rated or lower? - Management estimated that the typical CCC bucket in a CLO is around 7.5%, and they believe their exposure is not far off from the CLO market average of about 4.4% [39][43]. Question: What is the drag from credit hedges on a go-forward basis? - Management noted that the drag from credit hedges amounts to approximately 1%-2% of fund NAV per annum, which they consider reasonable for the protection provided [51][52]. Question: How do redemptions affect conditions in the CLO market? - Management stated that redemptions can create opportunities for active trading, as flows move between different funds and portfolios [64][65]. Question: What is the timeline and structure for working through potential defaults in the CLO market? - Management explained that recoveries from leveraged loans historically have been well above zero, with an average par burn or loss rate of about 75 basis points annually [68].

Core Insights - The fourth quarter was described as the most challenging environment for CLO equity since mid-2022, influenced by high credit dispersion and ongoing coupon spread compression [1] - The fund limited NAV losses to approximately 9%, outperforming the peer median of negative 14% for the full year by maintaining an 'up in credit' bias and active trading strategy [1] - A deliberate pivot toward CLO mezzanine debt was executed, representing about 70% of purchases over the nine-month period following the fund's conversion [1] - Active trading was a primary risk mitigator, with 47 unique CLO trades executed in Q4 to harvest gains and reposition into higher-quality deleveraging positions [1] - The fund avoided the new issue CLO equity market due to unattractive pricing dynamics and structural factors favoring secondary market opportunities [1] - A portion of the quarterly NAV decline was attributed to credit spread widening rather than fundamental impairment, indicating potential for future mark-to-market reversals [1]

Core Viewpoint - The company's net asset value per share has decreased to $1.69 from $1.95, primarily due to significant unrealized losses in the CLO equity portion of the portfolio [1] Group 1: Financial Performance - The valuation pressure during the quarter is attributed to a challenging year-end for CLO equity and broader volatility in the U.S. loan market [1] - The distress ratio increased notably to 4.34% from 2.88%, indicating growing concerns within the software private credit and syndicated loan markets [1] - The portfolio's performance was negatively impacted by a 265 basis point average decrease in CCC-rated loan prices, despite a slight improvement in B-rated loan pricing [1] Group 2: Investment Activity - Investment activity was concentrated on first-lien B2B loans, with $18 million in new purchases aimed at capturing value during periods of market pricing dispersion [1] - There is a general market pushback against the rapid growth of the private credit asset class, which has contributed to wider U.S. syndicated corporate loan spreads [1] Group 3: Strategic Positioning - The company continues to leverage its structure as a permanent capital vehicle to maintain a long-term investment horizon, despite short-term primary market slowdowns [1]

Financial Data and Key Metrics Changes - For the fourth quarter ended December 2025, the company's net investment income was approximately $5.4 million or $0.07 per share, a slight decrease from approximately $5.6 million or $0.07 per share in the prior quarter [4] - The net asset value per share decreased to $1.69 from $1.95 in the prior quarter [4] - Total investment income for the quarter was approximately $10.4 million, compared to approximately $10.2 million in the prior quarter [4] - The company recorded combined net unrealized and realized losses on investments of approximately $18.3 million or $0.22 per share, compared to losses of approximately $7.5 million or $0.09 per share in the prior quarter [5] Business Line Data and Key Metrics Changes - The investment activity during the quarter included purchases of approximately $18 million and repayments of approximately $7.4 million [5] - The company issued approximately 4.3 million shares of common stock, resulting in net proceeds of approximately $7.9 million [5] Market Data and Key Metrics Changes - U.S. loan market performance declined, with U.S. loan prices decreasing from 97.06% of par to 96.64% of par [7] - The 12-month trailing default rate for the loan index decreased to 1.23% from 1.47% [8] - The distress ratio, defined as loans with prices below 80% of par, increased to 4.34% from 2.88% [8] - U.S. leveraged loan primary market issuance was $70.7 billion, representing a 27% decrease compared to the same quarter in the previous year [8] Company Strategy and Development Direction - The company focuses on portfolio management strategies aimed at maximizing long-term total return, leveraging its status as a permanent capital vehicle to adopt a longer-term investment strategy [9] Management's Comments on Operating Environment and Future Outlook - Management noted that the current state of the software market reflects real concerns, contributing to wider corporate loan spreads and lower pricing in the syndicated loan markets [16] - The company sees opportunities in both primary and secondary markets despite the slowdown in the primary market due to volatility [13] Other Important Information - The board of directors declared monthly distributions of $0.035 per share for the months ending April, May, and June of 2026 [5] - Additional performance information is available on the company's website [10] Q&A Session Summary Question: Details on $18 million of new investment purchases - The company is focused on first lien loans, particularly B2B loans, and sees opportunities in both primary and secondary markets despite market volatility [12][13] Question: Distress ratio increase and its implications - Management confirmed that the increase in the distress ratio reflects concerns in the software market and broader market volatility, which may create investment opportunities at lower prices [14][16] Question: Drivers of unrealized appreciation in the quarter - The primary driver of unrealized appreciation was a markdown of the CLO equity portion of the investment book, which faced challenges during the quarter [17][18]

Financial Data and Key Metrics Changes - For Q4 2025, the company's net investment income was approximately $5.4 million or $0.07 per share, a slight decrease from approximately $5.6 million or $0.07 per share in the prior quarter [4] - The net asset value per share decreased to $1.69 from $1.95 in the prior quarter [4] - Total investment income for the quarter was approximately $10.4 million, compared to approximately $10.2 million in the prior quarter [4] - The company recorded combined net unrealized and realized losses on investments of approximately $18.3 million or $0.22 per share, up from approximately $7.5 million or $0.09 per share in the prior quarter [5] Business Line Data and Key Metrics Changes - The investment activity during the quarter included purchases of approximately $18 million and repayments of approximately $7.4 million [5] - The company issued approximately 4.3 million shares of common stock, resulting in net proceeds of approximately $7.9 million [5] Market Data and Key Metrics Changes - U.S. loan market performance declined, with loan prices decreasing from 97.06% of par to 96.64% of par [7] - The 12-month trailing default rate for the loan index decreased to 1.23% from 1.47% [8] - The distress ratio increased to 4.34% from 2.88% [9] - U.S. leveraged loan primary market issuance was $70.7 billion, a 27% decrease compared to the same quarter in the previous year [9] - U.S. loan fund outflows were approximately $3.2 billion for the quarter [10] Company Strategy and Development Direction - The company focuses on portfolio management strategies aimed at maximizing long-term total return, leveraging its status as a permanent capital vehicle to adopt a longer-term investment view [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the current state of the software market reflects real concerns, contributing to wider corporate loan spreads and lower pricing [16] - The increase in the distress ratio is indicative of volatility in the market, particularly in the software sector [15][16] Other Important Information - The board of directors declared monthly distributions of $0.035 per share for the months ending April, May, and June of 2026 [5] Q&A Session Summary Question: Details on $18 million of new investment purchases - Management indicated a focus on first lien loans, particularly B2B loans, and noted opportunities in both primary and secondary markets due to current trading conditions [14] Question: Drivers behind the increase in the distress ratio - Management confirmed that the distress ratio increase is reflective of volatility in the software market and a general pushback against growth in the private credit asset class [16] Question: Unrealized appreciation in the quarter - The primary driver of unrealized appreciation was a markdown of the CLO equity portion of the book, which faced challenges during the quarter [18]

Financial Data and Key Metrics Changes - In 2025, the company generated a GAAP return on equity of negative 0.7% and a total return on common stock of negative 15.2%, with cash distributions of $1.98 per share, representing 15% of the average stock price during the year [5][9] - The fourth quarter net investment income was $0.03 per share, down from $0.39 per share in the prior quarter, primarily due to a decline in SOFR and continued tightening in loan spreads [8][19] - The company's NAV decreased to $13.31 per share as of December 31, down from $14.21 per share at the end of September [9][21] Business Line Data and Key Metrics Changes - Paydowns within the CLO debt portfolio totaled $147 million during 2025, with early repayments contributing to realized capital gains of $0.12 per share [6][7] - The company participated in 10 resets and 6 refinancings across its CLO equity portfolio, resulting in average CLO debt cost savings of 46 basis points [7] - Recurring cash flows for the fourth quarter totaled $19 million, or $0.79 per share, representing an 18% increase quarter-over-quarter [9] Market Data and Key Metrics Changes - The S&P UBS Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the entirety of 2025, with the trailing twelve-month default rate decreasing from 1.5% to 1.2% [15][16] - CLO new issuance rose to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the previous year's record [16] - The company's portfolio's default exposure was 32 basis points as of December 31 [15] Company Strategy and Development Direction - The company actively managed its portfolio to seek opportunities across CLO debt and equity, as well as other asset classes beyond CLOs, reflecting a flexible investment strategy [4][10] - The company plans to continue repurchasing shares when trading at material discounts to NAV, viewing this as an attractive use of capital [12][23] - The management believes the current market environment presents compelling opportunities for patient, well-capitalized investors [23] Management's Comments on Operating Environment and Future Outlook - Management noted that the CLO market faced challenging conditions in 2025, with factors such as reduced SOFR levels and loan spread compression impacting performance [4] - Looking ahead, management expressed confidence in healthy underlying borrower fundamentals and a disciplined approach to capital allocation [5][23] - The company anticipates a robust pipeline of refinancings and resets, which could help lower liability costs in the CLO equity portfolio [23] Other Important Information - The company completed the full redemption of its 7.75% Series B Term Preferred Stock and announced plans to redeem the 8% Series C Term Preferred Stock [11] - As of January month-end, the company had $85 million of cash and revolver capacity available for investment [22] Q&A Session Summary Question: Follow-up on realized losses due to underperforming managers - Management indicated that underperforming managers had credit issues and loan spread compression, leading to a rotation into better-performing CLOs and other asset classes [26][27] Question: Source of funds for redeeming Series C Term Preferred Stock - Management confirmed that the redemption would be funded through a combination of the new revolver and cash on hand, along with proceeds from CLO debt repayments [29] Question: Expectation of balance sheet investment portfolio shrinkage - Management clarified that while redeeming preferred stock, they would continue to opportunistically buy back stock and maintain a leverage ratio within the target range [35] Question: Focus on alternative credit assets - Management stated that investments in non-CLO asset classes are being made across the Eagle Point platform, with dedicated teams focusing on these opportunities [37]

Financial Data and Key Metrics Changes - In 2025, the company generated a GAAP return on equity of negative 0.7% and a total return on common stock of negative 15.2%, assuming reinvestment of distributions [5] - The company paid $1.98 per share in cash distributions, representing 15% of the average stock price during the year [5] - The net investment income for the fourth quarter was $0.35 per share, down from $0.39 per share in the prior quarter [7] - The GAAP net loss for the fourth quarter was $15 million or $0.60 per share, compared to a GAAP net income of $0.43 per share in the third quarter [18] Business Line Data and Key Metrics Changes - Paydowns within the CLO debt portfolio totaled $147 million during 2025, contributing to early repayments [5] - The company participated in 10 resets and 6 refinancings across its CLO equity portfolio, resulting in average CLO debt cost savings of 46 basis points [6] - Recurring cash flows for the fourth quarter totaled $19 million or $0.79 per share, an 18% increase quarter-over-quarter [8] Market Data and Key Metrics Changes - The trailing twelve-month default rate decreased from 1.5% at the end of September to 1.2% as of December 31st, below the long-term average of 2.6% [14] - CLO new issuance rose to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the previous year's record [15] - The S&P UBS Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the entirety of 2025 [13] Company Strategy and Development Direction - The company actively managed its portfolio, seeking opportunities across CLO debt and equity, as well as other asset classes beyond CLOs [4] - The company plans to continue its share repurchase program, viewing its stock as undervalued and an attractive use of capital [11] - The management believes the current market environment represents a compelling opportunity for patient, well-capitalized investors [24] Management's Comments on Operating Environment and Future Outlook - Management noted that the CLO market faced challenging conditions, with reduced SOFR levels impacting CLO debt investment income and ongoing loan spread compression affecting CLO equity [4] - The company remains constructive on CLO market fundamentals, with a robust pipeline of refinancings and resets expected to lower liability costs [24] - Management emphasized the importance of active portfolio management amid dynamic market conditions, focusing on relative value and disciplined capital allocation [22] Other Important Information - The company's NAV decreased to $13.31 per share as of December 31st, down from $14.21 per share at the end of September [8] - The company completed the full redemption of its 7.75% Series B Term Preferred Stock and announced plans to redeem the 8% Series C Term Preferred Stock [10] Q&A Session Summary Question: Follow-up on realized losses due to underperforming managers - Management indicated that underperforming collateral managers faced credit issues and loan spread compression, leading to a rotation into better-performing CLOs and other asset classes [26][28] Question: Source of funds for redeeming Series C Term Preferred Stock - Management confirmed that the redemption would be funded through a combination of cash on hand and the new revolving credit facility [29] Question: Non-recurring items in earnings - Management stated there were no non-recurring items in the earnings for the quarter [35] Question: Expectation of balance sheet investment portfolio shrinkage - Management clarified that while redeeming preferred stock, they have been opportunistically buying back stock and do not expect a significant shrinkage in the investment portfolio [36] Question: Focus on alternative credit assets - Management explained that investments in alternative credit assets are made across the Eagle Point platform, with dedicated teams focusing on these opportunities [37][39]

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]