Financial Data and Key Metrics Changes - For Q3 2025, the company reported investment income of $5.4 million or $0.80 per share, a slight decrease from $5.5 million in the previous quarter [16] - Total expenses remained stable at $2.4 million or $0.35 per share, consistent with the prior quarter [16] - The net investment income was $3 million or $0.44 per share, leading to a net loss of $4.3 million or $0.64 per share for the quarter [16][18] - Recurring cash flows from the CLO portfolio totaled $8.7 million or $1.28 per share, an increase from $8 million or $1.18 per share in the previous quarter [18] Business Line Data and Key Metrics Changes - The portfolio's average junior OC cushion stands at 4.5%, with deals exposed to First Brands having a slightly higher cushion of 4.6% [7] - The weighted average GAAP yield of the portfolio increased to 13.07% from 12.75% as of June 30, 2025, due to refinancing activities [12] Market Data and Key Metrics Changes - The broader CLO equity market faced headwinds, primarily due to spread tightening in the broadly syndicated loans market [6] - The company noted a significant uptick in leveraged buyout (LBO) activity, with approximately $200 billion in deals announced in 2025, surpassing the $164 billion recorded for all of 2024 [11] Company Strategy and Development Direction - The company remains focused on disciplined portfolio management and long-term total return, viewing market dislocations as opportunities [10] - The investment platform combines machine learning and natural language processing with traditional credit analysis, providing a competitive advantage in sourcing opportunities [14] Management's Comments on Operating Environment and Future Outlook - Management expressed a constructive outlook for CLO equity performance in a gradually easing monetary environment, anticipating that lower rates will stimulate LBO activity and improve corporate refinancing conditions [11][21] - The company believes that CLOs provide an efficient way to access senior secured corporate loans and can offer an attractive risk-return profile across various credit cycles [21] Other Important Information - As of September 30, 2025, total assets were $157.5 million, and total net assets were $114.9 million, resulting in a net asset value per share of $16.89 [18] - The company has started to utilize its at-the-market (ATM) equity issuance program, issuing approximately 26,600 shares for net proceeds of about $400,000 [19] Q&A Session Summary Question: Insights on the primary CLO market and investment opportunities - Management indicated that the primary CLO equity market currently offers inadequate arbitrage returns for large-scale participation, with expected returns in the 10% to 12% range, while the secondary market presents more attractive opportunities [23][24] Question: Impact of resets and refinancings on expected yields - Management preferred not to comment on intra-quarter activities but confirmed that recent resets and refinancings contributed positively to yields [26][27] Question: Mix of opportunities between U.S. and European CLOs - The majority of the portfolio is focused on the U.S. CLO market, with occasional consideration of European CLOs, particularly single B positions that can provide stronger NAV protection [31][32] Question: Future ATM issuance versus share repurchase - Management is evaluating both options but considers it too early to prioritize share repurchase at this stage [33][34] Question: Potential portfolio growth and leverage management - Management stated that leverage levels are currently within the target range and will be adjusted based on market conditions and investment opportunities [35][36]
PEARL DIVER CREDIT COMPANY INC.(PDCC) - 2025 Q3 - Earnings Call Transcript